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LabourLawUpdate February2012
Summary of Important Judgments Employees' Provident Funds and Miscellaneous Provisions Act, 1952 1.
a) Manpower suppliers will be considered as the principal employer for provident fund purposes. b) HRA, overtime, bonus, commission, washing allowances will not attract Employees Provident Fund contributions. (2012 LLR 22)

2.

Special allowance, dearness allowance, conveyance and other allowances paid to all employees would be treated as basic wages. (2012 LLR 42)

Industrial Disputes Act, 1947 3. 4. 5. 6. 7. 8. 9.

A shift supervisor is not a workman. (2012 LLR 30) Probationers are not entitled to demand reason for their termination. (2012 LLR 46) No reinstatement to an employee who loses managements confidence. (2012 LLR 8) A workman cannot be forced to work with a different employer without his consent. (2012 LLR 76) Assaulting of superior at a workplace is gross indiscipline to justify dismissal. (2012 LLR 53) Habitual absence of the workman amounts to grave misconduct. (2012 LLR 70) Compensation in lieu of reinstatement is appropriate when casual labourers on daily wages have merely worked for more than 240 days before termination. (2012 LLR 1)

Payment of Wages Act, 1936 10. Deductions can be challenged before Authority under Payment of Wages Act only when wages
are less than prescribed ceiling. (2012 LLR 48)

Provident Fund 1. Case Name - Group 4 Securitas Guarding Ltd. & Another vs. Employees Provident Fund Appellate Tribunal & Ors. [2012 LLR 22] Forum - Delhi High Court Judgement (a) Responsibility for payment of Provident Fund Contributions Group 4 Securitas Guarding Ltd. (GSGL) was providing security personnel to M/s Havels (I) Ltd. as a contractor. GSGL was providing services to various firms and all security guards were under the ultimate control of GSGL. The security guards received their appointment letter and wages from GSGL. The Provident Fund Department had also been receiving contributions from GSGL treating it as the employer of the security guards. M/s Havels (I) Ltd. had no control over the security guards. It was held that the services being provided by GSGL are not as a contractor but on a principal to principal basis and M/s Havels (I) Ltd. cannot be termed as the principal employer. The High Court observed that the relationship between such a contractor and the establishment where the man-power is supplied by him would be of principal to principal and not that of employer-contractor. Thus, GSGL was held liable to pay Provident Fund contributions. (b) Allowances forming part of basic wages - Regional Provident Fund Commissioner, Faridabad initiated proceedings under Section 7A of the Employees' Provident Funds and

Miscellaneous Provisions Act, 1952, against GSGL for not depositing Provident Fund contribution on HRA, conveyance allowance and washing allowance. GSGL challenged the order of the Provident Fund Commissioner by filling appeal. However, the Appellate Tribunal dismissed the appeal. The order of Tribunal was challenged by GSGL and M/s Whirlpool of India Ltd before the Delhi High Court. The Delhi High Court observed that Section 2 (b) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 defined basic wages and HRA, overtime allowance, bonus, commission or any other similar allowances are not covered in the definition of basic wages. The Delhi High Court held that the view taken by the Provident Fund Commissioner and the Tribunal was based on wrong interpretation of the provisions of law. The High Court further held that the house rent allowance, conveyance allowance and washing allowance are not included in the definition of basic wages and thus no Provident Fund contribution is to be made towards such allowances. 2. Case Name Surya Roshini Limited vs. Employees Provident Fund and Another [2012 LLR 42] Forum Madhya Pradesh High Court Judgement - Assistant Provident Fund Commissioner passed an order under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 holding special

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allowances, dearness allowance, conveyance allowance and other allowances as part and parcel of basic wages and directed the petitioner to deposit the assessed amount. The Appellate Tribunal dismissed the appeal filed by the Petitioner against the order of the Provident Fund Commissioner. The order of Tribunal was challenged by the Petitioner before the Madhya Pradesh High Court. The High Court held that when special allowances, dearness allowance, conveyance allowances and other allowances are paid universally to all the employees, they would be treated as part and parcel of basic wages and Provident Fund would have to be paid in respect of such allowances under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Industrial Disputes Act, 1947 3. Case Name P.B. Sivasankaran vs. The Presiding Officer, First Additional Labour Court, Chennai and Another [2012 LLR 30] Forum - Madras High Court Judgement The petitioner was appointed as the Trainee Supervisor and his services were terminated without conducting enquiry. The petitioner raised an industrial dispute before the Labour Court claiming to be a workman under the definition provided in Section 2 (e) of the Industrial Disputes Act, 1947. The Labour Court after recording evidence observed that the petitioner was working as shift supervisor, having power to take action against the workers who default in their
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work. He was further responsible for recommending confirmation of workmen, granting leave to workmen, preparing log reports and daily reports and issuing memos to workers. The Labour Court held that the nature of duties of the petitioner, being in the supervisory nature, take him out of the purview of the definition of workman under Section 2 (e) of the Industrial Disputes Act, 1947. On a Writ Petition filed by the petitioner to challenge the order of the Labour Court, the Madras High Court held that the Labour Court has rightly concluded that the petitioner is not a workman. 4. Case Name Sarbjit Singh vs. Presiding Officer, Labour Court, Amritsar and Others [2012 LLR 46] Forum Punjab & Haryana High Court Judgement The services of the petitioner were terminated during his probation period while doing services as a conductor in Punjab Roadways. The petitioner contended before the Labour Court that the termination was done without any enquiry and consequently was invalid and violative of Section 25-F of the Industrial Disputes Act, 1947. The Labour Court held that the probationers are not entitled to demand reasons for their termination and thus their services can be terminated any time by the employer during their probation period. The P&H High Court upheld the decision of the Labour Court.

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5.

Case Name The Divisional Controller, KSRTC vs. M.G. Vittal Rao [2012 LLR 8] Forum Supreme Court Judgement The respondent employee while working as helper in the appellant-corporation was subjected to disciplinary proceedings mainly on the allegation of theft. The respondent employee was thereafter imposed with the punishment of dismissal. The Labour Court found the enquiry fair and proper and the respondent employee was held not entitled to any relief. The Supreme Court upheld the order of the Labour Court and held that once the employer has lost the confidence in the employee and the bona fide loss of confidence is affirmed, the order of punishment must be considered to be immune from challenge, for the reason that discharging the office of trust and confidence requires absolute integrity, and in case of loss of confidence, reinstatement cannot be directed.

consequent upon transfer of the factory, the employment of all the workmen would be taken over by M/s Kitchen Appliances India Ltd. with immediate effect and their services will be treated as continuous and the terms and conditions of services will not be in any way less favourable than those applicable immediately prior to the transfer of ownership. Upon a challenge by the aggrieved workmen who were forced to work under M/s Kitchen Appliances India Ltd., the Supreme Court held that it is settled law that without consent, workmen cannot be forced to work under different management. Hence, workmen were entitled to retirement/ retrenchment compensation from Philips. 7. Case Name Voltas Limited-Allwyn unit, Hyderabad vs. Additional Industrial tribunal-cum-Additional Labour Court, and Another [2012 LLR 53] Forum Andhra Pradesh High Court Judgement The supervisor of the petitioner Company had refused to grant attendance to a workman for the period of his absence from the Company and thereafter the workman had abused the supervisor in filthy language and had caught hold of the supervisors shirt and slapped him on his right cheek. The petitioner Company dismissed the said workman from service and the workman challenged his dismissal before the Labour Court. The Labour Court directed the petitioner Company to reinstate the workman into service with continuity of service, all other attendant benefits
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6.

Case Name Sunil K.R. Ghosh & Ors. vs. K. Ram Chandran & Ors. [2012 LLR 76] Forum Supreme Court Judgement In 1997, Philips India Ltd. (Philips) introduced a Voluntary Retirement Scheme (VRS) for its workmen and majority of the workmen opted for the same. In September 1998, Philips sold one of its factories to M/s Kitchen Appliances India Ltd. Thereafter Philips withdrew the said Voluntary Retirement Scheme. On December 22, 1999, Philips issued a notice informing its employees that

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and 50% back wages. The petitioner Company thereafter filed a Writ Petition before the Andhra Pradesh High Court. The Andhra Pradesh High Court held the act of assaulting a superior to be gross indiscipline and upheld the dismissal of the said workman. The Court observed that any lenient view would encourage indiscipline in the industrial establishment and the Labour Court erred in interfering with the punishment of dismissal of the workman as imposed by the petitioner Company. The High Court further observed that after introduction of Section 11 A of the Industrial Disputes Act, 1947, certain amount of discretion is vested with the Labour Court in interfering with the dismissal or discharge of a workman. However, such interference should only be exercised on the existence of certain factors like when the punishment is disproportionate to the gravity of misconduct so as to disturb conscience of the court, or the existence of any mitigating circumstances which require the reduction of punishment, or that the past conduct of the workman is unblemished, which may persuade the Labour Court to reduce the punishment. 8. Case Name Divisional Controller, Karnataka State Road Transport Corporation, Chikmagalur vs. M. Devaraju [2012 LLR 70] Forum Karnataka High Court Judgement Delinquent conductor was found guilty of absence for 2 years and 5 months. The conductor
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was thereafter on an enquiry, dismissed by the petitioner company. The Labour Court set aside the punishment of dismissal, holding that it was disproportionate to the gravity of misconduct and directed reinstatement of the conductor. On an appeal, the High Court observed that habitual absence of a workman amounts to grave misconduct and gross violation of discipline and quashed the award of the Labour Court which had granted reinstatement to the conductor. 9. Case Name Bharat Sanchar Nigam Ltd. vs. Man Singh [2012 LLR 1] Forum Supreme Court Judgement The respondentsworkmen worked with the appellant as casual labourers on daily wages during the year 1984-85. Due to nonavailability of work, their services were terminated in the year 1986. No notice or retrenchment compensation was given to them before terminating their services. After about five years, they raised an industrial dispute and the Labour Court ordered reinstatement of the respondentsworkmen on the same post which they were holding at the time of their termination. The High Court dismissed the writ petitions filed by the Appellant department challenging the award of reinstatement passed by the Labour Court. On an appeal, the Supreme Court observed that it is well settled law that although an order of retrenchment passed in violation of Section 25-F of the Industrial Disputes Act, 1947 may be set aside but an award of reinstatement should
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not be passed. This Court has distinguished between a daily wager who does not hold a post and a permanent employee. The Supreme Court held that in view of the legal position and the fact that the respondentsworkmen were engaged as daily wagers and they had merely worked for more than 240 days, the relief of reinstatement cannot be said to be justified and instead the Supreme Court directed the appellant, Bharat Sanchar Nigam Ltd. to pay Rs.2 lakhs to each of the respondents in full and final settlement of their claim. Payment of Wages Act, 1936 10. Case Name Singareni Collieries works Union, Khammam & Ors. vs. Singareni Colleries Company Limited & Another [2012 LLR 48] Forum Andhra Pradesh High Court

Judgement The Petitioners were being paid wages exceeding INR 6,500 per month. The Court held that pursuant to the 2003 amendment of Section 1(6) of the Payment of Wages Act, 1936, the said Act applies to employees whose wages are below INR 6,500 per month. The proviso to Section 9(2) of the Payment of Wages Act, 1936 enables the employer the employer to make penal deduction where ten or more employees go on unjustified strike. The Court held that as all the petitioners and the employees of the registered trade unions are getting more than INR 6,500 per month as wages, the respondent company has no power to exercise under Section 9(2) of the Payment of Wages Act, 1936. Thus, a claim about penal deductions of wages of workmen lies only when the employee is drawing salary more than INR 6,500 per month.

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Source Labour Law Reporter, press clippings Disclaimer This update is not a legal service and does not provide legal representation or advice to any recipient. This update is published by Chadha & Co. for the purposes of providing general information and should not be construed as legal advice. Should further information or analysis be required of any subject matter contained in this publication, please contact Chadha & Co. About Chadha & Co. Chadha & Co. is Indias leading boutique law firm with a specialised practice in advising foreign companies doing business in India on Indian laws and regulations. The Firm has a strong labour and employment laws practice. Contact Namita Chadha Rahul Chadha Savita Sarna Chair, Labour and Employment Chadha & Co. Advocates & Legal Consultants S 327, Greater Kailash II New Delhi 110 048 India Tel: +91 11 4163 9294; +91 11 4383 0000 Fax: +91 11 4163 9295 Website: www.chadha-co.com Email: ssarna@chadha-co.com

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