What Is The Employer Compliance Related To Severance Pay In India?

Severance pay is offered to employees who retire, are laid off, or reach the end of the contractual
agreements.
 One month’s salary must be paid to employees who have worked for a year or more.
 For mass termination in protected sectors, three months of wages must be offered to
employees.
 The Payment of Gratuity Act entitles employees to gratuity payment after five years of
continuous service.
 The Industrial Disputes Act of 1972, also states that retrenched (involuntarily dismissed)
workmen must be given 15 days of severance pay for each year of service that they have
completed.

Payment of Gratuity Act, 1972

(1) Gratuity shall be payable to an employee on the termination of his employment after he has
rendered continuous service for not less than five years,--

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease:

Provided that the completion of continuous service of five years shall not be necessary where the
termination of the employment of any employee is due to death or disablement:

(2) For every completed year of service or part thereof in excess of six months, the employer
shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last
drawn by the employee concerned:

(5) Nothing in this section shall affect the right of an employee receive better terms of gratuity
under any award or agreement or contract with the employer.

Industrial Disputes Act, 1947

This legislation mandates the employer to pay compensation for retrenchment to the employee.
Section 25F (b) of the Act states that employees are entitled to severance pay from their
employer per the prescribed calculation formula.
In a landmark, judgment the in landmark judgment of M/S Muller& Phillips Ltd Vs. K.C Subs,
the Hon’ble Supreme Court of India, observed that retrenchment compensation is given to
provide relief from unexpected and sudden elimination of the employment of the
workmen/employee.

The compensation to the employee has been retrenched and eliminated but not dismissed.
Therefore, such employees have the right to claim an amount in the form of compensation or
gratuity under the above-mentioned labour laws. This compensation or gratuity can be treated as
Severance Pay in India.

25F. Conditions precedent to retrenchment of workmen.—No workman employed in any

industry who has been in continuous service for not less than one year under an employer shall
be retrenched by that employer until—

(a) the workman has been given one month’s notice in writing indicating the reasons for
retrenchment and the period of notice has expired, or the workman has been paid in lieu
of such notice, wages for the period of the notice;

(b) the workman has been paid, at the time of retrenchment, compensation which shall be
equivalent to fifteen days' average pay 2 [for every completed year of continuous service]
or any part thereof in excess of six months; and

(c) notice in the prescribed manner is served on the appropriate Government 3 [or such a
authority as may be specified by the appropriate Government by notification in the
Official Gazette].

Can you fire a pregnant woman employee?

Maternity Benefit Act, 1961 (“Act”) governs the conditions of service of women employees on
maternity leave. Maternity Benefit (Amendment) Act 2017 has not brought any change on the
aspect of termination of a women employees’ services on account of her maternity status.
Section 12(1) of the Act states that when a woman absents herself from work in accordance with
the provisions of this Act, it shall be unlawful for her employer to discharge or dismiss her
during or on account of such absence.
The judgment of Supreme Court in case of Neera Mathur vs Life Insurance Corporation of
India1 had caused a paradigm shift in employer’s approach towards pregnant women employees.
In Neera Mathur case a woman who was on probation was dismissed from her employment
when she was on her medical leave. The ground of termination given by the employer was that
she deliberately tried to hide the fact that she was pregnant at the time of filling up of declaration
form prior to being appointed. The Court not only directed the LIC to reinstate her but also held
that collection of personal data relating to pregnancy, menstrual periods are violation of the right
to the privacy of the woman. The Court further observed that such personal data is collected to
deny women the benefit of medical leave to which she is duly entitled to.
In the case of Aarti Gupta (Mrs.) v. Rail India Technical and Economical Services Limited and
Ors2, the employees’ contract was arbitrarily terminated when she sought to avail maternity
leave. It was held by the Court that Section 12 of the Act underscores the independent and
inflexible nature of the liability to mandate that no woman employee can be dismissed on
account of her pregnancy. It is the right of the employee to get medical benefits since such grant
of maternity benefit is according to the mandate of the law.
Section 12(2)(a) of the Act provides that the employment of a pregnant woman can be
terminated if the employer provides her with the medical benefit and/or bonus prescribed under
the Act which she would have been entitled to as if she had still been in employment. This may
suggest that as long as the employer is paying the maternity benefits and/or bonus prescribed
under the Act, there should be no legal repercussions if he terminates the employment during an
employee’s leave.
In the case of K. Chandrika v. Indian Red Cross Society and Another, it was held that the fact
that she was given the medical benefits did not deprive her from getting reinstated with
consequential benefits if the termination of employment was arbitrary and illegal as long as she
is not gainfully employed by another establishment. It is important to note that the service of the
petitioner was terminated just when she had proceeded on maternity leave.
Penalty
Section 21 of the Act provides that if any employer fails to pay any amount of maternity benefit
to a woman entitled under this Act or terminates the employment of such woman during or on
account of her absence from work, he shall be punishable with imprisonment which shall not be
less than 3 (three) months but which may extend to 1 (one) year and with fine which shall not be
less than INR 2,000 (Indian Rupees Two thousand) but which may extend to INR 5,000 (Indian
Rupees Five thousand).

Vendor Agreement
 Common Factors in Vendor Contract Clauses

1. A Clear Picture
There should be a proper description of the product or service.

2. Payment Terms
There must be a proper payment or costing method like how much payment is due, mode
of payment, late payment, and terms of payment, and penalties for late payment.
 3. Period of Functionality
There must be a clear focus on how long the agreement is binding on parties. The
duration must be fixed before beginning the service, and until its conclusion.

4. Warranties and Representations

These are the important keynotes for a vendor agreement. The vendor should be
comfortable with warranties and representations before entering into a Vendor contract.
To prepare a vendor agreement, both parties should draft the agreement and include all
the required clauses.

5. Confidentiality
If you are implementing a piece of intimate information to the vendor then a clause of
confidentiality represents a very crucial role. Since it protects data from leakage.

6. Exclusivity
All vendors should have an exclusive relationship with the business owner, as the product
is unique to the business.

7. Intellectual Property
When vendors provide service or product to owners, while dealing with the business, it
should be only provided to the owners. There should not be another owner, to avoid the
risk of one getting the grant of intellectual; property license.

8. Limited Liability
In the case of vendors, the liability is limited to the cost of services as this is not such a
good provision in case of agreement. Moreover, from the perspective of business, if
something goes wrong then one should charge for the damages, more than the cost of
services.

9. Indemnity
Indemnification means when one party shows interest to bear the losses of other parties,
under ambiguous circumstances.

10. Insurance
To ensure safety, it is a very common practice in India to get insurance.

11. Relation With Parties

An agreement should specify the related parties. The vendors must be treated as
independent contractors. No other person can act on his behalf other than himself.

 Key Clauses to be Included in a Vendor Agreement

 1. Specify the goods and services that will be provided
2. Modes of payment
3. How a client will be billed
4. How a client will contact for accounts payable details
5. Statement of work
6. Legal requirements
7. Insurance
8. The vendor is not an employee and is not eligible for any employment benefits
9. The vendor is an independent contractor
10. Conditions of termination
11. Conditions of payment or reimbursement of attorney fees.

 Key Elements of Vendor Agreement\

1. Parties Involved: The agreement should clearly identify the parties involved, including
the company and the vendor, and their respective roles and responsibilities.

2. Scope of Work: The agreement should outline the scope of work, including the goods
or services being provided by the vendor, the timelines, and any specifications or quality
requirements.

3. Payment Terms: The agreement should specify the payment terms, including the price,
payment schedule, and any applicable taxes or fees.

4. Confidentiality: The agreement should include provisions for the protection of

confidential information, trade secrets, and intellectual property.

5. Warranties: The agreement should include warranties or guarantees for the goods or
services being provided, including any remedies or recourse in the event of defects or
non-performance.

6. Termination: The agreement should outline the circumstances under which the
agreement can be terminated, including any notice periods, penalties, or liabilities.

7. Dispute Resolution: The agreement should specify the process for resolving any
disputes or disagreements between the parties, including mediation or arbitration.

 Types of Vendor Contracts

 1. Fixed Price Contract: The buyer and seller agree on a set price for a defined product,
regardless of any changes that may affect its cost or value. Often used for low-risk
situations with well-known vendors.

2. Cash Reimbursable Contract: The buyer agrees to pay the seller a standard fee, plus
extra for any work related to fulfilling the contract. Usually used when there's more risk
or uncertainty about the product or service.

3. Time and Materials Contract: The buyer and seller agree on an hourly rate and
timeline. Often used with third-party vendors, consultants, freelancers, and other
contractors.

4. Letter Subcontract: The buyer and seller agree that a part of the work, usually less than
40%, will be done during a subcontract phase. Usually used when the project needs to
start before all contract details are final.

5. Indefinite Delivery Contract: The buyer and seller agree to a flexible contract for an
uncertain quantity of goods or time of service. Instead of specific deliverables, a range is
used. Usually used when several projects are being worked on at once under a master
agreement.

6. Distribution Agreement Contract: This is an agreement between a distributor and a

vendor about how, when, and where a product will be distributed. These contracts often
say whether the distribution is exclusive or non-exclusive.

Criminal Identification Bill:

The Criminal Procedure (Identification) Act, 2022 was passed by the Parliament in April 2022
which replaces the Identification of Prisoner's Act, 1920 that allowed police officers to take
measurements of the people who were convicted, arrested or were facing trials in criminal cases.

The Criminal Procedure (Identification) Act, 2022 gives legal sanction to the police officers to
take biological and physical samples of the people accused of the crimes and those of convicts as
well. Section 53 and 53A of the CrPc (Code of Criminal Procedure) 1973 allows the police to
collect data.
The Data which can be collected includes:
 Finger, Palm-Print & Footprint Impressions
 Photographs
 Iris and Retina scans
 Physical and Biological Samples
 Behavioural Attributes
If the offence committed under any law which is in force at the time of committing of the
offence is not an offence against a woman or a child or the period of imprisonment as
punishment of the offence is less than 7 years, then the individual concerned may not be obliged
to allow collection of his biological samples under the provisions of this Act. Therefore,
biological samples are to be collected for offences against a woman or a child or for offences
where the period of imprisonment is 7 years or more.

 Section 3 of the Act deals with the manner of taking measurements. Sub-Section (1) of
section 4 deals with collection, preservation, storing of the measurements and also their
sharing, dissemination, disposal and destruction of records of measurements.

 The measurements are to be recorded by a police officer or a prison officer. A police officer
is the officer-in-charge of the police station or an officer whose rank is not below the rank of
Head Constable. Prison officer is the officer whose rank is not below that of the Head
Warder. Section 6 sub-clause 1

 It is to note that any act of resistance or refusal towards the collection of measurements shall
be considered an offence under Section 186 of the Indian Penal Code. Section 7 of The
Criminal Procedure (Identification) Act, 2022 states that there shall be no suit or any
proceeding against any person who in good faith does or intends to do anything under this
Act or any other rule.

 There shall also be a record of measurements which are to be stored in digital format for a
period of 75 years from the date of collection of said measurements.

 It is to be noted that if a person has not been previously declared guilty of an offence under
any law with any term of imprisonment and under this Act has been subjected to collection of
measurements and is later:

 released without conducting any trial or

 discharged or
 acquitted by the court after utilizing all the existing legal remedies,
The records of measurements so far collected of the concerned individual shall be destroyed
unless and until the court or a Magistrate gives reasons in writing not to do so.

Comparison with the Identification of Prisoner's Act, 1920

1. The Criminal Procedure (Identification) Act, 2022 broadens the scope of measurements
taken to identify a criminal. Under the colonial law- Identification of Prisoner's Act, the
measurements which were allowed were merely finger and foot impressions and
 photographs. However, the measureable quantities of an individual now include palm-print
impressions, iris and retina scan, behavioural attributes like signatures or handwritings and
even physical and biological samples which include blood, semen, hair etc.

2. According to The Identification of Prisoner's Act, 1920, measurements were to be taken of

only those convicts or arrested people who committed crimes where the punishment was
rigorous imprisonment of one year or more, but the new act changes that and now people
who are convicted or arrested for any offence shall give their measurements.

3. There is one exception to note that biological samples are to be collected only when crimes
against women or children are committed or when the offence has a punishment of
minimum 7 years of imprisonment. The new Act also allows collection of data from people
who are detained under any preventive detention law.

4. Earlier, only the investigating officers, officers in-charge of a police station or an officer
whose rank is of sub-inspector or above were allowed to take measurements and collect data
of the convicts or arrested people but under the new law, the Head Warder of a prison is also
allowed to collect the data and measurements in addition to previously mentioned
authorities.

5. According to "The Identification of Prisoner's Act", a Magistrate was also required to give
clearance for direct collection of data. The Criminal Procedure (Identification) Act, 2022
allows a metropolitan or judicial magistrate of first class is allowed for the same. In case, the
person convicted or arrested or detained is required to maintain good behaviour or peace, an
Executive Magistrate may also collect the data and measurements.

M/S. Dhodha House v. S.K. Maingi (2006) 9 SCC 41

Issue: What is the scope of the word ‘carries on business' to file a suit as per CPC,1908?
Facts:

 The appellant filed a suit against the respondent for protecting his trademarks and
copyrights which has been infringed by the respondent. The suit was against the use of
the mark ‘Dhodha House'.
 The District Judge, Ghaziabad passed an order of injunction against the respondent.
 The respondent filed an appeal in HC. The HC held that the civil court had no territorial
jurisdiction to try the suit.
 Then, appellant filed appeal in SC.
Judgement:
The Supreme Court dismissed the appeal and upheld the decision of the High Court that the civil
court didn't have the territorial jurisdiction to try the said suit. “The expression “carries on
business” and the expression “personally works for gain” connote two different meanings. For
the purpose of carrying on business only presence of a man at a place is not necessary. Such
business may be carried on at a place through an agent or a manager or through a servant. The
owner may not even visit that place. The phrase “carries on business” at a certain place would,
therefore, mean having an interest in a business at that place, a voice in what is done, a share in
the gain or loss and some control there over. The expression is much wider than what the
expression in normal parlance connotes, because of the ambit of a civil action within the
meaning of Section 9 of the Code.”
A corporation in view of Explanation appended to Section 20 of the Code would be deemed to
be carrying on business inter alia at a place where it has a subordinate office. Only because its
goods are being sold at a place would thus evidently not mean that it carries on a business at that
place. - Para 46,47