LECTURE NOTES

ON

LABOUR LAWS II

BA.LL.B.

Semester - VIII

1
 Table of Contents
UNIT-1 ……………………………………………………………………………..... 4
The Workman’s Compensation Act 1923……………………………………………………4
Main Features of the Act…………………………………………………………………… .5
Definitions……………………………………………………………………………………8
Compensation, Dependent……………………………………………………………………8
Partial Diablement,Total Disablement…………………………………………………….....10
Employer’s Liability for Compensation …………………………………………………... ..10
Notice & Claim…………………………………………………………………………… 19
Commissioner ……………………………………………………………………………….22
Appeal………………………………………………………………………………… … 20
Medical Examination……………………………………………………………………… 21
UNIT 2……………………………………………………………………………………... 25
The Minimum Wages Act 1948…………………………………………………………… 25
Object & Constitutional Validity of the Act 67………………………………………… 25.
Salient Features……………………………………………………………………………..30
Definitions……………………………………………………………………………. 31
Cost of Living Index, Scheduled Employment, Wages…………………………………… 32
Minimum Wages………………………………………………………………………… .34.
Fair Wages……………………………………………………………………………… 35
Living Wages…………………………………………………………………………… 33
Fixation Revision of Minimum Rates of Wages………………………………………… 38
Working Hours…………………………………………………………………………… 41
Determination of Wages &Claims……………………………………………………… 43
Payment of Wages Act 1936…………………………………………………………… 44
Definition, Employer…………………………………………………………………… 44
Industrial &Other Establishment……………………………………………………… 44
Wages…………………………………………………………………………………… 45
Payment &Deduction from Wages……………………………………………………… 48
Authority to Hear Claim…………………………………………………………………… 49
UNIT 3……………………………………………………………………………………. 53
The Industrial Employment Standing Order Act 1946……………………………………. 53
Procedure for Certification & Adoption of Standing Order………………………….. 53
Cetifying Officer………………………………………………………………………… 54…

2
The Employee State Insurance Act 1948…………………………………………………...55
Employee State Insurance Corporation……………………………………………………..57
Standing Committee……………………………………………………………………… 59
Medical Benefit Council……………………………………………………………………60
Contribution…………………………………………………………………………………61.
Benefits………………………………………………………………………………………62,
Employee Insurance Court………………………………………………………….. 63
Unit 4……………………………………………………………………………….. 65
The Equal Remuneration Act 1976…………………………………………………………65
Definitions………………………………………………………………………………… 65
Payment of Remuneration at Equal Rates………………………………………………… 66
Inspectors……………………………………………………………………………….... 68
Penalty &Cognizance of Offences……………………………………………………… 69
The Payment of Bonus Act 1965………………………………………………………… 72
Eligibility………………………………………………………………………………… . 73
Disqualification for Bonus……………………………………………………………… 73
Minimum &Maximum Bonus…………………………………………………………. 73
Proportionate Reduction……………………………………………………………… 74
Recovery of Bonus Due……………………………………………………………… 74
Customary Bonus, Productivity Bonus……………………………………………… 74
The Payment of Gratuity Act 1972………………………………………………… 75
Definitions………………………………………………………………………… 75
Eligibility………………………………………………………………………… 78
Determination…………………………………………………………………… 78
Recovery &Protection of Gratuity……………………………………………… 80

3
 UNIT 1

WORKMEN’S COMPENSATION ACT, 1923

This is a very old enactment for providing social security to workmen. Under this Act, a
workman who dies or suffers disablement (partial or total) due to accident is entitled to
get compensation from employer. Act does not apply where workman covered under
Employees State Insurance Act5, since a workman is entitled to get compensation from
ESIC, a workman covered under Employees State Insurance Act is not entitled to get
compensation under Workmen‘s Compensation Act, as per section
53 of ESIC. However, Act is applicable to factories, mines, plantations, transport
establishments, construction work etc. who are not covered under Employees State
Insurance Act.

OBJECTIVES
The Workmen‘s Compensation Act, 1923, aims to provide workmen and their
dependents some relief in case of accidents, arising out of and in the course of
employment and causing either death or disablement of workmen as a measure of relief
and social security. It also provides payment by certain classes of employers to their
workmen, compensation for injury by accident. Enables a workman to get compensation
irrespective of his negligence. It lays down the various amounts payable in case of an
accident, depending upon the type and extent of injury. The employer now knows the
amount of compensation he has to pay and is saved of many uncertainties to which he
was subject before the Act came into force. The legislation has given security to the
worker and this has increased the availability of labour to some extent. The worker now
secured, has become efficient.

SCOPE AND COVERAGE

The Act extends to the whole of India and it applies to railways and other transport
establishments, factories establishments engaged in making, altering, repairing, adapting,
transport or sale of any articles, mines, docks, establishments engaged in constructions,
fire-brigade, plantations, oilfields and other employments listed in Schedule II of the
Act. The Workmen's Compensation (Amendment) Act, 1995, has extended the scope of
the Act to cover workers of newspaper establishments, drivers, cleaners, etc. working in
connection with motor vehicle, workers employed by Indian companies abroad, persons
engaged in spraying or dusting of insecticides or pesticides in agricultural operations,
mechanized harvesting and thrashing, horticultural operations and doing other
mechanical jobs.

4
. The salient features of the Act are as follows:
I. Extent and Application:

The Act extends to whole of India. It is also applicable to the workman recruited by
companies/establishments registered in India and sent for work abroad.

It applies to:

(a) All railway servants not permanently employed in any administrative, district or sub-
divisional office of a railway and not employed in any capacity as is specified in
Schedule II to the Act;

(b) Persons employed in any such capacity as is specified in Schedule II to the Act.
Schedule II includes persons employed in factories, mines, plantations, mechanically
propelled vehicles, construction works and certain other hazardous occupations. In all,
there are 48 employments listed in the Schedule; and

(c) Persons employed in employments added to Schedule II by the State Government in

exercise of the powers conferred on them under section 2(3) of the Act. In this
connection, a statement indicating the additions made so far by different State
Governments is enclosed (Annex-I).

There is no wage limit for coverage under the Act. All the employees employed in
Scheduled employment including the railway servants mentioned at (a) above, are
therefore, covered under the Act.

II. Contingencies in which Compensation is Payable:

Compensation is payable in case of temporary/permanent disablement or death as a

result of an employment injury. The contracting of any disease listed in Schedule III to
the Act is deemed to be an injury by accident.

III. Occupational Diseases:

If a workman employed in the employment specified in Schedule III of the Act contracts
any occupational disease peculiar to that employment he becomes eligible for payment
of compensation under the Act.

5
The occupational diseases should be contracted while in the service of an employer in
the specified employment. The Schedule III divides the occupational diseases in three
parts, namely Part-A, Part-B and Part-C.

For diseases specified in Part-A, there is no qualifying period of employment. In case of

diseases specified in Part-B, a person should have been employed in the specified
employment for a continuous period of not less than six months before the disease is
contracted.

For the diseases specified in Part-C, the qualifying period is specified by the Central
Government. The qualifying period specified for the diseases figuring in Part-C of the
Schedule is as given below:

(a) Pneumoconioses 7 years

(b) Pagassosis 3 years

(c) Byssionesis 7 years

No qualifying period is required to be specified.

(1) Where the monthly wages of a workman exceed two thou sand rupees, his monthly
wages for the purposes of (a) and (b) above shall be deemed to be two thousand rupees
only.

(2) The minimum rates of compensation for permanent disablement and death specified
in the Act is rupees Sixty thousand and fifty thousand respectively. The maximum
amount of compensation works out to about Rs. 2,74,248.00 for permanent disablement
and Rs. 2,28,540.00 for death.

V. Administration:

The Act does not provide for appointment of Inspectors. However, under Section 32 of
the Act, the State Governments/Union Territory Admin istrations have to frame rules to
carry out the purposes of the Act.

The rule making power under the Act was originally vested in the Central Govern ment
and in exercise of these powers, the Workmen’s Compensation Rules, 1924 were
framed. Some of the State Governments have subsequently farmed their own rules under
the Act.

6
In this connection, a statement showing the names of the States/UTs, which have so far
framed necessary rules under the Act, is attached (Annex-II). The remaining States/UTs
are being reminded to expedite the framing of rules under the Act.

VI. Settlement of Claims under the Act:

The claims for compensation broadly fall in three categories, namely (i) uncontested
cases of disablement; (ii) disputed cases of disablement and (iii) fatal cases. The
procedures for settlement of the three types of cases are as given below:

(i) Uncontested Cases:

(a) After a workman has given notice of the accident, the employer is expected to
arrange for medical examination of the workman. It must be free of charge. The medical
Examination will indicate the nature of the disablement.

(b) If the disablement is of temporary nature the employer will pay compensation as half
monthly payments, direct to the workmen.

(c) If the disablement is of permanent nature compensation will be paid in lump sum by
the employer to the workman if he is a male over 18 years of age. In the case of woman
and minors, the employer will deposit the amount of compensation with the Com
missioner, for disbursement.

(d) Where a workman has agreed to accept and has taken a smaller sum than the amount
fixed by the Act his right to bring proceed ings for the balance are protected.

(e) Any agreement with the workman for a lump sum payment must be registered with
the Commissioner by the employer.

(ii) Disputed Cases:

(a) If the employer refuses to pay compensation or does not pay the full amount due, the
workman has to make an application to the Commissioner for Workman’s Compensation
appointed by the State Government or Union Territory.

The application has to be made in Form ‘F* prescribed under the Workman’s
Compensation Rules. An illiterate person can have the application prepared under the
direction of the Commissioner.

(b) A claim for compensation must be preferred before the Commis sioner within 2 years
of the occurrence of the accident or in the case of death within 2 years of the date of
death.

In the case of contracting of a disease the accident is deemed to have occurred on the
first of the day during which the workman was continuously absent in consequence of
the disablement caused by the disease.

7
(iii) Fatal Cases:

(a) The amount of compensation due has to be deposited by the employer with the
Commissioner for Workmen’s Compensation. The Act specifically provided that no
payment made directly by the employer shall be deemed to be a payment of
compensation.

(b) The Commissioner shall distribute the lump sum amount of compensation to the
dependents in such proportion as he may decide.

(c) If the employer does not deposit the compensation the dependent or dependents have
to make an application to the Commissioner in Form ‘G’ prescribed under the
Workmen’s Compensation Rules for the issue of an order to deposit compensation.

VII. Extension of the provisions of the Workmen’s Compensation Act to Hazardous

Employments in Agriculture:

The Workmen’s Compensation Act, 1923 already applies to workers employed in

farming by tractors or other contrivances driven by steam or other mechanical power or
electricity etc.

DEFINITIONS
Compensation
“Compensation" means compensation as provided for by this Act

Dependent: Section 2(d) gives a list of persons who come within the category of
"dependent" of a workman. In ordinary language the dependent of a person is one who
lives on his earnings. Under Section 2 (d) there are three categories of dependents.
1. The following relations are dependents, whether actually so or not-widow, minor
legitimate son, unmarried legitimate daughter, a widowed mother.
2. The following relations come within the category if any were wholly dependent
on the earnings of the deceased workman at the time of his death-a son or daughter who
has attained the age of 18 years and who is infirm.
3. The following relations are dependents if they were wholly or partially so at the
time of the workman's death-widower; parent, other than widowed mother, minor
illegitimate son, unmarried illegitimate daughter or a daughter legitimate or illegitimate
if married and a minor or if widowed and a minor, a minor brother or an unmarried sister
or widowed sister if minor, a widowed daughter-in-law, a minor child from a
predeceased son, a minor child from a predeceased daughter where no parent or child is

8
alive, or a paternal grandparent if no parent of the workman is alive.
Whosoever is dependent ―at the time of death‖ will get the Compensation. It has been
held that the widow of deceased workman would not be disentitled to compensation on
her remarriage as Subsequent event would not affect the right to claim Compensation

Employer: Sec. 2( e) provides that the term Employer "includes" the following: (i)
anybody of persons, whether incorporated or not (ii) any managing agent of an employer
(iii) the legal representatives of a deceased employer, and (iv) any person to whom the
services of a workman are temporarily lent or let out, while the workman is working for
him. Thus the word ‘employer ‘includes not only natural persons, and body of persons,
but artificial and legal person

Workman

Workman means any person (other than a person whose employment is of a casual
nature and who is employed otherwise than for the purposes of the employer’s trade or
business) who is-

a railway servant as defined in section 3 of the Indian Railways Act, 1890 not
permanently employed in any administrative, district or sub-divisional office of a
railway and not employed in any such capacity as is specified in Schedule II, or

employed in any such capacity as is specified in Schedule II,

Whether the contract of employment was made before or after the passing of this Act
and whether such contract is expressed or implied, oral or in writing.

The provisions of the Act have been extended to cooks employed in hotels, restaurants
using power, liquefied petroleum gas or any other mechanical device in the process of
cooking.

Employees entitled to compensation

Every employee (including those employed through a contractor but excluding casual
employees), who is engaged for the purposes of employer’s business and who suffers an
injury in any accident arising out of and in the course of his employment, shall be
entitled for compensation under the Act.

9
Partial Disablement: Disablement, in ordinary language, means loss of capacity
to work or move. Such incapacity may be partial or total and accordingly there are two
types of disablement, partial and total. In the Act both types of disablement are further
subdivided into two classes, temporary and permanent. By Section 2 (g) Temporary
Partial Disablement means such disablement as reduces the earning capacity of a
workman in any employment in which he was engaged at the time of the accident, and
Permanent Partial Disablement means such disablement as reduces his earning capacity
in every employment he was capable of undertaking at that time. In a case of Partial
Disablement it is necessary that (a) there should be. an accident, (b) as a result of the
accident the workman should suffer injury, (c) which should result in permanent
disablement and (d) as a result whereof his earning capacity must have decreased
permanently. In the proportion in which his earning capacity has been decreased
permanently he is entitled to compensation. The medical evidence showing loss of
physical capacity is a relevant factor but it is certainly not the decisive factor as to the
loss of earning capacity. It is the loss of earning capacity that has to be determined. The
type of disablement suffered is to be determined from the facts of the case. But it is
provided that every injury specified in Part II of Schedule I to the Act shall be deemed to
result in permanent partial disablement. The schedule also mentions the percentage loss
of earning capacity which is to be presumed in each such case.
Total Disablement: According to Section 2(1) (g), total disablement means such
disablement, whether of a temporary or permanent nature, as incapacitates a workman
for all work which he was capable of performing at the time of the accident resulting in
such disablement, provided that permanent total disablement shall be deemed to result
from the permanent total loss of the sight of both eyes or from any combination of
injuries specified in Schedule I, where the aggregate percentage of the loss of earning
capacity as specified in that schedule against those injuries, amounts to one hundred per
cent. If a Carpenter‘s left hand above elbow is amputated as a result of a personal injury
suffered in the course of his employment, it is total disablement because a carpenter
cannot work with one hand.

LIABILITY FOR COMPENSATION

In order to attract section 3 (1) of the Act, following three conditions must be fulfilled:
(a) personal injury;
(b) accident; and
(c) arising out of and in the course of employment.
In order to succeed in an application for getting compensation under section 3 of the Act

10
the following points are required to be established:

(1) that the accident must arise out of and in the course of the workman‘s
employment;
(2) there must be causal connection between the injury and the accident and the work
done in

the course of the employment;

(3) the workman has to say that while doing a part of his duty or incidental thereto it
has resulted into an accident.
It is necessary that the workman must be actually working at the time of the injury or the
accident. Therefore, the three factors, that there must be injury, which must be caused in
an accident, it must be caused in the course of and out of the employment must be
established41.
Meaning of the expression “arising out of employment”
(i) The expression ―arising out of employment‖ means that there must be casual
relationship between the accident and the employment. If the accident has occurred on
account of the risk which is an incident of employment, it has to be held that the accident
has arisen out of the employment.
(ii) The words ―out of employment‖ is not limited to mere nature of the
employment, but it (arising out of employment) applies to its nature, its conditions and
obligations and its incidents. An accident which occurs on account of a risk, which is an
incident of employment, then the claim for compensation can succeed provided the
workman has not exposed himself to an added peril by his own imprudent act.
ASSESSMENT OF LOSS OF EARNING CAPACITY BY THE QUALIFIED
MEDICAL PRACTITIONER
The incorporation of words ―assessment of loss of earning capacity by the
qualified medical practitioner‖ in section 4 (1) (c) (ii) have some purpose and it is not a
case of ambiguity at all. So long as there is no provision which enables the
Commissioner to determine the compensation ignoring the medical practitioner‘s report,
there is no question of avoiding it by Commissioner unless he wants a second report
from the Medical Board.

The interference by High Court with the order of recall by Commissioner for Workmen‘s
Compensation on the ground of fraud by workman is unjustified both on fact and the
law.
OCCUPATIONAL DISEASE
Section 3(2) of the Act recognizes that the workman employed in certain types of
industries of occupation risk exposure to certain occupational disease peculiar to that
employment. Employer is liable if a workman contracts any specified occupational

11
disease, while he is in service of employer for at least 6 months.
Employer’s fault is immaterial
The compensation is payable even when there was no fault of employer. In New India
Assurance Co. Ltd. v. Pennamna Kuriern , the Court held that the claim of workmen for
compensation under Motor Vehicle Act was rejected due to negligence of employee, but
compensation was awarded under Workmen‘s Compensation Act on the principle of ‗no
fault‘.
Compensation payable even if workman was careless
Compensation is payable even if it is found that the employee did not take proper
precautions. An employee is not entitled to get compensation only if (a) he was drunk or
had taken drugs (b) he willfully disobeyed orders in respect of safety
(c) he willfully removed safety guards of machines. However, compensation cannot
be denied on the

ground that workman was negligent or careless.

Number of workmen employed is not criteria
In definition of ‗workman ‘in schedule II, in most of the cases, number of workmen
employed is not the criteria. In most of cases, employer will be liable even if just one
workman is employed. The Act applies to a workshop even if it employs less than 20
workmen and is not a ‗factory ‘under Factories Act.
Compensation payable under the Act
Section 4 of the Act prescribes the amount of compensation payable under the provisions
of the Act. Amount of compensation payable to a workman depends on:
1) The nature of the injury caused by accident.
2) The monthly wages of the workman concerned, and
3) The relevant factor for working out lump-sum equivalent of compensation
amount as specified in Schedule IV (as substituted by Amendment Act of 1984).
There is no distinction between an adult and a minor worker with respect to the amount
of compensation. Section 4, provides for compensation for:
1) Death;
2) Permanent total disablement;
3) Permanent partial disablement; and
4) Temporary disablement – total or partial.
1) Compensation for Death: Where death results from an injury, the amount of
compensation shall be equal to 50 percent of the monthly wages of the deceased
workman multiplied by the relevant factor, or Rs. 85,000 whichever is more.
2) Compensation for Permanent Total Disablement: Where permanent total
disablement results from an injury, the amount of compensation payable shall be equal to
60 percent of the monthly wages of the injured workman multiplied by the relevant

12
factor, or Rs. 90,000, whichever is more.
3) Compensation for Permanent Partial Disablement:
i) In the case of an injury specified in Part II of Schedule I, such percentage of the
compensation which would have been payable in the case of permanent total
disablement as is specified therein as being the percentage of the loss of earning capacity
caused by the injury; and in other words, the percentage of compensation payable is
proportionate to the loss of earning capacity permanently caused by the Scheduled
injury. Thus, if the loss of earning capacity caused by an injury specified in Part II of
Schedule I is 30 percent, the amount of compensation shall be 30 percent of
compensation payable in case of permanent total disablement.
ii) In the case of an injury not specified in Schedule I such percentage of the
compensation payable in the case of permanent total disablement as is proportionate to
the loss of earning capacity (as assessed by the qualified medical practitioner)
permanently caused by the injury.
4) Compensation for Temporary Disablement: A half monthly payment of the sum
whether total or partial results equivalent to 25% of monthly wages of the from the
injury workman to be paid in the manner prescribed.

5) Compensation to be Paid when due and Penalty for Default: Section 4A provides
for the payment of compensation and the penalty for default. It provides that
compensation shall be paid as soon as it falls due. Section 4 mandates employer to pay
compensation amount as soon as it falls due to victim or his or her legal heirs.
However, where the employer does not accept the liability for compensation to the
extent claimed, he shall be bound to make provisional payment based on the extent of
liability which he accepts, and such payment shall be deposited with the Commissioner
or made to the workman, as the case may be, without prejudice to the right of workman
to make any further claim.
Delayed payment or deposit of compensation entails interest as well as penalty
Delayed payment or deposit of compensation entails interest @ 6 % p.a. as well as
penalty not exceeding 50% of the amount.
Payment of compensation either to the workman or to deposit it with the Commissioner
Section 4A (2) states that, in the first place, the employer has to accept the extent of his
liability for payment of compensation and on that basis he has to make payment either to
the workman or to deposit with the Commissioner. The requirement of this sub-section is
payment to the workman and not to any other person including his heirs and legal
representatives. It takes within its sweep the case where the workman has not breathed
his last on account of the accident met with by him in the course of his employment.
Sub-section (3) of section 4A is a beneficial provision
It is apparent that sub-section (3) of section 4A is beneficial provision made for the
benefit of the employee, having regard to the scheme of the Act, the provision for
payment of interest and of penalty have been enacted with a view to deter the employer

13
from taking pleas and avoiding payment of the compensation which becomes payable.
Sub-section (3) of section 4A is not applicable for fixing rate of interest in a claim under
the Motor Vehicles Act
Section 4A(3) of the Workmen‘s Compensation Act is not applicable in the matter of
fixing rate of interest in a claim under the Motor Vehicles Act.

Liability of Principal Employer

Principal Employer is liable to pay the amount of compensation for the injury suffered
by workman employed through contractor, if the accident arises as a result of accident
arising out of and during the course of employment.
Payment of Compensation Only Through Commissioner
A Commissioner for Workmen‘s Compensation is appointed by Government. The
compensation must be paid only through the Commissioner in case of death or total
disablement. Any lump sum payment to workman under the Act must be made only
through Commissioner. Direct payment to workman or his dependents is not recognized
at all as compensation. However, in case of death, if employer has paid some
compensation to dependent, that will be refunded to employer. Expenditure made by
employer for medical treatment of workman is not considered for purposes of the
compensation.
Employees Entitled
Every employee, including those employed through contractor, but excluding casual
employees who is engaged for purpose of employer‘s business is eligible. The Act does
not cover employees employed in

clerical capacity. However, workmen in manufacturing processes, mines, ships,

construction, tractor or mechanical appliances in agriculture, circus etc. and also drivers,
watchmen etc. are covered. The compensation is payable if accident arises out of and
during the cause of employment, and such accident causes either death or disablement.
Injury arising out of and during the course of employment. The employee is eligible
to get disablement benefit‘ only when the injury arises out of and during the course of
employment. Similarly, a workman is entitled to get compensation only if accident is
arising out of and during the course of employment‘.
Employer Not To Pay Compensation Directly To the Deceased Heirs and Legal
Representatives No compensation has to be paid in respect of a workman whose injury
has resulted in death except by deposit with the Commissioner and no such payment
made directly by an employer shall be deemed to be a payment of compensation; the
employer should not make any payment of compensation directly to the deceased‘s heirs
and legal representatives or to any of them.

DISTRIBUTION OF COMPENSATION: OBJECT

14
(i) Section 8 of the Act is designed to protect the heirs and legal representatives of
the deceased workman against any kind of exploitation or fraud likely to be practiced on
them by or on behalf of the employer or any third party;52
(ii) Section 8 of the Act lays down the format for quantum of compensation payable
by an employer when an employee meets with an accident. Its object is that
unscrupulous employer should not take advantage of the ignorance of the employee in
making payment of a paltry sum. Therefore the Act safeguards the interest of the
workers and any private payment will not discharge the statutory obligation.
RULES REGARDING THE DISTRIBUTION OF COMPENSATION
Section 8 lays down the following rules regarding the distribution of compensation:
1. Compensation for death and lump sum payment due to a woman or to a person under
a legal disability must be deposited with the Commissioner.
2. But in the case of a deceased workman, an employer may make to any dependent
advances on account of compensation not exceeding an aggregate of one hundred rupees.
So much of such aggregate as does not exceed the compensation payable to that
dependent shall be deducted by the Commissioner from such compensation and repaid to
the employer.
3. Any other sum amounting to not less than Rs. 10 which is payable as compensation
may be deposited with the Commissioner on behalf of the person entitled thereto.
4. The receipt of the Commissioner shall be sufficient discharging respect of any
compensation deposited with him.
5. After the deposit of the compensation, the Commissioner shall deduct there from the
actual cost of the- workman's funeral expenses to an amount not exceeding Rs. 50 and
pay the' same to the person by whom the expenses were incurred.
6. The Commissioner may serve notices calling upon the dependents to appear before
him for the purpose of determining the distribution of the compensation.
7. If the Commissioner is satisfied that no dependent exists, he shall repay the balance
of the money to the employer.
8. The Commissioner shall on application by the employer, furnish a statement showing
in detail all disbursements made.

9. The compensation money is to be distributed among the dependents in such

proportions as the Commissioner thinks fit. The whole of it may be given to one person.
10. Except in the case of a woman or a person under a legal disability, the compensation
money is to be paid Jo the person entitled thereto.
11. Money payable to a woman or a person under a legal dis ability may be invested or
otherwise dealt with as the Commissioner thinks fit. Half-monthly payments payable to a
person under a legal disability may be paid to a dependent of the workman or to any
other person whom the Commissioner thinks best fitted to provide for the welfare of the
workman.

15
12. The orders of the Commissioner regarding the distribution of compensation may
be varied later if necessary.
13. Notice must be given to the parties affected.

DETERMINATION OF LOSS OF EARNING CAPACITY

Loss of earning capacity has to be determined by taking into account the diminution or
destruction of physical capacity as disclosed by the medical evidence and then it has to
be seen to what extent such diminution or destruction should reasonably be taken to have
disabled the affected workman of his class ordinarily performs. The medical evidence as
to physical capacity is an important factor in the assessment of loss of earning capacity,
in the absence of medical evidence by doctors examining the claimant on behalf of either
side, it is difficult to measure the physical disability of the claimant and thus also the
diminution or otherwise of the earning capacity.54
Medical Examination
It is the responsibility of the employer to get for medical examination of the workman
receiving injuries in an accident.55 No doubt section 11 provides that medical
examination can be ordered by the Commissioner under the Workmen‘s
Compensation Act but it has been held that it is the responsibility of the employer to
press for the medical examination of the workman.56
SPECIAL PROVISIONS RELATING TO WORKMEN ABROAD OF COMPANIES
AND MOTOR VEHICLES
(i) in the cease of workmen who are persons recruited by companies registered in
India and working as such abroad, and
(ii) persons sent for work abroad along with motor vehicles registered under the
Motor Vehicles Act, 1988 (59 of 1988) as drivers, helpers, mechanics, cleaners or other
workmen, subject to the following modifications, namely:—
(1) The notice of the accident and the claim for compensation may be served on the
local agent of the company, or the local agent of the owner of the motor vehicle, in the
country of accident, as the case may be.
(2) In the case of death of the workman in respect of whom the provisions of this
section shall apply, the claim for compensation shall be made within one year after the
news of the death has been received by the claimant.
Provided that the Commissioner may entertain any claim for compensation in any case
notwithstanding that the claim had not been preferred in due time as provided in this sub-

Section, if he is satisfied that the failure so to prefer the claim was due to sufficient
cause.
(3) Where an injured workman is discharged or left behind in any part of India or in
any other country any depositions taken by any Judge or Magistrate in that part or by any
Consular Officer in the foreign country and transmitted by the person by whom they are

16
taken to the Central Government or any State Government shall, in any proceedings for
enforcing the claims, be admissible in evidence:
(a) if the deposition is authenticated by the signature of the Judge, Magistrate or
Consular Officer before whom it is made;
(b) if the defendant or the person accused, as the case may be, had an opportunity by
himself or his agent to cross-examine the witness;
(c) if the deposition was made in the course of a criminal proceeding, on proof that
the deposition was made in the presence of the person accused, and it shall not be
necessary in any case to prove the signature or official character of the person appearing
to have signed any such deposition and a certificate by such person that the defendant or
the person accused had an opportunity of cross-examining the witness and that the
deposition if made in a criminal proceeding was made in the presence of the person
accused shall, unless the contrary is proved, be sufficient evidence that he had that
opportunity and that it was so made.
Legislative Mandate Cannot Be Bypassed In Exercise of Supervisory and Extraordinary
Jurisdiction under Article 227 of the Constitution
The Legislative mandate to protect rights of workman cannot be bypassed in exercise of
supervisory and extraordinary jurisdiction under Article 227 of Constitution.

DOCTRINE OF NOTIONAL EXTENSION AND ADDED PERIL

The principal behind compensation to the injured worker under the Employee‘s State
Insurance Act, 1948 and Workmen‘s Compensation Act, 1923 is considered according to
the Doctrine of Notional Extension. This doctrine throws light on the course of
employment of a worker.
Section 3(1) of the Workmen‘s Compensation Act, 1923 provides that the injury must be
caused to workman by an accident arising out of and in the course of employment.
Employment does not necessarily ends when the tool down signal is given or when the
workman leaves the actual workshop. There is a notional extension at both the entry and
exit time and space. As employment may end or may begin not only when the employee
begins to work or leaves his tools but also when he used the means of access and egress
to and from the place of employment. As a rule, the employment of a workman does not
commence until he has reached the place of employment and does not continue when he
has left the place of employment, the journey to and from the place of employment being
excluded. It is now well-settled, however, that this is subject to the theory of notional
extension of the employer‘s premises so as to include an area which the workman passes
and re passes in going to and in leaving the actual place of work. There may be some
reasonable extension in both time and place and a workman may be regarded as in the
course of his employment even though he had not reached or had left his employer‘s
premises. The facts and circumstances of each case will have to be examined very
carefully in order to determine whether the accident arose out of and in the course of the
employment of a workman, keeping in view at all times this theory of notional
extension.

17
Various judgments of Supreme Court and different High Courts have considered the
concept of notional employment and said that if the employee dies due to accident while
going to work place from residence

or while returning from work place to residence, as an accident arising out of and during
the course of employment and as such entitled for compensation in accordance with
provisions of the Act.59 Although this doctrine is not specifically enshrined under the
Employees State Insurance Act or Workmen‘s Compensation Act. Notional extension is
yet to be amended either in Employees State Insurance Act or Workmen‘s Compensation
Act. Under Employees State Insurance, if any accident happens outside the premises
within one kilometer radius from the work premises during reasonable office related
hours it will be considered as employment injury. Same logic will be applicable for
Workmen‘s Compensation Act, 1923.
If accident happens in the company provided vehicle, irrespective of the location and
time it is employment injury for consideration under ESI and WC. The employee cannot
claim wages for the loss of pay period. The employee can claim (or company can give)
compensation under Workmen‘s Compensation Act registering a case with Labour
Commissioner. Any payment made by the employer directly to the employee under any
outside settlement will not be considered as a legal compensation. The payment has to be
made before the labour commissioner and it‘s mandatory. If the employee is covered
under ESI, the employee has to approach ESI for benefit - employer should have given
accident notification to ESI. However, there is no proper test for application of this
doctrine. The scope of such extension depends on the facts and circumstances of each
case.

DOCTRINE OF ADDED PERIL

This doctrine is contrary to the doctrine of notion extension. While the doctrine of
notional extension benefits to the employee, the doctrine of added peril is for the benefit
to the employer. It contemplates that if a workman while doing his masters work
undertakes to do something which he is not ordinarily called upon to do and which
involves extra danger he cannot hold his master liable for the risk arising there from. The
doctrine of added peril is dis-entitled an injured worker from compensation on the
ground that he had taken a greater risk than he had been required by his employer to
assume. Therefore, where the injury is not caused to workman by an accident arising out
of and in the course of employment, he/she is not entitled to get any benefit or
compensation under the Employee‘s State Insurance Act, 1948 and the Workmen‘s
Compensation Act, 1923.

OTHER PROVISIONS REGARDING COMPENSATION

Payment of Compensation
Compensation shall be paid as soon as it falls due. Where the employer does not accept

18
the liability to the extent claimed, he must make provisional payment based on the extent
of liability which he accepts. This is without prejudice to the right of the workman to
make any further claim. If an employer fails to pay the compensation within one month
of the date on which it fell due, the Commissioner may direct the payment of simple
interest thereon at 6%. If the Commissioner thinks that there is no justification for the
delay, he may direct the payment of a further sum, not exceeding 50% of the sum due,
by way of penalty
Protection of Compensation
Save as provided by this Act, no lump sum or half-monthly payment payable- under the
Act shall in any way be capable of being assigned or charged or be liable to attachment
or pass to any person other than' the workman by operation of law, nor shall any claim
be set off against the same61. This section has been framed, to protect as far as possible
the workman from moneylenders.

Notice and Claim

Section 10 of the Act provides that no claim or compensation shall be entertained by the
Commissioner unless notice of the accident has been given in the manner provided as
soon as practicable. The required notice must be served upon the employer or upon any
of several employers or upon any person responsible to the employer for the
management of any branch of the trade or business in which the injured workman was
employed. The notice shall give the name and address of the person injured the cause of
the injury and the date of the accident. The notice may be given by the injured workman
or by anybody on his behalf. It may be served by delivering it or sending it by registered
post.

The State Government may require that any prescribed class of employers shall keep at
the place of employment a notice book (accessible to all workers or persons acting
bonafide on their behalf) where the occurrence of accidents may be recorded. An entry in
the notice book is sufficient notice. The want of notice or any defect or irregularity in it
shall not be a bar to a claim in the following cases:
(1) Where a workman dies or an accident occurring in the premises of the employer
or while working under the control of the employer or of any person employed by him
and the workman died on the premises or without leaving the vicinity of the premises.
(2) If the employer or anyone of several employers or any person responsible to the
employer for the management of any branch of the trade or business in which the injured
workman was employed, had knowledge of the accident from any other source at or
about the time when it occurred.
(3) If the Commissioner is satisfied that the failure to give notice was due to
sufficient cause. A workman is bound to give notice of any accident which is not merely
trivial, and it is not for him to decide whether it is likely to give rise to a claim for
compensation. Section 10 also provides s that a claim for compensation must be

19
preferred before the Commissioner within two years of the occurrence of the accident or
the date of death as the case may be. In case the accident is the contracting of a disease
the date of its occurrence is the first of the days during which the workman was
continuously absent from work in consequence of the disablement caused by the disease.
The Commissioner may entertain a claim filed after the prescribed time, if he is of
opinion that the failure to file it within time, was due to.

Fatal Accident
Section 10 A provides that where a Commissioner receives information that a workman
has died as a result of an accident arising out of and in course of his employment, he may
send by registered post a notice to the workman's employer requiring him to submit,
within thirty days of the service of the notice, a statement in the prescribed form, giving
the circumstances attending the death of the workman, and indicating whether in the
opinion of the employer, he is or is not liable to deposit compensation on account of the
death. If the employer is of opinion that he is liable, he shall make the deposit within
thirty days of the service of the notice. If he is of opinion that he is not liable, he must
state his grounds. In the latter case, the Commissioner, after such enquiry as he may
think fit inform any of the dependents of the .deceased workman that it is open to them
to prefer a claim and may give them such further information as he may think fit. Section
10 B provides that where by any law for the time being in force, notice is required to be
given to any authority by or on behalf of an employer, at any accident resulting in death
or serious bodily injury, the person required to give the notice shall also send a report to
the

Commissioner. The report may be sent alternatively to any other authority prescribed by
the State Government. The State government may extend the scope of the provision
requiring reports of fatal accidents to any class of premises. But Sec. 10 B does not apply
to factories to which the Employees' State Insurance Act applies.

Appeals.-(Sec 30)

(1) An appeal shall lie to the High Court from the following orders of a Commissioner,
namely:--
(a) an order awarding as compensation a lump sum whether by way of redemption of a
half- monthly payment or otherwise or disallowing a claim in full or in part for a lump
sum;
(aa) 1 an order awarding interest or penalty under section 4A;]
(b) an order refusing to allow redemption of a half- monthly payment;
(c) an order providing for the distribution of compensation among the dependents of a
deceased workman, or disallowing any claim of a person alleging himself to be such

20
dependent;
(d) an order allowing or disallowing any claim for the amount of an indemnity under the
provisions of sub- section (2) of section 12; or
(e) an order refusing to register a memorandum of agreement or registering the same or
providing for the registration of the same subject to conditions: Provided that no appeal
shall lie against any order unless a substantial question of law is involved in the appeal
and, in the case of an order other than an order such as is referred to in clause (b), unless
the amount in dispute in the appeal is not less than three hundred rupees: Provided,
further, that no appeal shall lie in any case in which the parties have agreed to abide by
the decision of the Commissioner, or in which the order of the Commissioner gives
effect to an agreement come to by the parties: 2 Provided further that no appeal by an
employer under clause (a) shall lie unless the memorandum of appeal is accompanied by
a certificate by the Commissioner to the effect that the appellant has deposited with him
the amount payable under the order appealed against.]
(2) The period of limitation for an appeal under this section shall be sixty days.
(3) The provisions of section 5 of the Indian Limitation Act, 1908 (9 of 1908 ), shall be
applicable to appeals under this section.

Medical Examination
1. After a workman gives notice of an accident, the employer may, within three
days of the service of the notice, offer to have him examined free of charge by a
qualified medical practitioner.
2. Any workman in receipt of half-monthly payments may also be required to
submit for examination from time to time.
3. The Examination must be in accordance with the rules framed for the purpose.
4. If the workman refuses, without sufficient cause, to submit to the examination or
if he leave the vicinity of the place in which he was employed, his right to receive
compensation shall be suspended during the continuance of the refusal or until his return
to the vicinity and examination.
5. In case 1he workman, who refused medical examination, subsequently dies, the
Commissioner has discretionary powers of direct payment of compensation to the
dependents of the deceased workman.
6. The condition of an injured workman may be aggravated by refusal to submit to
Medical examination or refusal to follow the instructions of the medical examiner or
failure to be attended by or follow the instructions of a qualified medical practitioner.
7. In such a case he would get compensation, not for the aggravated injury, but for
what the injury would have been had he been properly treated.
Remedies of Employer Against Stranger
Where a workman has recovered compensation in respect of any injury caused under
circumstances creating a legal liability of some person over than the person by whom the

21
compensation was paid and any person who has been called on to pay an indemnity
under Section 12 shall be indemnified by the Person so liable to pay damages as
aforesaid.
Insolvency of Employer
The liability to pay workmen's compensation can be insured against. If an employer who
has entered into a contract of insurance for this purpose, becomes insolvent or enters into
a scheme of composition or arrangement or (being a company) is wound up, the rights or
the employer as against the insurer shall be transferred to and vest in. the workman. The
liability to pay compensation to a workman is to be treated as a preferred debt under
insolvency and winding" up for this purpose, the liability to pay half- monthly payments
is to be taken as equivalent to the lump sum payment into which it can be commuted.
This section does not apply where a company is wound up voluntarily merely for the
purpose of reconstruction or amalgamation with another company.
APPOINTMENT OF COMMISSIONERS
The Act provides for appointment of Officers to be known as Commissioners of
Workmen's Compensation. The Commissioners are to determine the liability of any
person to pay compensation (including the question whether a person is or is not a
workman) and the amount or duration of

Compensation (including any question as to the nature or extent of disablement). No

civil court bas jurisdiction to deal with matters which are required to be dealt with by a
Commissioner. Certain powers have been given to the Commissioners, e.g., the power to
call for further deposits. The Commissioner has the powers of a Civil Court.

POWERS OF COMMISSIONERS
The Commissioner shall have all the powers of a Civil Court under the Code of Civil
Procedure, 1908 (5 of 1908), for the purpose of taking evidence on oath (which such
Commissioner is hereby empowered to impose) and of enforcing the attendance of
witnesses and compelling the production of documents and material objects, [and the
Commissioner shall be deemed to be a Civil Court for all the purposes of 66[section 195
and of Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974)]].
Form of application
No application for settlement of any matter by a Commissioner shall be made, if the
parties have been able to settle it by agreement. An application to the Commissioner67
shall be made in the prescribed form according to the rules, and accompanied by a
prescribed fee. The following particulars must be given namely-
(a) concise statement of the circumstances and the relief claimed; (b) in case of claim for
compensation against an employer, the date of service of notice of accident, with its due
time of notice and the reason why notice was not given; (c) the names and addresses of
the parties; and (d) except in case of application by dependent for compensation a

22
concise statement of the matter on which, agreement has and of those on which
agreement has not been come to. If the applicant is illiterate or for any reason is unable
to furnish the required information, the application, if the applicant so desires, shall be
prepared under the direction of the Commissioner.
Power to require from employers statements regarding fatal accidents
Where a Commissioner receives information from any source that a workman has died
as a result of an accident arising out of and in the course of his employment, he may send
by registered post a notice to the workman‘s employer requiring him to submit, within
thirty days of the service of the notice, a statement, in the prescribed form, giving the
circumstances attending the death of the workman, and indicating whether, in the
opinion of the employer, he is or is not liable to deposit compensation on account of the
death.
If the employer is of opinion that he is liable to deposit compensation, he shall make the
deposit within thirty days of the service of the notice. If the employer is of opinion that
he is not liable to deposit compensation, he shall in his statement indicate the grounds on
which he disclaims liability. Where the employer has so disclaimed liability, the
Commissioner, after such inquiry as he may think fit, may inform any of the dependents
of the deceased workman that it is open to the dependents to prefer a claim for
compensation, and may give them such other further information as he may think fit.
Reports of fatal accidents and serious bodily injuries
Where, by any law for the time being in force, notice is required to be given to any
authority, by or on behalf of an employer, of any accident occurring on his premises
which results in death or serious bodily injury, the person required to give the notice
shall, within seven days of the death or serious bodily

injury, send a report to the Commissioner giving the circumstances attending the death
or serious bodily injury, Provided that where the State Government has so prescribed the
person required to give the notice may instead of sending such report to the
Commissioner send it to the authority to whom he is required to give the notice.
Award of compensation by Workmen’s Compensation Commissioner
It is within the competence of the Workmen‘s Compensation Commissioner and he is
also bound to award compensation as prescribed under Schedule 4 read with sec. 4 (1)
(a) of the Act even if heirs of deceased workman claim less compensation than
prescribed under the Act and the Schedule.
Principle of Waive or Acquiescence
Even if the claimant has made a claim of lesser amount than due, his right to claim or the
power of the Commissioner to enhance the compensation is neither waived nor curtailed
since the principle of waive or acquiescence has no application to such type of cases.
Refusal by Commissioner to Record Memorandum of Agreement
Where it appears to the Commissioner that an agreement as to the payment of lump sum
whether by way of redemption of a half-monthly payment or otherwise, or an agreement

23
as to the amount of compensation to a workman or a person under a legal disability
ought not to be registered because of inadequacy of the sum or amount or by reason of
the agreement having been obtained by fraud or undue influence or other improper
means, the Commissioner may refuse to record the memorandum of the agreement. He
may pass such order including an order as to any sum already paid under the agreement,
as he thinks just in the circumstances.
Method of Recording Evidence
The Commissioner shall make a brief memorandum of the substance of the evidence of
every witness as the examination of the witness proceeds, and such memorandum shall
be written and signed by the Commissioner with his own hand and shall form part of the
record:
Provided that, if the Commissioner is prevented from making such memorandum, he
shall record the reason of his inability to do so and shall cause such memorandum to be
made in writing from his dictation and shall sign the same, and such memorandum shall
form part of the record, Provided further that the evidence of any medical witness shall
be taken down as nearly as may be word for word.
Costs
All costs, incidental to any proceedings before a Commissioner shall, subject to rules
made under this Act, be in the discretion of the Commissioner.
Power to submit cases
A Commissioner may, if he thinks fit, submit any question of law for the decision of the
High Court and, if he does so, shall decide the question in conformity with such
decision.
Registration of agreements
Where the amount of any lump sum payable as compensation has been settled by
agreement whether by way of redemption of a half-monthly payment or otherwise, or
where any compensation has been so settled as being payable to a woman, or a person
under a legal disability, a memorandum thereof shall be sent by the employer to the
Commissioner, who shall, on being satisfied as to its genuineness, record

the memorandum in a register in the prescribed manner. avoid such hazardous

enterprises to enter into India and if it cannot, it should take every precaution to avoid
such catastrophic disaster!
Life cannot be valued. Similarly no human being can put any monetary value of his limb
or of any other human being. How does one assess the value of the loss of all faculties
when some victim of an accident loses his mental faculties and lives in vegetative state.
The courts can only grant compensation for the pecuniary and monetary loss caused and
some other expenses, but no court can even attempt to grant compensation for loss of life
or limb. Mainly pecuniary loss has to be assessed. Nominal damages for funeral
expenses, loss of consortium and conventional damages. Long expectation of life is
connected with earning capacity. In its very nature whenever a Tribunal or a Court is

24
required to fix the amount of compensation in cases of accident, it involves some guess
work, some hypothetical consideration, some amount of sympathy linked with the nature
of the disability caused.

UNIT 2

MINIMUM WAGES ACT 1948

OBJECT AND SCOPE OF THE LEGISLATION

The Minimum Wages Act was passed in 1948 and it came into force on 15th March,
1948. The National Commission on Labour has described the passing of the Act as
landmark in the history of labour legislation in the country. The philosophy of the
Minimum Wages Act and its significance in the context of conditions in India, has been
explained by the Supreme Court in Unichoyi v. State of Kerala (A.I.R. 1962 SC 12), as
follows:

“What the Minimum Wages Act purports to achieve is to prevent exploitation of labour
and for that purpose empowers the appropriate Government to take steps to prescribe
minimum rates of wages in the scheduled industries. In an underdeveloped country
which faces the problem of unemployment on a very large scale, it is not unlikely that
labour may offer to work even on starvation wages. The policy of the Act is to prevent
the employment of such sweated labour in interest of general public and so in
prescribing the minimum rates, the capacity of the employer need not to be considered.
What is being prescribed is minimum wage rates which a welfare State assumes every
employer must pay before he employs labour”.

According to its preamble the Minimum Wages Act, 1948, is an Act to provide for fixing
minimum rates of wages in certain employments. The employments are those which are

25
included in the schedule and are referred to as ‘Scheduled Employments’. The Act
extends to whole of India.

Constitutional Validity of The Minimum Wages Act, 1948

India introduced the Minimum Wages Act in 1948, giving both the Central government
and State government jurisdiction in fixing wages. The act is legally non-binding, but
statutory. Payment of wages below the minimum wage rate amounts to forced labour.
Wage Boards are set up to review the industry’s capacity to pay and fix minimum wages
such that they at least cover a family of four’s requirements of calories, shelter, clothing,
education, medical assistance, and entertainment. Under the law, wage rates in scheduled
employments differ across states, sectors, skills, regions and occupations owing to
difference in costs of living, regional industries' capacity to pay, consumption patterns,
etc. Hence, there is no single uniform minimum wage rate across the country and the
structure has become overly complex.

(A) The act is not unreasonable:

It can scarcely be disputed that securing of living wages to labourers which ensure not
only bare physical subsistence but also the maintenance of health and decency is
conducive to the general interest of the public. This is one of the directive principles of
the state policy embodied in Article 43 of the constitution.

Individual employers might find it difficult to carry on the business on the basis of
minimum wages fixed under the Act but this must be not be the entire premise and
reason to strike down the law itself as unreasonable.

“ The restrictions, though they interfere to some extent with the freedom of trade or
business guaranteed under Article 19(1)(g) of the constitution, are reasonable and , being
imposed on the general interest of the general public, are protected by the terms of the
clause (6) of the article 19.” This quote is a part of judgment in the case “
Gulmuhommad Tarasaheb , a bidi factory by its proprietors Shamrao vs State of
Bombay, AIR 1962 Bom 97: AIR1955, Sc33:1963, Ker 115: 1964 Tri 32.

An another important judgment that favours and supports the constitutional Valitity of
the Minimum Wages Act,1948 is , “ V. Unichonoy vs State of Kerala,1962, SC12. This
case raised the same questions which were raised in the case of Gulmuhommad
Tarasaheb vs State of Bombay, AIR 1962 Bom 97”., which were , “that , can a state be
prevented from making any law, in the interest of general public, where it creates
restrictions and interferes to some extent with the freedom of trade or business

26
guaranteed under Article 19(1)(g) , of the Constitution of India, and it was held that , “
Fixation of minimum wages is for preservation of public order , and if no minimum
wage is fixed then it shall lead to arbitrariness by the employers and that shall lead to
clashes of interest between employer and labour which shall cause friction in society”.

The article 14 of the Indian Constitution which relates to equality before the law, it must
be noted that minimum wages are not fixed equally across the whole nation but they vary
from occupation to occupation and industry to industry and from place to place.

The case of Uchinoy vs State of Kerala,1962 SC12, further quotes the following , “ As
regards to the procedure for fixing of the minimum wages, the ‘appropriate government’
has undoubtedly been given very large powers , but it has to take into consideration,
before fixing wages, the advice of the committee if one is appointed on the
representations on proposals made by persons who are likely to be affected thereby. The
various provisions constitute an adequate safeguard against any hasty or capricious
decision by the ‘appropriate government’. In suitable cases, the ‘appropriate
government’ has also been given the power of granting exemptions from the operations
of the provisions of the Act. There is no provision undoubtedly, for a further review of
the decision of the appropriate government, but that itself would not make the provisions
of the act unreasonable”.

(B) The Act doesn't violate Article 14 of the Indian Constitution.

“On a careful examination of the various of the Act and the machinery setup by this Act,
Section 3(3)(iv) neither contravene Article 19(1) of the constitution nor does it infringe
the equal protection clause of the constitution. the Courts have also held that the
constitution of the committees and the Advisory Board did not contravene the statutory
provisions in that behalf prescribed by the legislature”,- this was held in the case of
‘Bhikusa Yamasa Kshatriya vs Sangammar Akola Bidi Kamgar Union”, AIR 1963
SC306. Further, as decided in the case “C.B. Boarding & Lodging, Re(1970) II LLJ 403:
AIR 1970: SC 2042 : 38 FIR I .” , it added to the above mentioned case that , “... nor the
reason that two different procedures are provided for collecting information.” .

(C) Notification fixing different rates of minimum wages for different localities is not
discriminatory.
where the fixation of rates of wages and their revision were manifestly preceded by a
detailed survey and enquiry and the rates were brought into force after a full
consideration of the representations which were made by a section of the employers
concerned, it would be difficult in the circumstances to hold that notification which fixed

27
different rates of minimum wages for different localities was not based on intelligent
differentia having a rational nexus with the object of the Act, and thereby violated article
14. when the Government issued notification improving upon the existing minimum
wages as revised minimum wages disregarding the contrary report of the committee
appointed under Section 5-1(a) ; such notification was bad under the law and was to be
made inoperative.”.

As pointed out by one of the India’s Union Labour and Employment Minister Shri
Mallikarjuna Kharage ;, “The variation of minimum wages between the states is due to
differences in socio-economic and agro-climatic conditions, prices of essential
commodities, paying capacity, productivity and local conditions influencing the wage
rate. The regional disparity in minimum wages is also attributed to the fact that both the
Central and the State Governments are the appropriate Governments to fix, revise and
enforce minimum wages in Scheduled employments in their respective jurisdictions
under the Act”.

Referring the case of “N.M.Wadia Charitable Hospital vs State of Maharashtra , 1993”,

it was decided by the Court that – “ Fixing different minimum wages for different
localities is permitted under the constitution and under labour laws , hence the question
that any provisio of the Minimum Wages Act is in any way against the provisio of
constitution is wrong.

The constitution of India accepts the responsibility of the State to create an economic
order, in which every citizen finds employment and receives a “fair wage”. This made it
necessary to quantify or lay down clear criteria to identify fair wage. Therefore, a
Central Advisory Council, in its first session in November 1948, appointed a tripartite
Committee on Fair Wages. The committee consisted of representatives of employers,
employees, and the Government. Their task was to enquire into and report on the subject
of fair wages to the labour.

(D) Sanctity of The Minimum Wage Act

Supreme Court in three separate rulings, has held that nonpayment of minimum wages is
tantamount to ‘forced labour’ prohibited under Article 23 of the Constitution. The
Supreme Court holds that ‘forced labour’ may arise in several ways, including
“compulsion arising from hunger and poverty, want and destitution”. In Sanjit Roy Vs.
State of Rajasthan (1983), the Supreme Court held that the Exemption Act in so far as it
excluded the applicability of the Minimum Wages Act 1948 to the workmen employed
in famine relief work is “clearly violative” of Article 23. Thus even public works
ostensibly initiated by the government for the sole purpose of providing employment are
subject to the Minimum Wage Act.

28
Drawing on the Supreme Court rulings, Andhra High Court set aside the Government of
India (GoI) notification mandating that prevailing state minimum wage be paid. This has
been underscored in the legal opinion provided by Additional Solicitor General, Ms.
Indira Jaising, to the Central Employment Guarantee Council (CEGC) Working Group
on Wages where she made it clear that using Section 6(1) to allow a payment of less than
minimum wage in MGNREGA works will amount to forced labour. 15 eminent jurists
and lawyers of India too have asked Government of India to immediately revoke its
unconstitutional notification and ensure that minimum wages are paid to all workers in
India.

The Act and the judgments are in favour of equality provided under Article 14 of the
Constitution and a judgment in the case namely, “Engineering Workers Union /vs/ Union
of India(1994) I .LLJSup.942Bom.”, pronounces the judgment that , “The provision
under Section 3(2)(A), that minimum rate of wages in scheduled employment fixed or
revised, shall not apply to the employees during the period of adjudication, violated
equality clause of Article 14 and hence that section is void”.

In the view of the Directive Principles of State Policy as contained in the Article 43 of
the Indian Constitution, it is beyond doubt that securing of living wages to labourers
which ensures not only bare physical subsistence but also the maintenance of health and
decency, it is conducive to the general interest of the public.

The Minimum wages Act was passed to fulfill the aspiration as contained in the
following resolution:-
“ If the labourers are to be secured the enjoyment of minimum wages and they are to be
protected against exploitation by their employers, it is absolutely necessary that restraints
should be imposed upon the freedom of contract and such restrictions cannot be said to
be unreasonable. On the other hand, the cannot be heard to complain if they are
compelled to pay any minimum wages to their labourers even though the labourers , on
account of their poverty and helplessness, are willing to work even at lesser wages”.

In the case of “PETITIONER: BIJAY COTTON MILLS LTD./Vs./

RESPONDENT: THE STATE OF AJMER.DATE OF JUDGMENT:

14/October /1954”,
The Constitutional validity of this Act was attacked on the ground that it violates the
guarantee of freedom of trade or business etc., envisaged by Article 19(1)(g) of the
Indian Constitution, (Constitution of India, Article. 19(1)(g), 19(6)-Minimum Wages Act
(XI of 1948), sections. 3,4 and 5-Appropriate

29
Government-Fixing minimum rate of wages-Whether offends fundamental rights
guaranteed under Art. 19(1)(g).)

, it was held that , the restrictions imposed upon the freedom of contract by the fixation
of minimum rates of wages though they interfere to some extent with the freedom of
trade or business guaranteed under Art. 19(1)(g) of the Constitution are not unreasonable
and being imposed in the interest of general public and with a view to carry out one of
the Directive Principles of State Policy as embodied in Art. 43 of the Constitution are
protected by the terms of el. (6) of Art. 19. It can thus be said that the provisions of the
Act are bound to affect harshly and even oppressively a particular class of employers,
who for purely economic reasons are unable to pay the minimum rate of wages fixed by
the authorities , but have absolutely dishonest intention of exploiting their workers.

The fact that employer might find it difficult to carry on business on settled principle
cannot be a sufficient reason for striking down the law itself as unreasonable. The
poverty of labourers is also a factor to be taken into consideration while determining the
question whether a particular provision is in the interest of the general public.

Salient features of the Minimum Wages Act, 1948

1. The Act applied to certain employments (listed in the Schedule). Both the
governments (Central and State) have to declare minimum wages for their sphere. The
appropriate government may add any employment to the list if there are 1000 workers
are working in that state.
2. Minimum wage means all remuneration in cash includes HRA (declared minimum
wage + special allowance).
3. Kinds of fixing of Minimum wages : (a) a minimum time rate, (b) a minimum piece
rate, (c) a guaranteed time rate, (d) a time rate or a piece rate applicable to overtime rate.
4. Classes of fixing minimum rates of wages : (a) different scheduled employments; (b)
different classes of work in the same scheduled employment; (c) adults, adolescents,
children and apprentices; and (d) different localities (zone wise).
5. Norms to be consider for fixing minimum wage :
 Standard family of four members – three consumption units (2 adults + 2 children) for
one earner.
 Minimum food requirement should be calculated on the basis of a net intake of
calories.
 Clothing a total of 72 yards;
 The rent corresponding to the minimum area (one room)

30
 Other routine expenditure 20% of the total minimum wage.
 Social expenditure – further constitute 25% of the total minimum wage.
6. Period to revise minimum wages by appropriate government is five years.
7. The appropriate Government shall declare special allowance after each six months
(i.e. 1st April and 1st October of every year).
8. In case of not paying minimum wage a claim can be made under section 20 before the
labour authority who can make of order of payment of 10 times of difference amount.
9. Not paying Minimum wages is an offence punishable up to six months’ imprisonment
or with fine up to Rs. 500 or with both.
10. Contracting out : Any contract or agreement whereby an employee either
relinquishes or reduces his right to a minimum rate of wages or any privilege or
concession accruing to him under this Act shall be null and void.
11. Regional Labour Commissioner (C) is the authority declared by Central Government
to decide claims (less than minimum wages) made under section 20 of the Act. Assistant
Commissioner of Labour is authority in Gujarat.

DEFINITIONS

Employer [Section 2(e)]

“Employer” means any person who employs, whether directly or through another person,
or whether on behalf of himself or any other person, one or more employees in any
scheduled employment in respect of which minimum rates of wages have been fixed
under this Act, and includes, except, in sub-section (3) of Section 26 –

(i) in a factory where there is carried on any scheduled employment in respect of

which minimum rates of wages have been fixed under this Act, any person named under
clause (f) of sub-section (1) of Section 7 of the Factories Act, 1948, as manager of the
factory;

(ii) in any scheduled employment under the control of any Government in India in
respect of which minimum rates of wages have been fixed under this Act, the person or
authority appointed by such Government for the supervision and control of employees or
where no person of authority is so appointed, the Head of the Department;

(iii) in any scheduled employment under any local authority in respect of which

31
minimum rates of wages have been fixed under this Act the person appointed by such
authority for the supervision and control of employees or where no person is so
appointed, the Chief Executive Officer of the local authority;

(iv) in any other case where there is carried on any scheduled employment in respect
of which minimum rates of wages have been fixed under this Act, any person
responsible to the owner of the supervision and control of the employees or for the
payment of wages.

The definitions of “employees” and “employer” are quite wide. Person who engages
workers through another like a contractor would also be an employer (1998 LLJ I Bom.
629). It was held in Nathu Ram Shukla v. State of Madhya Pradesh A.I.R. 1960 M.P.
174 that if minimum wages have not been fixed for any branch of work of any scheduled
employment, the person employing workers in such branch is not an employer with the
meaning of the Act. Similarly, in case of Loknath Nathu Lal v. State of Madhya Pradesh
A.I.R. 1960 M.P. 181 an out-worker who prepared goods at his residence, and then
supplied them to his employer was held as employee for the purpose of this Act.

Cost of Living Index

"cost of living index number", in relation to employees in any scheduled employment in

respect of which minimum rates of wages have been fixed, means the index number
ascertained and declared by the competent authority by notification in the Official
Gazette to be the cost of living index number applicable to employees in such
employment;

Scheduled employment [Section 2(g)]

“Scheduled employment” means an employment specified in the Schedule or any

process or branch of work forming part of such employment.

Note: The schedule is divided into two parts namely, Part I and Part II. When originally
enacted Part I of Schedule had 12 entries. Part II relates to employment in agriculture. It
was realised that it would be necessary to fix minimum wages in many more
employments to be identified in course of time. Accordingly, powers were given to
appropriate Government to add employments to the Schedule by

following the procedure laid down in Section 21 of the Act. As a result, the State

32
Government and Central Government have made several additions to the Schedule and it
differs from State to State.

Wages [Section 2(h)]

“Wages” means all remunerations capable of being expressed in terms of money, which
would, if the terms of the contract of employment, express of implied, were fulfilled, be
payable to a person employed in respect of his employment or of work done in such
employment and includes house rent allowance but does not include:

(i) the value of:

(a) any house accommodation, supply of light, water medical;

(b) any other amenity or any service excluded by general or social order of the
appropriate Government;

(ii) contribution by the employer to any Pension Fund or Provides Fund or under any
scheme of social insurance;

(iii) any traveling allowance or the value of any traveling concession;

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

(v) any gratuity payable on discharge.

Types of Wages

Living Wages:
Living wages means the wages that may be sufficient to provide for the bare necessities
as well as certain amenities for the employee. It means the level of wages that may be
sufficient to provide for the bare necessities and such amenities that are considered
necessary for the well-being of the employee and his family members in accordance with
his social status.

Article 43 of the Constitution of India States that “The state shall endeavour to secure by

33
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….”

The term Living Wages has been defined as -The Fair Wage Committee Report, “The
living wage should enable the male earner to provide himself and his family not merely
the base essentials of food, clothing and shelter but a measure of frugal comfort
including education for the children, protection against ill health, requirements of
essential social needs, and measures of insurance against the more import misfortunes
against old age.”

Justice Higgives, “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 Wage must provide not only for the bare necessities, such as—food,
clothes and shelter, but also for some comforts and amenities estimated by current
human standards such as—travelling, health, education of children, social needs, old age
and recreation etc

Minimum Wages:
According to Fair Wages Committee, “Minimum Wages should provide not only for the
bare necessities of a worker. It should also provide for the maintenance of efficiency of
the worker. From this point of view, minimum wages must be sufficient to provide for
all requirements of education, health and other essential amenities.

Minimum Wages means the minimum payment to worker so that he may be able in
providing for basic needs for himself and his family members and to maintain his
working efficiency only. Some other scholars are of the view that minimum wages
should also provide for minimum education, medical facilities and other amenities.
According to them, minimum wages should ensure a minimum standard of living
considering the health, efficiency and well-being of the worker.

What should be the amount of fair wages is a question for which no specific answer can
be given. It depends upon the economic, social and geographical factors of the country.
Besides, it depends upon the size and paying capacity of the enterprise also.

However, it can be said that minimum wages is the amount that is enough for providing
basic needs of the worker and his family and to enable him to maintain his efficiency.

34
Objects of Minimum Wages:

Important objectives of minimum wages are as under:

1. To maintain the efficiency of workers, particularly in the industries where the workers
do not get fair wages.

2. To check the unhealthy competition among entrepreneurs.

3. To discourage the strikes, lock-outs and industrial disturbances so that industrial peace
may be maintained

4. To check the exploitation of workers by the entrepreneurs.

5. To increase the efficiency of workers.

6. To protect the interests of workers, particularly when the workers are not organized.

7. To strengthen labour unions.

8. To help the workers in maintaining and increasing their standard of living.

9. To check the unhealthy competition among the workers.

10. To provide economic and social justice to the workers.

11. To increase the productivity of workers.

12. To improve the management system.

. Fair Wages:
It is very difficult to give a precise definition of Fair Wages because it varies from
country to country and from time to time. Therefore, it is possible that an amount of
wages that is fair for one country at one time may not be fair for another country or for
next time. Therefore, fair wages can be determined only after considering the specific
circumstances of the industry for which the wages are to be determined.

35
The term ‘Fair Wages’ has been defined as under:

Encyclopedia of Social Sciences, “Fair wages mean the remuneration which is paid to
the workers for the jobs requiring equal efficiency, difficulty and pains.”

Prof. Marshall, “Rate of wages in a particular industry can be regarded as fair wages
only when it is almost equal to the wages which is paid in other industries for the works
which are of the same caliber and equally difficult and require almost equal efficiency
and training.”

Prof. Pigou, “Fair wages is the wages which is paid at the rate which is being paid to the
workers of same status in the enterprises of the same type and of near-by areas”.

On the basis of analytical study of above definitions, it can be concluded that Fair Wages
is the amount of wages that may provide the basic needs and amenities to the workers
according to their social status.

Fair Wage is more than minimum wages. Fair Wage is determined after considering
several factors such as the wages paid for similar work in other trades and industries
requiring same amount of ability and adjustment, productivity of the labour and paying
capacity of the industry. Fair Wage is determined between the lower and upper limits.
The lower limit of wage is the minimum wage and the upper limit is the capacity of the
industry to pay.

Norms for the Fixation of Minimum Wages:

The 15th Indian Labour Conference considered the question of minimum wage and
adopted a resolution, the relevant portion of which is reproduced below:

With regard to the minimum wage fixation it was agreed that the minimum wage was
need based” and should ensure the minimum human need of the industrial worker,
irrespective of any other considerations. To calculate the minimum wage, the committee
accepted the following norms and recommended that they should guide all wage fixing
authorities, including minimum wage committees, wage boards and adjudicators etc.

(i) In calculating the minimum wage, the standard of working class family should be
taken to consist of three consumption units for earners; the earnings of women, children
and adolescents should be disregarded.

36
(ii) Minimum food requirements should be calculated on the basis of a net intake of 2700
calories, as recommended by Dr. Aykroyd for an average Indian adult of moderate
activity.

(iii) Clothing requirements should be estimated at per capita consumption of 18 yards per
annum which should give for the average worker’s family four, a total of 72 yards.

(iv) In respect of housing, the norm should be the minimum rent charged by government
in any area for houses provided under the Subsidised Industrial Housing Scheme for low
income groups.

(v) Fuel, lighting and other, “Miscellaneous” items of expenditure should constitute 20
per cent of the total minimum wage.

While agreeing to these guidelines for fixation of minimum wage for industrial workers
throughout the country, the committee recognized the existence of instances where
difficulties might be experienced in implementing these recommendations. Wherever the
minimum wage fixed went below the recommendations, it would be incumbent on the
authorities concerned to justify the circumstances which prevented them from adherence
to the norms laid down.

The resolution has been considered as ‘important, as for the first time, it has tried to give
correctness to the whole concept of minimum wage. The Wage Boards were asked to
keep in view the norms laid down in the resolution while making their recommendations.

However, the committee on the functioning of the system of wage boards reported that
the majority of wage boards had not found it feasible to fix the “need-based minimum”
of the wage because of one or more of the following reasons:

(i) It would be beyond the capacity of the industry to pay;

(ii) It would result in excessive and abrupt increase in wages;

(iii) It would unduly affect the relativity of wages among industries in the same region;
and

(iv) It would be extravagance at the cost of the consumer on whom the burden of
increase wages and salaries would fall.

37
It should, however, be noted that the committee on Fair Wages categorically stated that
an industry which was incapable of paying the minimum wage had no right to exist. The
Committee was of the definite view that for fixing minimum wages no regard should be
paid to the capacity of an industry to pay and it should be based solely on the
requirements of worker and his family.

On the other hand, the upper limit of the fair wage, according to the committee on fair
wages (C F W) “is equally set by what may be called the capacity of the industry to
pay.” It is, thus, obvious that the Committee is of the view that, while fixing the
minimum wage no regard should be paid to the capacity of the industry to pay and it
should be solely based on the requirements of the worker and his family. But, the upper
limit of fair wages should be based solely on the capacity of the industry to pay.

But, the National Commission on Labour was of the view that capacity to pay of the
industry should be taken into account, while fixing fair wage, “the need-based minimum
wage is also a level of fair wage and represents a wage higher than the minimum
obtaining at present in many industries, though it is only the lower reaches of the fair
wage. We, therefore, hold that in fixing the need-based minimum, the capacity to pay
will have to be taken into account.

FIXATION OF MINIMUM RATES OF WAGES [Section 3(1)(a)]

Section 3 lays down that the ‘appropriate Government’ shall fix the minimum rates of
wages, payable to employees in an employment specified in Part I and Part ii of the
Schedule, and in an employment added to either part by notification under Section 27. In
case of the employments specified in Part II of the Schedule, the minimum rates of
wages may not be fixed for the entire State. Parts of the State may be left out altogether.
In the case of an employment specified in Part I, the minimum rates of wages must be
fixed for the entire State, no parts of the State being omitted. The rates to be fixed need
not be uniform. Different rates can be fixed for different zones or localities: [Basti Ram
v. State of A.P. A.I.R. 1969, (A.P.) 227].

Notwithstanding the provisions of Section 3(1)(a), the “appropriate Government” may

not fix minimum rates of wages in respect of any scheduled employment in which less
than 1000 employees in the whole State are engaged. But when it comes to its
knowledge after a finding that this number has increased to 1,000 or more in such
employment, it shall fix minimum wage rate.

REVISION OF MINIMUM WAGES

38
According to Section 3(1)(b), the ‘appropriate Government’ may review at such intervals
as it may thing fit, such intervals not exceeding five years, and revise the minimum rate
of wages, if necessary. This means that minimum wages can be revised earlier than five
years also.

MANNER OF FIXATION/REVISION OF MINIMUM WAGES

According to Section 3(2), the ‘appropriate Government’ may fix minimum rate of
wages for:

(a) time work, known as a Minimum Time Rate;

(b) piece work, known as a Minimum Piece Rate;

(c) a “Guaranteed Time Rate” for those employed in piece work for the purpose of
securing to such employees a minimum rate of wages on a time work basis; (This is
intended to meet a situation where operation of minimum piece rates fixed by the
appropriate Government may result in a worker earning less than the minimum wage),
and

(d) a “Over Time Rate” i.e. minimum rate whether a time rate or a piece rate to apply
in substitution for the minimum rate which would otherwise be applicable in respect of
overtime work done by employee.

Section 3(3) provides that different minimum rates of wages may be fixed for –

(i) different scheduled employments;

(ii) different classes of work in the same scheduled employments;

(iii) adults, adolescents, children and apprentices;

(iv) different localities

Further, minimum rates of wages may be fixed by any one or more of the following
wage periods, namely:

39
(i) by the hour,

(ii) by the day,

(iii) by the month, or

(iv) by such other large wage periods as may be prescribed;

and where such rates are fixed by the day or by the month, the manner of calculating
wages for month or for a day as the case may be, may be indicated.

However, where wage period has been fixed in accordance with the Payment of Wages
Act, 1986 vide Section 4 thereof, minimum wages shall be fixed in accordance therewith
[Section 3(3)].

MINIMUM RATE OF WAGES (Section 4)

According to Section 4 of the Act, any minimum rate of wages fixed or revised by the
appropriate Government under Section 3 may consist of –

(i) a basic rate of wages and a special allowance at a rate to be adjusted, at such
intervals and in such manner as the appropriate Government may direct to accord as
nearly as practicable with the variation in the cost of living index number applicable to
such worker (hereinafter referred to as the cost of living allowance); or

(ii) a basic rate of wages or without the cost of living allowance and the cash value of
the concession in respect of supplies of essential commodities at concessional rates
where so authorized; or

(iii) an all inclusive rate allowing for the basic rate, the cost of living allowance and
the cash value of the concessions, if any.

The cost of living allowance and the cash value of the concessions in respect of supplies
essential commodities at concessional rates shall be computed by the competent
authority at such intervals and in accordance with such directions specified or given by
the appropriate Government.

PROCEDURE FOR FIXING AND REVISING MINIMUM WAGES (Section 5)

40
In fixing minimum rates of wages in respect of any scheduled employment for the first
time or in revising minimum rates of wages, the appropriate Government can follow
either of the two methods described below.

First Method [Section 5(1)(a)]

This method is known as the ‘Committee Method’. The appropriate Government may
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. After
considering the advise of the committee or committees, the appropriate Government
shall, by notification in the Official Gazette fix or revise the minimum rates of wages.

The wage rates shall come into force from such date as may be specified in the
notification. If no date is specified, wage rates shall come into force on the expiry of
three months from the date of the issue of the notification.

Note: It was held in Edward Mills Co. v. State of Ajmer (1955) A.I.R. SC, that
Committee appointed under

Section 5 is only an advisory body and that Government is not bound to accept its
recommendations. As regards composition of the Committee, Section 9 of the Act lays
down that it shall consist of persons to be nominated by the appropriate Government
representing employers and employee in the scheduled employment, who shall be equal
in number and independent persons not exceeding 1/3rd of its total number

of members. One of such independent persons shall be appointed as the Chairman of the
Committee by the appropriate Government.

Second Method [Section 5(1)(b)]

The method is known as the ‘Notification Method’. When fixing minimum wages under
Section 5(1)(b), the appropriate Government shall by notification, in the Official Gazette
publish its proposals for the information of persons likely to be affected thereby and
specify a date not less than 2 months from the date of notification, on which the
proposals will be taken into consideration.

The representations received will be considered by the appropriate Government. It will

also consult the Advisory Board constituted under Section 7 and thereafter fix or revise

41
the minimum rates of wages by notification in the Official Gazette. The new wage rates
shall come into force from such date as may be specified in the notification.

However, if no date is specified, the notification shall come into force on expiry of three
months from the date of its issue. Minimum wage rates can be revised with retrospective
effect. [1996 II LLJ 267 Kar.].

FIXING HOURS FOR A NORMAL WORKING DAY (Section 13)

Fixing of minimum rates of wages without reference to working hours may not achieve
the purpose for which wages are fixed. Thus, by virtue of Section 13 the appropriate
Government may –

(a) fix the number of work which shall constitute a normal working day, inclusive of
one or more specified intervals;

(b) provide for a day of rest in every period of seven days which shall be allowed to
all employees or to any specified class of employees and for the payment of
remuneration in respect of such day of rest;

(c) provide for payment of work on a day of rest at a rate not less than the overtime
rate.

The above stated provision shall apply to following classes of employees only to such
extent and subject to such conditions as may be prescribed:

(a) Employees engaged on urgent work, or in any emergency, which could not have
been foreseen or prevented;

(b) Employees engaged in work in the nature of preparatory or complementary work

which must necessarily be carried on outside the limits laid down for the general
working in the employment concerned;

(c) Employees whose employment is essentially intermittent;

(d) Employees engaged in any work which for technical reasons, has to be completed
before the duty is over;

42
(e) Employees engaged in any work which could not be carried on except at times
dependent on the irregular action of natural forces.

For the purpose of clause (c) employment of an employee is essentially intermittent

when it is declared to be so by the appropriate Government on ground that the daily
hours of the employee, or if these be no daily hours of duty as such for the employee, the
hours of duty, normally includes period of inaction during which the employee may be
on duty but is not called upon to display either physical activity or sustained attention.

There is correlation between minimum rates of wages and hours of work. Minimum
wages are to be fixed on basis of standard normal working hours, namely 48 hours a
week; Benode Bihari Shah v. State of W.B. 1976 Lab I.C. 523 (Cal).

PAYMENT OF OVERTIME (Section 14)

Section 14 provides that when an employee, whose minimum rate of wages is fixed
under this Act by the hours, the day or by such longer wage period as may be prescribed,
works on any day in excess of the number of hours constituting a normal working day,
the employer shall pay him for every hour or part of an hour so worked in excess at the
overtime rate fixed under this Act or under any other law of the appropriate Government
for the time being in force whichever is higher. Payment for overtime work can be
claimed only by the employees who are getting minimum rate of wages under the Act
and not by those getting better wages. (1998 LLJ I SC 815).

WAGES OF A WORKER WHO WORKS LESS THAN NORMAL WORKING DAY

(Section 15)

Where the rate of wages has been fixed under the Act by the day for an employee and if
he works on any day on which he employed for a period less than the requisite number
of hours constituting a normal working day, he shall be entitled to receive wages for that
day as if he had worked for a full working day.

Provided that he shall not receive wages for full normal working day –

(i) if his failure to work is caused by his unwillingness to work and not by omission
of the employer to provide him with work, and

(ii) such other cases and circumstances as may be prescribed.

43
MINIMUM TIME – RATE WAGES FOR PIECE WORK (Section 17)

Where an employee is engaged in work on piece work for which minimum time rate and
not a minimum piece rate has been fixed, wages shall be paid in terms of Section 17 of
the Act at minimum time rate.

AUTHORITY AND CLAIMS (Section 20-21)

Under Section 20(1) of the Act, the appropriate Government, may appoint any of the
following as an authority to hear and decide for any specified area any claims arising out
of payment of less than the minimum rate of wages or in respect of the payment of
remuneration for the days of rest or of wages at the rate of overtime work:

(a) any Commissioner for Workmen’s Compensation; or

(b) any officer of the Central Government exercising functions as Labour

Commissioner for any region; or

(c) any officer of the State Government not below the rank of Labour Commissioner;
or

(d) any other officer with experience as a Judge of a Civil Court or as the Stipendiary
Magistrate.

The authority so appointed shall have jurisdiction to hear and decide claim arising out of
payment of less than the minimum rates of wages or in respect of the payment
remuneration for days of rest or for work done on such days or for payment of overtime.

The provisions of Section 20(1) are attracted only if there exists a disputed between the
employer and the employee as to the rates of wages. Where no such dispute exists
between the employer and employees and the only question is whether a particular
payment at the agreed rate in respect of minimum wages, overtime or work on off days is
due to an employee or not, the appropriate remedy is provided by the Payment of Wages
Act, 1936.

44
PAYMENT OF WAGES ACT 1936 OBJECT AND SCOPE
The main object of the Act is to eliminate all malpractices by laying down the time and
mode of payment of wages as well as securing that the workers are paid their wages at
regular intervals, without any unauthorized deductions. In order to enlarge its scope and
provide for more effective enforcement the Act empowering the Government to enhance
the ceiling by notification in future. The Act extends to the whole of India.

Definitions

Employed person” includes the legal representative of a deceased employed person.

{Section 2(ia)}

“Employer” includes the legal representative of a deceased employer. {Section 2(ib)}

“Factory” means a factory as defined in clause (m) of section 2 of the Factories Act 1948
(63 of 1948) and includes any place to which the provisions of that Act have been
applied under sub-section (1) of section 85 thereof. {Section 2(ic)}

“Industrial or other establishment” means any –

(a) tramway service or motor transport service engaged in carrying passengers or

goods or both by road for hire or reward;

(aa) air transport service other than such service belonging to or exclusively employed in
the military naval or air forces of the Union or the Civil Aviation Department of the
Government of India;

(b) dock wharf or jetty;

(c) inland vessel mechanically propelled;

(d) mine quarry or oil-field;

(e) plantation;

(f) workshop or other establish establishment in which articles are produced adapted

45
or manufactured with a view to their use transport or sale;

(g) establishment in which any work relating to the construction development or

maintenance of buildings roads bridges or canals or relating to operations connected with
navigation irrigation or to the supply of water or relating to the generation transmission
and distribution of electricity or any other form of power is being carried on;

(h) any other establishment or class of establishments which the Appropriate

Government may having regard to the nature thereof the need for protection of persons
employed therein and other relevant circumstances specify by notification in the Official
Gazette. {Section 2(ii)}
Wages
“Wages” means all remuneration (whether by way of salary allowances or otherwise)
expressed in terms of money or capable of being so expressed which would if the terms
of employment express or implied were fulfilled by payable to a person employed in
respect of his employment or of work done in such employment and includes –

(a) Any remuneration payable under any award or settlement between the parties or
order of a court;

(b) Any remuneration to which the person employed is entitled in respect of

overtime work or holidays or any leave period;

(c) Any additional remuneration payable under the terms of employment (whether
called a bonus or by any other name);

(d) any sum which by reason of the termination of 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 within which the payment is to be made;

(e) any sum to which the person employed is entitled under any scheme framed
under any law for the time being in force, but does not include –

(1) any bonus (whether under a scheme of profit sharing or otherwise) which does
not form part of the remuneration payable under the terms of employment or which is
not payable under any award or settlement between the parties or order of a court;

(2) the value of any house-accommodation or of the supply of light water medical

46
attendance or other amenity or of any service excluded from the computation of wages
by a general or special order of Appropriate Government;

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

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

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

(6) any gratuity payable on the termination of employment in cases other than those
specified in sub-clause (d). {Section 2(vi)}

Responsibility for payment of wages

Section 3 provides that every employer shall be responsible for the payment to persons
employed by him of all wages required to be paid under the Act. However, in the case of
persons employed in factories if a person has been named as the manager of the factory;
in the case of persons employed in industrial or other establishments if there is a person
responsible to the employer for the supervision and control of the industrial or other
establishments; in the case of persons employed upon railways if the employer is the
railway administration and the railway administration has nominated a person in this
behalf for the local area concerned; in the case of persons employed in the work of
contractor, a person designated by such contractor who is directly under his charge; and
in any other case, a person designated by the employer as a person responsible for
complying with the provisions of the Act, the person so named, the person responsible to
the employer, the person so nominated or the person so designated, as the case may be,
shall be responsible for such payment. It may be noted that as per section 2(ia)
“employer” includes the legal representative of a deceased employer.

Fixation of wage period : As per section 4 of the Act every person responsible for the
payment of wages shall fix wage-periods in respect of which such wages shall be
payable. No wage-period shall exceed one month.

Time of payment of wages

Section 5 specifies the time payment of wages. The wages of every person employed
upon or in any railway factory or industrial or other establishment upon or in which less
than one thousand persons are employed, shall be paid before the expiry of the seventh

47
day.

The wages of every person employed upon or in any other railway factory or industrial
or other establishment shall be paid before the expiry of the tenth day, after the last day
of the wage-period in respect of which the wages are payable. However, in the case of
persons employed on a dock wharf or jetty or in a mine the balance of wages found due
on completion of the final tonnage account of the ship or wagons loaded or unloaded as
the case may be shall be paid before the expiry of the seventh day from the day of such
completion.

Where the employment of any person is terminated by or on behalf of the employer the
wages earned by him shall be paid before the expiry of the second working day from the
day on which his employment is terminated.

However, the employment of any person in an establishment is terminated due to the

closure of the establishment for any reason other than a weekly or other recognised
holiday the wages earned by him shall be paid before the expiry of the second day from
the day on which his employment is so terminated.

The Appropriate Government may by general or special order exempt to such extent and
subject to such conditions as may be specified in the order the person responsible for the
payment of wages to persons employed upon any railway or to persons employed as
daily-rated workers in the Public Works Department of the Appropriate Government
from the operation of this section in respect of wages of any such persons or class of
such persons. All payments of wages shall be made on a working day.

Wages to be paid in current coin or currency notes

As per section 6 of the Act, all wages shall be paid in current coin or currency notes or in
both. However, the employer may, after obtaining the written authorisation of the
employed person, pay him the wages either by cheque or by crediting the wages in his
bank account.

Deductions from the wages of an employee

Section 7 of the Act allows deductions from the wages of an employee on the account of
the following:- (i) fines; (ii) absence from duty; (iii) damage to or loss of goods
expressly entrusted to the employee; (iv) housing accommodation and amenities
provided by the employer; (v) recovery of advances or adjustment of overpayments of
wages; (vi) recovery of loans made from any fund constituted for the welfare of labour in

48
accordance with the rules approved by the State Government, and the interest due in
respect thereof; (vii) subscriptions to and for repayment of advances from any provident
fund;(viii) income-tax; (ix) payments to co-operative societies approved by the State
Government or to a scheme of insurance maintained by the Indian Post Office; (x)
deductions made with the written authorization of the employee for payment of any
premium on his life insurance policy or purchase of securities.

Fines

Section 8 deals with fines. It provides that :

(1) No fine shall be imposed on any employed person save in respect of such acts
and omissions on his part as the employer with the previous approval of the State
Government or of the prescribed authority may have specified by notice under sub-
section (2).

(2) A notice specifying such acts and omissions shall be exhibited in the prescribed
manner on the premises in which the employment carried on or in the case of persons
employed upon a railway (otherwise than in a factory) at the prescribed place or places.

(3) No fine shall be imposed on any employed person until he has been given an
opportunity of showing cause against the fine or otherwise than in accordance with such
procedure as may be prescribed for the imposition of fines.

(4) The total amount of fine which may be imposed in any one wage-period on any
employed person shall not exceed an amount equal to three per cent of the wages
payable to him in respect of that wage period.

(5) No fine shall be imposed on any employed person who is under the age of fifteen
years.

(6) No fine imposed on any employed person shall be recovered from him by
instalments or after the expiry of ninety days from the day on which it was imposed.

(7) Every fine shall be deemed to have been imposed on the day of the act or
omission in respect of which it was imposed.

(8) All fines and all realisations thereof shall be recorded in a register to be kept by
the person responsible for the payment of wages under section 3 in such form as may be

49
prescribed; and all such realisations shall be applied only to such purposes beneficial to
the persons employed in the factory or establishment as are approved by the prescribed
authority.

It may be noted that when the persons employed upon or in any railway, factory or
industrial or other establishment are part only of a staff employed under the same
management all such realisations may be credited to a common fund maintained for the
staff as a whole provided that the fund shall be applied only to such purposes as are
approved by the prescribed authority.

Maintenance of registers and records

Section 13A provides that every employer shall maintain such registers and records
giving such particulars of persons employed by him, the work performed by them, the
wages paid to them, the deductions made from their wages, the receipts given by them
and such other particulars in prescribed form. Every register and record required to be
maintained shall be preserved for a period of three years after the date of the last entry
made therein.
Authority to Hear Claims
Claims arising out of deductions from wages or delay in payment of wages and penalty
for malicious or vexatious claims

Section 15 deals with claims arising out of deductions from wages or delay in payment
of wages and penalty for malicious or vexatious claims. It provides that the appropriate
Government may, by notification in the Official Gazette, appoint-

(a) any Commissioner for Workmen’s Compensation; or

(b) any officer of the Central Government exercising functions as,-

(i) Regional Labour Commissioner; or

(ii) Assistant Labour Commissioner with at least two years’ experience; or

(c) any officer of the State Government not below the rank of Assistant Labour
Commissioner with at least two years’ experience; or

(d) a presiding officer of any Labour Court or Industrial Tribunal, constituted under
the Industrial Disputes Act, 1947 or under any corresponding law relating to the

50
investigation and settlement of industrial disputes in force in the State; or

(e) any other officer with experience as a Judge of a Civil Court or a Judicial
Magistrate, as the authority to hear and decide for any specified area all claims arising
out of deductions from the wages, or delay in payment of the wages, of persons
employed or paid in that area, including all matters incidental to such claims.

Provided that where the appropriate Government considers it necessary so to do, it may
appoint more than one authority for any specified area and may, by general or special
order, provide for the distribution or allocation of work to be performed by them under
this Act.

Sub-section (2) of section 15 provides that where contrary to the provisions of the Act
any deduction has been made from the wages of an employed person or any payment of
wages has been delayed such person himself or any legal practitioner or any official of a
registered trade union authorised in writing to act on his behalf or any Inspector under
this Act or any other person acting with the permission of the authority appointed under
subsection (1) may apply to such authority for a direction under sub-section (3) :

However, every such application shall be presented within twelve months from the date
on which the deduction from the wages was made or from the date on which the
payment of the wages was due to be made as the case may be. Any application may be
admitted after the said period of twelve months when the applicant satisfies the authority
that he had sufficient cause for not making the application within such period.

As per sub-section (3) when any application under sub-section (2) is entertained, the
authority shall hear the applicant and the employer or other person responsible for the
payment of wages under section 3, or give them an opportunity of being heard, and, after
such further enquiry, if any, as may be necessary, may, without prejudice to any other
penalty to which such employer or other person is liable under this Act, direct the refund
to the employed person of the amount deducted, or the payment of the delayed wages,
together with the payment of such compensation as the authority may think fit, not
exceeding ten times the amount deducted in the former case and not exceeding three
thousand rupees but not less than one thousand five hundred rupees in the latter, and
even if the amount deducted or delayed wages are paid before the disposal of the
application, direct the payment of such compensation, as the authority may think fit, not
exceeding two thousand rupees.

A claim under the Act shall be disposed of as far as practicable within a period of three
months from the date of registration of the claim by the authority. It may be noted that
the period of three months may be extended if both parties to the dispute agree for any

51
bona fide reason to be recorded by the authority that

the said period of three months may be extended to such period as may be necessary to
dispose of the application in a just manner.

No direction for the payment of compensation shall be made in the case of delayed
wages if the authority is satisfied that the delay was due to-

(a) a bona fide error or bona fide dispute as to the amount payable to the employed
person; or

(b) the occurrence of an emergency, or the existence of exceptional circumstances,

the person responsible for the payment of the wages was unable, in spite of exercising
reasonable diligence; or

(c) the failure of the employed person to apply for or accept payment.

As per sub-section (4) if the authority hearing an application under this section is
satisfied that the application was either malicious or vexatious the authority may direct
that a penalty not exceeding three hundred seventy five Rupees be paid to the employer
or other person responsible for the payment of wages by the person presenting the
application; or in any case in which compensation is directed to be paid under sub-
section (3) the applicant ought not to have been compelled to seek redress under this
section the authority may direct that a penalty not exceeding three hundred seventy five
Rupees be paid to the State Government by the employer or other person responsible for
the payment of wages.

52
 UNIT 3

THE INDUSTRIAL EMPLOYMENT (STANDING ORDER) ACT.1946

The Industrial Employment (Standing Orders) Act (herein after referred as “the Act or said
Act) was enacted in the year 1946 and the scope of extent includes whole of India. The said
Act is applicable to all the industrial establishments which employ or had employed
hundred or more workmen during a year. However, the Appropriate Government after
issuing notification in its official gazette extend the provisions of this act to any industrial
employment employing less than hundred workers or the number specified in the notice
during a year.

The main object of the Act is to bring in uniform terms and conditions of service in various
industrial establishments. Such uniform terms of employment ensure to the employer that
once such terms are implemented, the employed workmen cannot change them to their

53
detriment or prejudice of their rights and interest. Such Standing Orders or terms of services
act as express or written condition or statutory guidelines for the aspiring workmen to
accept the same before joining the industrial establishment. The Standing orders also
function as a bulwark to maintain peace and stability in the industrial establishment and
promotes efficiency and productivity.

Standing orders are thus, a set of rules pertaining to the subjects mentioned in the schedule
to the Act. The Standing orders are to be certified from a Certifying Officer. A Certifying
Officer is either a Labour Commissioner or a Regional Labour Commissioner and also
includes any other Officer appointed by the appropriate government through notification in
the official gazette.

Procedure for Certification & Adoption of Standing Order

As soon as the said Act becomes applicable to the industrial establishment, the employer of
that establishment is required to submit to the Certifying Officer five draft copies of the
standing orders which he intends to adopt for his establishment. Such draft standing orders
sent by the employer for approval must adhere to the model standing orders and must
contain all the aspects mentioned in the schedule which are applicable to his industrial
establishment. The draft must be attached with the details of the number of workmen
employed in the industrial establishment along with the names of the trade union, if any.

The draft standing orders shall stand certified if they are in compliance with the relevant
provisions stated in the schedule to this Act or they must adhere to the other provisions of
this Act. The onus lies upon the Certifying officer to check the reasonableness and
justifiability of the draft standing orders before approving. The standing orders must comply
with the provisions of this Act and if any such specification is found unreasonable by the
Certifying Officer, he must deny certifying the same.

The Certifying Officer, after receiving the draft standing orders from the employer, shall
forward a copy of the same to the trade union (if any) or to the workmen in the prescribed
manner along with a notice to raise objections, if any. Such objections are to be brought
forward within 15 days from the date of receipt of the notice. Further, the Certifying Officer
shall consider the objections raised and provide an opportunity of being heard to the
workmen and employer and then shall proceed to carry out necessary amendments, after
which he shall certify the Standing orders. The copies of the certified standing orders must
be sent to both the employer and employees within 7 days of such certification. The
Certifying Officer is empowered to maintain a register under Section 8 of this Act, wherein
he can maintain a record of all the certified standing orders certified by him and he is also
entitled to furnish a copy of the same to any person upon payment of prescribed fees.

The Act authorizes the employer or trade union or workmen to oppose to the certified
standing orders and make an appeal before the appellate authority within 30 days from the

54
date on which the copies are forwarded to the employer and workmen. The decisions made
by the appellate authority shall be final. The appellate authority may either confirm the
standing orders certified by the Certifying Officer or amend the same and send the copies of
it within 7 days from the date of its order to the employer or the workmen representative.
However, it is pertinent to note that the appellate authority is not empowered to set aside the
order of the Certifying Officer, it can give assent or modify the standing orders.

The standing orders shall come into force or be in operation on expiry of 30 days from the
date of sending of authenticated copies to the employer or the workmen. In case of any
appeal to the appellate authority, then upon expiry of seven days from the date on which the
copies are sent to the appellate authority.

he employer shall post the standing orders in prominent letter in English as well as the
language acquainted by majority of the workmen. Such standing orders shall be posted on
special boards maintained at the entrance or near by the entrance where it can be viewed by
the majority of the workmen.

The Act prohibits the employer to modify the standing orders after the certification of the
same. However, it is pertinent to note that the workmen are entitled to apply for
modification and there is no limit on number
subsistence allowance shall be referred to the Labour Court constituted under the Industrial
Disputes Act, 1947.

Further, the said Act states that, in case of any query or question regarding interpretation or
implementation of the standing orders certified under this Act, the same shall be referred to
the Labour Court by the employer or workmen representative or trade union. The Labour
Court, upon giving equal opportunities of being heard shall pass an order to that effect. Such
an order passed by the Labour Court shall be final and binding on the parties.

The Act provides for temporary application of the model standing orders to the industrial
establishment. The model standing orders shall be applicable to the industrial establishment
from the date on which the said Act has become applicable to the particular industrial
establishment till the date of the receipt of the certified standing orders. In case, there are no
certified standing orders, then the model standing orders are deemed to be applicable to that
industrial establishment.

The Certifying Officer and the appellate authority shall have the powers of the civil Court
for the purpose of accepting evidence, governing oaths, implementing attendance of
witnesses etc.

The Act confers penalties upon the employer in case of failure on behalf of the employer to
send draft standing orders or to carry out modifications of the standing orders in

55
contravention to the provisions of this Act. Such employer shall be penalised with a fine
which may extend to five thousand rupees and further fine of rupees two hundred in case of
continuing the offence.

Employee State Insurance Act 1948

INTRODUCTION

The Employees’ State Insurance Act and the scheme framed there under constitute
an important social security programme and protection to industrial workers and
their families who are exposed to the risks of sickness, employment injury and
occupational diseases and in the case of family
employees to maternity.
The promulgation of Employees’ State Insurance Act, 1948(ESI Act), by the Indian
Parliament is the first major legislation on Social Security for workers in the
independent India. It is a time when the industry was still in a budding stage and the
country was heavily dependent on an assortment of imported goods from the
developed or fast developing countries. The deployment of manpower in
manufacturing processes was limited to a few selected industries such as jute,
textile, chemicals and the like. The legislation on creation and development of a
fool- proof multi-dimensional Social Security system, when the country’s economy
was in a very fledgling state was obviously a remarkable gesture towards the socio
economic improvement of a workface though limited in number and geographic
distribution. India, notwithstanding, thus, took the lead in providing organized
social protection to the working class through statutory provisions.

The ESI Act 1948 encompasses certain health related eventualities that the workers
are generally exposed to such as sickness, maternity, temporary or permanent
disablement, occupational diseases or death due to employment injury, resulting in
loss of wages or earning capacity-total or partial. Social security provisions made in
the Act to counterbalance or negate the resulting physical or financial distress in
such contingencies, are thus, aimed at upholding human dignity in times of crises
through protection from deprivation, destitution and social degradation while
enabling the society the retention and continuity of a socially useful and productive
manpower.
The Employees State Insurance Scheme is implemented in the state in accordance
with the provisions of the ESI Act 1948. The scheme is administered by a duly
constituted corporate body called the Employees State Insurance Corporation, as
provided under the ESI Act. Employees State Insurance Scheme of India is an
integrated social security scheme, tailored to provide protection to workers in the
organised sector and their dependents in contingencies such as sickness, maternity,
death and disablement due to an employment injury or occupational disease, as
Medical Benefit, Sickness Benefit, Maternity Benefit, Disablement Benefit,

56
Dependent’s Benefit, Extended Sickness Benefit, Enhanced Sickness Benefit,
Temporary Disablement Benefit, Permanent Disablement Benefit and Funeral
Benefit.

PREAMBLE AND OBJECT.

The Employees’ State Insurance Act is the social security legislation and was
enacted to combat various risks and contingencies sustained by workers while
serving in a factory or establishment. It is thus entitled to promote the general
welfare of the worker. Hence, the enactment demands a liberal interpretation in
order to achieve the legislative purpose and object. The Act is designed to provide
cash benefit in the case of sickness, maternity and employment injury, payment in
the form of pension to the dependants of workers who died of employment injury
and medical benefit to workers. It introduces the contributory principle against such
contingencies, provides protection against sickness, offers lumpsum payments by
pension in the case of dependents benefit and places the liability for claims on a
statutory Organization. However, because of the vastness of the country and the
considerable preparatory work involved, such as provision of building, equipment
and personnel, the scheme could not be implemented throughout the country
simultaneously. Plan for its phased extension to different places was drawn up. The
Act also envisages transitory provisions requiring payment of special contribution
by all employers in order to meet the objection of employers in covered areas
that the ESI. levy would affect their competitive position adversely. The
contribution of employers in the implemented areas was fixed at a rate higher than
that of employers in non-implemented area. The scheme came into operation in
Kanpur and Delhi on 24th February, 1952.

ADMINISTRATION

The Employees’ State Insurance Scheme is administered by a corporate body called

the Employees’ State Insurance Corporation (ESIC), which has members
representing employers, employees, the Central Government, State Governments,
medical profession and the Parliament. A Standing Committee constituted from
among the members of the Corporation acts as the Executive Body for the
administration of the Scheme. The Corporation is the highest policy making and
decision taking authority under the ESI Act and oversees the functioning of the
Scheme. The Corporation is to meet at least twice a year, to conduct business as
may be required to regulate the functioning of the Scheme. There is also a
Medical Benefit Council to advise the Corporation on matters connected with the
provision of Medical Benefit. The Medical care under the Scheme is
administered by State Governments, which have the statutory responsibility in this
regard, except in Delhi State and Noida area of U.P. Besides, the ESI Hospital,

57
K.K. Nagar at Chennai, ESI Hospital, and Thakurpukur at Calcutta and ESI
Hospital at Nagda are also being run directly by the Corporation.
The ESI. Act is treated as a landmark in the history of social security or in the
process of evolution of social security schemes. A statutory body-the Employees’
State Insurance Corporation has been created under the Act to administer and to
execute its provisions. The ESI. Corporation is the premier social security
organization in the South East Asia. It came into being on 1st
October, 1948 under the authority of the ESI. Act. Its composition is of tripartite
character with representation of all possible interests (Employers, Employees and
the State). Its origin is on the idea of ‘Public Corporation’ with the object of
autonomy allowing reasonable State intervention and to avoid bureaucratic
procedure and the delays. The Corporation has the social purposes as distinguished
from commercial one where the corporations are formed to manage industries.
The special feature of the Corporation is that it enjoys autonomy in the
administration of its affairs and at the same time subject to the general control and
supervision of Central Government as to keep up the social purpose of the Act and
also to co-ordinate the scheme with broad public policy on social security. In its
administrative nature and organizational structure it is akin to public corporation. In
its actual administration it adopts the principle of democratic control and
decentralization of authority. In organisation it has hierarchical structure with line
and staff agencies.

ORGANIZATIONAL STRUCTURE&COMPOSITION OF ESI. CORPORATION

The ESI. Corporation is principally policy formulating body and governs the wide
range of activities under the Act. Apart from its being an autonomous, it is a body
corporate with perpetual succession. It is composed of the representatives of
various interests and has various organs constituted on the principle of
decentralization of authority and centralization of coordinating mechanism, for
the effective implementation of various provisions of the Act.
The representatives in the Corporation are drawn from the Central Government, the
State Government, and the members of Lok sabha, medical profession, the
employers and the employees. Prior to the amendment of 1966 the Chairman and
Vice-Chairman were generally the Union Labour Minister and the Union Health
Ministers respectively. Now any person can be nominated for these posts by the
Central Government. Its organs and functionaries are the Standing Committee,
Medical Benefit Council, the Director General, Insurance Commissioners, Medical
Commissioner, Chief Accounts Officer and the Actuary. In order to achieve
decentralization Regional Boards and local committees can also be constituted.
The Standing Committee, Medical Benefit Council and the Regional Boards help
the Corporation in taking policy decisions with regards to framing of regulation,
measures for promoting health and the enhancing of the scales of benefits. The
other functionaries are instrumental in carrying out effectively the day to day

58
administration and translating the policy decisions of the Corporation into practice.
The powers and functions of the each organ and functionary are well defined and
detailed out in the relevant provisions of the Act and consequent rules and
regulations for the purpose.

FUNCTIONS AND POWERS OF THE ESI. CORPORATION

The Corporation is primarily concerned with policy formulation and effective

implementation of various provisions of the ESI. Act. For this it has the following
functions and the powers:
(1) The Corporation may promote measures for the improvement of health
and welfare of the insured persons, for the rehabilitation and re –
employment of insured persons who have been disabled or injured, and
may incur for these purposes expenditure from the funds of the
Corporation within such limits as may be prescribed by the Central
Government. This power has been given to the Corporation under Section
19 to step up the benefits for the insured persons. This is very important in
today’s context as the vital problem of the persons injured or disabled by
accident or occupational disease is not compensation, but the
rehabilitation and the re-employment
(2) To extend medical benefit to the families of insured persons. To settle
disputes arising between Corporation and State Government and the
proportionate share of the cost of medical benefits which is proposed to be
referred to arbitration. The Corporation shall prepare budget estimates
showing the probable receipts and expenditure for the following year. The
budget shall be submitted to the Central Government.
(3) To make any proposal to set up hospitals and their maintenance by the
Corporation itself in agreement with the State Government. To make any
proposal to grant exemption from one or more provisions by the Act by
the State Government. The Corporation shall submit correct accounts of
the income and expenditure in such form and in such manner as may be
prescribed by the Central Government.
(4) Section 97 empowers the Corporation to make regulations consistent with
the provisions of ESI. Act. There are various matters on which such
regulations can be framed, but important ones arising among them are as
follows:
(i) Time, place and the procedure to be followed for the meetings
of the Corporation, Standing Committee and Medical Benefit
Council;
(ii) Details of the payment of contributions certification of
sickness, eligibility for cash benefits, communication of any
payment and the form of claims;
(iii) The circumstances in which an employee in receipt of

59
 disablement benefit may be dismissed, discharged reduced or
otherwise provided;
(iv) Certification and notice of pregnancy;
(v) Relaxation of conditions;
(vi) Returns to be submitted and records to be maintained by
various parties;
(vii) Duties and powers of inspectors and other officers and servants
of the Corporation;
(viii) Method of recruitment and the service conditions of the
employees of Corporation;
(ix) Remission of contributions to the Corporation;
(x) The constitution of Medical Boards and the Medical Appeal
Tribunals;
(xi) Penalties for breach of regulations;
(xii) Any other matter relevant under the Act.
(xiii) The Corporation shall receive contribution from the employers,
shall determine contribution in certain cases and also ensure
the regular and effective recovery.

THE STANDING COMMITTEE

The Standing Committee is constituted with three members representing central

and state governments and three elected from among employers and employees and
others one each from paramedical professionals. Director General, ESI Corporation
is also an ex-officio member of the Standing Committee. The Committee holds its
quarterly meetings. The Standing Committee is vested with powers to administer
the affairs of the Corporation, exercise any of the powers and perform any
functions of the Corporation subject to the overall control and supervision of the
Corporation. Standing Committee is also empowered to constitute any non-
statutory sub- committees for specific purposes as the need be.

Powers of the Standing Committee

Subject to the general superintendence and control of the Corporation the Standing
Committee shall administer the affairs of the Corporation and may exercise any of
the powers and perform any of the functions of the Corporation. The Standing
Committee shall submit for the consideration and decision of the Corporation all
such cases and matters as may be specified in the regulations made in this behalf.
The Standing Committee may in its discretion submit any other case or matter for
the decision of the Corporation.

60
THE MEDICAL BENEFIT COUNCIL

Medical Benefit Council is an advisory body on matters related to the

administration of medical benefit under the ESI Scheme. The council is constituted
by the Central Govt. for a specific term and consists of:-
1. Director General, Central Health Services(ex-officio Chairman)

2. Deputy Director General/Addl. Director General, Central Health Services.

3. One member each representing respective State Govts.

4. Three members each representing employees, employers

and the medical profession.
5. Medical Commissioner, ESI Corporation(ex-officio member)

The ESI Act empowers the Medical Benefit Council to advise the Corporation on
matters related to developments and improvements in the medical service delivery
system. The constitution of the Corporation, Standing Committee and the Medical
Benefit Council are dealt with in Section 4, 8 and 10 of the ESI Act, 1948
respectively. Powers of the Standing Committee and duties of the MBC are given
under Section 18 and 22 respectively.

Duties of Medical Benefit Council

The Medical Benefit Council shall -

a) Advise the Corporation and the Standing Committee on matters relating to the
administration of medical benefit the certification for purposes of the grant of
benefits and other connected matters;
(b) Have such powers and duties of investigation as may be prescribed in
relation to complaints against medical practitioners in connection with
medical treatment and attendance; and
(c) Perform such other duties in connection with medical treatment and
attendance as may be specified in the regulations.

CONTRIBUTION

Contribution is the amount payable to the Corporation by the principal employer in

respect of an employee and comprises the amount payable by the employee and the

61
employer. The scheme is primarily funded by contribution raised from insured
employees and their employers in the implemented areas as a small but specified
percentage of wages payable to such employees.
The rate of contribution as of now
is:- Employees’ contribution-1.75
percent of the wages Employers’
contribution-4.75 percent of the wages
Total-6.50 percent of the wages

It is obligatory on the part of the employer to calculate and remit ESI Contribution
comprising of employers' share 4.75% plus employees' share of 1.75% which is
payable on or before 21st of the following month, to the month to which the salary
relates. If the employee is drawing upto Rs.50/- as daily average wage, he is exempt
from the payment of his share of contribution. The employer is however to pay
employer's share of 4.75% of the salary received/receivable by the employee. The
state government bears one-eighth share of expenditure on medical benefits within
per capita ceiling of Rs.1000/- per I.P. family per annum.

Contribution period and benefit period

There are two contribution periods each of six months duration and two
corresponding benefit periods also of six months duration as in under.
Contribution period Corresponding Cash Benefit period

1st April to 30th Sept. 1st January to 30th June of the

following year. 1st Oct. to 31st March 1st July to 31st December of the
year following

Benefits

The Employees’ State Insurance Act, 1948 is one of the most important laws that provide
social security. It contains six kinds of ESI benefits that injured employees can avail. All of
these benefits must arise in the course of employment in order to enable workers to access
them.

Section 46 of the Act describes all benefits that an injured employee can avail. It is important
to note that a worker can avail these benefits in the course of employment only.
For example, if a worker suffers an injury, this injury must be an employment injury only.
Section 2(8) says that an employment injury is a personal injury that an employee suffers.
Such injury must be the result of an accident or occupational disease that arises out of
employment.

Apart from benefits related to injuries and sickness, some ESI benefits can arise after
maternity as well. The ESI Corporation provides some compensation and financial support to

62
employees during these periods.
The following are some ESI benefits that employees can avail under the ESI Act
 Medical benefit
 Sickness benefit
 Maternity benefit
 Dependants benefits
 Disablement benefits
 Other benefits
1. Medical benefit
Every insurable employee under the Act gets medical benefits the day he becomes an
employee. This benefit extends to his family members as well. This medical benefit has no
ceiling in terms of expenditure on healthcare.
Hence, the ESI Corporation takes care of all treatment expenses as per its rules.
Apart from general healthcare benefits, retired and permanently disabled workers also get an
annual premium of Rs. 120. This benefit extends to the spouses of the workers as well.
Learn more about the Employees State Insurance Act, 1948 here in detail
2. Sickness benefit
Insurable employees under the Act can draw some cash compensation in case they fall sick.
This compensation is generally 70% of their wages during the period of sickness for a
maximum of 91 days in a year.
In order to avail this sickness benefit, a worker must pay his contribution for 78 days out of 6
months. Hence, he cannot seek this benefit if he contributes for less than 78 days.
3. Maternity benefit
All female insurable employees can avail maternity benefits under the Act in cases of
pregnancy or confinement.
Confinement, in this case, means labour which results in the birth of a living child. It can also
mean birth after 26 weeks of pregnancy, whether the child is living or not.
This maternity benefit is generally payable to employees for three months. It may, however,
be extendable for one more month depending on medical advice.
The compensation amount in such cases is the full wage amount of the employees. This is
payable only if the employee makes a contribution for 70 days in the preceding year.
4. Dependants benefits
ESI benefits extend not only to the employees but to their dependents as well in case of the
employee’s death. Such death, however, must occur in the course of an employment injury or
an occupational hazard.
This compensation is generally 90% of the dead employee’s wages in the form of
monthly payments.
5. Disablement benefits
In case an employee suffers some disablement due to an employment injury, he can seek
disablement benefits. Such disablement may be either temporary or permanent.
In the case of temporary disablement, the compensation is generally 90% of the wage amount
until the disablement continues. The employee can claim this benefit irrespective of whether
or not he paid his contribution.
As far as permanent disablement is concerned, the compensation amount depends on 0n the
extent of the injury. The Medical Board first determines the extent of the employee’s loss of

63
earning capacity and then decides it.
6. Other benefits
Apart from these five basic ESI benefits, an insurable employee can avail the following
miscellaneous benefits also:
a) Funeral expenses: The dependents of a deceased employee receive Rs. 10,000 to perform
his last rites.
b) Vocational/physical rehabilitation: This is generally payable to permanently disabled
employees. They can avail of this benefit for undergoing vocational and physical
rehabilitation.
c) Old age medical care: This is payable for employees retiring on superannuation or under
VRS/ERS. Even persons who leave employment after suffering a permanent injury and their
spouses can avail this benefit. The compensation amount here is generally Rs. 120 per month.

Employee Insurance Court

Section 75 in The Employees' State Insurance Act, 1948 deals with Employee Insurance
Court.
Matters to be decided by Employees' Insurance Court.
(1) If any question or dispute arises as to—
(a) Whether any person is an employee within the meaning of this Act or whether he is liable
to pay the employee's contribution, or
(b) the rate of wages or average daily wages of an employee for the purposes of this Act, or
(c) the rate of contribution payable by a principal employer in respect of any employee, or
(d) the person who is or was the principal employer in respect of any employee, or
(e) the right of any person to any benefit and as to the amount and duration thereof, or
192 [(ee) any direction issued by the Corporation under section 55A on a review of any
payment of dependants' benefit, or] 193 [***]
(g) any other matter which is in dispute between a principal employer and the Corporation, or
between a principal employer and an immediate employer or between a person and the
Corporation or between an employee and a principal or immediate employer, in respect of
any contribution or benefit or other dues payable or recoverable under this Act, 194 [or any
other matter required to be or which may be decided by the Employees' Insurance Court
under this Act], such question or dispute 195 [subject to the provisions of sub-section (2A)]
shall be decided by the Employees' Insurance Court in accordance with the provisions of this
Act.
(2) 195 [Subject to the provisions of sub-section (2A), the following claims] shall be decided
by the Employees' Insurance Court, namely:—
(a) claim for the recovery of contributions from the principal employer;
(b) claim by a principal employer to recover contributions from any immediate employer;
196 [***]
(d) claim against a principal employer under section 68;
(e) claim under section 70 for the recovery of the value or amount of the benefits received by
a person when he is not lawfully entitled thereto; and
(f) any claim for the recovery of any benefit admissible under this Act.
197 [(2A) If in any proceedings before the Employees' Insurance Court a disablement

64
question arises and the decision of a medical board or a medical appeal tribunal has not been
obtained on the same and the decision of such question is necessary for the determination of
the claim or question before the Employees' Insurance Court, that Court shall direct the
Corporation to have the question decided by this Act and shall thereafter proceed with the
determination of the claim or question before it in accordance with the decision of the
medical board or the medical appeal tribunal, as the case may be, except where an appeal has
been filed before the Employees' Insurance Court under sub-section (2) of section 54A in
which case the Employees' Insurance Court may itself determine all the issues arising before
it.]
198 [(2B) No matter which is in dispute between a principal employer and the Corporation in
respect of any contribution or any other dues shall be raised by the principal employer in the
Employees' Insurance Court unless he has deposited with the Court fifty per cent. of the
amount due from him as claimed by the Corporation: Provided that the Court may, for
reasons to be recorded in writing, waive or reduce the amount to be deposited under this sub-
section.]
(3) No Civil Court shall have jurisdiction to decide or deal with any question or dispute as
aforesaid or to adjudicate on any liability which by or under this Act is to be decided by 199
[a medical board, or by a medical appeal tribunal or by the Employees' Insurance Court].

UNIT 4

EQUAL REMUNERATION ACT, 1976

65
CHAPTER – I PRELIMINARY
1. Short title, extend and commencement. -- (1) This Act may be called the Equal
Remuneration Act, 1976.

(2) It extends to the whole of India.

(3) It shall come into force on such date, not being later than three years from the passing
of this Act, as the Central Government may, by notification, appoint and different dates may
be appointed for different establishments or employments.

2. Definitions. -- In this Act, unless the context otherwise requires, --

(a) “appropriate Government” means –

(i) in relation to any employment carried on by or under the authority of the Central
Government or a railway administration, or in relation to a banking company, a mine, oilfield
or major port or any corporation established by or under a Central Act, the Central
Government, and

(ii) in relation to any other employment, the State Government;

(b) “commencement of this Act” means, in relation to an establishment or employment,

the date on which this Act comes into force in respect of that establishment or employment;
“employer” has the meaning assigned to it in clause (f) of Section 2 of the Payment of
Gratuity Act, 1972 (39 of 1972);
(c) “man” and “woman” mean male and female human beings, respectively, of any age;

(d) “notification” means a notification published in the Official Gazette;

(e) “prescribed” means prescribed by rules made under this Act;
(f) “remuneration” means the basic wage or salary, and any additional emoluments
whatsoever payable, either in cash or in kind, to a person employed in respect of employment
or work done in such employment, if the terms of the contract of employment, express or
implied, were fulfilled;
(g) “same work or work of a similar nature” means work in respect of which the skill,
effort and responsibility required are the same, when performed under similar working
conditions, by a man or a woman and the differences, if any, between the skill, effort and
responsibility required of a man and those required of a woman are not of practical
importance in relation to the terms and conditions of employment;
(h) “worker” means a worker in any establishment or employment in respect of which
this Act has come into force;
(i) words and expressions used in this Act and not defined but defined in the Industrial
Disputes Act, 1947 (14 of 1947), shall have the meaning respectively assigned to them in that
Act.

66
3. Act to have overriding effect. -- The provisions of this Act shall have effect
notwithstanding anything inconsistent therewith contained in any other law or in the terms of
any award, agreement or contract of service, whether made before or after the
commencement of this Act, or in any instrument having effect under any law for the time
being in force.

CHAPTER – II

PAYMENT OF REMUNERATION AT EQUAL RATES TO MEN AND WOMEN

WORKERS AND OTHER MATTERS

4. Duty of employer to pay equal remuneration to men and women workers for same
work or work of a similar nature. -- (1) No employer shall pay to any worker, employed by
him in an establishment or employment, remuneration, whether payable in cash or in kind, at
rates less favourable than those at which remuneration is paid by him to the workers of the
opposite sex in such establishment or employment for performing the same work or work of a
similar nature.

(2) No employer shall, for the purpose of complying with the provisions of sub-section
(1), reduce the rate of remuneration of any worker.

(3) Where, in an establishment or employment, the rates of remuneration payable before

the commencement of this Act for men and women workers for the same work or work of a
similar nature are different only on the ground of sex, then the higher (in cases where

there are only two rates), or, as the case may be, the highest (in cases where there are only
two rates), of such rates shall be the rate at which remuneration shall be payable, on and from
such commencement, to such men and women workers:

Provided that nothing in this sub-section shall be deemed to entitle a worker to the revision of
the rate of remuneration payable to him or her with reference to the service rendered by him
or her before the commencement of this Act.

5. No discrimination to be made while recruiting men and women workers. -- On and

from the commencement of this Act, no employer shall, while making recruitment for the
same work or work of a similar nature, 2[or in any condition of service subsequent to
recruitment such as promotions, training or transfer], make any discrimination against women
except where the employment of women in such work is prohibited or restricted by or under
any law for the time being in force:

Provided that the provisions of this section shall not affect any priority or reservation for
scheduled castes or scheduled tribes, ex-servicemen, retrenched employees of any other class
or category of persons in the matter of recruitment to the posts in an establishment or
employment.

67
6. Advisory Committee. -- (1) For the purpose of providing increasing employment
opportunities for women, the appropriate Government shall constitute one or more Advisory
Committees to advise it with regard to the extend to which women may be employed in such
establishments or employments as the Central Government may, by notification, specify in
this behalf.

(2) Every Advisory Committee shall consist of not less than ten persons, to be nominated
by the appropriate Government, of which one-half shall be women.

(3) In tendering its advice, the Advisory Committee shall have regard to the number of
women employed in the concerned establishment or employment, the nature of work, hours
of work, suitability of women for employment, as the case may be, the need for providing
increasing employment opportunities for women, including part-time employment, and such
other relevant factors as the Committee may think fit.

(4) The Advisory Committee shall regulate its own procedure.

(5) The appropriate Government may, after considering the advice tendered to it by the
Advisory Committee and after giving to the persons concerned in the establishment or
employment an opportunity to make representations, issue such directions in respect of
employment of women workers, as the appropriate Government may think fit.

7. Power of appropriate Government to appoint authorities for hearing and deciding

claims and complaints. -- (1) The appropriate Government may, by notification, appoint

such officers, not below the rank of a Labour Officer, as it thinks fit to be the authorities for
the purpose of hearing and deciding—

(a) complaints with regard to the contravention of any provision of this Act;

(b) claims arising out of non-payment of wages at equal rates to men and women workers
for the same work or work of a similar nature,

and may, by the same or subsequent notification, define the local limits within which each,
such authority shall exercise its jurisdiction.

(2) Every complaint or claim referred to in sub-section (1) shall be made in such manner
as may be prescribed.

(3) If any question arises as to whether two or more works are of the same nature or of a
similar nature, it shall be decided by the authority appointed under sub-section (1).

(4) Where a complaint or claim is made to the authority appointed under sub-section (1) it
may, after giving the applicant and the employer an opportunity of being heard, and after
such inquiry as it may consider necessary, direct, —

68
(i) in the case of a claim arising out of a non-payment of wages at equal rates to men and
women workers for the same work or work of a similar nature, that payment be made to the
worker of the amount by which the wages payable to him exceed the amount actually paid;

(ii) in the case of complaint, that adequate steps be taken by the employer so as to ensure
that there is no contravention of any provision of this Act.

(5) Every authority appointed under sub-section (1) shall have all the powers of a Civil
Court under the Code of Civil Procedure, 1908 (5 of 1908), for the purpose of taking
evidence and of enforcing the attendance of witnesses and compelling the production of
documents, and every such authority shall be deemed to be a Civil Court for all the purposes
of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).

(6) Any employer or worker aggrieved by any order made by an authority appointed
under sub- section (1), on a complaint or claim may, within thirty days from the date of the
order, prefer an appeal to such authority as the appropriate Government may, by notification,
specify in this behalf, and that authority may, after hearing the appeal, confirm, modify or
reverse the order appealed against and no further appeal shall lie against the order made by
such authority.

(7) The authority referred to in sub-section (6) may, if it is satisfied that the appellant was
prevented by sufficient cause from preferring the appeal within the period specified in

sub-section (6), allow the appeal to be preferred within a further period of thirty days but not
thereafter.

(8) The provisions of sub-section (1) of Section 33-C of the Industrial Disputes Act, 1947
(14 of 1947), shall apply for the recovery of monies due from an employer arising out of
decision of an authority appointed under this section.

CHAPTER – III MISCELLANEOUS

8. Duty of employers to maintain registers. -- On and from the commencement of this
Act, every employer shall maintain such registers and other documents in relation to the
workers employed by him as may be prescribed.

9. Inspectors. -- (1) The appropriate Government may, by notification, appoint such

persons as it think fit to be Inspectors for the purpose of making an investigation as to
whether the provisions of this Act, or the rules made thereunder, are being complied with by
employers, and may define the local limits within which an Inspector may make such
investigation.

(2) Every Inspector shall be deemed to be a public servant within the meaning of Section

69
21 of the Indian Penal Code (45 of 1860).

(3) An Inspector may, at any place within the local limits of his jurisdiction, --

(a) enter, at any reasonable time with such assistance as he thinks fit, any building,
factory, premises or vessel:
(b) require any employer to produce any register, mister-roll or other documents relating
to the employment of workers, and examine such documents;
(c) take on the spot or otherwise, the evidence of any person for the purpose of
ascertaining whether the provisions of this Act are being, or have been, complied with:
(d) examine the employer, his agent or servant or any other person found in charge of the
establishment or any premises connected therewith or any person whom the Inspector has
reasonable cause to believe to be, or to have been a worker in the establishment;
(e) make copies, or take extracts from, any register or other document maintained in
relation to the establishment under this Act.

(4) Any person required by an Inspector to produce any register or other document or to
give any information shall comply with such requisition.

10. Penalties. -- (1) If after the commencement of this Act, any employer, being required
by or under this act, so to do—

(a) omits or fails to maintain any register or other document in relation to workers
employed by him, or
(b) omits or fails to produce any register, muster-roll or other document relating to the
employment of workers, or
(c) omits or refuses to gives any evidence or prevents his agent, servant, or any other
person in charge of the establishment, or any worker, from giving evidence, or
(d) omits or refuses to give any information,

he shall be punishable 3[with simple imprisonment for a term which may extend to one
month or with fine which may extend to ten thousand rupees or with both].

(2) If, after the commencement of this Act, any employer—

(a) makes any recruitment in contravention of the provisions of his Act, or

(b) makes any payment or remuneration at unequal rates to men and women worker, for
the same work or work of a similar nature, or
(c) makes any discrimination between men and women workers in contravention of the
provisions of this Act, or
(d) omits or fails to carry out any direction made by the appropriate Government under
sub-section (5) of Section 6.

he shall be punishable 4[with fine which shall not be less than ten thousand rupees but which
may extend to twenty thousand rupees or with imprisonment for a term which shall be not

70
less than three months but which may extend to one year or with both for the first offence,
and with imprisonment which may extend to two years for the second and subsequent
offences].

(3) If any person being required so to do, omits or refuses to produce to an Inspector any
register or other document or to give any information, he shall be punishable with fine, which
may extend to five thousand rupees.

11. Offences by companies. -- (1) Where an offence under this Act has been committed
by a company, every person who, at the time the offence was committed, was in charge of,
and was responsible to, the company, for the conduct of the business of the company, as well
as the company, shall be deemed to be guilty of the offence and shall be liable to be
proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any
punishment, if he proves that the offence was committed without his knowledge or that he
had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where any offence under this
Act has been committed by a company and it is proved that the offence has been committed
with the consent or connivance of, or is attributable to, any neglect on the part

of any director, manager, secretary or other officer of the company, such director, manager,
secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be
proceeded against and punished accordingly.

Explanation. – For the purposes of this section, --

(a) “company” means any body corporate and includes a firm or other association of
individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.

5[12. Cognizance and trial of offences. -- (1) No court inferior to that of a Metropolitan
Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under
this Act.

(2) No court shall take cognizance of an offence punishable under this Act except upon—

(a) its own knowledge or upon a complaint made by the appropriate Government or an
officer authorized by it in this behalf; or

(b) a complaint made by the person aggrieved by the offence or by any recognized
welfare institution or organization.

Explanation. –For the purposes of this sub-section “recognized welfare institution or

71
organization” means a social welfare organization or institution recognized in this behalf by
the Central or State Government.]

13. Power to make rule. -- (1) The Central Government may, by notification, make rules
for carrying out the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such rules
may provide for all or any of the following matters, namely—

(a) the manner in which complaint or claim referred to in sub-section (1) of Section 7
shall be made;

(b) registers and other documents which an employer is required under Section 8 to
maintain in relation to the workers employed by him;

(c) any other matter which is required to be, or may be, prescribed.

(3) Every rule made by the Central Government under this Act shall be laid, as soon as
may be after it is made, before each House of Parliament while it is in session, for a total
period of thirty days which may be comprised in one session or in two or more successive
sessions, and if, before the expiry of the session immediately following the session or the
successive

sessions aforesaid, both Houses agree in making any modification in the rule or both Houses
agree hat the rule should not be made, the rule shall thereafter have effect only in such
modified from or be of no effect, as the case may be; so however, that any such modification
or annulment shall be without prejudice to the validity of anything previously done under that
rule.

14. Power of Central Government to give directions. -- The Central Government may
give directions to a State Government as to the carrying into execution of this Act in the
State.

6[15. Act not to apply in certain special cases. -- Nothing in this Act shall apply—

(a) to cases affecting the terms and conditions of a woman’s employment in complying
with the requirements of any law giving special treatment to women, or
(b) to any special treatment accorded to women in connection with—

(i) the birth or expected birth of a child, or

(ii) the terms and conditions relating to retirement, marriage or death or to any provision
made in connection with the retirement, marriage or death].

16. Power to make declaration. -- Where the appropriate Government is, on a

consideration of all the circumstances of he case, satisfied that the differences in regard to the

72
remuneration, or a particular species of remuneration, or men and women workers in any
establishment or employment is based on a factor other than sex, it may, by notification,
make a declaration to that effect, and any act of the employer attributable to such a difference
shall not be deemed to be contravention of any provision of this Act.

17. Power to remove difficulties. -- If any difficulty arises in giving effect to the
provisions of this Act, the Central Government may, by notification, make any order, not
inconsistent with the provisions of this Act, which appears to it to be necessary for the
purpose of removing the difficulty:

Provided that every such order shall, as soon as may be after it is made, be laid before each
House of Parliament.

18. Repeal and saving. -- (1) The Equal Remuneration Ordinance, 1975 (12 of 1975)
hereby repealed.

Payment of Bonus Act 1965

The payment of Bonus Act, 1965 aims to regulate the amount of bonus to be paid to the
persons employed in establishments based on its profit and productivity. The act is applicable
to the whole of India for all establishments which had twenty or more persons employed on
any day during the year. In this article, we examine the various aspects of Payment of Bonus
Act in detail. To know more about Payments of Wages Act.

Objectives of the Act

The objectives of the Bonus Act (Payment of bonus Act) are as follows:

To impose a legal responsibility upon the employer of every establishment covered by the
Act to pay the bonus to employees.
To designate the minimum and maximum percentage of bonus.
To prescribe the formula for calculating bonus.
To provide redressal mechanism.
Applicability of the Act
The Payment of Bonus Act implements to the establishments which fall under any of the
below listed:

It applies to any factory or establishment which had twenty or more workers employed on
any day during the year.
The act does not apply to the non-profit making organisations.
It is not applicable to establishments such as LIC, hospitals which are excluded under Section
32.

73
It is not applicable to establishments where employees have signed an agreement with the
employer.
It is not applicable to establishments exempted by the appropriate government like sick units.
Departments, Undertakings and Branches
According to the Bonus Act, any different departments or undertakings or branches of an
establishment of whether located in the same place or at different areas should be considered
as parts of the similar establishment for computation of bonus under the Act.

A separate balance sheet regarding profit and loss of the establishment in the year had to be
prepared and maintained concerning such department or undertaking, or branch should be
treated as a separate establishment for computation of bonus for the year.

Eligibility for Bonus

Any employee is eligible for availing bonus if the following conditions are satisfied:

The employee receiving salary or wages up to Rs.21,000 per month

The employee engaged in any work whether skilled, unskilled, managerial, supervisory etc.
The employee who have worked not less than 30 working days in the same year.
Disqualification of Bonus
The employees cannot avail the bonus if any action taken by the management in case of
dishonesty, theft, sabotage of any property of establishment, violent behaviour while on the
duty within premises of the establishment.

Number of Working Days

An employee will be considered “working” in a year if the following conditions are satisfied:

The employee who is under an agreement or as permitted by standing orders under the
Industrial Employment (Standing Orders) Act, 1946, the Industrial Disputes Act, 1947 or
any other law applicable to the establishment.
The employee during employment has taken leave with salary.
The employee who has been absent due to temporary disablement caused by accident during
the work.
The employee has been on maternity leave with salary in the accounting year.

Payment of Minimum and Maximum Bonus

The minimum bonus will be 8.33% of the salary during the year, or
100 rupees will be given in case of employees above 15 years and sixty rupees in the case of
employees below 15 years, whichever is higher.
The maximum bonus is 20% of the salary during the accounting year.

Timeline for Payment of Bonus

The payment of bonus should be paid in cash within eight months from the end of the
accounting year or within a month from the date of enforcement of the act.

74
Computation of Bonus

As per the Section 4 and Section 7 together with the Schedule 1 and two deal with the
calculation of gross profit and available surplus out of which 67% in case of companies and
60% in other cases would be allocable surplus.

To compute the available surplus the sums, so deductible from the gross profits are:

All direct taxes under Section 7

The sums which are particularised in the schedule
The allowance for investment or development in which the employer is allowed to deduct
from his income under the Income Tax Act.
Available Surplus = Gross Profit – ( deduct) the following :

Depreciation is allowable in Section 32 of the Income-tax Act.

Recovery of bonus due from an employer

Where any money is due to an employee by way of bonus from his employer under a
settlement or an award or agreement, the employee himself or any other person authorized by
him in writing in this behalf, or in the case of the death of the employee, his assignee or heirs
may, without prejudice to any other mode of recovery, make an application to the appropriate
government for the recovery of the money due to him, and if the appropriate government or
such authority as the appropriate government may specify in this behalf is satisfied that any
money is so due, it shall issue a certificate for that amount to the Collector who shall proceed
to recover the same in the same manner as an arrear of land revenue:
PROVIDED that every such application shall be made within one year from the date on
which the money became due to the employee from the employer:
PROVIDED FURTHER that any such application may be entertained after the expiry of the
said period of one year, if the appropriate government is satisfied that the applicant had
sufficient cause for not making the application within the said period.
Explanation: In this section and in 23[sections 22, 23, 24 and 25] "employee" includes a
person who is entitled to the payment of bonus under this Act but who is no longer in
employment.

Customary bonus - Customary bonus is a voluntary payment made by the employer to his
employees to meet special expenses of a festival. (For Example - Bonus of Diwali Festival )

Productivity Bonus Under section 6 of The Act has laid down a detailed procedure for the
calculation of amount payable as a bonus, to employees. First of all, Gross Profit calculates as
per First or Second Schedule. From this Gross Profit, the sums deductible under Section 6
deductions take place. Thus, to this figure, we add the sum equal to the difference in the
direct tax calculated on gross profit. Under section 31A, payment of bonus was linked with
production or productivity with a special provision. Therefore bonus linked with production.

75
productivity.

PAYMENT OF GRATUITY ACT 1972

WHAT IS GRATUITY?
Gratuity is one of the most misunderstood and misconstrued components of a person’s
salary. In simple terms, it is a retirement benefit paid as gratitude to the employees who
have rendered a continuous service for at least five years to incentivize them so that
they continue working efficiently. It is an amount paid to an employee based on the
duration of his total service but an employee becomes eligible only after he has
completed 5 years of his service. Gratuity is paid to an employee when he either retires
or his employment is terminated or he resigns or upon his death. Gratuity is given the
force of law by the Payment of Gratuity Act 1972, which is further administered and
enforced by the Central Government and the designated establishments under its
control.

APPLICABILITY OF THE GRATUITY ACT

The Payment of Gratuity Act, 1972 is applicable to every factory, mine, oilfield,
plantation, port and railway company; every shop or establishment within the meaning
of any law in which ten or more persons are employed, or were employed, on any
day of the preceding twelve months; such other establishments or class of
establishments, in which ten or more employees are employed, or were employed, on
any day of the preceding twelve months, as the Central Government may, by
notification, specify in this behalf. Once the Act becomes applicable to an organization
i.e. once an establishment hires more than 10 employees, the Act would continue to
apply to the same even after the number of employees gets reduced below the minimum
requirement. The Act extends to the whole of India excluding the State of Jammu and
Kashmir.

.Definitions.-
In this Act, unless the context otherwise requires,-
(a) "appropriate Government" means,-
(i) in relation to an establishment-
(a) belonging to, or under the control of, the Central Government,
(b) having branches in more than one State,
(c) of a factory belonging to, or under the control of, the Central Government,

(d) of a major port, mine, oilfield or railway company, the Central Government,
(ii) in any other case, the State Government;
(b) "completed year of service" means continuous service for one year;

76
(c) "continuous service" means uninterrupted service and includes service which is
interrupted by sickness, accident, leave, layoff, strike or a lock-out or cessation of work
not due to any fault of the employee concerned, whether such interrupted or interrupted
service was rendered before or after the commencement of this Act.
Explanation I.- In the case of an employee who is not in uninterrupted service for one
year, he shall be deemed to be in continuous service if he has been actually employed
by an employer during the twelve months immediately preceding the year for not less
than-
(i) 190 days, if employed below the ground in a mine, or
(ii) 240 days, in any other case, except when he is employed in a seasonal
establishment.
Explanation II.- An employee of a seasonal establishment shall be deemed to be in
continuous service if he has actually worked for not less than seventh-five per cent of
the numbers of days on which the establishment was in operation during the year.

(d) "controlling authority" means an authority appointed by the appropriate

Government under section 3;
(e) "employee" means any person (other than an apprentice) employed on wages, not
exceeding one thousand rupees per mensem, in any establishment, factory, mine,
oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled, or
unskilled, manual, supervisory, technical or clerical work, whether the terms of such
employment are express or implied, but does not include any such person who is
employed in a managerial or administrative capacity, or who holds a civil post under
the Central Government or a State Government, or who is subject to the Air Force Act,
1950, (45 of 1950) the Army Act, 1950, (46 of 1950) or the Navy Act, 1957 (62 of
1957).
Explanation.- In the case of an employee, who having been employed for a period of
not less than five years on wages not exceeding one thousand rupees per mensem, is
employed at any time thereafter on wages exceeding one thousand rupees per mensem,
gratuity, in respect of the period during which such employee was employed on wages
not exceeding one thousand rupees per mensem, shall be determined on the basis of the
wages received by him during that period;

(f) "employer" means, in relation to any establishment, factory, mine, oilfield,

plantation, port, railway company or shop-
(i) belonging to, or under the control of, the Central Government or a State
Government, a person or authority appointed by the appropriate Government for the
supervision and control of employees, or where no person or authority has been so
appointed, the head of the Ministry or the Department concerned,
(ii) belonging to, or under the control of, any local authority, the person appointed by
such authority for the supervision and control of employees or where no person has
been so appointed, the chief executive officer of the local authority,
(iii) in any other case, the persons, who, or the authority which, has the ultimate control
over the affairs of the establishment, factory, mine, oilfield, plantation, port, railway

77
company or shop, and where the said affairs are entrusted to any other person, whether
called a manager, managing director or by any other name, such person;
(g) "factory" has the meaning assigned to it in clause (m) of section 2 of the Factories
Act, 1948 (63 of 1948);
(h) "family", in relation to an employee, shall be deemed to consist of-
(i) in the case of a male employee, himself, his wife, his children, whether married or
unmarried, his dependent parents and the widow and children of his predeceased son, if
any,
(ii) in the case of a female employee, herself, her husband, her children, whether
married or unmarried, her dependent parents and the dependent parents of her husband
and the widow and children of her predeceased son, if any :

Provided that if a female employee, by a notice in writing to the controlling authority,

expresses her desire to exclude her husband from her family, the husband and his
dependent parents shall not longer be deemed, for the purposes of this Act, to be
included in the family of such female employee unless the said notice is subsequently
withdrawn by such female employee.

Explanation.- Where the personal law of an employee permits the adoption by him of a
child, any child lawfully adopted by him shall be deemed to be included in his family,
and where a child of an employee has been adopted by another person and such
adoption is, under the personal law of the person making such adoption, lawful, such
child shall be deemed to be excluded from the family of the employee;
(i) "major port" has the meaning assigned to it in clause (8) of section 3 of the Indian
Ports Act, 1908 (15 of 1908);
(j) "mine" has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of
the Mines Act, 1952 (35 of 1952);
(k) "notification" means a notification published in the Official Gazette;
(l) "oilfield" has the meaning assigned to it in clause (e) of section 3 of the Oilfields
(Regulation and Development) Act, 1948 (53 of 1948);
(m) "plantation" has the meaning assigned to in clause (f) of section 2 of the Plantations
Labor Act, 1951 (69 of 1951);
(n) "port" has the meaning assigned to it in clause (4) of section 3 of the Indian Ports
Act, 1908 (15 of 1908);
(o) "prescribed" means prescribed by rules made under this Act;
(p) "railway company" has the meaning assigned to it in clause (5) of section 3 of the
Indian Railways Act, 1890 (9 of 1890);
(q) "retirement" means termination of the service of an employee otherwise than on
superannuation;

(r) "superannuation", in relation to an employee, means,-

(i) the attainment by the employee of such age as is fixed in the contract or conditions
of service as the age on the attainment of which the employee shall vacate the
employment; and

78
(ii) in any other case, the attainment by the employee of the age of fifty-eight years;
(s) "wages" means all emoluments which are earned by an employee while on duty or
on leave in accordance with the terms and conditions of his employment and which are
paid or are payable to him in cash and includes dearness allowance but does not include
any bonus, commission, house rent allowance, overtime wages and any other
allowance.

ELIGIBILITY FOR GRATUITY

An employee who has rendered at least five years of service becomes entitled to the
said benefit. The pre-requisite of 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 to the extent that the person is literally unable to provide the
required services. In the case of death of the employee, gratuity payable to him shall be
paid to his nominee or, if no nomination has been made, to his heirs, and where any
such nominees or heirs is a minor, the share of such minor, shall be deposited with the
controlling authority who shall invest the same for the benefit of such minor in such
bank or other financial institution, as may be prescribed, until such minor attains
majority.

HOW DOES IT WORK?

An employer may offer gratuity out of the establishment’s funds or may approach an
insurance company in order to purchase a group gratuity plan. In case the employer
chooses a life insurer, he has to pay annual contributions as decided by the insurer.

MEANING OF CONTINUOUS SERVICE

According to the Act, gratuity shall be payable to an employee on the termination of his
employment after he has provided continuous service for not less than five years. The
question that arises is, what is the meaning of “continuous service”? An employee shall
be said to be in continuous service for a period if he has, for that period, been in
uninterrupted service and includes service which may be interrupted on account of
sickness, accident, leave, absence from duty without leave, lay off, strike or a lock-out
or cessation of work not due to any fault of the employee, whether such uninterrupted
or interrupted service was rendered before or after the commencement of this Act.

CALCULATION OF AMOUNT OF GRATUITY

GRATUITY = LAST DRAWN SALARY × 15/26 × NO. OF YEARS OF SERVICE
The ratio 15/26 represents 15 days out of the 26 working days in a
month Last drawn salary = Basic Salary + Dearness Allowance
Years of Service are rounded down to the nearest full year.
For example, if the employee has a total service of 20 years, 10 months and 25 days,
only 20 years will be factored into the calculation.
1. In the case of a piece-rated employee or a person who works on commission,
daily wages shall be computed.

79
 2. For the purpose of computing the gratuity payable to an employee who is
employed, after his disablement, on reduced wages, his wages for the period
preceding his disablement shall be taken to be the wages received by him during
that period, and his wages for the period subsequent to his disablement shall be
taken to be the wages as so reduced.
PAYMENT OF GRATUITY
The employer shall arrange to pay the amount of gratuity within 30 days from the date
it becomes active i.e. from the day the person retires or his employment is terminated,
to the person to whom the gratuity is awarded. If the amount of gratuity payable under
the section is not paid by the employer within the period specified, he will have to pay
simple interest on it from the date on which the gratuity becomes payable at the rate in
coherence with the guidelines laid down by the by the Central Government. Gratuity
can be paid in cash, demand draft or bank cheque to the employee via his preferred
mode of payment.

FORFEITURE OF GRATUITY
The employer can withhold or forfeit gratuity wholly or partially even if employee has
completed 5 years if the employment of the said employee has been terminated for
disorderly conduct or any other misdemeanour or an act tantamount to violence
provided that such offense is committed by him in the course of his employment. It may
be noted that above act should have been committed by employee during his
employment.

EXEMPTION FROM TAX

Taxability of gratuity depends on the recipient’s job. In case of government employees
there is no tax on the gratuity. In case of private sector employees, the gratuity is
exempt from tax subject to a maximum of Rs 10 lakhs or 15 days salary for each
completed year of service
If a person has received gratuity before and if any exemption was allowed for the same,
then the exemption to be allowed during the retirement year gets reduced to the extent
of exemption already allowed, subject to the overall limit of Rs 10 lakhs.

TIME LIMIT FOR MAKING PAYMENT OF GRATUITY AMOUNT

1. A person can himself, or via his authorized person send an application to the
employer for payment of the desired gratuity.
2. As soon as gratuity becomes payable, it is calculated by the employer.
Furthermore, the employer gives a notice in writing to the eligible person and
also to the controlling authority specifying the amount determined.
3. The employer must pay the amount of gratuity within thirty days from the date
it becomes payable to the person to whom the gratuity is payable.
FAILURE TO PAY GRATUITY AMOUNT
Payment of gratuity is a statutory requirement. In case an employer fails to pay gratuity
amount to an employee, he shall be liable for punishment. Where the employer fails to

80
make payment of any gratuity payable to the employee, he shall be punishable with
imprisonment for a term which shall not be less than six months but which may extend
to two years. Any employer who contravenes or makes default in complying with any
of the provisions of the Act or any rule or order made there under shall be punishable
with imprisonment for a term which shall not be less than three months but which may
extend to one year or with fine which shall not be less than ten thousand rupees but
which may extend to twenty thousand rupees, or with both. If an employer makes any
false statement or false representation in order to avoid any payment to be made by
himself under the Act or of enabling any other person to avoid such payment shall be
punishable with imprisonment for a term which may extend to six months or with fine
which may extend to ten thousand rupees or with both.
PROTECTION OF GRATUITY
The gratuity amount payable shall not be twisted in a serpentine manner in execution of
any decree or order of any civil, revenue or criminal court.
REMEDY IN CASE THE EMPLOYER DOES NOT PAY GRATUITY
If the amount of gratuity is not paid by the employer within the prescribed time to the
said person, he/she has the right to file a complaint to the Controlling Authority under
the Payment of Gratuity Act within the area where the employer’s establishment is
situated or where the employee was working at the time of termination. Moreover, the
aggrieved person can also approach Labour Courts to get relief and justice.

**********************************************************************

81