ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark.

Page 1 of 13

ECONOMIC, LABOUR AND INDUSTRIAL LAWS (Guideline Answers)
INTERMEDIATE EXAMINATION DECEMBER 2003 Time allowed: 3 hours Maximum marks: 100

NOTE: Answer SIX questions including Question Nos. 1 and 7 which are COMPULSORY.

Question 1 With reference to the relevant legal enactments, write notes on any five of the following : i. Tie-up arrangements ii. Repatriation of sale proceeds iii. Powers of the Central Government to revoke registration of an industrial undertaking iv. Money laundering v. Surrender of patents vi. Control of noise pollution. (3 marks each) Answer 1(i) Tie Up Arrangements Within the meaning of Section 33(1)(d) of the *M.R.T.P Act, 1969 tie up arrangement is one, whereby a seller agrees to sell a product or service (the main or the tying item) only on the condition that the buyer agrees to buy another (second or tied item) from the seller and not to buy the tied product from any other supplier. Such arrangements are generally used to push the sale of a slow moving and less in demand product along with a more popular product or for introducing a new product in the market. Such practice is restrictive in nature unless it passes through one or more gateways under Section 38 of the Act and is registrable irrespective of the value of the tied product because it results in reducing/eliminating competition for the tied product as also forcing the buyers to forgo the choice among products, which compete with the tied product. There have been various cases where the courts have held that tying arrangements affect competition for exam, Hindustan Lever’s case, Mathrubhumi Printing and Publishing Co. Ltd. (1977 Tax.L.R.2290), D.G v. Ghotane Gas Agency, Kohlapur (RTP Enquiry No.308/88 dated 3.2.1989). Answer 1(ii) Repatriation of Sale Proceeds Repatriation of Sale Proceeds of Immovable Property

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Page 2 of 13

Under the Foreign Exchange Management (Acquisition and Transfer of Immoveable Property in India) Regulations, 2000 issued by the RBI, in case of a person resident outside India, or his successor the sale proceeds of any immoveable property shall not, except with the prior permission of the Reserve Bank, be repatriated outside India. However, in the event of sale of any immovable property other than agricultural land/farm house/plantation property in India by a person resident outside India who is a citizen of India or a person of Indian origin, the authorized dealer may allow repatriation of sale proceeds outside India, provided the following conditions are satisfied: a. The immovable property was acquired by the seller in accordance with the provisions of foreign exchange law in force at the time of acquisition by him or b. the amount to be repatriated does not exceed the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency Non-Resident Account or the foreign currency equivalent, as on the date of payment, of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property. c. In case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties. Or Remittance of Sale Proceeds of Securities Under the regulations made by the Reserve Bank for transfer and issue of securities by a person resident outside India, an authorised dealer may allow, on the following conditions, the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India: i. the security was held by the seller on repatriation basis; ii. either the security has been sold on a recognised stock exchange in India through a stock broker at the ruling market price as determined on the floor of the Exchange, or the Reserve Bank’s approval has been obtained in other cases for sale of the security and remittance of the sale proceeds thereof; and iii. a no objection/tax clearance certificate from the Income Tax authority has been produced. (Credit may be given to the student in case he answers any one of the above-mentioned alternatives) Answer 1(iii) Powers of Central Government to revoke registration of an Industrial Undertaking The Central Government has been empowered to revoke the registration of an Industrial Undertaking under Industries (Development & Regulation) Act, 1951, if it is satisfied that i. it was obtained by misrepresentation as to essential facts; or ii. the undertaking has ceased to be registrable by reason of any exemption granted

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Page 3 of 13

under this Act; or iii. for any other reason the registration has become useless or ineffective and therefore requires to be revoked. The Central Government is however, required to give an opportunity to the owner of the undertaking to be heard, before revoking the registration. Answer 1(iv) Money Laundering Money Laundering is the processing of criminal proceeds to disguise its illegal origin. Terrorism, illegal arms sales, financial crimes, smuggling and the activities of organized crime including drug trafficking and prostitution rings generate huge sums. Embezzlement, insider trading, bribery and computer fraud also produce large profits and create the incentive to legitimize the ill-gotten gains through money laundering. When a criminal activity generates substantial profits, the individual or group involved in such activities routes the funds to safe heavens by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention. A number of initiatives have been taken to deal with the problem at international level. The possible social, economic and political effects of money laundering, if left unchecked are serious. In India, a comprehensive legislation is made to prevent money laundering. Answer 1(v) Surrender of patents Section 63 of the Patents Act, 1970 dealing with surrender of patents entitles the patentee to surrender the patent, at any time by giving notice in the prescribed manner to the Controller of Patents. The Controller, on receipt of such an offer is under obligation to advertise the offer in the Official Gazette, and also notify every person other than the patentee whose name appears in the register as having an interest in the patent. Any person interested may, within a period of three months after such advertisement give notice to the Controller of opposition to the surrender in Form No.14, and where any such notice is given the Controller shall notify the patentee. If the Controller is satisfied after hearing the patentee and any opponent desirous of being heard, that the patent may properly be surrendered, he may accept the offer and direct the patentee to return the patent and on receipt of such patent, the Controller shall by order, revoke the patent and notify the revocation in the Official Gazette. Answer 1(vi) In order to control the noise pollution caused from various sources such as industrial activity, construction activity, generator sets, loud speakers, public address system, music systems, vehicular horns and other mechanical devices, the Central Government has framed certain rules known as ‘The Noise Pollution (Regulation and Control) Rules, 2000. The rules provide for the ambient air quality standard in respect of noise for different areas/zones. An area comprising 100 metres around hospitals, educational institutions and courts has been declared as the silence area/zone. The ambient air quality standards shall also be considered by the all development authorities, local bodies while taking any development activity. A loud speaker or a public address

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Page 4 of 13

system shall not be used at night (between 10:00 p.m. to 6:00 a.m.) except in closed premises for communication. Whoever commits any offence of playing music or uses any sound amplifiers, beats a drum or blows a horn, etc. in a silence zone/area shall be liable to a penalty. Question 2 a. What is an ‘ancillary industrial undertaking’ ? (2 marks) b. How is the value of plant and machinery including the imported machinery calculated ? State briefly the items to be excluded in calculating the value of plant and machinery for an ancillary industrial undertaking. (5 marks) c. On the basis of facts mentioned below, state whether the following amount to restrictive trade practices or unfair trade practices. Refer to relevant case law in support of your answer : i. A firm of builders widely advertised for the sale of plots of land claiming that all urban facilities are available and inviting prospective bidders to visit the plots on Wednesdays and Fridays whereas the builders did not actually own any piece of land. (4 marks) ii. Mrs. Swapna made an application for allotment of 200 equity shares in a limited company in response to the public issue made by the company. However, she neither got any allotment of shares nor the refund of the application money. A number of reminders were sent to the company which remained unattended. (4 marks) Answer 2(a) Government of India, Ministry of Industry, Department of Industrial Policy and Promotion, vide Notification No. S.O. 857(E) dated 10th December 1997 specified the following norms on the basis of which an industrial undertaking shall be regarded as an Ancillary Undertaking, for the purpose of Industries (Development and Regulation) Act, 1951. “ An industrial undertaking which is engaged or is proposed to be engaged in the manufacturing or production of parts, components, sub-assemblies, tooling or intermediates, or the rendering of services, and undertaking supplies or proposes to supply or render not more than fifty per cent of its production or services, as the case may be, to one or more other industrial undertakings (other than parent unit) and whose investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupees one crore.” However, no ancillary industrial undertaking referred to above shall be subsidiary of, or owned or controlled by any other industrial undertaking. Answer 2(b) In calculating the value of plant and machinery for the purposes of small scale/ancillary industrial undertaking, the original price thereof, irrespective of whether the plant and machinery are new or second hand, shall be taken into account. However, in calculating the value of plant and machinery, the following shall be excluded, namely:

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Page 5 of 13

i. the cost of equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores; ii. the cost of installation of plant and machinery; iii. the cost of research and development equipment and pollution control equipment iv. he cost of generation sets and extra transformer installed by the undertaking as per the regulations of the State Electricity Board; v. the bank charges and services charges paid to the National Small Industries Corporation or the State Small Industries Corporation; vi. the cost involved in procurement or installation of cables, wiring, bus bars, electrical control panels (not those mounted on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures; vii. the cost of gas producer plants; viii. transportation charges (excluding of sales-tax and excise) for indigenous machinery from the place of manufacture to the site of the factory; ix. charges paid for technical know-how for erection of plant and machinery; x. cost of such storage tanks which store raw materials, finished products only and are not linked with the manufacturing process; and xi. cost of fire fighting equipments. In the case of imported machinery, the following shall be included in calculating the value, namely: a. import duty (excluding miscellaneous expenses as transportation from the port to the site of the factory, demurrage paid at the port); b. the shipping charges; c. customs clearance charges; and d. sales tax. Answer 2(c)(i) This is an instance of Unfair Trade Practice because the builders in question did not own any land and the fact was not disclosed when inviting people to invest in the plots of land. The facts are similar to the case of M/s Mahamaya Builders Pvt. Ltd., New Delhi (L.A No.15/1988 MRTPC Order dated 07.12.1988) wherein the Commission held that it to be an unfair trade practice within the meaning of Section 36A(1) on the grounds that the orchested claims that the plots could be shown on specific days made one believe that the entire land was owned and was in possession and that the plots were earmarked on the ground to be allotted to intending investors. Answer 2(c)(ii) The facts of the case are similar to Raj Kumari Khurana v. Murablack India Ltd. & Another (C.A 183/93 decided on 14.01.1994). Non-allotment of shares and non-refund of application money have been held to amount to unfair trade practice under Section 36A(1) of the M.R.T.P Act, 1969. Question 3 a. With reference to the relevant provisions of the Foreign Exchange Management Act, 1999, advise on the following :

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Page 6 of 13

i. A request has been received from a shareholder informing that she has shifted from Mumbai to London and that her latter address is to be recorded in the Register of Members maintained by the company. ii. A non-resident shareholder of an Indian company wants to transfer his shares to another non-resident. iii. smile Bank Ltd., a banking company registered in Bangladesh, wants to establish a branch office in Kolkata. iv. Sonali, a resident outside India, wants to transfer some of her foreign securities to Sadhna, who is a person resident in India. (2 marks each) b. State the salient features of the Competition Act, 2002. (4 marks) c. A society engaged in educational programme for imparting knowledge of political nature has been offered foreign contribution by an NRI association in U.K. State with reasons whether the society can accept the offer under the Foreign Contribution (Regulation) Act, 1976. (3 marks) Answer 3(a)(i) By a notification general permission has been granted by the RBI to Indian companies to register a foreign address in the Register of Members. Answer 3(a)(ii) A person resident outside India, not being a non-resident Indian or an overseas corporate body, may transfer by way of sale or gift, the shares to any person resident outside India. However, a non-resident Indian may transfer by way of sale or gift, the shares to another non-resident Indian only. Provided the person to whom the shares are being transferred has obtained prior permission of Central Government to acquire the shares if he has previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied field in which the Indian company whose shares are being transferred is engaged. Answer 3(a)(iii) Normally a banking company does not require RBI approval under FEMA for establishing a place of business in India if it has obtained approval under Banking Regulation Act, 1949. However, Ismile Bank Ltd. being a banking company registered in Bangladesh is debarred, without prior permission of the Reserve Bank, from establishing in India, a branch or liaison office or a project office or any other place of business by whatever name called as citizens of Pakistan, Bangladesh, Srilanka, China etc. require prior approval of RBI. Answer 3(a)(iv) Sonali may transfer by way of sale foreign securities held by her to Sadhna, a person resident in India, when the consideration for sale is paid out of funds held in Resident Foreign currency (RFC) account of Sadhna. The transaction is subject to the provisions and limits specified in Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000. It may also require the permission of Reserve bank in some cases. She may, however transfer any security held by her, to a

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Page 7 of 13

person resident in India by way of gift also. Answer 3(b) The salient features of Competition Act, 2002 are as under: 1. The Act has been enacted to prevent practices having appreciable adverse effect on competition, to promote and sustain competition in the market and to protect the interest of consumers and to ensure freedom of trade. 2. With the enforcement of the Act, the M.R.T.P Act, 1969 shall stand repealed and the M.R.T.P Commission shall be dissolved. 3. The Act seeks to achieve its objectives by prohibiting anti-competitive trade agreements, preventing abuse of dominance, regulating combinations and formulating a policy on Competition, creating awareness and by imparting training on competition issues. 4. The Act provides for establishment of Competition Commission of India and prescribes its duties, functions and powers. Answer 3(c) As per Section 5 of the FCRA, a society engaged in educational programme for imparting knowledge of political nature, being an organization notified by the Central Government, cannot accept the foreign contribution without the prior approval of the Central Government. An NRI association in UK, being a foreign source within the meaning of Section 2(1)(e) of the Act, the society engaged in educational programme for imparting knowledge of political nature violates Section 5 of the FCRA if it accepts foreign contribution. Question 4 a. Your client wants to know whether he can register ‘Darjeeling’ as a trade mark on soaps manufactured by him. Advise. b. Manchanda, a publisher, wants to obtain a license to translate and publish a literary work and seeks your advice about the relevant provisions of the Copyright Act, 1957. Advise. c. State the rights of co-owners under the Patents Act, 1970. Can a co-owner assign his rights on the patent ? (5 marks each) Answer 4(a) The word ‘Darjeeling’ refers to a well-known geographical name. Under Section 9(1) (b) of the Trade and Merchandise Marks Act, 1999, a mark, which indicates geographical origin, is not registrable. However, if no registration is desired there is no objection to the use of the word. But in such cases client will bear the risk of others also using such trademark in which, legal action may not afford adequate relief. However, if the goods can be identified as having originated from any particular area, it may be registered under Geographical Indication of Goods (Registration and Protection) Act, 1999. Answer 4(b) Under Section 32 of the Copyright Act, 1957 any person may apply to the Copyright

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Page 8 of 13

Board for a license to produce and publish a translation to a literary or dramatic work after seven years from its publication. Manchanda is required to make an application to the Copyright Board for a license to translate and publish stating the proposed retail price of copy of translation work along with prescribed fee. The Copyright Board after holding necessary enquiry may grant license to the applicant to publish the translated work subject to payment of royalty and such terms and conditions as it may determine. Answer 4(c) Section 50 of the Patents Act, 1970 provides that where a patent is granted to two or more persons, each of those persons shall, unless an agreement to the contrary is in force, be entitled to an equal undivided share in the patent. This section further entitles each co-owner, by himself or his agents, to make, use, exercise and sell the patented invention for his own benefit without accounting to the other person or persons. However, a license under the patent may not be granted and share in the patent may not be assigned by one of such persons except with the consent of the other person or persons. Question 5 With reference to the provisions of the Consumer Protection Act, 1986, decide the following giving reasons in support of your answer : i. Rosy made a deposit of Rs.5 lakh with a co-operative housing society for the purchase of a flat to be built by it at a given site on the commitment to deliver completed flat in two years’ time. On expiry of this period, the society offered her the option of money back without interest or booking of a flat of the same size on another plot situated at a distance of 2 Kms. The reason given for the fresh offer was some litigation on the title of the land which had hampered the progress of construction. She demanded money back with interest @ 12%. The society refused and Rosy approached the appropriate consumer forum for relief. Will she succeed ? ii. Could the parents of a minor child be regarded as ‘consumer’ under the Consumer Protection Act, 1986 for filing a complaint for ‘deficiency in service’ on behalf of a minor child who collapsed for wrong treatment by an untrained nurse in a nursing home ? iii. An income-tax payer went to a Government hospital for treatment where treatment is rendered free of charges. Being not satisfied with the treatment, he lodged a complaint with the Consumer Disputes Redressal Forum alleging deficiency in service and claiming compensation contending that the income-tax paid by him has been appropriated in providing the ‘so-called free service’ by the hospital. Will he succeed ? (5 marks each) Answer 5(i) The facts of the case are similar to S.P.Dhavaskar v. Housing Commissioner, Karnataka Housing Board and vice versa (first appeal no.203 of 1993 decided on 27.09.1995 NCDRC) wherein it was held by the National Commission that a person who has deposited a lump sum cannot be expected to take back the money after two years without interest or opt for an alternative house at an increased cost. The housing society was grossly negligent in rendering service. Before taking up construction job they should have taken adequate care as to the title of land. The offer was not at all reasonable concession granted to allottee. Therefore Ms. Rosy would succeed in her

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark. Page 9 of 13

claim. Answer 5(ii) The facts of the case are similar to Spring Meadows Hospital v. Harjot Ahluwalia through K.S. Ahluwalia (1998 (2) SCALE 456) wherein the National Commission has held that the definition of consumer is wide enough to include not only the person who hired the services but also beneficiary of such services, when the beneficiary was other than the person who hired the services. Both the parents of the child as well as the child would be consumer within the meaning of Section 2(1)(d)(ii) of the Act and could claim compensation under the Act. In the present case the patient was a minor child and parents had taken him to hospital. The child was awarded compensation for permanent disability caused to him and the parents were awarded compensation for acute mental agony and lifelong care and attention that they would have to bestow on the child. Therefore, in the instant case, both the child as well as the parents are consumers and entitled to compensation under Consumer Protection Act, 1986. Answer 5(iii) There are certain essential characteristics of tax. They are: 1. it is imposed under statutory power without the taxpayer’s consent; 2. it is an imposition made for public purpose without reference to any special benefit to be conferred on the tax payer; and 3. it is part of the common burden. In view of the above tax paid by the consumer for service rendered free of charge in a Government hospital cannot be treated as a consideration or charge for the service rendered. Quesiton 6 a. Discuss the powers of the Central Government to prevent, control and abate environmental pollution. b. What are the restrictions on use of industrial plants under the Air (Prevention and Control of Pollution) Act, 1981 ? c. Discuss the powers of the National Environment Appellate Authority. (5 marks each) Answer 6(a) The Central Government has been granted general powers under Section 3 of the Environment (Protection) Act, 1986 to take all such measures as it deems necessary, for protecting and improving the quality of the environment and for preventing, controlling and abating environmental pollution. Such measures include with respect to all or any of the following matters: i. coordinating the actions of various State Governments; ii. planning and execution of a nation-wide programme for the prevention, control and abatement of environmental pollution; iii. laying down standards for the quality of environment; iv. laying down standards for emission or discharge of environmental pollutants; v. restricting the carrying on of industries, operations or processes in certain areas

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark.Page 10 of 13

or permitting them to be carried out subject to certain safeguards; vi. laying down procedures and safeguards for the prevention of accidents; vii. laying down procedures and safeguards for the handling of hazardous substances; viii. examining manufacturing processes, materials and substances as are likely to cause environmental pollution; ix. carrying out and sponsoring investigations and research relating to problems of environmental pollution; x. inspecting any premises, plant, equipment, machinery, manufacturing process, materials, etc. and issuing directions to any person officer or authority etc. to take steps for the prevention, control and abatement of environmental pollution; xi. establishing or recognising environmental laboratories; xii. collecting and disseminating information relating to environmental pollution; xiii. preparing manuals, codes, guides etc. to prevent control and abate environmental pollution; xiv. such other matters as the Central Government deems necessary or expedient for the purpose of securing the effective implementation of the provisions of the Act. Answer 6(b) Section 21 of the Air (Prevention and Control of Pollution) Act, 1986 deals with restriction on use of certain industrial plants. Accordingly, no person is allowed, without the previous consent of the State Board, to establish or operate any industrial plant in an Air Pollution Control Area. Application for approval of the State Board should be made in the prescribed Form along with the prescribed fee. Such an application is required to be made within 3 months of the declaration of that area to be an air pollution control area. Within a period of four months after the receipt of the application, the State Board should, by order in writing and reasons to be recorded in the order, grant the consent applied for, subject to such conditions and for such period as may be specified therein or refuse such consent. Answer 6(c) The National Environment Appellate Authority Act, 1997 provides for appeal against any orders in respect of environmental clearances. The National Environment Appellate Authority, for the purpose of discharging its functions, has been entrusted with the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters namely: a. summoning and enforcing the attendance of any person and examining him on oath; b. requiring the discovery and production of documents; c. receiving evidence on affidavits; d. subject to the provisions of the Indian Evidence Act, 1872, requisitioning any public record or document or copy of such record or document from any office; e. issuing summons for the examination of witnesses or documents; f. reviewing its decisions; g. setting aside any order or dismissal of any representation for default or any order passed by it ex-parte; and h. any other matter which is required to be, or may be prescribed by the Central Government. Question 7

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark.Page 11 of 13

a. Discuss any two of the following : i. Bonus linked with production or productivity. ii. Payment of subsistence allowance. iii. Lock-out. (5 marks) b. Attempt any five of the following stating the relevant legal provisions and case law, if any : i. Can the gratuity be withheld for non-vacation of service quarters by the retiring employees ? ii. Ace Ltd. notified its vacancies to the employment exchange and a list of 20 candidates was sent by the employment exchange. However, the company did not recruit them. Daisy, one of the candidates, filed a suit against the company for not recruiting her, even though her name was in the list sent by the employment exchange. She stated that it was obligatory for the company to make recruitment from the candidates sponsored by the employment exchange. Will she succeed ? iii. Are the workmen entitled to wages for the strike period ? iv. A workman was dismissed from service on 15th February, 2000 after a departmental inquiry for an act of misconduct. No bonus was paid to him for the accounting year during which he was dismissed. Subsequently, he was reinstated by the Court with full back wages. Will he be entitled to claim bonus along with full back wages ? v. Can provident fund dues of an employee be attached in execution of a decree or order of the court in respect of any debt or liability incurred by him? vi. Have the Government employees a fundamental or statutory right to go on strike ? vii. There is a cycle stand run by a private contractor in a public theatre premises. Whether the theatre owner will be liable as principal employer for the payment of the ESI contributions in respect of cycle stand attendants ? viii. Whether a car driver engaged by the area manager of a bank for which allowance was given to him is a workman under the Industrial Disputes Act, 1947, if the car was maintained at the bank’s expenses ?(3 marks each) Answer 7(a)(i) Bonus linked with production or productivity The Payment of Bonus Act, 1965 postulates special provisions with respect to payment of bonus linked with production or productivity. As per Section 31-A of the said Act, where the employees have entered into an agreement with their employer [either before or after the commencement of the Payment of Bonus (Amendment) Act, 1976] for payment of an annual bonus linked with production or productivity in lieu of bonus based on profits under the Payment of Bonus Act, 1965, then such employees shall be entitled to receive bonus due to them under such agreement. But any such agreement or settlement whereby the employees relinquish their right to receive the minimum bonus under Section 10 shall be null and void in so far as it purports to deprive them of such right. Further, such employees shall not be entitled to be paid any bonus in excess of 20% of the salary or wage earned by them during the relevant accounting year.

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark.Page 12 of 13

Answer to Question No 7(a)(ii) Payment of Subsistence Allowance As per Section 10A of the Industrial Employment (Standing Orders) Act,1946 where any employee is suspended by the employer pending inquiry into complaints or charges of misconduct against him, he shall be entitled to subsistence allowance at the rate of 50 percent of wages for the first 90 days of suspension and thereafter at the rate of 75 percent of the wages for the remaining period of suspension if the delay in completion of the disciplinary proceedings is not directly attributable to the conduct of such workman. Any dispute relating to subsistence allowance may be referred to the Labour Court. Answer to Question No. 7(a)(iii) Lock-out Lock-out as per Section 2(l) of the Industrial Dispute Act, 1947 means the temporary closing of a place of employment, or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him. The essentials of lock-out are as follows : a. There is a temporary closing of the place of employment, or suspension or withholding of the work by the employer in some form; b. There is an element of demand for which the place of employment is locked-out or closed; and c. There is an intention to re-employ the workers if they accept the demands. In Kairbetta Estate v. Rajamanickam, AIR (1960) SC 893, the Supreme Court observed : ”Lock-out can be described as the antithesis of a strike. Just as a strike is a weapon available to the employees for enforcing their industrial demand, a lock-out is a weapon available to the employer to persuade by a coercive process the employees to see his point of view to accept his demands…. The liability of the employer in case of a lock-out would depend upon whether the lock-out was justified and legal or not. Where the manager of a factory was violently attacked and other members of the staff were threatened, the lock-out was fully justified.” In a tussle between employees and an employer, ‘strike’ is the weapon of the employees, ‘lock-out’ is the corresponding weapon in the armoury of the employer. If the employer shuts down his place of business as a means of reprisal or as an instrument of coercion or as a mode of exerting pressure on the employees, or generally speaking, when his act is what may be called an act of belligerency, there would be a lock-out. Answer 7(b) i. Assignment of gratuity is prohibited. It cannot be withheld for non-vacation of service quarters by retiring employees. (Air India v. Authority under the Act, 1999 CLA 34 Bom.66). ii. Daisy will not succeed. Under sub-section 4 of Section 4 of the Employment

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007

ECONOMIC Please purchase PDFcamp Printer on http://www.verypdf.com/ to remove this watermark.Page 13 of 13

iii.

iv.

v.

vi.

vii.

viii.

Exchanges (Compulsory Notification of Vacancies) Act,1959 there is no obligation on an employer to recruit only those persons sponsored by the Employment Exchanges because the vacancy has been notified under the Act. In Union of India v. Hargopal (1987) 3 SCC 308, it was held that employers are obliged only to notify the vacancies. They are not bound to appoint only those sponsored by Employment Exchanges. Regarding wages to the workers during strike period, the Supreme Court in Charakulam Tea Estate v. Their Workmen AIR 1969 SC 998 held that strike which is legal and justified the workmen will be entitled to full wages for the strike period. Similar view was expressed by the Supreme Court Crompton Greaves Ltd. 1978 Lab IC 1379 (SC). However, if the strike is illegal or unjustified workers will not be entitled to wages for the strike period. Statesman Ltd. v. Their Workmen AIR 1976 SC 758. In Bank of India v. T.S Kalewala, (1990) 2 Lab & IC 39, the Supreme Court held that the workers are not entitled to wages for the strike period. The Court observed that the legality of strike does not always exempt the employees from deduction of their salaries for the period of strike. Bonus can be paid to a dismissed employee if he is reinstated with full back wages. It was held in the case of Project Manager, Ahemdabad Project, ONGC v. Sham Kumar Sahegal, (1995) 1 LLJ 863 that an employee suspended but subsequently reinstated with full back wages cannot be treated to be eligible for bonus for the period of suspension. As per Section 10 of the Employees Provident Funds and Misc. Provisions Act,1952 provident fund dues of an employee are not liable to attachment in execution of any decree or order of the Court in respect of any debt or liability incurred by the member. Government employees have no fundamental or statutory right to go on strike. Even if there is injustice to the employees in a democratic welfare state, they have to resort to the machinery provided under statutory provisions for redressal of their grievances. (T K Rangarajan v. Government of Tamil Nadu & Others, Supreme Court of India). The Supreme Court in Royal Talkies Hyderabad v. ESIC, AIR 1978 SC 1476 has held that two operations namely keeping a cycle and running a canteen are incidental to the primary purpose of the theater and the workers engaged therein are covered by the definition of employee as given in the ESI Act. The theatre owner is liable as principal employer to pay ESI contribution. (viii) In PNB v. Ghulam Dastagir, (1978) 2 SCC 358 it was held that a car driver engaged by area manager of a bank for which allowance was given to him was not a “workman” of the bank even though the car was maintained at the bank’s expenses as the control of the driver did not rest in the bank.

file://C:\Documents and Settings\subha\Desktop\qus\D2003\ELIL122003.htm

4/26/2007