1

2ND SURANA & SURANA & SCHOOL OF LAW, RAFFLES UNIVERSITY

NATIONAL LABOUR LAW MOOT COURT COMPETITION, 2018

Before

THE HONORABLE SUPREME COURT OF LAPINDA

Petition No.-___of

(UNDER ARTICLE 136 OF THE CONSTITUTION OF LAPINDA)

AIESL LABOUR UNION..............................................................APPELANT

VERSUS

AIESL...........................................................................................RESPONDENT

___________________________________________________________________________

Petition No.-____of

(UNDER ARTICLE 136 OF THE CONSTITUTION OF LAPINDA)

SEBI.........................................................................................................APPELANT

VERSUS

AIESL.......................................................................................................RESPONDENT

___________________________________________________________________________

Petition No.-____of

(UNDER ARTICLE 32 OF CONSTITUTION OF LAPINDA)

LABOUR SHAKTI SANGHATAN...........................................................APPELANT

VERSUS

UNION OF LAPINDA..............................................................................RESPONDENT

MEMORANDUM FOR THE RESPONDENT

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TABLE OF CONTENTS

INDEX OF AUTHORITIES .....................................................................................................3

STATUTES AND RULES.........................................................................................................3

ONLINE DATABASE .............................................................................................................3

CASES…………………………………………………………………………………………4

STATEMENT OF JURISDICTION .........................................................................................5

STATEMENT OF FACTS ........................................................................................................6

STATEMENT OF ISSUES........................................................................................................7

SUMMARY OF ARGUMENTS ...............................................................................................8

ARGUMENT ADVANCED......................................................................................................9

1. Whether the present industrial scenario necessitates the revision of the definition of the

term ‘industry’ and whether the AIESL can be termed as ‘industry’?.................................9

2. Whether the process of discharge of employees by AIESL stands in violation of the

Act?....................................................................................................................................11

3. Whether the exercise of rights by the investor amounts to ‘Control’ as per SEBL

Takeover Regulations, 2011? ............................................................................................15

4. In the light factual matrix, whether the employees can exercise the ESOPs even after

being discharged from the employment? ..........................................................................17

5. In the present industrial scenario, whether there is a need to move labour laws from

Concurrent list to the State list of the Constitution of Lapinda? .......................................19

PRAYER..................................................................................................................................24
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THE INDEX OF AUTHORITIES

STATUTES AND RULES

The Constitution of Lapinda, 1950

Industrial Dispute Act, 1947

SEBL Regulation 2011

The Lapinda Contract Act, 1872

ONLINE DATABASE

1. www.lexisnexis.com/in/legal

2. www.westlawindia.com

3. www.scconline.com

4. www.jstor.org

5. www.manupatra.com
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CASE
 Workmen of Dimakuchi Tea Estate v. Dimakuchi Tea Estate, (1958) 1LLJ 500

 Bangalore Water Supply v. A. Rajappa 1978 AIR 548, 1978 SCR (3) 207

 Coir Board, Ernakulam Cochin & Anr v Indira Devi P.S. & Ors on 04/03/1992

 State of U.P vs Jai Bir Singh Appeal (civil) 897 of 2002 decided on 05/05/2005

 Gram Panchayat v. Sharadkumar D. Acharya, 1994 LLR 470 (Guj) (DB)

 State Bank v. Sundaramony, (1957) I LLJ 453

 Bombay Union of Journalist v. State of Bombay, AIR 1964 SC 1617

 M/s. Om Oil and Oilseeds Exchange Ltd., Delhi v. Their Workmen, AIR 1966 SC

1657

 Subhkam Ventures (I) Pvt. Ltd vs. SEBI [2010] 99 SCL 159 (SAT-MUM)

 Prafulla v. Bank of Commerce, A.I.R. 1947 PC 28 (India).

 The State of West Bengal v. Kesoram Industries Ltd. and Ors.,

MANU/SC/0038/2004.

 DR. C.D. JHA, JUDICIAL REVIEW OF LEGISLATIVE ACTS 8655, (2nd Ed.,

Lexis Nexis, 2009).

 Bharat Hydropower Corpn. Ltd. v. State of Assam; (2004) 2 S.C.C. 553.

 State of Bombay v. Narottamdas, A.I.R. 1951 S.C. 69. (India)

 T.M.A. Pai Foundation Vs. State of Karnataka (2002) 8 SCC 481

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STATEMENT OF JURISDICTION

I -PETITION NO- ___ OF

THE PETITIONER HAS APPROACHED THIS HONOURABLE COURT UNDER

ARTICLE 136 OF THE CONSTITUTION OF LAPINDA.

”136. Special leave to appeal by the Supreme Court

(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant

special leave to appeal from any judgment, decree, determination, sentence or order in any

cause or matter passed or made by any court or tribunal in the territory of India

(2) Nothing in clause ( 1 ) shall apply to any judgment, determination, sentence or order passed

or made by any court or tribunal constituted by or under any law relating to the Armed Forces”

I I-PETITION NO- ___ OF

THE PETITIONER HAS APPROACHED THIS HONOURABLE COURT UNDER

ARTICLE 136 OF THE CONSTITUTION OF LAPINDA.

”136. Special leave to appeal by the Supreme Court

(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant

special leave to appeal from any judgment, decree, determination, sentence or order in any

cause or matter passed or made by any court or tribunal in the territory of India

(2) Nothing in clause ( 1 ) shall apply to any judgment, determination, sentence or order passed

or made by any court or tribunal constituted by or under any law relating to the Armed Forces”

III -PETITION NO- ___ OF

THE PETITIONER HAS APPROACHED THIS HONOURABLE COURT UNDER ARTICLE 32

OF THE CONSTITUTION OF LAPINDA.

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THE STATEMENT OF FACTS

I: Air Lapindana Engineering Services Limited (“AIESL”), subsidiary company of Air

Lapinadana Limited formed in 2004, serves all engineering requirements in aircrafts.

Comptroller and Auditor General of Lapinda recommended financial restructuring plan for it.

This resulted in less revenue generation for the enterprise leading to the disinvestment by the

government in it & AIESL led to the acquisition of its 40% shares along with voting rights,

through agreement, by Richman Sachs in Aug. 2014. On recommendation of investor, AIESL

employed 2,50,000 IT professionals in Sept. 2015 and issued Employees Stock Option Plan

(ESOPs) to its one lakh employees with a vesting period of 3 years. The investor used its

veto to influence the promoters of AIESL to introduce the Artificial Intelligence, and replace

the manpower with the robotic technology. In Sept 2015 the enterprise discharged 100,000

employees after paying them one month’s salary in advance.

II: AIESL Labour Union filed a writ petition in Ahmrat High Court but the petition was

set aside. Aggrieved by the decision of the High Court, they filed a Special Leave Petition

before the Supreme Court of Lapinda. A complaint was made to Securities and Exchange

Board of Lapinda claiming to exercise ESOPs issued by AIESL. When SEBL rejected the

complaint, investors filed an appeal before the Securities Appellate Tribunal (“SAT”). The

Hon’ble SAT rejected SEBL’s views. Eventually, SEBL filed an appeal before the Hon’ble

Supreme Court of Lapinda against the order of SAT.

III: In the meanwhile, Labour Shakti Sanghatan (“LSS”), a NGO, conducted a study which

revealed that there was uncertainty in the State amendments and the Central laws. Taking this

into consideration, LSS filed a Public Interest Litigation (“PIL”) in the Apex Court to move

labour laws from Concurrent list to the State list.

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STATEMENT OF ISSUES

(i) Whether the present industrial scenario necessitates the revision of the definition

of the term ‘industry’ and whether the AIESL can be termed as ‘industry’?

(ii) Whether the process of discharge of employees by AIESL stands in violation of

the Act?

(iii) Whether the exercise of rights by the investor amounts to ‘Control’ as per SEBL

Takeover Regulations, 2011?

(iv) In the light factual matrix, whether the employees can exercise the ESOPs even

after being discharged from the employment?

(v) In the present industrial scenario, whether there is a need to move labour laws

from Concurrent list to the State list of the Constitution of Lapinda?

 8

THE SUMMARY OF ARGUMENTS

I. It is most humbly submitted before the Hon’ble court that there is urgent need for

revision of term ‘industry’ as present definition inadvertently overlooked the interests

of the employer and ignored the main object of the Act, 1947. Also AIESL is not an

industry.

II. It is most humbly submitted before the Hon’ble court that the discharge of employees

by the AIESL was in accordance with the procedure laid down in The Industrial

Dispute Act, 1947. Such act is done to avoid economic burden on the enterprise and

not to infringe rights of any workmen.

III. It is most humbly submitted before the Hon’ble court that the acquirer/investor i.e.

Richhman Sachs Group Inc. didn’t have any rights that amounts to control as mentioned

under SEBL (Substantial Acquisition of Shares and Takeover) Regulation, 2011.

Moreover the rights conferred to them are just the basic fundamental rights which has

to be there after being the major investor of the enterprise with 40 percent of shares.

IV. It is most humbly submitted before the Hon’ble court the employee cannot exercise

ESOPs after being discharge from the employment as per the guideline set up in

securities and exchange board of Lapinda (employee stock option scheme and

employee stock purchase scheme) guidelines, 1999. This guideline clearly defines that

the vesting period should be completed to exercise ESOPs before that the AIESL is not

liable to pay ESOPs.

V. It is most humbly and respectfully submitted before the Hon’ble court that Lapinda is

a constitutional republic having quasi-federal structure and the powers are separated

between the Centre and the States and there is no need to move subject of concurrent

list to state list of 7th schedule.

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THE ARGUMENTS ADVANCEMENT

ISSUE 1: Whether the present industrial scenario necessitates the revision of the

definition of the term ‘industry’ and whether the AIESL can be termed as ‘industry’?

It is most humbly submitted before the Hon’ble court that there is urgent need for revision of

term ‘industry’ as present definition inadvertently overlooked the interests of the employer and

ignored the main object of the Act, 1947. Also AIESL is not an industry.

1.1 Scope of Industry under The Industrial Dispute Act, 1947

s. 2 (j) defines industry as

"industry" means any business, trade, undertaking, manufacture or calling of employers

and includes any calling, service, employment, handicraft, or industrial occupation or a

vocation of workmen;

In order to refine the interpretation of term ‘industry’, a landmark judgement Bangalore Water

Supply v. A. Rajappa1 laid down ‘Triple Test’ to ascertain what an industry is.

This judgement and the triple test has being used for a quiet a long time as a settled law in the

industrial matters to construe the identity of an organization – if it is an industry or not.

However, this experience does not seem to appear entirely happy. Instead of leading to

industrial peace and welfare of the community, which was the ultimate aim of the Industrial

Dispute Act, its application has done more damage than good, not only to the organizations but

also to employees and the economy ultimately. Without actually realizing , the SC in the

Bangalore Water Supply, gave very wide expansion to the term ‘industry’ and by its

implication included educational institution, charitable institutions and all other liberal

profession into its sweep. The reason being, that every time an organization which though did

1
1978 AIR 548, 1978 SCR (3) 207
 10

not intent to be an industry somehow fell under the ambit of “industry” by coinciding with any

one of the wide conditions of triple test.

For instance, in case of a voluntary organization which run workshop in order help poor or

destitute woman to earn some income by organizing some activities like preparing of spices,

pickles. In this case, only small number of persons were employed to assist in the activities and

the income earned by these activities was distributed to the women who were given such work.

Now, technically speaking, such organization would be termed as an industry, if following the

triple test, despite the fact that it was not organized like industries and even do not have the

means or manpower to run it as industries. In consequence to which, a large number of such

voluntary welfare schemes have been abandoned because of the wide interpretation given to

the term industry.

Considering the disastrous consequence of this widened definition, the government amended

the definition of industry in the Industrial Disputes Act in 1982. Although it is yet to come into

force. The Statement of Objects and Reasons of the Industrial Disputes (Amendment) Act,

1982 had stated:

“[I]t is proposed to exclude from the scope of this expression, certain institutions…However,

…it is proposed to have a separate law for the settlement of individual grievances as well as

collective disputes in respect of the workmen of these institutions.”

There is need to remove the inhibitions and difficulties faced by the executive in implementing

the law, that is to say, the legislature should draft a concise definition with certain restrictions

and exemptions; for such exempted categories new legislations should be carved to address

any redresses of the employees. It is conceded that demands of the competing sectors have to

be taken into account but that should not act as an excuse for non-implementation of legislative
 11

intent by the executive. Therefore, the judgement of the Coir Band 2 and Jai Bir Singh3 seems

to be the correct position that such sweeping definition of industry in the Bangalore case needs

to crystallized and refined taking into consideration the interests of workmen and employers

equally and for achieving the object of the Act, 1947 i.e. growth of industry by harmonization

of employer-employee relation. Similarly, the overarching definition of industry provided in

the Draft Code Bill, 2015 which merely reiterates the Bangalore case with no specific

exceptions requires modification along the same lines so that floodgates to litigation are not

opened.

It must be noted that even the 1982 amendment had envisaged the formulation of a special law

for such employees. The Statement of Objects and Reasons of the Industrial Disputes

(Amendment) Act, 1982 had stated:

“[I]t is proposed to exclude from the scope of this expression, certain institutions…However,

…it is proposed to have a separate law for the settlement of individual grievances as well as

collective disputes in respect of the workmen of these institutions.”

 AIESL cannot be termed as ‘industry’ because it neither comply with test laid down by

Banglore Water Supply Case, nor with the amended definition of 1982, thus not falling

into any of the definition. Hence it stands apart from category of ‘industry’.

___________________________________________________________________________
ISSUE 2: Whether the process of discharge of employees by AIESL stands in

violation of the Act?

It is most humbly submitted before the Hon’ble court that the discharge of employees

by the AIESL was in accordance with the procedure laid down in The Industrial

Dispute Act, 1947. Such act is done to avoid economic burden on the enterprise and

not to infringe rights of any workmen.2.1

2
Coir Board, Ernakulam Cochin & Anr v Indira Devi P.S. & Ors on 04/03/1992
3
State of U.P vs Jai Bir Singh Appeal (civil) 897 of 2002 decided on 05/05/2005
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2.1 Workman under Industrial Dispute Act

All the 2,50,000 Information Technology professionals employed by AIESL falls

under the definition of ‘Workman’4 under s. 2 (s) of The Industrial Dispute Act, 1947

(s) "workman" means any person (including an apprentice) employed in any industry

to do any manual, unskilled, skilled, technical, operational, clerical or supervisory

work for hire or reward, whether the terms of employment be express or implied, and

for the purposes of any proceeding under this Act in relation to an industrial dispute,

includes any such person who has been dismissed, discharged or retrenched in

connection with, or as a consequence of, that dispute, or whose dismissal, discharge

or retrenchment has led to that dispute,

2.2 Continuous Service:

The workman discharged here worked for more than two hundred and forty days

before retrenchment, (from September 2015 to January 2017) which is enough to say

that they were in Continuous Service, as defined under s. 25B (2) (a) (ii)

(2) where a workman is not in continuous service within the meaning of clause (1) for

a period of one year or six months, he shall be deemed to be in continuous service

under an employer-

(a) for a period of one year, if the workman, during a period of twelve calendar

months preceding the date with reference to which calculation is to be made, has

actually worked under the employer for not less than-

(ii) two hundred and forty days, in any other case;

In Gram Panchayat v. Sharadkumar D. Acharya5 the Hon’ble court held that:

4
Workmen of Dimakuchi Tea Estate v. Dimakuchi Tea Estate, (1958) 1LLJ 500
5
Gram Panchayat v. Sharadkumar D. Acharya, 1994 LLR 470 (Guj) (DB)
 13

A workman is deemed to be in continuous service for a period of one year, if he,

during the period of twelve calendar months preceding the date of termination, has

actually worked under the employer for not less than 240 days.

2.3 Retrenchment

As defined under s. 2 (oo) of The Industrial Dispute Act, 1947

“Retrenchment’ means the termination by the employer of the service of a workman

for any reason whatsoever,”6

The Act lays down a proper procedure that must to be followed by every employer for

a retrenchment under s. 25G of The Industrial Dispute Act, 1947

‘Where any workman in an industrial establishment who is a citizen of India, is to be

retrenched and he belongs to a particular category of workmen in that establishment,

in the absence of any agreement between the employer and the workman in this

behalf, the employer shall ordinarily retrench the workman who was the last person

to be employed in that category, unless for reasons to be recorded the employer

retrenches any other workman’

In M/s. Om Oil and Oilseeds Exchange Ltd., Delhi v. Their Workmen 7, the Supreme

Court further observed that ‘last come first go’ is not ‘universal principle’ which

would not be departed from by the management that the last should go first. The

management has a discretion provided it acts bona fide and on good grounds.

With the advancement of technology Artificial Intelligence was introduced within the

enterprise, and some workmen were discharged in order to increase the efficiency and

reduce the cost of production and combat with the change in Lapindian economy.

6
State Bank v. Sundaramony, (1957) I LLJ 453
7
AIR 1966 SC 1657
 14

Decisions made towards growth of an enterprise would not be mala fide, till the time

proper procedure is followed

2.4 Conditions precedent to retrenchment of workmen

s. 25 F lays down certain conditions which must be followed while discharging any

employee:

No workman employed in any industry who has been in continuous service for not less

than one year under an employer shall be retrenched by that employer until-

(a) the workman has been given one month’s notice in writing indicating the reasons

for retrenchment and the period of notice has expired, or the workman has been

paid in lieu of such notice, wages for the period of the notice;

(b) the workman has been paid, at the time of retrenchment, compensation which

shall be equivalent to fifteen days’ average payor any part thereof in excess of six

months;

(c) notice in the prescribed manner is served on the appropriate government

Though employees are provided with one month prior salary.

Referring to the Bombay Union of Journalist v. State of Bombay8 it was

interpreted that there is every justification for constituting Cls. (a) and (b) as

conditions precedent but the same cannot be said about the requirement as to Cl.

(c). Cl. (c) is not intended to protect the interests of the workman as such. It is

only intended to give intimidation to the appropriate government about the

retrenchment. Therefore having regard to the object which is intended to be

achieved by Cl. (a) and (b) as distinguished from the object of Cl. (c) has in mind,

it would not be unreasonable to hold that Cl. (c), unlike Cl. (a) and (b), is not a

condition precedent.

8
AIR 1964 SC 1617
 15

ISSUE 3: Whether the exercise of rights by the investor amounts to ‘Control’ as per SEBL

Takeover Regulations, 2011?

It is most humbly submitted before the Hon’ble court that the acquirer/investor i.e. Richhman

Sachs Group didn’t have any rights that amounts to controls mentioned under SEBL

(Substantial Acquisition of Shares and Takeover) Regulation, 2011. Moreover the rights

conferred to them are just the basic fundamental rights which has to be there after being the

major investor of the enterprise with 40 percent of shares.

3.1.1 Control as per SEBL

The term control has been defined in Regulation 2(1)(c) of the takeover code9 to “include the

right to appoint majority of the directors or to control the management or policy decisions

exercisable by a person or persons acting individually or in concert, directly or indirectly,

including by virtue of their shareholding or management rights or shareholders agreements

or voting agreements or in any other manner.”

This definition is an inclusive one and not exhaustive and it has two distinct and separate

features: i) the right to appoint majority of directors or, ii) the ability to control the

management or policy decisions by various means referred to in the definition. This control

of management or policy decisions could be by virtue of shareholding or management rights

or shareholders agreement or voting agreements or in any other manner. 10

The investor are vested with the veto power as per the agreement with the AIESL. The basic

principle that can be followed is that veto rights not amounting to acquisition of control

may be protective in nature rather than participative in nature i.e. such rights may be aimed

with the purpose of allowing the investor to protect his investment or prevent dilution of his

shareholding. At the same time, the Investor should neither have the power to exercise

9
SEBL (Substantial Acquisition of Shares and Takeover) Regulation, 2011
10
Subhkam Ventures (I) Pvt. Ltd vs. SEBI [2010] 99 SCL 159 (SAT-MUM)
 16

control over the day-to-day running of the business nor the policy making process. Having

rights in decisions involving a significant change in the current business activity or that

apply on exceptional circumstances would also be treated as a protective right.

After all, the investor has made heavy investments in the target company and is interested in

ensuring that the objects for which the company has been set up are not deviated from without

its knowledge or consent. So it is their right to get satisfied and by granting that power to

nominate director on the board of directors does not result in giving any control, much less

effective control, over the target company

Hon'ble SAT, in its judgment of subhkam Ventures (I) (P.) Ltd. v. SEBI 11dated January

15, 2010, rejected SEBI's view stating that none of the clauses of the agreements,

individually or collectively, demonstrated control in the hands of the acquirer. Hon’ble

SAT had observed that:

“…Control, according to the definition, is a proactive and not a reactive power. It

is a power by which an acquirer can command the target company to do what he

wants it to do. Control really means creating or controlling a situation by taking the

initiative. Power by which an acquirer can only prevent a company from doing what

the latter wants to do is by itself not control. In that event, the acquirer is only

reacting rather than taking the initiative. It is a positive power and not a negative

power….The test really is whether the acquirer is in the driving seat….By no stretch

of logic, can such an affirmative vote confer control over the day to day working

of the company…Affirmative vote of the investor in these matters is necessary for

protecting its investment….Such fetters fall far short of the existence of “control”

over the target company. It must be remembered that every fetter of any nature in

11
subhkam Ventures (I) (P.) Ltd. v. SEBI [2010] 99 SCL 159 (SAT-MUM)
 17

the hands of any person over a listed company cannot result in “control” of

that person over that company…”

The mere fact that any such important decision by the company requires an affirmative

vote from the investor, it is again indicative of the fact that it wants to protect its

investment and that the basic structure of the company is not altered without its

knowledge and approval. By no stretch of logic can such an affirmative vote confer

control over the day to day working of the company

We do not think that the provision of agreement gives any control to the investor. On the

contrary, it only enables to safeguard its own investment and the interests of the

shareholders in general. The agreement which gives a right to the investor director to be

a member of any committee of the board and to vote at all meetings of such committees

does not in our opinion give any control to the investor. The object of this clause is that

if what would be done at the board level is done at a committee level, the investor is kept

apprised of the development.

___________________________________________________________________________

ISSUE 4: In the light factual matrix, whether the employees can exercise the ESOPs

even after being discharged from the employment?

It is most humbly submitted before the Hon’ble court the employee cannot exercise ESOPs

after being discharge from the employment as per the guideline set up in securities and

exchange board of Lapinda (employee stock option scheme and employee stock purchase

scheme) guidelines, 1999. This guideline clearly defines that the vesting period should be

completed to exercise ESOPs before that the AIESL is not liable to pay ESOPs.

4 ESOP: Definition and Purpose

“Employee stock option”(2A) means the option given to the whole-time Directors, Officers

or employees of a company which gives such Directors, Officers or employees, the benefit
 18

or right to purchase or subscribe at a future date, the securities offered by the company at a

predetermined price. 12

Many companies use employee stock options plans to compensate, retain, and attract

employees. These plans are contracts between a company and its employees that give

employees the right to buy a specific number of the company’s shares at a fixed price within

a certain period of time. The fixed price is often called the grant or exercise price.

Employees who are granted stock options hope to profit by exercising their options to buy

shares at the exercise price when the shares are trading at a price that is higher than the

exercise price. 13

4.1 Termination of ESOPs

According to provisions 11.6 mentioned in ‘Securities and Exchange Board of lapinda

(employee stock option scheme and employee stock purchase scheme) Guidelines, 1999, In the

event of resignation or termination of the employee, all options not vested as on that day shall

expire

As such, upon termination/resignation, vested ESOPs may be exercised by an employee, during

the relevant notice period, or held on for Exercising during a merger, entity buy over, change

of control situation in a company. Many a times, the way vested ESOPs could be exercised, is

also made dependent upon whether such termination or resignation is for a good reason or a

bad reason.

Unvested ESOPs, however, under all circumstances, get cancelled, upon a

resignation/termination. If that person's employment terminates before the end of the vesting

period, the company can buy back the shares at the original price. The employee cannot sell or

transfer the stock options during the vesting period.

12
https://www.sec.gov/fast-answers/answers-empopthtm.html
13
securities and exchange board of Lapinda (employee stock option scheme and employee stock purchase
scheme) guidelines, 1999
 19

2.1 (15) "vesting" means the process by which the employee is given the right to apply for

shares of the company against the option granted to him in pursuance of ESOS. 14

2.1(16) "vesting period" means the period during which the vesting of the option granted to the

employee in pursuance of ESOS takes place. 15

The hon’ble court held in the matter of Religare Finvest Ltd., New Delhi v. Acit, New Delhi16

‘The options so granted may lapse during the vesting period itself by reason of termination of

employment or some of the employees may not choose to exercise the option even after

rendering the services during the vesting period.’

So here the employees didn’t fulfilled the basic condition which has to be there to claim ESOPs

and i.e. completing the vesting period. Hence, they are not liable to get any ESOPs.

___________________________________________________________________________

ISSUE 5: In the present industrial scenario, whether there is a need to move labour laws

from Concurrent list to the State list of the Constitution of Lapinda?

It is most humbly and respectfully submitted before the Hon’ble court that Lapinda is a

constitutional republic having quasi-federal structure and the powers are separated between the

Centre and the States and there is no need to move subject of concurrent list to state list of 7 th

schedule.

5.1. Quasi-federal structure

The union of Lapinda has a “Quasi Federal” structure. It divides its power between both states

and the centre, but gives centre more powers as compared to the state. Even though Lapinda

has Quasi Federal Structure when it comes to distribution of the power, there isn’t a complete

14
securities and exchange board of Lapinda (employee stock option scheme and employee stock purchase
scheme) guidelines, 1999
15
securities and exchange board of Lapinda (employee stock option scheme and employee stock purchase
scheme) guidelines, 1999
16
PAN: AAFCS6801H, ITA No. 2284/Del/2013
 20

concentration of power, otherwise it would have been a unitary structure. As Justice P.N. Sapru

said:

“Our founding fathers wisely did not establish for this country a completely unitary sovereignty

among various units composing it. Any such attempt would have completely broken down, as

India is too vast a country to be governed as a completely unitary state.”17

The federal Structure has been adopted so that the states can exercise their autonomy on certain

matters according to the needs of the people and more effective and efficient governing is

possible.

5.2. Applicability of Doctrine of Pith and substance

“It is not possible to make a clean cut between the powers of the various legislatures; they are

bound to overlap from time to time” 18

Pith means ‘true nature’ or ‘essence of something’ and Substance means ‘the most important

or essential part of something’. This doctrine relates to the violation of constitutional

delimitation of the legislative powers in a Federal State. Under it, the court ascertains whether

the alleged encroachment is merely incidental or substantial. Thus, the doctrine of pith and

substance postulates, for its application, that the impugned law is substantially encroached

upon the legislative field of another legislature.

Where the legislative competence of a Legislature of any State is questioned on the ground that

it encroaches upon the legislative competence of Parliament to enact a law, the question one

has to ask is whether the legislation relates to any of the entries in Lists I or III. If it does, no

further question need be asked and Parliament's legislative competence must be upheld. Where

there are three Lists containing a large number of entries, there is bound to be some overlapping

17
M. SHARMA, INDIAN GOVERNMENT AND POLITICS 368-369 ( Navjyoti Press, New Delhi, 1984)
18
Prafulla v. Bank of Commerce, A.I.R. 1947 PC 28 (India).
 21

among them. In such a situation the doctrine of pith and substance has to be applied to

determine as to which entry a given piece of legislation relates. Once it is so determined, any

incidental trenching on the field reserved to the other Legislature is of no consequence. The

Court has to look at the substance of the matter. The doctrine of pith and substance is sometimes

expressed in terms of ascertaining the true character of legislation. The name given by the

Legislature to the legislation is immaterial. Regard must be had to the enactment as a whole,

to its main objects and to the scope and effect of its provisions. Incidental and superficial

encroachments are to be disregarded. 19

In the present case as already discussed above the State is just trying to regulate the land and

setting up a committee to overlook the water management of the project. Such powers are

granted to it by Art. 246.

In the matter of M. Karunanidhi v. Union of India 20 The Hon’ble court said that:

“1. Where the provisions of a Central Act and a State Act in the Concurrent List are fully

inconsistent and are absolutely irreconcilable, the Central Act will prevail and the State Act

will become void in view of the repugnancy.”

5.2.1. Incidental or Ancillary Encroachment

The doctrine of incidental encroachment means that in enacting a legislation, the legislature

has not travelled beyond the legislative field allotted to it by the arrangement of distribution of

powers in the constitution, and there has been merely incidental encroachment of powers which

does not affect any main scheme of the distribution of powers.21 Thus, we see that if the

19
The State of West Bengal v. Kesoram Industries Ltd. and Ors., MANU/SC/0038/2004.
20
1979 AIR 898, 1979 SCR (3) 254
21
DR. C.D. JHA, JUDICIAL REVIEW OF LEGISLATIVE ACTS 8655, (2nd Ed., Lexis Nexis, 2009).
 22

encroachment by the State Legislature is only incidental in nature, it will not affect the

Competence of the State Legislature to enact the law in question. 22

Once it is found that in pith and substance a law falls within the permitted field, any incidental

encroachment by it on a forbidden field does not affect the competence of the concerned

legislature to enact the law. “Effect is not the same thing as subject-matter. If a state act,

otherwise valid, has effect on a matter in list I, it does not cease to be a legislation with respect

to an entry in List II or III23

As discussed above the state has only enacted the legislature by exercising its power given to

it by Art. 246, and all the elements that has been governed by this Act has been mentioned in

the state list, it only incidentally encroaches upon the matters of the union list.

With respect to matters enumerated in List III (Concurrent List), both Parliament and the State

Legislature have equal competence to legislate. Here again, the courts are charged with the

duty of interpreting the enactments of Parliament and the State Legislature in such manner as

to avoid a conflict. If the conflict becomes unavoidable, then Article 245 indicates the manner

of resolution of such a conflict.

In T.M.A. Pai Foundation Vs. State of Karnataka24, Justice Khare, as he then was, on the

question of transposition of subject "Education" from List II to List III and its effects, held :

"It may be remembered that various entries in three lists of the Seventh Schedule are not powers

of legislation but field of legislation. These entries are mere legislative heads and demarcate

the area over which the appropriate legislatures are empowered to enact law. The power to

legislate is given to the appropriate legislatures by Article 246 and other articles. .Thus the

function of entries in three lists of the Seventh Schedule is to demarcate the area over which

22
Bharat Hydropower Corpn. Ltd. v. State of Assam; (2004) 2 S.C.C. 553.
23
State of Bombay v. Narottamdas, A.I.R. 1951 S.C. 69. (India).
24
(2002) 8 SCC 481
 23

the appropriate legislatures can enact laws but does not confer power either on Parliament or

the State Legislatures to enact laws. It may be remembered, by transfer of the entries, the

character of the entries is not lost or destroyed."

So in the light of above stated arguments it is clear that the state has given power to implement

the laws and division of power among three list is just to simplify the work so that the better

laws are made and the disputes didn’t arose between anyone.
 24

THE PRAYER

WHEREFORE IN THE LIGHT OF ISSUES RAISED, ARGUMENTS ADVANCED AND AUTHORITIES

CITED, THE COUNSEL ON THE BEHALF OF THE RESPONDENT MOST HUMBLY PRAY BEFORE

THIS HON’BLE COURT TO DECLARE AND ADJUDGE THAT:

 Discharge of employee did not stand for any violation of any right, therefore AIESL

should not be liable to pay any compensation.

 ESOPs should not be given to employees.

 The labour law subject should not be transfer to state list.

And to pass any order or relief in the Favour of the Respondent which this Hon’ble Court

may deem fit in the larger interest of the Justice.

FOR THIS ACT OF KINDNESS, THE COUNSEL SHALL REMAIN DUTY BOUND FOREVER.

Sd/-

COUNSEL FOR RESPONDENT