SYLLABUS

FSB - LABOUR LAW-II

Unit - I Introduction: Social Security and Labour Welfare
Concept, Evolution and Constituents of Social Security - Object of Social Security
Laws - Social Security and Constitution - ILO on Social Security
Unit - II Social Security: Industrial Injuries
The Employees' Compensation Act, 1923: Scope, Objects, Coverage and Definitions-
Liability of the Employer to Pay Compensation - Personal Injury, Accident arising out of and
in the Course of Employment, Doctrine of Notional Extension and Occupational Diseases -
Determination and Distribution of Compensation - Principal Employer's Right of Indemnity -
Commissioner's Powers and Functions.
Unit - III Social Security: Social Insurance
The Employee's State Insurance Act, 1948: Objects, Applications and 'Seasonal
Factory' - Definitions - E.S.I. Corporation - E.S.I. Funds, Payment of Contributions - E.S.I.
Benefits - Adjudication of Disputes - E.S.I. Court - Penalties.
Unit - IV Other Social Security Legislations
The Maternity Benefits Act, 1961: Object and Application - Eligibility and Maternity
Benefits - Notice of Claim Prohibition against Dismissal, Wage Deduction - Powers and
Duties of Inspectors.
The Employee's Provident Funds and Miscellaneous Provisions Act, 1952: Scope,
Coverage, Application and Definitions - Authorities, their Powers and Functions
Contributions - Employees Provident Fund Scheme, Employees' Pension Scheme and
Deposit Linked Insurance Scheme -Penalties.
The Payment of Bonus Act, 1965: Bonus Commission - Definitions and Coverage -
Kinds of Bonus - Eligibility and Extent of Bonus - Calculation of Bonus - Available Surplus,
Allocable Surplus, Set On Set Off - Forfeiture of Bonus - Prior Charges - Machinery.
Payment of Gratuity Act, 1972: Background, Object and Definitions - Eligibility for Payment
of Gratuity - Forfeiture, Exemption, Determination - Controlling Authority -Penalties.
Unit - V Labour Welfare Legislations
Factories Act, 1948: Background and Definitions - Formalities to start a Factory -
Health, Safety and Welfare Measures - Working Hours - Employment of Young Persons -
Annual Leave with Wages - Special Provisions.
The Tamil Nadu Shops and Establishment Act, 1947: Applicability and Person
covered by this Act, - Opening and Closing Hours - Employment of Young Persons -
Working Hours, Public Holiday, Safety, and Cleanliness - Leave and Annual Leave with
Wages.

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Statutory Materials with Amendments
1. The Employees' Compensation Act, 1923
2. The Employees' State Insurance Act, 1948
3. The Maternity Benefit Act, 1961.
4. The Payment of Bonus Act, 1965.
5. Payment of Gratuity, 1972.
6. Factories Act, 1948.
7. The T.N. Shops and Establishment Act, 1947.

Books for Reference:

1. S.N.Mishra : Labour and Industrial Law
2. V.G. Goswami : Labour Law
3. Madhavan Pillai : Labour and Industrial Law
4. S.C.Srivastava : Social Security and Labour Laws
5. K. D. Srivastava : The Employees' Compensation Act, 1923
6. K.D. Srivastava : The Employees' State Insurance Act, 1948
7. K. D. Srivastava : The Employees' Provident Funds and Miscellaneous Provisions Act,
1961.
8. K. D. Srivastava : The Payment of Bonus Act, 1965
9. K. D. Srivastava : Payment of Gratuity, 1972
10. K. D. Srivastava : Factories Act, 1948
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 LABOUR LAW – II

UNIT – I

INTRODUCTION: AND SOCIAL SECURITY AND SOCIAL WELFARE

INTRODUCTION:

Labour at all times, has been recognized as a separate factor of production. In

economy, every work whether it is manual or mental which is done for monetary purpose is
called ‘labour’. Various differences are found in the opinion with regard to the importance of
labour as to, what is productive or unproductive but it can be said that no production can be
done without the dedicated and efficient labour force.

However, labour is manifestly different from other factors of production and has got
certain characteristics which arise a lot of problems in all countries. In different countries
different problems are found because of different ecological problems and human nature. So,
both physical and mental work considered as labour which is inseparable and perishable
commodity.

The quantity and quality of labour are both a cause and consequences of economic
development. If it is called the backbone of nation it would not be taken as exaggeration.
Since the time immemorial, labour works as a mean of production without the consideration
of various systems working in different countries and modes of productions. Most of time,
labour is considered as a source of production but no one try to look into another part which
signifies it as a major segment of population and beneficiary of the fruits of development.
These benefits and fruits are given to them as the measures of labour welfare and social
security by the factory owners and government during their employment.

SOCIAL SECURITY

Social security in a welfare state like India has assumed great important in recent
years. Social security is now spreading all over the world. To provide social democracy,
social security is very necessary because without security, democracy can never be enjoyed.
Social security measures provide a kind of protection and stability in midst the stress and
strain of modern life. Social Security is one of the fundamental human rights as provided in
the Universal Declaration of human rights adopted by General Assembly of United Nation on
10 December, 1948

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 A welfare state always works for the help, benefits and welfare of its human beings.
Modern welfare states have comprehensive welfare schemes to take care of its citizens from
“Womb to Tomb.” Social security is one of the important pillars of the welfare state on which
the whole structure of it rests. In a few countries, from its modest beginning in early decades
of present century, social security has now become a fact of life for millions of people
throughout universe. The economic and social policies of all the developing and developed
countries are influenced by it presently so every kind of economy is now not far away from
the social security of labour class.

CONCEPT AND MEANING

Social security is a dynamic concept and dynamism cannot be defined using rigid
limits. The concept of social security is based on ideals of human dignity and social justice.
The basic philosophy of social security is that a citizen who has contributed to his country’s
welfare should be given protection against certain hazards of the life to which he is exposed
to either in his working life or consequence of it. Social security is a way to ensure a person
against various problems and mis happening of the life.

Social justice is not a narrow or one sided approach or concerned about small details
and rules and is not limited to industrial adjunction alone; it is very comprehensive in its
domain. Socio-economic equality is its basic aim and it works to remove every king of
disparities working in society. With the concept analysis of social justice it can be said that
there is a close relationship between social justice and social security. According to Leo
Wildman there is no lasting peace without social security.

The social security has been mentioned in early Vedic Hymns which wishes everyone
to be happy, free from ill health, enjoy a bright future and suffer no sorrows. It does not work
in a similar form throughout the world but it varies from country to country and time to time.
Social security schemes are affected by the economic growth of concerned country. In every
country, now it has become a vital part of national programmes and policy which strikes on
the roots of various problems for the well being of those persons who become incapable
earning their livelihood. It works to develop the idea of welfare state. Social security is an
integral part of labour welfare.

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SOCIAL SECURITY DEFINED
Various organizations and intellectuals define social security according to their views
and ideas and include distinct components in it. I.L.O. defines social security as “The security
that the society furnishes through appropriate organization against certain risks to which its
members are exposed. These risks are essentially contingencies against which the individual
of small means cannot effectively provide by his own ability of foresight alone or even in
private combination with his fellow. It is characteristic of those contingencies that they
imperil the ability of the working man to support himself and his dependents in health and
decency.”

Friedlander defines social security as “A programme of protection provided by

society against contingencies of modern life like sickness, unemployment, old age,
dependency, industrial accident and invalidism against which the individual cannot be
expected to protect himself and his family by his own ability or foresight.”

According to Weber and Cohen, “Social security is a controversial and dynamic

subject with various facets- philosophical, theoretical, humanitarian, financial, administrative,
social, economic, statistical, actuarial, medical and legal.”

W.A. Robson defines social security comprehensively “Social security is a way of

ensuring freedom from want or poverty which is one of the formidable obstacles in the way
to progress. Social security implies insurance against those misfortunes to which an
individual remains exposed even when the condition of society as a whole improves. It does
not include the various measures for improving the condition of society- full employment,
minimum wages, factory laws, public health, housing, education and so forth.”

Maurice Stack says that, “Each country must create, consume and build up the
intellectual, moral and physical vigour of its active generation prepare the way for its future
generations, and support the generation that has been discharged form productive life. This is
social security; a genuine and rationale economy of human resources and values.”

According to Lord William Boveridge, “The term social security is used to denote the
security of an income to take place of the earning when they are interrupted by
unemployment, sickness or accident to provide for retirement through age, to provide against
loss of support by the death of another person, and to meet exceptional expenditure, such as
those connected with birth, death and marriage.”

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 Lord Boveridge is very comprehensive about the social security in his definition and
seems to attack on five giants’ viz. want, disease, ignorance, squalor and idleness. To
understand the severity of these five contingencies explanation is necessary as follows:

(a) Want
A worker during and after job always faces strictness of want and to satisfy such
wants sufficient money is required by him. His family sometimes entirely depends on him
and he has to fulfil all their desires so sufficient income must be given to him in return of his
services to achieve all basic needs of life.

(b) Disease
Disease is such a thing to which no one can run away, everyone can be infected by it
and it plagues the workers more. Modern industries use complicated machinery without the
safety measures and dangerous liquors are also brought in services which sometime prove
harmful for the workers. So proper preventive measures must be adopted

(c) Ignorance
Ignorance can be harmful for the workers because lack of awareness and knowledge
can create a lot of problems for them. Ill- informed workers are surrounded by darkness and
misunderstandings about health, welfare, social security, strength of union etc. Ignorance can
be removed through education, training about work, vocational guidance programmes.

(d) Squalor
Squalor, pollution, insanitation are the cause of various diseases and health related
problems to workers and to general public nearby industrial areas. It means all those evils
which come through unplanned growth of industries and cities, bad housing, dumping of
waste material in rivers and destruction of forests prove harmful for industrial workers. Thus
remedial measures against squalor means planned industrial growth and revolution in
housing.

(e) Idleness
Employment is very much necessary for every worker to maintain the necessities. The
work must be provided to all who are willing to do work, because empty mind can never
think positively and constructively. So employment must be ensured to every hand.

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MAIN CONSTITUENTS OF SOCIAL SECURITY
Social security is provided through various methods to its beneficiaries, different
countries adopt different constituents or methods for it but in practice, there are three or four
main constituents of social security, viz.

(i) Social Insurance

(ii) Social Assistance

(iii) Public Services

(iv) Allied Services

SOCIAL INSURANCE

Social insurance is one of the devices to prevent individual from falling into deep
poverty and contingencies. It helps a person at the time of uncertainties and misfortune.

The I.L.O. defines ‘Social Insurance’ as a scheme that provides benefits for persons of
small earning granted as of right in amounts which includes in it combine contribution of
insured person as well as employer and state. It is a group idea which helps a needy. In this
insurance workers have to contribute a little but major portion is paid by employer or state
and in return of a little contribution, a worker will get every kind of help in emergency.
Social insurance scheme try to maintain a minimum standard of living to the beneficiaries.

For industrial workers this insurance is totally compulsory due to the hazardous
working conditions. Social insurance is social in nature because of collective efforts but
contrary to it, commercial insurance is profit oriented which provides as much helps as much
contribution has been made.

SOCIAL ASSISTANCE

Social assistance is a device of social security to provide every kind of help to a

person at the time of earning loss. It depends on certain conditions and legalities between
worker and the state. This assistance is purely a matter of government and beneficiary has not
to pay for it. Social assistance is provided until need remains continue. For this help a person
needs not to give any service in return but means test is necessary, a person has to prove
himself capable for this benefit.

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 In many countries this is the successor of the former poor law system transformed to
accord with current social attitude. This system is non-contributory so public revenue funds
are being utilized for it.

PUBLIC SERVICES
Public services are also an important type of social security constituents. It provides
both cash and medical benefits. It covers the programmes such as National Health Services,
Old Age Pensions, and Pension for Invalidism, Survivor’s Pension to Widow or Orphan etc.

ALLIED SERVICES
Social insurance and Social assistance are two main constituents of social security but
allied services include some other schemes of social security, such as mutual benefits
schemes in which labourers contribute, the employer’s financed schemes which are made by
employers to help the workers and employers’ employees’ financed schemes which are built
collectively for the workers’ welfare.

NEED OF SOCIAL SECURITY

In modern century whenever society is becoming industrialized and workers are
migrating from agriculture to industries, the burden is increasing on industrialists of their
security. There was a time when after migration they had relations with relatives and they did
help to them at the event of contingencies but now due to the busyness of modern society and
work pressure, workers become disconnected with rural areas and have no sources and saving
of protection. Social security is very much necessary for them.

Every society today faces a situation which has never been known before. The
imbalance industrial development and unexpected growth of population have created a lot of
problems and complications. Contingencies of industrial as well as general life are also
increasing day by day. Individualism is affecting the people badly.

Hence, to protect the individual and society from uncertainties of future social
security has been adopted by every country as an indispensable national programme. Any
measure of social security strikes at the roots of poverty and exploitation. Its ultimate goal is
to provide social as well as economic justice to all.

Social security works as a factor to fulfil the concept of welfare state which provides
security to the members of society against unprecedented want, hazards, accident,

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contingencies of further life. Financial resources of developing countries are not so enhanced
therefore its population, mainly working class, has to live in deep deprivation so the need of
social security in such countries can hardly be avoided especially for working class.

Social security is also needed to reduce or minimize the uneven distribution of income
assets and wealth. The insufficiency of wages to maintain the large families is a major cause
of poverty. In such a low income large poor families are not able to get an appropriate living
standard and health facilities.

Apart to such families, there are also some families who have sufficient income but
due to the debt of exceptional expenses like marriage, hospitalization, medical expenses,
serious injuries or accidents, are not capable to maintain expenditures and fall in poverty. In
such circumstances people needed subsidized services or cash benefits or medical facilities to
come out of such situations.

Every employer or industrialist want to increase the production of factory and it can
be possible if the workers of his factory will be happy and satisfied so to make them facilitate
and secure, inside as well as outside the establishment, welfare and social security activities
are necessary.

In India, it is well known that workers get low wages so whenever they meet any
problem or calamities and seasonal unemployment they with their families indulge in child
labour, beggary and even in prostitution which is social evils so to stop such activities
government should formulate some rule-regulations, legislations for the financial help of
workers. The concept of welfare economy also forced government to give all kind of help to
every human being so that they can survive respectfully and easily in society after mishap
pining, retirement and old age.

AIM OF SOCIAL SECURITY

Social security represents society’s current answer to the problem of economic
insecurity. Social security measures have a twofold significance for every developing
country. They constitute an important step towards the goal of a welfare state, by improving
living and working conditions and affording the people protection against the uncertainties of
the future. These measures are also important for every industrialisation plan, for, not only do
they enable workers to become more efficient, but they also reduce wastage arising from
industrial disputes causing work stoppages. Hence, the aim of all social security measures is
three fold in nature which are as follows:

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1. Compensation
It aims to substitute income when there is interruption of earnings due to
unemployment, sickness, permanent disability, old age etc.

2. Restoration
It is designed to provide certain services like medical care to the sick and invalid and
rehabilitations in cases of need.

3. Prevention

Social security measures not only provide reliefs when occasions require expenditure
that strains family budget, but also prevents the risks from arising in the first place itself.
Prevention is designated to avoid the loss of productive capacity due to sickness,
unemployment or invalidity and to render the available resources which are used up by
voidable disease and idleness and this increase the material, intellectual and moral well being
of the community.

HISTORICAL PERSPECTIVE
Social security is as old as human itself. Even in primitive community the particles of
social security were found. In ancient time, kings also helped the poor and disabled of his
state. There was a time when human needs were limited, society was not so developed and
families were joint there was no need of formal social security schemes. People always did
the help of each other and crèches, guilds, religious institutes, charitable institutions always
provide required help to the needy persons. Some voluntary organizations were also working
but all these efforts were voluntary in nature not compulsory.

Since the Industrial revolution up to 1880, three approaches, namely saving plans,
private insurance and employer’s liability plans were established in Europe to safeguard the
interests of workers. Government was acting under the so-called poor laws. But all such
measure was not sufficient and due to the rapid industrialization, risks were increasing for
worker’s life. So a formal social security system was needed.

Social security originated in Germany when in 1881, Emperor William I urged upon
the Reichstag to adopt social insurance scheme. Further, Bismarck was also a great supporter
of social insurance in Germany.

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 Great Britain introduced in 1908, a non-contributory old age pension scheme for the
persons reached the age of 70, then in 1911, a unemployment insurance scheme was adopted
but it was U.S.A. who adopted the first comprehensive legislation in this respect the ‘Social
Security Act, 1935’. Another important Social Security Act was passed in 1936 in New
Zealand which provided through this Act a compulsory social insurance scheme and soon
other countries of world followed the social security schemes to save their citizens from
hazards and contingencies of life.

The Second World War became a big reason for the expansion of this scheme because
after Second World War there was a scarcity of commodities and people were feeling
helpless and they need some help. In 1942, Beveridge Report played vital role in
reorganization of social security schemes.

PROGRESS OF LABOUR WELFARE AND SOCIAL SECURITY

LEGISLATIONS IN INDIA
Labour welfare and social security measures and legislations are influenced by
humanitarian principles in India. In the starting era of industrialization (before independence)
there was no welfare and social security measure introduced by industrialist and no proper
legislations have been made to ensure welfare and social security by government. Workers
were not aware and no efforts had been made to provide facilities at their work place but after
independence Indian government took keen interest to provide social security to workers so
the historical development of labour welfare and social security in India can be divided into
two phases:

(i) Pre-Independence Period

(ii) Post-Independence Period

PRE-INDEPENDENCE PERIOD
In India large scale factories were started since 1850, but at that time industrial
development was not so fast, it was very slow and it was mainly confined to the textile
industry.

It was the period when the labour enactments were initiated for ‘regulating the
relationship’ rather than ‘protection of labour’ from exploitation. In the movement of labour
class first unrest come before in 1877 at Empress Mill Nagpur which was regarding the
improvement of wages that was below the satisfaction. At that time, workers were not

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organized. But after the Empress Mill unrest, workers fight for their rights till the Factories
Act, 1881 was not passed.

The first trade union organization was formed in year 1890 by Narayan Maghajee
Lokhande, named as the "Bombay Mill Hand’s Association" it was not so strong but it was a
start of organized movement in India. In 1885, British Government passed the Fatal Accident
Act. This Act was an important Social Security Act, which required the employers to pay
compensation to his employees if it was proved in court that the accident was not occurred
due to the employees’ negligence.

In 1920, International Labour Organization (I.L.O.) played an important role in social

security of labour by organising a convention. The First World War created a kind of unrest
among the workers so to please them British Government passed Workmen’s Compensation
Act, 1923 and Maternity Benefit Act. The main objective of these Acts was to ensure the
social security for male as well as female workers.

Then in 1929, Royal Commission was appointed in chairmanship of J.H. Whitley to

survey about the working conditions of labour class and the Commission put the stress on
comprehensive social security scheme. Then government tried to introduce the sickness
insurance in India so they designed a contributory health insurance scheme in 1937 but there
was no provision for medical benefit in the scheme. Many committees were appointed to give
suggestions on sickness benefits, medical benefits, health provisions and after a long process
a ground was made for Employees’ State Insurance Act, which was formally passed after
independence. It was a complete plan for the health insurance of workers.

POST-INDEPENDENCE PERIOD
After independence, industrial growth started increasing rapidly and working class
became more aware about welfare and social security measures. Welfare measures for the up
liftmen of labour class were intensified. The ESI Act, 1948 marked the beginning of the era
of social insurance of labour in India and I.L.O. helped up to a very large extent.

After enacting the ESI Act, in the same year government made certain modifications
in already existing Factory Act and passed the ‘Factory Act, 1948’ to ensure safety, health,
proper working hours, conditions of work at workplace etc. The Minimum Wages Act was
also passed in 1948; this Act was to stop the exploitation of the workers by paying low
wages. Whenever government was considering the social security of workers one more

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important legislations was passed named the Employees’ Provident Fund and Miscellaneous
Provisions Acts, 1952. This Act was mainly for the retirement benefit and also provided
refundable and non- refundable advances to the workers during Job. In the series of Social
Security Acts, the Maternity Benefit Act was introduced in 1961, in the favour of working
women which provides them help during pregnancy.

The Payment of Gratuity Act, 1972 was also a social security legislation which is for
financial help after retirement. In addition to these Acts, some other social security and labour
welfare Acts were passed during the ‘Five Years Plans’ that were for the workers of
plantation, mines and various hazardous jobs.

CONSTITUTIONAL PROVISIONS FOR LABOUR CLASS

The Constitution of a country embodies its legal framework, establishes its high
institutions and lays down the rules which regulate functioning of the government and its
agencies. Constitution formulates structure of various organizations of state and declares the
limitations, powers, privileges and jurisdiction of them.

In a federal state it defines the relationship of centre and state and lays down a
demarcation between their powers. It is in fact a group of principles, rules, regulations and
laws which drives a country. Fundamental rights, fundamental duties, equality, justice are
provided to the citizens of the country through it. Sovereignty, socialism, secularism,
fundamental rights and duties, federalism, directive principles of state policy are the basic
principles of our Constitution. In our Constitution part IV deals with the ‘Directive Principles
of State Policy’ which bears 16 articles from 36 to 51.

Directive Principles group is a mirror through which the estimate of the expectations
of the people of India can be seen. These principles have been added in Constitution to create
a kind of democratic sense and ground for freedom and justice and to provide assured of
future welfare. Directive Principles dealt with welfare of people, removal of inequalities in
income, status, facilities and opportunities, proper distribution of material resources, social
security of workers, humane conditions at work, promote cottage industries and to increase
worker’s participation is management.

Most of the provisions for working class have been introduced in ‘Directive
Principles’ and such provisions provide protection and security against exploitation to the
labour class. Whenever state government passes law and prepares policy to direct any

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department or organization it has to keep in mind Directive Principles. These principles are a
kind of obligation on the shoulders of state. But these principles are not enforceable in court
of law and no citizen can compel its government to provide to them these principles. Through
Directive Principles government tries to ensure social and economic justice and equality to
all.

ARTICLE 23, 24

Both Article 23 and 24 are against exploitation. Article 23 prohibits traffic and beggar
in human beings and similar forms of forced labour. According to Article 24 no child below
the age of 14 years shall be worked in any factory or mine or any other hazardous occupation.
This article says that children below the age of 14 years should be given compulsory
education so that they can become useful and responsible citizens in future. Negligence of
this article is punishable.

Under clause (1) of Article 23 “traffic” includes the slavery and prostitution system
whereas “beggar” means to insist any one to work involuntarily by without payment.
However, under clause (2) of this article some important exception is made in favour of state
which may impose some compulsory service for public purposes i.e. national defence,
removal of illiteracy etc. According to law traffic and beggar are punishable offence.

ARTICLE 38

This article declares “The state shall strive to promote the welfare of the people by
securing and protecting as effectively as it may a social order in which justice, social-
economic and political, shall inform all the institutions of the national life.”

This article ensures the citizens that not only in the political field but also in social-
economic fields they would get protection which is symbol of a progressive society.

ARTICLE 39
Article 39 contains 6 clauses. It explains that the state shall in particular, direct its
policy towards securing-

(a) That the Citizens men and women equally have the right to adequate means of
livelihood;

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 (b) That the ownership and control of the material resources of the community are so
distributed as best as to sub serve that common good;

(c) That the operation of the economic system does not result in the concentration of
wealth and means of productions to common detriment;

(d) That there is equal pay for equal work for both men and women;

(e) That the health and strength of workers, men and women and the tender age of
children are not abused and the citizens are not forced by economic necessity to enter
avocation unsuited to their age;

(f) That the children and youth are protected against exploitation and against moral
and material abandonment (under Constitutional Act, 1976, 42nd Amendment w.e.f.
Jan 3, 1997). This article provides equality to the citizens of the country.

ARTICLE 39 A

This article mainly inserted to enjoin the state to provide ‘free legal aid’, to the poor
and to take other steps to ensure equal justice to all which is offered by Preamble of
Constitution.

ARTICLE 41
Article 41 directs that the state shall within the limits of its economic capacity and
development; make effective provisions for securing the right to work, to education and to
public assistance in cases of unemployment, old-age, sickness, disablement and in other cases
of undeserved wants.

This article is specially formulated to provide social security to working class at the
time contingencies fall. State is not yet fully successful to achieve this objective but, is trying
to ensure the social security through various legislations. Employment opportunities for all
are also in process to come true.

ARTICLE 42
This article directs state to make provisions for securing justice and humane
conditions of work and maternity relief. So it makes state liable for the proper working
conditions for labour at the work place. Government has formulated factories laws, labour
legislations to ensure the safety of workers. Maternity Act provides the relief to female
workers during pregnancy.

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ARTICLE 43
The state shall endeavour to secure, by suitable legislation or economic organization
or any other way, to all workers, agricultural, industrial or otherwise the following rights.

(a) Right to work;

(b) Right to a living wage; and

(c) Right to such condition of work as would ensure a decent standard of life and full
employment of leisure and social and cultural opportunities. So the objective of this
article is to provide employment to every willing hand so that he can enjoy a decent
living standard.

There is also another part of this article which directs the state to endeavour to
promote cottage industries on an individual or co-operative basis in rural areas. This part is
inserted for the development of rural areas.

ARTICLE 43 A
According to constitutional amendment 42 under Constitutional Act, 1976 (w.e.f.
1977) a new article 43A has been added in Constitution which is as-

The state shall take steps by suitable legislation or in any other way, to secure the
participation of workers in the management or undertakings, establishments or other
organizations engaged in any industry. This article is introduced to increase the workers’
participation in management of industries so that the benefit of their experiences can be get
for better work and to make them feel vital part of the organization.

CHAPTER I OF INDIAN CONSTITUTION: DISTRIBUTION OF LEGISLATIVE

POWERS

India is a federal country so both union and the state have the right to constitute
legislations and part XI of first chapter explains the legislative relations of centre and state.

The union is not a league of states, united in a loose relationship, nor is the states the
agencies of the union, driving powers form it. Both union and states are created by
Constitution both derive their respective authority form the Constitution. The one is not
subordinate to other in its own field; the authority of one is coordinate with that of other.

Three lists are embodied in schedule VII of Indian Constitution.

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1. UNION LIST

This list consists 98 items and is longest of three. The items mentioned in this list
have national importance and parliament has exclusive power of legislation with regards all
items of this list. All the important matters take place in the union list.

2. STATE LIST

The selection of the subjects for this list is made on the basis of local interest and it
envisages the possibility of diversity of treatment with respect to different items in different
states of union.

This lists bears 62 items and state legislatures has exclusive powers to make law on
the items lay in this list another to this list state has also power to constitute legislation
mentioned in concurrent list.

3. CONCURRENT LIST

The 52 items enumerated in this list and both parliament of India and state legislatures
have right to constitute legislation on the subjects vested in this list.

SUBJECTS OF THE LISTS

Part XXII, schedule VII explains the subjects and items vested in all three lists. The
subjects that are related to industries, labour welfare, social security, dispute and other
interest of labour in all the three lists are as follow.

(i) Union List

1. Item–13 Participation in international conference, association and other bodies and

implementing of decisions made thereat.

2. Item–28 Port quarantine, including hospitals, connected there with; seamen and
marine hospitals.

3. Item–47 Insurance.

4. Item–52 Industries, the control of which by union is declared by parliament by law to

be expedient in the public interest.

5. Item–61 Industrial disputes concerning union employees.

6. Item-65 Union agencies and institutions for-

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 (a) Professional, vocational or technical training, including of police officers;
or

(b) The promotion of special studies or research; or

(c) Scientific or technical assistance in the investigation or detection of crime.

7. Item–94 Enquires, surveys and statistics for the purpose of any of the matters in this
list.

(ii) State List

Item – 9 Relief of the disabled and unemployable.

Item – 24 Industries subject to the provision of list I.

(iii) Concurrent List

Item – 20 Economic and social planning.

Item – 21 Commercial and industrial monopolies, combines and trusts

Item – 22 Trade union, industrial and labour disputes.

Item – 23 Social security and social insurance, employment and unemployment.

Item – 24 Welfare of labour including conditions of work, provident funds, employers

liability, workmen’s compensation, invalidity and old age pension and maternity
benefits.

Item – 25 Vocational and technical training of labour.

Item - 36 Inquires and static for the purpose of any of the matters specified in list II or
list III.

The matters related to labour is jointly handled by centre and state governments.
Union and all the territories establish machinery at their own level to administer and
implement the various laws and legislations. At central level Labour & Employment Ministry
look into the related matters while the Labour Departments at state level play vital role in
labour affairs. Some autonomous bodies also work to handle all the respective matters.

LABOUR POLICY OF INDIA

Labour policy basically is a group of various programmes enactments and schemes

which is designed for the welfare, protection, social security and safety of workers. Without a

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proper labour policy it becomes difficult to handle all labour matters and ensure workers a
healthy work environment.

The labour policy broadly covers the treatment of labour under Constitutional,
Legislative, Administrative Acts, rules, practices, precepts laid down in the five year plans
and so on.

The main objectives of the labour policy are as follow:

(i) Protection and promotion of interest of the workers.

(ii) Rationalization of existing labour laws according to the needs of the future and
labour market and enactment of umbrella legislation for the unorganized workers.

(iii) Proper implementation of Rastriya Swasthya Bima Yojna (RSBY) which is a

health insurance scheme for below poverty line (BPL) families.

(iv) To address all the emerging requirements in the area of research and training
related to working class.

Vision

1. Exercise the recommendations of Second National Labour Commission.

2. To bring the unorganized workers under the various legislations to protect them and
proper implementation of ‘Unorganized Social Security Act, 2008’.

3. Elimination of child labour form hazardous jobs and stop exploitation of them.

4. To ensure nationally acceptable and internationally competitive standards of health,

safety and welfare of workers.

5. Spread the reach of social security to organized sector workers as well as international
workers through distinct enactments.

6. Monitoring the implementation of Minimum Wages Act, 1948 in the central and state
sphere to provide workers living and fair wages.

7. To empower the social factors with capacities to meet the challenges of change.

8. Disseminate the information on labour matters.

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Ministry of Labour and Employment is working hard to achieve the above mentioned
objectives through various enactments and their proper enforcement.

RECOMMENDATIONS OF SECOND NATIONAL LABOUR

COMMISSION ON SOCIAL SECURITY
The National Labour Commission is appointed time to time to give its
recommendations about labour. The first report of this Commission was submitted in 1967
and the second National Commission was appointed by the Government of India on October
15, 1999 under the Chairmanship of Ravindra Verma former Minister of Labour,
Government of India. After 35 years of first Commission in June 2002, the second report has
been presented.

The main recommendations of Labour Commission made about social security of working
class are as follow:

1. It was recommended that the state should provide elementary and basic security to
workers however, higher level left to individuals who can acquire through
contributory participation. It will minimize the role of state and maximize the role of
individuals.

2. To take in view the demographic diversities of India no single approach is adequate

but a multi-dimensional approach is needed for social security.

3. The Workmen’s Compensations Act should be converted in a social insurance scheme

despite of employers’ liability.

4. A separate legislation should be constituted to the unorganized workers for maternity

benefit.

5. The Payment of Gratuity Act may be integrated with the Employees’ Provident Fund
Act and converted into a social insurance scheme.

6. The Employees’ Provident Fund Organization (EPFO) should have its own
mechanism for investment of its balances.

7. A Social Security Fund of India and similar of state may be set up.

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 8. There should be three kind of social security schemes (i) social insurance type;
contributory, (ii) subsidized insurance type; partly contributory and (iii) social
assistance type; wholly the responsibility of state.

9. The unification of administrative responsibility is necessary.

10. Commission strongly recommended the constitution of a high powered ‘National

Social Security Authority’ under the chairmanship of Prime Minister of India. It will
make the national policy on social security and will co-ordinate the central and state
level programmes.

11. Commission suggested to establish a distinguish department of social security within

the Ministry of Labour to co-ordinate, monitor and review specific programmes of
social security running by various ministries and states.

12. An appropriate national scheme for relief and rehabilitation of economically and
socially distressed people should establish.

The second National Labour Commission made important recommendations about social
security of working class and social security can be made more effective and strong through
the implementation and practicing of such recommendations and suggestions.

IMPACT OF NEW INDUSTRIAL POLICY ON LABOUR WELFARE

AND SOCIAL SECURITY
Indian economy was in a great crisis in 1991 when new government was constituted and like
European countries India adopted the policy of liberalisation and globalisation to come out of
bankruptcy and crisis. The objective of new economic policy was to bring about rapid and
sustainable improvement in the quality of the life of the people in India. At that time Indian
economy was in worse condition, so for the sake of frequent growth in incomes and
employment new economic policy was adopted.

Through this policy Indian government adopted a structure of privatized, liberalized and
globalized economy. Bring into service of this policy, use of machines was increased and the
danger of safety was also enlarged and the unskilled worker were replaced by the skilled and
a big fraction of labour force and unskilled workers become unemployed and source less.
Private sector industries were profit oriented and they don’t care for labour laws and
exploited the poor workers and tried to avoid the welfare and social security measures.
Within the area of private industries union activities were also banned.

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 So in most of cases workers could not claim any kind of compensation at the time of
accident whereas provident fund, gratuity and pension schemes were also less applicable after
retirement. Therefore, the new economic policy affected workers interest to great extent.

GLOBAL INSTITUTIONS FOR SOCIAL SECURITY

In addition to the national, state and local organizations some international bodies are also
working to furnish the social security throughout the world.

INTERNATIONAL LABOUR ORGANIZATION (ILO)

I.L.O. was founded in 1919 for the promotion of social justice and improving the living
conditions of workers all over the world. India is one of the founder members of it and
presently it has 175 members. The tripartite character of ILO gives it unique feature and
every member country of it, has also adopted the same feature. ILO assures the social Justice
through (i) international standards; (ii) providing information; (iii) technical assistance and
guidance; and (iv) cooperation with other organizations and it provides the impetus help
needed by most of the countries.

ILO is a comprehensive social security agency in the achievement of its announced

objectives, which include “the protection of the workers against sickness, diseases and injury
arising out of his employment, the protection of children, young persons and women,
provision for old age and injury.” These objectives find a place among the specific measures
proposed in the Preamble of the Constitution of the ILO.

ILO plays vital role to spread social security measures throughout the world. It deliberates
on the labour issues according to passage of the time and organizes various conventions and
creates several recommendations on social security. In 1942, ILO published a report on
‘Approaches to Social Security’ and further in 1944, ILO again published a report entitled
‘Social Security: Principles and Problems Arising out of War’ in which scheme of social
security had been suggested for the post-war reconstruction. Thus this organization is direly
working in field of social security to increase it and to make it easily possible for every
worker.

Further in 1962, ILO convention of social security (minimum standard) had divided
social security into following nine components

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(i) Medical Care
It should cover pregnancy, confinement and its consequence and any disease may led
to morbid condition.

(ii) Sickness Benefit

This benefit should cover incapacity to work due to unwholesome condition resulting
in a loss of earning.

(iii) Unemployment Benefit

Unemployment benefit will cover the loss of earning at that time period whenever a
person is capable to do work but remain unemployed because of lack of suitable work.

(iv)Old Age Benefit

This benefit provides for the payment or certain amount of money depending upon one’s
contribution before the retirement age.

(v) Employment Injury Benefit

Under this benefit every contingency arising out of employment and resulting in any
incapacity and death are included.

(vi)Family Benefit
This benefit includes the responsibility of the children i.e. food, housing, clothing till the
contingency ends.

(vii) Maternity Benefit

This benefit covers pregnancy, confinement and their consequences resulting in suspension of
earnings.

(viii) Invalidism Benefit

The invalidism benefit, in the form of periodical payment should cover the needs of
the workers who suffer from any disability arising out of sickness and who are unable to
engage in any gainful activity.

(ix) Survivor’s Benefit

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 It covers the periodical payments made to a family follow the death of its breadwinner
and should continue till the contingency ends.

These facilities suggested by ILO provide a strong and comprehensive social security
system to workers and their families.

Decent Work
The concept of ‘Decent Work’ is being propagated by the ILO. It encompasses four
strategic objectives.

I. Promotion of Rights at Work (a fresh instrument to achieve goals)

II. Employment (to reduce poverty and inequalities)

III. Social Protection (expansion of social security schemes)

IV. Social Dialogue (to examining way of strengthening the institutional capacity of
ILO)

ILO SOCIAL SECURITY (MINIMUM STANDARDS) CONVENTION

NO.102 OF1952 DEFINES SOCIAL SECURITY TO MEAN:
“The result achieved by a comprehensive and successful and series of measures for
protecting the public (or a large sector of it) from the economic distress, that, in the absence
of such measures, would be caused by the stoppage of earning in sickness, unemployment or
old age and after death; for making available to that same public medical care as needed; and
for subsidizing families bringing up young children”.

As per the contention of ILO social security is a multi-winged and multi-faceted

concept. It also observed that social security is the basic need of all people regardless of
employment in which they work and live. It should be begun with birth and should continue
till death.

ILO conventions and recommendations relevant to social security extension policies

include:

 The Social Security (Minimum Standards) Convention, 1952 (No. 102)

 The Equality of Treatment (Social Security) Convention, 1962 (No. 118)
 The Employment Injury Benefits Convention, 1964 (Schedule I amended in1980)
(No.121)

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  Invalidity, Old-Age and Survivors’ Benefits Convention, 1967 (No. 128)
 The Medical Care and Sickness Benefits Convention, 1969 (No.130)
 The Maintenance of Social Security Rights Convention, 1982 (No. 157)
 The Employment Promotion and Protection against Unemployment Convention, 1988
(No.168)
 The Job Creation in Small and Medium- Sized Enterprises Recommendation,
1998(No. 189)
 Maternity Protection Convention (Revised) 2000 (No. 183)

In 2001, the International Labour Conference adopted the Resolution and Conclusions
concerning Social Security.

ADMINISTRATION OF SOCIAL SECURITY ACTS

Social security is such a type of help which ensures a person that he will surely get
assistance at the time of his illness, injury, old age, invalidity and even after his death. But
this social security only covers the workers who are working in organized sector but a large
proportion of workers of unorganized sector yet to be covered. However, a few schemes are
working for unorganized workers but they are not enough. The social security schemes are
run by joint efforts of employees, employers and government. There are a lot of social
security laws which are working in industries. The various Social Security Acts and their
administrative machinery are as follow:

Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

The Employees’ Provident Fund Act is enacted for social security of workers. This
Act provides retirement benefits to the workers. It provides monetary help to the workers and
their family at the time of crisis. Now, the following three schemes are working under the Act

i. Employees’ Provident Funds Scheme, 1952;

ii. Employees’ Deposit Linked Insurance Scheme, 1976;

iii. Employees’ Pension Scheme, 1995.

The Employees’ Provident Fund Act, 1952 is administered by the Employees’ Provident
Fund Organization (EPFO). This organization looks after all the working, investment,
implementation of the Act in various establishments.

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Employees’ State Insurance Act, 1948
This Act provides for health care and cash benefit payments in the case of sickness,
maternity and employment injury. The ESI scheme is administered by a statutory body,
called the Employees’ State Insurance Corporation (ESIC). All employers, employees,
central and state governments, and medical professional and parliament representatives are
the members of the ESIC. The Union Minister of Labour and Employment is the chairman of
the body. There is a Standing Committee of the Corporation. The Director General is a Chief
Executive Officer of the Corporation. Its headquarters is situated in New Delhi and it has a
large number of field offices. A lot of employees and officers do the work at different level in
the Corporation to run it effectively.

Payment of Gratuity Act, 1972

The Payment of Gratuity Act provides the benefits to the employees after their
retirement. This Act is applicable to all workers engaged in factories, mines, plantations,
ports, railways, educational institutions and other establishments. This Act is enforced by the
central and state governments jointly. Both has right to appoint a controlling authority for the
administration of the Act. The government is enable to appoint the various area inspectors to
find out, that the provisions of the Act are being completed or not.

Maternity Benefit Act, 1961

This Act is specially made for the working women. It provides them benefits and
medical care at the time of their pregnancy. According to this Act, no employer can force any
woman worker for work when she is pregnant. The Maternity Benefit Act provides them
leave with pay. It enables them to get 12 weeks leave, 6 weeks before the birth of child and 6
weeks after the birth of child.

Workmen’s Compensation Act, 1923

This Act is mainly to provide the compensation to workers for industrial injury,
accidents and any mis happening at the time of work. All the workers, who are working in
any hazardous job, are able to get the benefits of the Act. The state governments have power
to extend the scope of the Act to any class of workers’. The state government administer the
provisions of this Act through the Commissioners appointed for specified areas. The state
government also make rules for ensuring that the provisions for the Act are being
implemented or not.

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The Factories Act, 1948
The Factories Act, 1948 is designed to protect the workers in the factories. The Act
has undergone various amendments from time to time. The main object of the Act is to
ensure adequate safety measures and to promote the health and safety of the workers and
further, deal with benefits and welfare facilities and health, safety and hygiene inside the
factory premises.

Provisions regarding health of the workers relate mainly to cleanliness, disposal of

wastes and affluent, ventilations, control of temperature. Elimination of dust and fumes,
artificial humidification, overcrowding, lighting, drinking water facilities, latrines, urinals and
spittoons. Besides, every factory has to make effective arrangements to provide and maintain
a sufficient supply of wholesome drinking water for all workers employed therein; and where
250 or more workers are working, employers are required to provide cool drinking water in
hot weather.

Provision regarding safety of workers relate to the fencing of machinery, easing of

new machinery, testing and examination of appliances and plants such as hoists, lifts, cranks,
chains and pressure plants, supply of safety appliances to workers, precautions against
dangerous fumes and in cased of fire etc. The Act also lays down the conditions under which
young persons and women may be employed.

Provision regarding welfare facilities covers such items as washing facilities for
storing and drying clothes, facilities for sitting, first aid appliances, canteens in case of
factories employing over 250 workers, suitable shelters or rest rooms, lunch rooms. The Act
also grants power to state governments to make rules requiring the representative of workers
in any factory to be associated with management in regard to welfare factory to be associated
with management in regard to welfare arrangement of the workers.

The implementations of the Act are under the jurisdictions of the State Governments.
It is enforced through the Factory Inspectorates. Any worker can complain to the Inspector
about conditions inside the factory, and the source from which the complaint has come is not
supposed to be disclosed unfortunately, the implementations mechanism of the Act is
unsatisfactory. Each factory inspector has more than a thousand factories under him. These
infrastructural facilities available to him are totally inadequate.

This Act, in its updated form, has a very broad definition of `worker`. However
contract and ad hoc workers do not get the benefits given to permanent workers. It imposes

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restrictions on employment of women during the night, especially the period between 7.00
p.m. to 6.00 a.m.

There are also restrictions of daily working hours for men and women in factories.
Sections 23 and 27 of the Factories Act prohibit women from handling dangerous devices.
However, all these provisions are not applied in practice for a section of the workers.
Moreover, the Act is applicable only to manufacturing units, organised as factories. The
provisions of this Act do not apply to the vast masses of workers in the unorganised sector
employed in smaller manufacturing units and other sectors.

In conclusion it can be seen that

(i) Social security benefit has expanded rapidly after independence.

(ii) Social Security in India has been supported by laws which have enacted from time
to time during last four decades.
(iii) In India Employee State Insurance and Employee provident fund Schemes of the
central govt. where a state does not need to contribute.
(i) (iv)Unfortunately in India only workers engaged in Industry and organized sectors
are covered by these schemes. Unorganized sector, agricultural sectors have been
ignored they have to yet received benefits of these social measures.

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 UNIT – II

EMPLOYEES COMPENSATION ACT, 1923

INTRODUCTION:

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 Act, 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.

It enables employees to get compensation irrespective of his negligence. It also lays

down the various amounts payable in case of an accident depending upon the type and extent
of injury.

The main purpose of the Act is to provide special machinery to deal with the cases of
compensation in case of accidents and to make arrangement for some prompt compensation
the injured employees who cannot afford to go to the Court of Law.

The latest amendment to the Act was made in 1984. The Amendment Act, 1976 raised
the wage limit for coverage under the Act from Rs.500 to Rs.1.000 per month. The
Amendment Act of 1984 has altogether abolished this limit.

OBJECT AND SCOPE OF THIS ACT

 The Employees’ Compensation Act is social security legislation.

 It imposes statutory liability upon an employer to discharge his moral
obligation towards his employees when they suffer from physical disabilities
and diseases during the course of employment in hazardous working
conditions.
 To help the dependents of the employee rendered destitute by the ‘accidents’
and from the hardship arising out from such accidents.

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  The Act provides for cheaper and quicker mode of disposal of disputes
relating to compensation through special proceedings than possible under the
civil law.
 The Act extends to the whole of India.

DEFINITIONS UNDER WORKMEN'S COMPENSATION ACT

DEFINITIONS

DEPENDANT 2(1) (D)

Means any of the following relatives of a deceased employee:

 a widow, a minor legitimate or adopted son, an unmarried legitimate or adopted

daughter, or a widowed mother, and
 if wholly dependent on the earnings of the employee at the time of his death, a son or
a daughter who has attained the age of 18 years and who is infirm; and
 if wholly or in part dependent on the earnings of the employee at the time of his
death:
 a widower,
 a parent other than a widowed mother,
 a minor illegitimate son, an unmarried illegitimate daughter or a daughter
legitimate or illegitimate or adopted if married and a minor, or if widowed and
a minor,
 a minor brother or an unmarried sister, or a widowed sister if a minor,
 a widowed daughter-in-law,
 a minor child of a pre-deceased son/adopted son
 a minor child of a pre-deceased daughter/ adopted daughter where no parent of
the child is alive or
 a paternal grandparent, if no parent of the employee is alive.

EMPLOYEE SECTION 2(DD)

Means a person, who is –

 a railway servant as defined in clause (34) of section 2 of the Railways Act, 1989, 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

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  Employees’ Compensation Act, 1923
 a master, seaman or other members of the crew of a ship,
 a captain or other member of the crew of an aircraft,
 A person recruited as driver, helper, and mechanic, cleaner or in any other capacity in
connection with a motor vehicle.
 a person recruited for work abroad by a company, and who is employed outside India
in any such capacity as is specified in Schedule II and the ship, aircraft or motor
vehicle, or company, as the case may be, is registered in India; 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; but does not include any person
working in the capacity of a member of the Armed Forces of the Union; and any
reference to any employee who has been” injured shall, where the employee is dead,
include a reference to his dependants or any of them;

EMPLOYER [SECTION 2(1) (E)]

 anybody of persons incorporated or not;
 any managing agent of the employer;
 Legal representative of a deceased employer. Thus, one who inherits the estate of the
deceased is made liable for the payment of compensation under the Act. However, he
is liable only up to the value of the estate inherited by him;
 any person to whom the services of a employee are temporarily lent or let on hire by a
person with whom the employee has entered into a contract of service or
apprenticeship.

Case: Baijnath Singh v. O.T. Railway

A contractor falls within the above definition of the employer. Similarly, a General
Manager of a Railway is an employer.

SEAMAN - SECTION 2(1) (K) Means:

Any person forming part of the crew of any ship but does not include the master of
the ship.

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WAGES - SECTION 2(1)(M)
Include any privilege or benefit which is capable of being estimated in money, other
than

 a travelling allowance or
 the value of any travelling concession or
 a contribution paid by the employer to an employee towards any pension or provident
fund or
 a sum paid to employee to cover any special expenses entailed on him by the nature of
his employment.

Case:-Godawari Sugar Mills Ltd. v. Shakuntala;

Case:-Chitru Tanti v. TISCO; and

Case:-Badri Prasad v. Trijugi Sitaram

Wages include dearness allowance, free accommodation, overtime pay, etc.

Case: - KSRTC Bangalore v. Smt. Sundari

The driver of a bus died in an accident. On a claim for compensation made by widow
it was held that line allowance and night out allowance came under the privilege or benefit
which is capable of being estimated in money and can be taken into consideration in
computing compensation as part of wages. The claim of bonus being a right of the workman
is a benefit forming part of wages and the same can be included in wages.

DISABLEMENT
 The Act does not define the word Disablement.
 It only defines the partial and total disablement.
 After reading the partial or total disablement as defined under the
 Act one may presume that disablement is loss of earning capacity by an injury which
depending upon the nature of injury and percentage of loss of earning capacity will be
partial or total.
 The Act has classified disablement into two categories-
 Partial disablement, and
 Total disablement.

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PARTIAL DISABLEMENT [SECTION 2(1) (G)]
Partial disablement can be classified as temporary partial disablement and permanent
partial disablement.

 Where the disablement is of a temporary nature: Such disablement as reduces the

earning capacity of an employee in the employment in which he was engaged at the
time of the accident resulting in the disablement; and
 Where the disablement is of a permanent nature: Such disablement as reduces for all
time his earning capacity in every employment which he was capable of undertaking
at the time. But every injury specified in Part II of Schedule I shall be deemed to
result in permanent partial disablement.
 Schedule I contains list of injuries deemed to result in Permanent Total/Partial
disablement.
 In case of temporary partial disablement, the disablement results in reduction of
earning capacity in respect of only that employment in which he was engaged at the
time of accident. This means the employee’s earning capacity in relation to other
employment is not affected. But in case of permanent partial disablement, the
disablement results in reduction in his earning capacity in not only the employment in
which he was engaged at the time of accident but in all other employments.
 Whether the disablement is temporary or permanent and whether it results in
reduction of earning capacity, the answer will depend upon the fact of each case,
except when the injury is clearly included in Part II of Schedule I.

Case:-Sukhai v. Hukam Chand Jute Mills Ltd.,

 It was observed that if a workman suffers as a result of an injury from a

physical defect which does not in fact reduce his capacity to work but at the
same time makes his labour unsalable in any market reasonably accessible to
him, there will be either total incapacity for work when no work is available to
he at all or there will be a partial incapacity when such defect makes his labour
saleable for less than it would otherwise fetch.
 The capacity of a workman may remain quite unimpaired, but at the same time
his eligibility as an employee may be diminished or lost if such a result ensure
by the reason of the results of an accident, although the accident has not really
reduced the capacity of the workman to work.

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  He can establish a right to compensation, provided he proves by satisfactory
evidence that he has applied to a reasonable number of likely employers for
employment, but had been turned away on account of the results of the
accident visible on his person.

Case: - General Manager, G.I.P. Rly. v. Shankar

If after the accident a worker has become disabled, and cannot do a particular job but
the employer offers him another kind of job, the worker is entitled to compensation for partial
disablement.

Deemed to be permanent partial disablement:

Part II of Schedule I contain the list of injuries which shall be deemed to result in
permanent partial disablement.

Complete and permanent loss of the use of any limb or member referred to in this
Schedule shall be deemed to be the equivalent to the loss of that limb or member.

Case: - Lipton (India) Ltd. v. Gokul Chandran Mandal

On the question whether eye is a member or limb as used in the note to Schedule I it
was held that considering the meaning as stated in the Oxford Dictionary as also in the
Medical Dictionary, it could be said that the words limb or member include any organ of a
person and in any case it includes the eye.

TOTAL DISABLEMENT [SECTION 2(1) (L)]

 Total disablement can also be classified as temporary total disablement and
permanent total disablement.
 Total disablement means, such disablement whether of a temporary or permanent
nature, which incapacitates an employee for all work which he was capable of
performing at the time of accident resulting in such disablement.
 Permanent total disablement shall be deemed to result from every injury specified in
Part I of Schedule I or similarly total disablement shall result from any combination of
injuries specified in Part II of Schedule I, where the aggregate percentage of loss of
earning capacity, as specified in the Part II against these injuries amount to one
hundred per cent or more.

Case: - Ball v. William Hunt & Sons Ltd

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  The expression incapacitates a workman for all work does not mean capacity to work
or physical incapacity. If due to any physical defect, a workman is unable to get any
work which a workman of his class ordinarily performs, and has thus lost the power to
earn he is entitled to compensation for total disablement.
 It is immaterial that the workman is physically fit to perform some work. Thus, where
a workman, though physically capable of doing the work cannot get employment in
spite of his best efforts, he becomes incapacitated for all work and hence entitled to
compensation for total disablement.

Case:-Mangru Palji v. Robinsons,

Loss of physical capacity is co-extensive with loss of earning capacity but loss of
earning is not as co-extensive with loss of physical capacity as he may be getting the same
wages even though there may be loss of physical capacity. In a case permanent partial
disability caused to a workman in accident while working on ship, e.g. getting pain in his left
hand and experiencing difficulty in lifting weights, it was held that workman can be said to
have lost his earning capacity even though getting same amount of wages as before. Where it
is not a scheduled injury the loss of earning capacity must be proved by evidence.

Case:-Katras Jherriah Coal Co. Ltd. v. Kamakhya Paul

Where the worker lost his vision of one eye permanently in an accident in course of
his employment in colliery, the compensation should be assessed in accordance with item 26
Part II in Schedule I.

Case:-Pratap Narain Singh Deo v. Sriniwas Sabata

In an injury the workman, had amputated his left arm from elbow, who was a
carpenter. It was held by the Supreme Court that it is a total disablement as the carpenter
cannot carry his work with one hand and not a partial permanent disablement.

Case: - Divisional Manager KSRTC v. Bhimaiah

Where the workman, a driver of bus belonging to the employer was involved in an
accident which resulted in an impairment of the free movement of his left hand disabling him
from driving vehicles, it was held that this is not one of the injuries mentioned in the 1st
Schedule which are accepted to result in permanent total disablement. In the present case the
workman was also capable of performing duties and executing works other than driving

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vehicles. Nature of injury to be determined not on the basis of the work he was doing at the
time of accident.

EMPLOYER’S LIABILITY FOR COMPENSATION [SECTION 3]

(A) IN CASES OF OCCUPATIONAL DISEASE

 Where an employee employed in any employment specified in Part A of Schedule III
contracts any disease specified therein, as an occupational disease, peculiar to that
employment, the contracting of disease shall be deemed to be an injury by accident
arising out of and in the course of employment.
 Where the employee employed in any employment specified in Part B of Schedule III,
for a continuous period of not less than six months under the same employer, and
whilst in the service contracts any disease specified in the Part B of Schedule III, the
contracting of disease shall be deemed to be an injury by accident arising out of and in
the course of employment. The employer shall be liable even when the disease was
contracted after the employee ceased to be in the service of the employer, if such
disease arose out of the employment.
 If an employee whilst in service of one or more employers (not necessarily the same
employer) in any employment specified in Part C of Schedule III for such continuous
period as the Central Government may specify, contracts any disease, even after he
ceased to be in the service of any employer and disease arose out of such
employment, specified in the Schedule, the contracting of disease shall be deemed to
be an injury by accident arising out of and in the course of employment.
 [Section 3(2A)] - However, where the employment was under more than one
employer, all such employers shall be liable for the payment of the compensation in
such proportion as the
 Commissioner may in circumstances deem just.
 If it is proved that the employee whilst in the service of one or more employers in any
employment specified in Part C of Schedule III has contracted a disease specified
therein as an occupational disease peculiar to that employment during a continuous
period which is less than the period specified under this sub-section for that
employment, and

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  If it is proved that the disease has arisen out of and in the course of the employment;
the contracting of such disease shall be deemed to be an injury by accident within the
meaning of this section.
 The Central Government or the State Government after giving, by notification in the
Official Gazette, not less than three months notice of its intention so to do, may, by a
like notification, add any description of employment to the employments specified in
Schedule III, and shall specify in the case of employments so added the diseases
which shall be deemed for the purposes of this section to be occupational diseases
peculiar to those employments respectively, and thereupon the provisions of Sub-
section (2) shall apply in the case of a notification by the Central Government, within
the territories to which this Act extends or, in case of a notification by the State
Government, within the State as if such diseases had been declared by this Act to be
occupational diseases peculiar to those employments.
 Except as mentioned above no compensation shall be payable to an employee in
respect of any disease unless the disease is directly attributable to a specific injury by
accident arising out of and in the course of his employment.

(B) IN CASE OF PERSONAL INJURY

The employer becomes liable if the injury is caused to an employee by accident
arising out of and in the course of his employment.

(i) There must be personal injury caused to an employee.

Normally, Injury implies physical or bodily injury caused by an accident. However,
such personal injury will also include nervous shock or break-down or mental strain.

Case:-Indian News Chronicle v. Mrs. Lazarus

An electrician who had to go frequently to a heating room from a cooling plant,

contracted pneumonia which resulted in his death It was held that the injury caused by an
accident is not confined to physical injury and the injury in the instant case was due to his
working and going from a heating room to a cooling plant as it was his indispensable duty.

(ii) The personal injury must be caused by an “accident”.

The term “accident” has not been defined in the Act but its meaning has been
sufficiently explained in number of decided cases.

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 The expression accident must be construed to its popular sense. It has been defined as
a mishap or an untoward event which is not expected or designed. What the Act intends to
cover is what might be expressed as an accidental injury.

Case: - Smt. Sunderbai v. The General Manager, Ordinance Factory Khamaria, Jabalpur

 The Madhya Pradesh High Court has clarified the difference between accident and
injury. Accident means an untoward mishap which is not expected or designed by
workman; ‘Injury’ means physiological injury.
 Accident and injury are distinct in cases where accident is an event happening
externally to a man, e.g., where a workman falls from the ladder and suffers injuries.
 But accident may be an event happening internally to a man and in such cases
accident and injury coincide. Such cases are illustrated by failure of heart and the like,
while the workman is doing his normal work.
 Physiological injury suffered by a workman mainly due to the progress of disease
unconnected with employment may amount to an injury arising out of and in the
course of employment if the work that the workman was doing at the time of the
occurrence of the injury contributed to its occurrence.
 The connection between employments must be furnished by ordinary strain of
ordinary work if the strain did in fact contribute to accelerate or hasten the injury. The
burden of proof is on applicant to prove the connection of employment and injury.

(iii) Arising out of employment and in the course of employment

To make the employer liable, it is necessary that the injury is caused by an accident
which must be raised out of and in the course of employment.

Arising out of employment

The expression “arising out of employment” suggests some causal connection

between the employment and the accidental injury. The cause contemplated is the proximate
cause and not any remote cause.

Case:-Laxmibai Atma Ram v. Bombay Port Trust

Where a workman suffers from heart disease and dies on account of strain of work by
keeping continuously standing or working, held that the accident arose out of employment.

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 Generally if an employee is suffering from a particular disease and as a result of wear
and tear of his employment he dies of that disease, employer is not liable. But if the
employment is contributory cause or has accelerated the death that the death was due to
disease coupled with the employment, then the employer would be liable as arising out of the
employment.

Case: - Mackenzie v. I.M. Issak

 It was observed that the words arising out of employment means that injury has
resulted from risk incidental to the duties of the service which unless engaged in the
duty owing to the master, it is reasonable to believe that the workman would not
otherwise have suffered.
 There must be a casual relationship between the accident and the employment.
 If the accident had occurred on account of a risk which is an incident of the
employment, the claim for compensation must succeed unless of course the workman
has exposed himself to do an added peril by his own imprudence.

Case:-Mackinnon Mackenzie and Co. (P.) Ltd. v. Ibrahim Mohammed Issak

Case:-Lancashire and Yorkshire Railway Co. v. Highley

The Supreme Court observed that the test is:

 Part of the injured person’s employment to hazard, to suffer or to do that which

caused his injury?
 If yes, the accident arose out of his employment,
 If not it did not.

Arising in the course of employment

 Suggests the period of employment and the place of work.
 In other words, the workman, at the time of accident must have been employed in the
performance of his duties and the accident took place at or about the place where he
was performing his duties.
 The expression “employment” is wider than the actual work or duty which the
employee has to do.
 It is enough if at the time of the accident the employee was in actual employment
although he may not be actually turning out the work.

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  Even when the employee is resting, or having food, or taking his tea or coffee,
proceeding from the place of employment to his residence, and accident occurs, the
accident is regarded as arising out of and in the course of employment.

Case: - Union of India v. Mrs. Noorjahan

A man may be in course of his employment not only when he is actually engaged in
doing something in the discharge of his duty but also when he is engaged in acts belonging to
and arising out of it.

For the expression “accident arising out of and in the course of

employment”
 The basic and indispensable ingredient is unexpectedness.
 The second ingredient is that the injury must be traceable within reasonable limits, to
a definite time, place or occasion or cause.

(iv)Theory of notional extension of employment

To make the employer liable it is necessary that the injury caused by an accident must
have arisen in the course of employment.

It means that the accident must take place at a time and place when he was doing his
master’s job.

Case: - Weaver v. Tradegar Iron and Coal Co. Ltd.

It is well settled that the concept of “duty” is not limited to the period of time the
workman actually commenced his work and the time he downs his tools. It extends further in
point of time as well as place. But there must be nexus between the time and place of the
accident and the employment. If the presence of the workman concerned at the particular
point was so related to the employment as to lead to the conclusion that he was acting within
the scope of employment that would be sufficient to deem the accident as having occurred in
the course of employment.

It is known as doctrine of notional extension of employment; whether employment

extends to the extent of accident depends upon each individual case.

Case: - Naima Bibi v. Lodhne Colliery

A workman while returning home after duty was murdered within the premises of the
employer. It was held that there was casual and proximate connection between the accident

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and the employment. Since the workman was on spot only for his employment and his wife is
entitled for compensation.

Case: - TNCS Corporation v. Poonamalai

If an employee in the course of his employment has to be in a particular place by

reason where he has to face a peril which causes the accident then the casual connection is
established between the accident and the employment.

(v) When employer is not liable

In the following cases, the employer shall not be liable:

 When the injury does not result in disablement for a period exceeding 3 days
 When the injury not resulting in death or permanent total disability is due to any of
the following reasons:
 the employee was at the time of accident, under the influence of drink or
drugs, or
 the employee wilfully disobeyed an order expressly given or a rule expressly
framed for the purpose of securing safety of workers, or
 The employee wilfully disregards or removes any safety guards or safety
devices which he knew to have been provided for the safety of the employee.

Case:-R.B. Moondra & Co. v. Mst. Bhanwari

In this case it was held that where an employee dies due to an accident arising out of
and in the course of employment, it cannot be pleaded that death was due to any of the
reasons stated above.

Suit for damages in a Court barred [Section 3(5)]

An employee is not entitled to any compensation under the Workmen’s Compensation

Act, 1923, if he has instituted, in a Civil Court, a suit for damages against the employer or
any other person.

Similarly, an employee is prohibited from instituting a suit for damages in any court of law,

 if he has instituted a claim to compensation in respect of the injury before a

Commissioner; or
 If the employee and the employer have entered into an agreement for the payment of
compensation in accordance with the provisions of this Act.

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EMPLOYER’S LIABILITY WHEN CONTRACTOR IS ENGAGED
[SECTION 12]

Sometimes, employer may engage a contractor instead of employing his own

employee for the purpose of doing any work in respect of his trade or business. Such a
contractor then executes the work with the help of the employee engaged by him. If any
injury is caused by an accident to any of these employees, the employer cannot be held liable
because they are not employed by him and hence are not his employees. But now Section
12(1) makes the employer liable for compensation to such employees hired by the contractor
under following circumstances:

 The contractor is engaged to do a work which is part of the trade or business of the
employer (called principal).
 The employees were engaged in the course of or for the purpose of his trade or
business.
 The accident occurred in or about the premises on which the principal employer has
undertaken or undertakes to execute the work concerned.
 The amount of compensation shall be calculated with reference to the wages of the
employee under the employer by whom he is immediately employed.

Section 12(2) - Where the principal is liable to pay compensation under this section, he shall
be entitled to be indemnified by the contractor or any other person from whom the employee
could have recovered compensation and where a contractor who is himself a principal is
liable to pay compensation or to indemnify a principal under this section, he shall be entitled
to be indemnified by any person standing to him in relation of a contractor from whom the
employee could have recovered compensation and all questions as the right to and the amount
of any such indemnity shall, in default of agreement, be settled by the Commissioner.

Section 12(3) - The above provision, however, does not prevent an employee from
recovering compensation from the contractor instead of the employer, i.e., the Principal.

Section 12(4) - This section shall not apply in any case where the accident occurred
elsewhere than on, in or about the premises on which the principal has undertaken, or usually
undertakes, as the case may be to execute the work or which are otherwise under his control
or management.

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Illustrations on Section 12:-
A Municipal Board entrusted the electrification work of the town to State employees.
An employee received injuries while performing his work. Held, it is the State and not the
Board, liable to pay compensation because execution of electrical project is not the ordinary
business of the Municipal Board.

A contractor was entrusted with the repairs of a defective chimney. An employee

engaged by him was injured while carrying out repairs. Held, mill was not liable for
compensation as the repairing of chimney is not the part of companies’ trade or business,
whether ordinarily or extraordinarily.

A cart man was engaged by a Rice Mill to carry rice bags from mill to railway station.
The cart man met with an accident on a public road while returning back from railway station
and this resulted in his death.

There was no evidence to show that employee was engaged through a contractor. In a
suit for compensation against the mill owner, it was observed that Section 12 is not applicable
where the accident arises out of and in the course of employment. Even assuming that the
deceased was in the employment of contractor engaged by the employer, the liability of the
owner was clear from Section 12(1) and it had not been excluded by reason of Section 12(4).

COMPENSATION

MEANING OF COMPENSATION [SECTION 2(1) (C)]

AMOUNT OF COMPENSATION [SECTION 4]

Amount of compensation is payable in the event of an employee meeting with an

accident resulting into temporary or permanent disability or disease as stated in Schedule II
and III in terms of Section 4 of the Act, read with Schedule IV.

Schedule II contains a list of persons engaged in different employments/ operations

specified therein who are covered by the definition of employee and entitled to compensation
e.g. a person employed for loading/unloading of materials in a factory or ship, persons
employed in work incidental or connected with manufacturing process.

Schedule III contains a list of occupational diseases which if contracted while in

employment entitles an employee to compensation such as disease caused by lead, mercury,
etc.

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 Schedule IV lays down the relevant factor (a certain figure) related to the age of the
employee at the time of death, injury or accident by which wages are multiplied to arrive at
compensation.

AMOUNT OF COMPENSATION (SEC.4)

 The nature of injury caused by accident,

 The monthly wages of the employee concerned
 The relevant factor for working out lump-sum equivalent of compensation amount as
specified in Schedule IV.

Provides for the compensation in Sec.4—

1. Death

2. Permanent total disablement

3. Permanent partial disablement

4. Temporary disablement, whether total or partial.

Compensation for death

Where death results from an injury, the amount of compensation shall be equal to 50
per cent of the monthly wages of the deceased employee multiplied by the relevant factor as
given as column for completed years of age on the last birthday as given in column, 1 or Rs
one lakh twenty thousand whichever is more.

The formula for calculating the amount of compensation in case of death;

50 x Monthly wages x relevant factor

_______________________________

100

Or Rs. 1, 20,000, whichever is more

Compensation for permanent total disablement (Sec.4)

In permanent total disablement results from an injury, the amount of compensation

payable shall be equal to 60 per cent of the monthly wages of the injured employee multiplied
by the relevant factor, or Rs. 1, 40,000, whichever is more. Formula:

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 60 x Monthly wages x relevant factor

________________________________

100

Or Rs. 1, 40,000, whichever is more

Compensation for temporary disablement - total or partial

In temporary disablement, whether total or partial, results from the injury, the amount
of compensation shall be a half-monthly payment of the sum equivalent to 25 percent of
monthly wages of the employee, 25 per cent of monthly wages of the employee shall be
payable every half month.

If an employee is earning Rs.500 a month before the temporary disablement is caused,

he will be entitled to a compensation of 25 per cent of Rs. 500 that is Rs, 125 every half-
month till the disablement lasts. But if the employee is earning Rs. 300 a month after the
accident, his half- monthly payment shall not exceed 25 per cent of Rs. 200.

RELEVANT FACTOR SCHEDULE IV OF WORKMEN

COMPENSATION ACT (NOW KNOWN AS – EMPLOYEE’S
COMPENSATION ACT)
Age is the completed years of age, of the workman or employee on the last birthday.
The last birthday is the latest birthday of the workman which is immediately preceding the
due date of compensation liability.

Age Factor Age Factor Age Factor Age Factor

16 228.54 29 209.92 42 178.49 55 135.56

17 227.49 30 207.98 43 175.54 56 131.95

18 226.38 31 205.95 44 172.52 57 128.33

19 225.22 32 203.85 45 169.44 58 124.7

20 224 33 201.66 46 166.29 59 121.05

21 222.71 34 199.4 47 163.07 60 117.41

22 221.37 35 197.06 48 159.8 61 113.77

23 219.95 36 194.64 49 156.47 62 110.14

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24 218.47 37 192.14 50 153.09 63 106.52

25 216.91 38 189.56 51 149.67 64 102.93

26 215.28 39 186.9 52 146.2 65 ormore99.37

27 213.57 40 184.17 53 142.68

28 211.79 41 181.37 54 139.13

Compensation to be paid when due and penalty for default

TIME OF PAYMENT OF COMPENSATION: SECTION 4A

Case:-Smt. Jayamma v. Executive Engineer, P.W.D. Madhugiri Division

Compensation under Section 4 shall be paid as soon as it falls due. Compensation

becomes due on the date of death of employee and not when Commissioner decides it.

The employer is required to deposit or to make provisional payment based on the

extent of liability which he accepts with the Commissioner or hand over to the employee as
the case may be even if the employer does not admit the liability for compensation to the
extent claimed.

Where an employer is in default in paying compensation, he would be liable to pay

interest thereon and also a further sum not exceeding fifty percent of such amount of
compensation as penalty. The interest and the penalty stated above are to be paid to the
employee or his dependent as the case may be.

METHOD OF CALCULATING WAGES (SECTION 5)

Monthly wages mean the amount of wages deemed to be payable for a month’s
service and calculated as follows:

(a) Where the employee has, during a continuous period of not less than 12 months
immediately preceding the accident, been in the service of the employer who is liable
to pay compensation, the monthly wages of the employee shall be 1/12th of the total
wages which have fallen due for payment to him by the employer in the last 12
months of that period.

(b) Where the whole of the continuous period of service was less than one month, the
monthly wages of the employee shall be the average monthly amount which during
the 12 months immediately preceding the accident was being earned by an employee

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 employed on the same work by the same employer, or, if there was no employee so
employed, by an employee employed on similar work in the same locality.

(c) In other cases, including cases in which it is not possible to calculate the monthly
wages under clause (b) the monthly wages shall be 30 times the total wages earned in
respect of the last continuous period of service, immediately preceding the accident
from the employer who is liable to pay compensation, divided by the number of days
comprising such period.

A period of service shall be deemed to be continuous which has not been interrupted
by a period of absence from work exceeding 14 days.

REVIEW OF HALF-MONTHLY PAYMENT [SECTION 6]

Any half-monthly payment payable under this Act, either under an agreement
between the parties or under the order of a Commissioner may be reviewed by the
Commissioner on the application either of the employer or of the employee accompanied by
the certificate of a qualified medical practitioner that there has been a change in the condition
of the employee or subject to rules made under this Act, an application made without such
certificate.

Any half monthly payment, may on review, under the above provisions be continued,
increased, decreased or ended, or if the accident is found to have resulted in permanent
disablement, be converted to the lump sum to which the employee is entitled less any amount
which he has already received by way of half-monthly payments.

COMMUTATION OF HALF MONTHLY PAYMENTS [SECTION 7]

Any right to receive half-monthly payments may, by agreement between the parties or
if the parties cannot agree and the payments have been continued for not less than 6 months
on the application of either party to the Commissioner, be redeemed by the payment of a
lump sum of such amount as may be agreed to by the parties or determined by the
Commissioner as the case may be.

DISTRIBUTION OF COMPENSATION (SECTION 8)

 No compensation has to be paid in respect of an employee whose injury has resulted
in death and no payment of lump sum compensation to a woman or a person under a
legal disability except by deposit with the Commissioner.

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  The employer cannot make payment of compensation directly to the deceased legal
heirs. It is the Commissioner who decides on the distribution of compensation to the
legal heirs of the deceased employee.
 Right to claim compensation passes to heirs of dependant as there is no provision
under the Act to this effect.
 Payment of ex-gratia or employment on compassionate grounds will not be
employers’ liability.

COMPENSATION NOT TO BE ASSIGNED (SECTION 9)

Save as provided by this Act, no lump sum or half-monthly payment payable under
this Act can be assigned, or charged or attached or passed to any person other than the
employee by operation of law nor can any claim be set-off against the same.

COMPENSATION TO BE FIRST CHARGE (SECTION 14A)

 The compensation money shall bear the first charge on the assets transferred by the
employer.
 It says that where an employer transfers his assets before any amount due in respect of
any compensation, the liability whereof accrued before the date of transfer has been
paid, such amount shall, notwithstanding anything contained in any other law for the
time being in force, be a first charge on that part of the assets so transferred as
consists of immovable property.

INSOLVENCY OF EMPLOYER AND THE COMPENSATION

[SECTION 14]
 Where any employer has entered into a contract with any insurers in respect of any
liability under this Act to any employee, then in the event of the employer becoming
insolvent or making a composition or scheme of arrangement with his creditors or, if
the employer is a company, in the event of the company having commenced to be
wound up, the rights of the employer against the insurers as respects that liability
shall, notwithstanding anything in any law for the time being in force relating to
insolvency or the winding up of companies, be transferred to and vest in the
employee, and upon any such transfer the insurers shall have the same rights and
remedies and be subject to the same liabilities as if they were the employer, so,

Page 50 of 148
 however, that the insurers shall not be under any greater liability to the employee than
they would have been under the employer.
 If the liability of insures to the employee is less than the liability of the employer to
the employee, the employee may prove for the balance in the insolvency proceedings
or liquidation.
 Where in any case such as is referred to in sub-section (1) the contract of the
employer with the insurers is void or voidable by reason of non-compliance on the
part of the employer with any terms or conditions of the contract (other than a
stipulation for the payment of premium), the provisions of that sub-section shall apply
as if the contract were not void or voidable, and the insurers shall be entitled to prove
in the insolvency proceedings or liquidation for the amount paid to the employee.
 But the employee is required to give notice of accident and resulting disablement
there from to the insurers as soon as possible after he becomes aware of the
insolvency or liquidation proceedings otherwise the above provisions shall not be
applied.
 There shall be deemed to be included among the debts which under Section 49 of the
Presidency Towns Insolvency Act, 1909, or under Section 61 of the Provincial
Insolvency Act, 1920 or under Section 530 of the Companies Act, 1956, are in the
distribution of property of an insolvent or in the distribution of the assets of a
company being wound up to be paid in priority to all other debts, the amount due in
respect of any compensation the liability where for accrued before the date of the
order of adjudication of the insolvent or the date of the commencement of the winding
up, as the case may be, and those Acts shall have effect accordingly.
 Where the compensation is half-monthly payment, the amount due in respect thereof
shall, for the purposes of this Section, be taken to be the amount of the lump sum for
which the half monthly, payment could, if redeemable be redeemed if application
were made for that purpose under Section 7, and a certificate of the Commissioner as
to the amount of such sum shall be conclusive proof thereof.
 The provisions of sub-section (iv) shall apply in the case of any amount for which an
insurer is entitled to prove under sub-section (iii) but otherwise those provisions shall
not apply where the insolvent or the company being wound up has entered into such a
contract with insurers as if referred to in sub-section (i).
 This Section shall not apply where a company is wound up voluntarily merely for
purpose of reconstruction or of amalgamation with another company.

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CONTRACTING OUT OF COMPENSATION [SECTION 17]
Any contract or agreement whereby an employee relinquishes any right of
compensation from the employer for personal injury arising out of or in the course of
the employment shall be null and void in so far as it purports to remove or reduce the
liability of any person to pay compensation under this Act.

OBLIGATIONS AND RESPONSIBILITY OF AN EMPLOYER

(i) Power of Commissioner to require from employers statements regarding

fatal accidents (Section 10A)
 Where a Commissioner receives information from any source that an employee 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 employee’s employer requiring him to
submit, within 30 days of the service of the notice, a statement, in the prescribed form
giving the circumstances attending the death of the employee, 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 30 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 employee, 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.

(ii) To submit 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 in 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 in
the prescribed form (Form EE of the Workmen’s Compensation Rules: Rule 17).

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  “Serious bodily injury” means an injury which involves, or in all probability will
involve, the permanent loss of the use of, or permanent injury to, any limb, or the
permanent loss of or injury to the sight or hearing, or the fracture of any limb, or the
enforced absence of the injured person from work for a period exceeding twenty days.
[Expl. to Section 10B(1)]
 The State Government may, by notification in the Official Gazette, extend the
provisions of sub-section (i) to any class of premises other than those coming within
the scope of that sub-section, and may, by such notification, specify the persons who
shall send the report to the Commissioner.
 Section 10B - Nothing in this section shall apply to the factories to which the
Employees’ State Insurance Act, 1948, applies.

NOTICE AND CLAIM

No claim for compensation shall be entertained by a Commissioner unless the notice

of the accident has been given in the manner hereinafter provided as soon as practicable after
the happening thereof and unless the claim is preferred before him within two years of the
occurrence of the accident or, in case of death, within two years from the date of death.
(Section 10)

Provided that:

 where the accident is the contracting of a disease the accident shall be deemed to have
occurred on the first of the days during which the employee was continuously absent
from work in consequence of the disablement caused by the disease;
 in case of partial disablement due to the contracting of any such disease and which
does not force the employee to absent himself from work, the period of two years
shall be counted from the day the employee gives notice of the disablement to his
employer;
 if an employee who, having been employed in an employment for a continuous period
specified under sub-section 3(2) in respect of that employment ceases to be so
employed and develops symptoms of an occupational disease peculiar to that
employment within two years of the cessation of employment, the accident shall be
deemed to have occurred on the day on which the symptoms were first detected.
 The want of or any defect or irregularity in a notice shall not be a bar to the
entertainment of a claim:

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  if the claim is preferred in respect of the death of an employee resulting from
an accident which occurred in the premises of the employer, or at any place
where the employee at the time of the accident was working under the control
of the employer or of any person employed by him, and the employee died on
such premises, or at such place, or on any premises belonging to the employer,
or died without having left the vicinity of the premises or place where the
accident occurred, or
 if the employer or any one of several employers or any persons responsible to
the employer for the management of any branch of the trade or business in
which the injured employee was employed had knowledge of the accident
from any other source at or about the time when it occurred.
 The Commissioner may entertain and decide any claim to compensation in any case
notwithstanding that the notice has not been given, or the claim has not been
preferred, in due time as provided in this sub-section, if he is satisfied that the failure
to give the notice or prefer the claim, as the case may be, was due to sufficient cause.

(b) Every such notice shall give the name and address of the person injured and shall state in
ordinary language the cause of the injury and the date on which the accident happened, and
shall be served on the employer or upon any one 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 employee was employed.

(c) The State Government may require that any prescribed class of employers shall maintain
at their premises at which employees are employed a notice-book, in the prescribed form,
which shall be readily accessible at all reasonable times to any injured employee employed
on the premises and to any person acting bona fide on his behalf.

(d) A notice under this section may be served by delivering it at, or sending it by registered
post addressed to the residence or any office or place of business of the person on whom it is
to be served or, where a notice-book is maintained, by entry in the notice-book. The
Commissioner can initiate sue motu proceedings and can waive the period of limitation under
this Section.

MEDICAL EXAMINATION [SECTION 11]

(i) Where an employee has given notice of an accident, he shall, if the employer, before
the expiry of 3 days from the time at which service of the notice has been effected,

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 offers to have him examined free of charge by a qualified medical practitioner, submit
himself for such examination, and any employee who is in receipt of half monthly
payment under this
(ii) Act shall, if so required, submit himself for such examination from time to time as per
the rules under the Act.
(iii)If an employee refuses to submit himself for examination by a qualified medical
practitioner or in any way obstructs the same, his right to compensation shall be
suspended during the continuance of such refusal, or obstruction unless, in the case of
refusal, he was prevented by any sufficient cause from so submitting himself.
(iv) If an employee, voluntarily leaves without having been so examined the vicinity of
the place in which he was employed, his right to compensation shall be suspended
until he returns and officers himself for such examination.
(v) Where an employee, whose right to compensation has been suspended under sub-
section (ii) or subsection (iii), dies without having submitted himself for medical
examination as required by either of those subsections, the Commissioner may, if he
thinks fit, direct the payment of compensation to the dependants of the deceased
employee.
(vi) Where under sub-section (ii) or sub-section (iii) a right to compensation is suspended,
no compensation shall be payable in respect of the period of suspension, and, if the
period of suspension commences before the expiry of the waiting period referred to in
clause (d) of subsection (i) of Section 4, the waiting period shall be increased by the
period during which the suspension continues.
(vii) Where an injured employee has refused to be attended by a qualified medical
practitioner whose services have been offered to him by the employer free of charge
or having accepted such offer has deliberately disregarded the instructions of such
medical practitioner, then, if it is proved that the employee has not thereafter been
regularly attended by a qualified medical practitioner or having been so attended had
deliberately failed to follow his instructions and that such refusal, disregard or failure
was unreasonable in the circumstances of the case and that the injury has been
aggravated thereby, the injury and resulting disablement shall be deemed to be of the
same nature and duration as they might reasonably have been expected to be if the
employee had been regularly attended by a qualified medical practitioner, whose
instructions he had followed, and compensation, if any, shall be payable accordingly.

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Case:-Burhwal Sugar Mills Ltd. v. Ramjan

The Allahabad High Court observed that Section 11 confers a right and not an
obligation on employer to have workmen medically examined. If he does not do so it will not
debar employer from challenging medical certificate produced by employee. The court held
that where the award of compensation was passed on basis of medical certificate without
examination of doctor on oath, the award was liable to be quashed since there was no
evidence on oath on which compensation could be awarded.

PROCEDURE IN THE PROCEEDINGS BEFORE THE

COMMISSIONER

(i) Appointment of Commissioners [Section 20]

 State Government may, by notification in the Official Gazette, appoint any person
who is or has been a member of a State Judicial Service for a period of not less than
five years or is or has been for not less than five years an advocate or a pleader or is or
has been a Gazetted Officer for not less than five years having educational
qualifications and experience in personal management, human resource development
and industrial relations to be a
 Commissioner for Employee’s Compensation for such area as may be specified in the
notification.
 Where more than one Commissioner has been appointed for any area, the
Government may by general or special order regulate the distribution of business
between them.
 Every Commissioner shall be deemed to be a public servant within the meaning of the
Indian Penal Code.
 Section 20(3) empowers the Commissioner to appoint or choose any person,
possessing special knowledge of any matter relevant to the matter under inquiry, to
assist him in holding the inquiry.

(ii) Reference to Commissioner and his jurisdiction [Section 19(1)]

Jurisdiction of a Commissioner to entertain a claim in respect of payment of
compensation to an employee The Commissioner is empowered in default of an agreement to
settle any question which may arise in any proceeding under this Act as to the liability of any

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person to pay compensation, and in particular, the Commissioner has jurisdiction over
following matters:

 Liability of any person to pay compensation.

 Whether a person injured is or is not an employee?
 The nature and extent of disablement.
 The amount or duration of compensation.

Case: - United India Fire & General Insurance Co. Ltd. v. Kamalalshi

If an application is made under the Employee’s Compensation Act to the

Commissioner, he has, by virtue of Section 19(1) of the Act, jurisdiction to decide any
question as to the liability of any person including an insurer to pay compensation. Section
19(2) further provides that the enforcement of that liability can only be made by him. The
Commissioner’s jurisdiction is wide enough to decide the tenability of the objections; the
consequential direction of the Commissioner to the insurer to pay is also covered under
Section 19(1). In any event in execution of the order against the insured, namely, the
employer, the Commissioner can enforce his liability against the insurer under Section 31. In
the light of Section 19 read along with Section 31, the order of the Commissioner can never
be challenged as being without jurisdiction.

(iii) Jurisdiction of Civil Court barred

Case:-Madina Saheb v. Province of Madras

No Civil Court shall have jurisdiction to settle, decide or deal with any question
which is by or under this Act required to be settled, decided or dealt with by a Commissioner
or to enforce any liability incurred under this Act. However, where the Commissioner has no
jurisdiction to decide any matter and even fails to decide when raised, thereby leaving a party
without any defence the Civil Court will have jurisdiction to entertain such suits.

(iv) Venue of proceedings and transfer [Section 21]

Where any matter under this Act is to be done by or before a Commissioner, the same
shall, subject to the provisions of this Act and to any rules made hereunder, be done by or
before the Commissioner for the area in which:

 the accident took place which resulted in the injury; or

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  the employee or in case of his death, the dependent claiming the compensation
ordinarily resides; or
 the employer has his registered office:

No matter shall be processed before or by a Commissioner, other than the Commissioner

having jurisdiction over the area in which the accident took place, without his giving notice in
the manner prescribed by the Central Government to the Commissioner having jurisdiction
over the area and the State Government concerned:

Where the employee, being the master of a ship or a seaman or the captain or a member
of the crew of an aircraft or an employee in a motor vehicle or a company, meets with the
accident outside India any such matter may be done by or before a Commissioner for the area
in which the owner of agent of the ship, aircraft or motor vehicle resides or carries on
business or the registered office of the company is situate, as the case may be.

If a Commissioner, other than the Commissioner with whom any money has been
deposited under Section 8, proceeds with a matter under this Act, the former may for the
proper disposal of the matter call for transfer of any records or money remaining with the
latter and on receipt of such a request, he shall comply with the same.

If a Commissioner is satisfied that any matter arising out of any proceedings pending
before him can be more conveniently dealt with by any other Commissioner, whether in the
same State or not, he may, subject to rules made under this Act, order such matter to be
transferred to such other Commissioner either for report or for disposal, and, if he does so,
shall forthwith transmit to such other Commissioner all documents relevant for the decision
of such matter and, where the matter is transferred for disposal, shall also transmit in the
prescribed manner any money remaining in his hands or invested by him for the benefit of
any party to the proceedings:

The Commissioner shall not, where any party to the proceedings has appeared before
him, make any order of transfer relating to the distribution among dependants of a lump sum
without giving such party an opportunity of being heard.

The Commissioner to whom any matter is so transferred shall, subject to rules made
under this Act, inquire thereto and, if the matter was transferred for report, return his report
thereon or, if the matter was transferred for disposal, continue the proceedings as if they had
originally commenced before him.

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 On receipt of a report from a Commissioner to whom any matter has been transferred
for report under Subsection (2), the Commissioner by whom it was referred shall decide the
matter referred in conformity with such report.

The State Government may transfer any matter from any Commissioner appointed by
it to any other Commissioner appointed by it.

(v) Form of application (Section 22)

All claims for compensation subject to the provision of the Act shall be made to the
Commissioner. But such applications other than the applications made by dependant or
dependants can only be submitted when the parties have failed to settle the matter by
agreement.

An Application to a Commissioner may be made in such form and shall be accompanied

by such fee, if any, as may be prescribed and shall contain, in addition to any particulars
which may be prescribed, the following particulars namely:

 a concise statement of the circumstances in which the application is made and the
relief of order which the applicant claims;
 in the case of a claim for compensation against an employer, date of service of notice
of the accident on the employer and, if such notice has not been served or has not
been served in due time, the reason for such omission;
 the names and addresses of the parties; and
 Except in the case of an application by dependents for compensation, a concise
statement of the matters on which agreement has and of those on which agreement has
not been come to.

If the applicant is illiterate or for any other reason is unable to furnish the required
information in writing, the application shall, if the applicant so desires, be prepared under the
direction of the Commissioner.

Case: - M.B. & G. Engineering Factory v. Bahadur Singh

However, any defect in the application, e.g., when it is not in the prescribed form
cannot be fatal to the claim. Any such irregularity can be rectified with the permission of the
Commissioner at any stage.

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(vi)Power of the Commissioner to require further deposit in case of fatal
accident (Section 22A)

Where the Commissioner is of the opinion that any sum deposited by the employer as
compensation payable on the death of an employee, is insufficient, he is empowered to call
upon, by a notice in writing stating his reasons, the employer to show because why he should
not make a further deposit within a stipulated period. If the employer fails to show cause to
the satisfaction of the Commissioner, the Commissioner may make an award determining the
total amount payable and requiring him to deposit the deficiency.

(vii) Powers and procedure of Commissioners (Section 23)

The Commissioner shall have for the following purposes, all the powers of a Civil
Court under the Code of Civil Procedure, 1908 for the purpose of:

 taking evidence on oath;

 enforcing the attendance of witnesses; and
 Compelling the production of documents and material objects.

(viii) Appearance of parties

Any appearance, application or act required to be made or done by any person before
or to a Commissioner other than an appearance of a party which is required for the purpose of
his examination as a witness, may be made or done on behalf of such person, by a legal
practitioner or by an official of an Insurance Company or registered Trade Union or by an
Inspector appointed under Section 8(1) of the Factories Act, 1948, or under Section 5(1) of
the Mines Act, 1952 or by any other officer specified by the State Government in this behalf,
authorised in writing by such person, or, with the permission of the Commissioner by any
other person so authorised.

(ix) Method of recording evidence (Section 25)

 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 a
part of the record.
 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

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 writing from his dictation and shall sign the same and such memorandum shall form a
part of the record.
 The evidence of any medical witness shall be taken down as nearby as may be word
for word.

Case:-M.S.N. Co. Ltd. v. Mohd. Kunju

It was held that the Commissioner should not make a medical certificate the basis of
his award unless he has examined the concerned medical officer.

(x) Time Limit for disposal of cases relating to compensation [Section25A]

The Commissioner shall dispose of the matter relating to compensation within a

period of 3 months from the date of reference and intimate the decision in respect thereof
within the period to the employee.

(xi) Costs (Section 26)

All costs, incidental to any proceedings before a Commissioner, shall subject to rules
made under this Act, be in the discretion of the Commissioner. However, the Commissioner
must use his discretion judiciously.

(xii) Power to submit cases (Section 27)

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.

(xiii) Registration of agreements [Section 28]

It is obligatory for the employer to send a memorandum to the Commissioner where
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 a compensation has been settled as being payable to a woman or a person
under a legal disability.

The Commissioner shall record the memorandum in a register in the prescribed manner,
after he has satisfied himself as to its genuineness provided that the Commissioner has given
at least 7days notice to the parties concerned before recording such memorandum. The
Commissioner may at any time rectify the register.

The Commissioner may refuse to register the memorandum on the following grounds:

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  Inadequacy of the sum or amount settled; or
 Agreement obtained by fraud or undue influence or other improper means.

The Commissioner may in such a situation make such order including an order as to any
sum already paid under the agreement, as he thinks just in the circumstances.

An agreement which has been registered as aforesaid shall be enforceable under this Act
notwithstanding anything contained in the Indian Contract Act, 1872, or in any other law for
the time being in force.

(xiii) (Section 29) - Effect of failure to register agreement

Where a memorandum of any agreement, the registration of which is required by
Section 28 is not sent to the Commissioner as required by that Section, the employer shall be
liable to pay the full amount of compensation which he is liable to pay under the provisions
of this Act, and notwithstanding anything contained in the proviso to sub-section (1) of
Section 4, shall not unless the Commissioner otherwise directs, be entitled to deduct more
than half of any amount paid to the employees by way of compensation whether under the
agreement or otherwise.

APPEALS (SECTION 30)

An appeal shall lie to the High Court from the following orders of a Commissioner,
namely:

 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;
 an order awarding interest or penalty under Section 4A;
 an order refusing to allow redemption of a half-monthly payment;
 an order providing for the distribution of compensation among the dependants of a
deceased employee or disallowing any claim of a person alleging himself to be such
dependant;
 an order allowing or disallowing any claim for the amount of an indemnity under the
provisions of Subsection (2) of Section 12; or
 An order refusing to register a memorandum of agreement or registering the same or
providing for the registration of the same subject to conditions.

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 Such appeal should be filed within 60 days of order. The section empowers appellate
Court to infer with findings recorded by commissioner only in case of substantial error of
law. The provisions of Section 5 of Limitation Act, 1963 shall be applicable to appeals under
the Section.

No appeal shall lie unless the following requirements are fulfilled:

 A substantial question of law is involved in the appeal.
 In case of order, other than order refusing to allow redemption of a half-monthly
payment, unless the amount in dispute in the appeal is not less than three hundred
rupees;
 The memorandum of appeal should be accompanied by a certificate by the
Commissioner to the effect that the applicant has deposited with him the amount
payable under the order appealed against. Deposit of compensation amount is alone
contemplated: deposit of penalty or interest is not condition precedent for filing
appeal.
 The appeal does not relate to 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.
 Jurisdiction conferred on High Court being special any further appeal against the
judgement is barred. No. leave petition was therefore held maintainable. Finding
whether the claimant was an employee arrived by commissioner on material on record
is a fact hence no further appeal is allowed.

WITHHOLDING OF CERTAIN PAYMENTS PENDING DECISION OF

APPEAL (SECTION 30A)
Where an employer makes an appeal under clause (a) of sub-section (1) of Section 30,
the Commissioner may, and if so directed by the High Court, shall, pending the decision of
the appeal, withhold payment of any sum in deposit with him.

RECOVERY (SECTION 31)

The Commissioner may recover, as an arrear of land revenue, any amount payable by
any person under this Act, whether under an agreement for the payment of compensation or
otherwise, and the Commissioner shall be deemed to be a public officer within the meaning
of Section 5 of the Revenue Recovery Act, 1890.

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PENALTIES [SECTION 18A]
The Act prescribes penalties for the contravention of the provisions of the Act which
include fine up to Rs. 5,000.The following omissions attract this punishment under the Act:

 Whosoever fails to maintain a notice book which he is required to maintain under

Section 10(3); or
 Whosoever fails to send to the Commissioner a statement of fatal accidents which he
is required to send under Section 10A(1); or
 Whosoever fails to send a report of fatal accidents and serious bodily injuries which
he is required to send under Section 10B; or
 Whosoever fails to make a return of injuries and compensation which he is required to
make under Section 16.

No prosecution under Section 18A shall be instituted except by or with the previous
sanction of the Commissioner and no court shall take cognizance of any offence under this
section unless complaint is made within 6 months of the date on which the alleged
commission of offence comes to the knowledge of the Commissioner.

CONCLUSION

The Workman Compensation Act, 1923 was formed to provide compensations for
workers who acquired/acquire injuries caused by accidents in the course of employment. It
ensures that their rights and value as labourers is maintained. Therefore employers are
obligated to pay compensations to workers who got injuries that led to disablement or even
death in the course of employment

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 UNIT - III

EMPLOYEES’ STATE INSURANCE ACT, 1948

INTRODUCTION

The Employee State Insurance Act, [ESIC] 1948, is a piece of social welfare
legislation enacted primarily with the object of providing certain benefits to employees in
case of sickness, maternity and employment injury and also to make provision for certain
others matters incidental thereto.

The Act in fact tries to attain the goal of socio-economic justice enshrined in the
Directive principles of state policy under part 4 of our constitution, in particular, articles 41,
42 and 43 which enjoin the state to make effective provision for securing, the right to work,
to education and public assistance in cases of unemployment, old age, sickness and
disablement. The act strives to materialize these avowed objects through only to a limited
extent.

This act becomes a wider spectrum than factory act, in the sense that the factory act is
concerned with the health, safety, welfare, leave etc of the workers employed in the factory
premises only. But the benefits of this act extend to employees whether working inside the
factory or establishment or elsewhere or they are directly employed by the principal
employee or through an intermediate agency, if the employment is incidental or in connection
with the factory or establishment. Related Legislations: ESI (Central) Rules, 1950 and ESI
(General) Regulations, 1950

ORIGIN OF THE ACT

The Employee State Insurance act was promulgated by the Parliament of India in the
year 1948. To begin with the ESIC scheme was initially launched on 2nd February 1952 at
just two industrial centres in the country namely Kanpur and Delhi with a total coverage of
about 1.20 lakhs workers. There after the scheme was implemented in a phased manner
across the country with the active involvement of the state governments.

OBJECTIVE AND SCOPE OF THE ACT

 The Employees’ State Insurance Act, 1948 provides for certain benefits to employees
in case of sickness, maternity and employment injury and also makes provisions for
certain other matters in relation thereto.

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  The Act has been amended by the Employees’ State Insurance (Amendment) Act,
2010 for enhancing the Social Security Coverage, streamlining the procedure for
assessment of dues and for providing better services to the beneficiaries.
 The Act extends to the whole of India.
 The Central Government is empowered to enforce the provisions of the Act by
notification in the Official Gazette, to enforce different provisions of the Act on
different dates and for different States or for different parts thereof [Section 1(3)].
 The Act applies in the first instance to all factories (including factories belonging to
the Government) other than seasonal factories [Section 1(4)].
 According to the proviso to Section 1(4) of the Act, nothing contained in sub-section
(4) of Section 1 shall apply to a factory or establishment belonging to or under the
control of the Government whose employees are otherwise in receipt of benefits
substantially similar or superior to the benefits provided under the Act.
 Section 1(5) of the Act empowers the appropriate Government to extend any of the
provisions of the Act to any other establishment or class of establishments, industrial,
commercial, agricultural or otherwise after giving one month’s notice in the Official
Gazette.
 However, this can be done by the appropriate Government, only in consultation with
the Employees’ State Insurance Corporation set up under the Act and, where the
appropriate Government is a State Government, it can extend the provisions of the
Act with the approval of the Central Government.
 Under these enacting provisions, the Act has been extended by many State
Governments to shops, hotels, restaurants, cinemas, including preview theatres,
newspaper establishments, road transport undertakings, etc., employing 20 or more
persons.

Case:-ESIC v. M.M. Suri & Associates Pvt. Ltd

It is not sufficient that 20 persons are employed in the shop. They should be employee
as per Section 2(9) of the Act, getting the wages prescribed therein.

 According to the proviso to sub-section (5) of Section 1 where the provisions of the
Act have been brought into force in any part of a State, the said provisions shall stand
extended to any such establishment or class of establishment within that part, if the
provisions have already been extended to similar establishment or class of
establishments in another part of that State.

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  It may be noted that a factory or an establishment to which the Act applies shall
continue to be governed by this Act even if the number of persons employed therein
at any time falls below the limit specified by or under the Act or the manufacturing
process therein ceases to be carried on with the aid of power. [Section 1(6)]
 The coverage under the Act is at present restricted to employees drawing wages not
exceeding 15,000 per month.

SALIENT FEATURES OF ESI ACT 1948

1. Facilitating coverage of smaller factories;

2. Enhancing age limit of dependent children for eligibility to dependants
benefit;
3. Extending medical benefit to dependant minor brother/sister in case of not
having own family and whose parents are also not alive;
4. Streamlining the procedure for assessment of dues from defaulting employers;
5. Providing an Appellate Authority within the Corporation against assessment to
avoid unnecessary litigation;
6. Continuing medical benefit to insured persons retiring under VRS scheme or
taking premature retirement;
7. Treating commuting accidents as employment injury;
8. Streamlining the procedure for grant of exemptions;
9. Third party participation in commissioning and running of the Hospitals;
10. Opening of medical/dental/paramedical/nursing colleges to improve quality of
medical care;
11. Making an enabling provision for extending medical care to other
beneficiaries against payment of user charges to facilitate providing of medical
care from under-utilised ESI Hospitals to the BPL families covered under the
Rashtriya Swasthaya Bima Yojana introduced by the Ministry of Labour &
Employment.
12. Empowering State governments to set up autonomous Corporations for
administering medical benefit in the States for bringing autonomy and
efficiency in the working.

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IMPORTANT DEFINITIONS

APPROPRIATE GOVERNMENT [SECTION 2(1)]

Means

 the Central Government - in respect of establishments under the control of the Central
Government or a railway administration or a major port or a mine or oil-field; and
 the State Government - in all other cases

CONFINEMENT [SECTION 2(3)]

Means

Labour resulting in the issue of a living child or labour after 26 weeks of pregnancy
resulting in the issue of child whether alive or dead.

CONTRIBUTION [SECTION 2(4)]

Means

The sum of money payable to the Corporation by the principal employer in respect of
an employees and includes any amount payable by or on behalf of the employee in
accordance with the provisions of this Act.

DEPENDENT [SECTION 2(6A)]

Means

 Any of the following relatives of a deceased insured person namely:

 a widow, a legitimate or adopted son who has not attained the age of twenty-five
years,, an unmarried legitimate or adopted daughter,
 widowed mother,
 if wholly dependent on the earnings of the insured person at the time of his death, a
legitimate or adopted son or daughter who has attained the age of 25 years and is
infirm;
 if wholly or in part dependent on the earnings of the insured person at the time his
death:
 a parent other than a widowed mother,

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  a minor illegitimate son, an unmarried illegitimate daughter or a daughter
legitimate or adopted or illegitimate if married and minor or if widowed and a
minor,
 a minor brother or an unmarried sister or a widowed sister if a minor,
 a widowed daughter-in-law,
 a minor child of a pre-deceased son,
 a minor child of a pre-deceased daughter where no parent of the child is alive
or,
 a paternal grandparent if no parent of the insured person is alive.

EMPLOYMENT INJURY [SECTION 2(8)]

It means a personal injury to an employee caused by accident or an occupational

disease arising out of and in the course of his employment, being an insurable employment,
whether the accident occurs or the occupational disease is contracted within or outside the
territorial limits of India.

It is well settled that an employment injury need not necessarily be confined to any
injury sustained by a person within the premises or the concern where a person works.
Whether in a particular case the theory of notional extension of employment would take in
the time and place of accident so as to bring it within an employment injury, will have to
depend on the assessment of several factors.

There should be a nexus between the circumstances of the accident and the
employment. On facts no case could be an authority for another case, since there would
necessarily be some differences between the two cases. Therefore, each case has to be
decided on its own facts. It is sufficient if it is proved, that the injury to the employee was
caused by an accident arising out of and in the course of employment no matter when and
where it occurred. There is not even a geographical limitation.

Case:-Regional Director, E.S.I. Corpn. v L. Ranga Rao

The accident may occur within or outside the territorial limits of India. However,
there should be a nexus or casual connection between the accident and employment. The
place or time of accident should not be totally unrelated to the employment.

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Case:-Regional Director ESI v. Francis de Costa in year 1997

Where an employee who is on his way to factory meets with an accident, one from the
place of employment, the Court held that the injury cannot be said to be caused by accident
arising out of and in the course of his employment. Mere road accident on a public road while
employee was on his way to place of employment cannot be said to have its origin in his
employment in the factory.

Case:-E.S.I. Corpn. Indore v. Babulal,

The M.P. High Court held that injury arose out of employment where a workman
attending duty in spite of threats by persons giving call for strike and was assaulted by them
while returning after his duty was over.

Case:-Jayanthilal Dhanji Co. v. E.S.I.C

A worker was injured while knocking the belt of the moving pulley, though the injury
caused was to his negligence, yet such an injury amounts to an employment injury.

Case:-Shyam Devi v. E.S.I.C.

The word injury does not mean only visible injury in the form of some wound. Such a
narrow interpretation would be inconsistent with the purposes of the Act which provides
certain benefits in case of sickness, maternity and employment injury.

EMPLOYEE [SECTION 2(9)]

Means

Any person employed for wages in connection with the work of a factory or
establishment to which this Act applies and:

1) who is directly employed by the principal employer on any work of, or incidental or
preliminary to or connected with the work of the factory or establishment, whether
such work is done by employee in the factory or establishment; or elsewhere, or
2) who is employed by or through a immediate employer on the premises of the factory
or establishment or under the supervision of the principal employer or his agent, on
work which is ordinarily part of the work of the factory or establishment or which is
preliminary to the work carried on in or incidental to the purpose of the factory or
establishment; or

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 3) whose services are temporarily lent or let on hire to the principal employer by the
person with whom the person, whose services are Solent or let on hire, has entered
into a contract of service; and includes any person employed for wages on any work
connected with the administration of the factory or establishment or any part,
department or branch thereof, or with the purchase of raw materials of, or the
distribution or sale of the product of the factory or establishment; or any person
engaged as an apprentice, not being an apprentice engaged under Apprentices Act,
1961and includes such person engaged as apprentice whose training period is
extended to any length of time, ; but does not include:
o any member of the Indian Naval, Military or Air Forces; or
o any person so employed whose wages (excluding remuneration for overtime
work) exceed such wages as may be prescribed by the Central Government.

An employee whose wages (excluding remuneration for overtime work) exceed such
wages as may be prescribed by the Central Government at any time after (and not before) the
beginning of the contribution period shall continue to be an employee until the end of that
period. The Central Government has since prescribed by a Notification under Rule50 of the
E.S.I. Rules, 1950 the wage limit for coverage of an employee under Section 2(9) of the Act
as Rs. 10,000 per month. Further, it is provided that an employee whose wages (excluding
remuneration for overtime work) exceed Rs. 10,000 a month at any time after and not before
the beginning of the contribution period, shall continue to be an employee until the end of the
period.

Case: - Royal Talkies Hyderabad v. E.S.I.C

There was a canteen and cycle stand run by private contractors in a theatre premises.
On the question of whether the theatre owner will be liable as principal employer for the
payment of E.S.I. contributions, the Supreme Court held that the two operations namely
keeping a cycle stand and running a canteen are incidental or adjuncts to the primary purpose
of the theatre and the workers engaged therein are covered by the definition of employee as
given in E.S.I. Act.

The Supreme Court observed that the reach and range of Section 2(9) is apparently
wide and deliberately transcends pure contractual relationship.

Section 2(9) contains two substantive parts. Unless the person employed qualifies
under both, he is not an employee. First, he must be employed in or in connection with the

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work of an establishment. The expression in connection with the work of an establishment
ropes in a wide variety of workmen who may not be employed in the establishment but may
be engaged only in connection with the work of establishment. Some nexus must exist
between the establishment and the work of employee but it may be a loose connection. The
test of payment of salary or wages is not a relevant consideration. It is enough if the
employee does some work which is ancillary, incidental or has relevance to or link with the
object of the establishment.

The word employee would include not only persons employed in a factory but also
persons connected with the work of the factory. It is not possible to accept the restricted
interpretation of the words “employees in factories”.

Case:-Hyderabad Asbestos Cement Products, etc. v. ESIC

The persons employed in zone offices and branch offices of a factory and concerned
with the administrative work or the work of canvassing sale would be covered by the
provisions of the Act, even though the offices are located in different towns.

The Act is a beneficial piece of legislation to protect interest of the workers. The
employer cannot be allowed to circumvent the Act in the disguise of ambiguous designations
such as ‘trainees, ‘apprentices etc. who are paid regular wages, basic wages plus allowances.
Such workers also fall under the Act.

Case: - ESIC v. Apex Engg. Pvt. Ltd.,

Managing director could be an employee of the company. There could be dual

capacity i.e. as managing director as well as a servant of the company.

EXEMPTED EMPLOYEE [SECTION 2(10)]

Means an employee who is not liable under this Act to pay the employees
contribution

PRINCIPAL EMPLOYER [SECTION 2(17)]

 in a factory, owner or occupier of the factory and includes the managing agent of such
owner or occupier, the legal representative of a deceased owner or occupier and where
a person has been named as the manager of the factory under the Factories Act, 1948,
the person so named;

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  In any establishment under the control of any department of any Government in India,
the authority appointed by such Government in this behalf or where no authority is so
appointed the head of the Department.
 In any other establishment, any person responsible for the supervision and control of
the establishment.

FAMILY [SECTION 2(11)]

 Means all or any of the following relatives of an insured person, namely:

 a spouse;
 a minor legitimate or adopted child dependent upon the insured person;
 a child who is wholly dependent on the earnings of the insured person and who is:
 receiving education, till he or she attains the age of twenty-one years,
 an unmarried daughter;
 a child who is infirm by reason of any physical or mental abnormality or injury and is
wholly dependent on the earnings of the insured person, so long as the infirmity
continues.
 Dependant parents whose income from all sources does not exceed such income as
may be prescribed by the Central Government.
 In case the insured person is unmarried and his or her parents are not alive, a minor
brother or sister wholly dependent upon the earnings of the insured person

FACTORY [SECTION 2(12)]

Means

 any premises including the precincts thereof whereon ten or more persons are
employed or were employed on any day of the preceding twelve months, and in any
part of which a manufacturing process is being carried on or is ordinarily so carried
on, but does not including a mine subject to the operation of the Mines Act, 1952 or a
railway running shed.
 Terms manufacturing process, occupier and power, shall have the meaning assigned
to them in the Factories Act, 1948.

IMMEDIATE EMPLOYER [SECTION 2(13A)]

Means

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  a person, in relation to employees employed by or through him, who has undertaken
the execution on the premises of a factory or an establishment to which this Act
applies or under the supervision of principal employer or his agent, of the whole or
any part of any work which is ordinarily part of the work of the factory or
establishment of the principal employer or is preliminary to the work carried on, in or
incidental to the purpose of any such factory or establishment,
 And includes a person by whom the services of an employee who has entered into a
contract of service with him are temporarily lent or let on hire to the principal
employer and includes a contractor.
 It would not be necessary that the work undertaken by immediate employer should be
in the premises where the factory of principal employer is situated.

INSURABLE EMPLOYMENT [SECTION 2(13A)]

It means an employment in factory or establishment to which the Act applies.

INSURED PERSON [SECTION 2(14)]

It means a person who is or was an employee in respect of whom contributions are, or
were payable under the Act and who is by reason thereof entitled to any of the benefits
provided under the Act.

PERMANENT PARTIAL DISABLEMENT [SECTION 2(15A)]

 It means such disablement of a permanent nature, as reduced the earning capacity of
an employee in every employment which he was capable of undertaking at the time of
the accident resulting in the disablement:
 Every injury specified in Part II of the Second Schedule to the Act shall be deemed to
result in permanent partial disablement.

PERMANENT TOTAL DISABLEMENT [SECTION 2(15B)]

 It means such disablement of a permanent nature as incapacitates an employee for all

work which he was capable of performing at the time of the accident resulting in such
disablement:
 Permanent total disablement shall be deemed to result from every injury specified in
Part-I of the Second Schedule to the Act or from any combination of injuries specified
in Part-II thereof, where the aggregate percentage of the loss of earning capacity, as
specified in the said Part-II against those injuries, amounts to 100% or more.

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SEASONAL FACTORY [SECTION 2(19A)]
Means

 a factory which is exclusively engaged in one or more of the following manufacturing

processes namely, cotton ginning, cotton or jute pressing, decortications of
groundnuts, the manufacture of coffee, indigo, rubber, sugar or tea or any
manufacturing process which is incidental to or connected with any of the aforesaid
processes
 and includes
 a factory which is engaged for a period not exceeding seven months in a year:
 in any process of blending, packing or repacking of tea or coffee; or
 in such other manufacturing process as the Central Government may by
notification in the Official Gazette, specify.

SICKNESS [SECTION 2(20)]

It means a condition which requires medical treatment and attendance and
necessitates abstention from work on medical grounds.

TEMPORARY DISABLEMENT [SECTION 2(21)]

It means a condition resulting from an employment injury which requires medical
treatment and renders an employee as a result of such injury, temporarily incapable of doing
the work which he was doing prior to or at the time of injury.

WAGES [SECTION 2(22)]

Means

All remuneration paid or payable in cash to an employee if the terms of the contract of
employment, express or implied, were fulfilled and includes any payment to an employee in
respect of any period of authorized leave, lock-out, strike which is not illegal or lay-off and
other additional remuneration if any, paid at intervals not exceeding two months but does not
include:

 any contribution paid by the employer to any pension fund or provident fund,
or under this Act;
 any travelling allowance or the value of any travelling concession;

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  any sum paid to the person employed to defray special expenses entailed on
him by the nature of his employment, or
 any gratuity payable on discharge.

Wages include other

 Additional remuneration paid at intervals not exceeding two months wages.

Case:-Handloom House Ernakulam v. Reg. Director, ESIC

It is question of fact in each case whether sales commission and incentive are payable at
intervals not exceeding two months.

Case:-S. Ganesan v. The Regional Director, ESI Corporation, Madras

Travelling allowance paid to employees is to defray special expenses entitled on him

by nature of his employment. It does not form part of wages as defined under Section 2(22)
of the E.S.I. Act. Therefore, employer is not liable to pay contribution on travelling
allowance.

REGISTRATION OF FACTORIES AND ESTABLISHMENTS UNDER

THIS ACT [SECTION 2A]
Every factory or establishment to which this Act applies shall be registered within
such time and in such manner as may be specified in the regulations made in this behalf.

EMPLOYEES’ STATE INSURANCE [SECTION 38]

 The Act makes compulsory that subject to the provisions of the Act all the employees
in factories or establishments to which this Act applies shall be insured in the manner
provided by this Act.
 Such insured persons shall pay contributions towards Insurance Fund through their
employers who will also pay their own contribution. Such insured persons are entitled
to get certain benefits from that fund which shall be administered by the Corporation.
Any dispute will be settled by the Employees’ Insurance Court.

ADMINISTRATION OF EMPLOYEES’ STATE INSURANCE SCHEME

 For the administration of the scheme of Employees’ State Insurance in accordance
with the provisions of this Act, the Employees’ State Insurance Corporation Standing
Committee and Medical Benefit Council have been constituted.

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  ESI Fund has been created which is held and administered by ESI Corporation
through its executive committee called Standing Committee with the assistance,
advice and expertise of Medical Council, etc. and Regional and Local Boards and
Committees.

EMPLOYEES’ STATE INSURANCE CORPORATION [SECTION 3]

The establishment of Employees’ State Insurance Corporation by the Central
Government for administration of the Employees’ State Insurance Scheme in accordance
with the provisions of Act. Such Corporation shall be body corporate having perpetual
succession and a common seal and shall sue and be sued by the said name.

CONSTITUTION [SECTION 4]
The Central Government appoints

 a chairman, a vice-chairman and other members representing interests of employers,

employees, state governments/union territories and medical profession.
 Three members of the Parliament and the Director General of the Corporation are its
ex-officio members.

POWERS AND DUTIES OF THE CORPORATION

Section 19 - Empowers the Corporation, to promote measures for the improvement of
the health and welfare of insured persons and for the rehabilitation and reemployment of
insured persons who have been disabled or injured and incur in respect of such measures
expenditure from the funds of the Corporation within such limits as may be prescribed by the
Central Government.

SECTION 29 - EMPOWERS THE CORPORATION

 to acquire and hold property both movable and immovable,

 sell or
 otherwise transfer the said property;
 it can invest and reinvest any moneys which are not immediately required for
expenses and or realise such investments;
 it can raise loans and discharge such loans with the previous sanction of Central
Government;

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  it may constitute for the benefit of its staff or any class of them such provident or
other benefit fund as it may think fit. However, the powers under Section 29 can be
exercised subject to such conditions as may be prescribed by the Central Government.

APPOINTMENT OF REGIONAL BOARDS (SECTION 25)

The Corporation may appoint Regional Boards, Local Committees and Regional and
Local Medical Benefit Councils in such areas and in such manner, and delegate to them such
powers and functions, as may be provided by the regulations.

Wings of the Corporation

The Corporation to discharge its functions efficiently has been provided with two
wings:

STANDING COMMITTEE [SECTION 8]

The Act provides for the constitution of a Standing Committee amongst its members.

POWER OF THE STANDING COMMITTEE

 The Standing Committee has to administer affairs of the Corporation and may
exercise any of the powers and perform any of the functions of the Corporation
subject to the general superintendence and control of the Corporation.
 The standing Committee acts as an executive body for administration of Employees
State Insurance Corporation

MEDICAL BENEFIT COUNCIL [SECTION 10]

Empowers the Central Government to constitute a Medical Benefit Council Section 22
determines the duties of the Medical Benefit Council stating that the Council shall:

 advise the Corporation and the Standing Committee on matters relating to

administration of medical benefit, the certification for purposes of the grant of benefit
and other connected matters;
 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
 Perform such other duties in connection with medical treatment and attendance as
may be specified in the regulations.

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EMPLOYEES’ STATE INSURANCE FUND

CREATION OF FUND [SECTION 26]

 The Act provides that all contributions paid under this Act and all other moneys
received on behalf of the Corporation shall be paid into a Fund called the Employees’
State Insurance Fund which shall be held and administered by the Corporation for the
purposes of this Act.
 The Corporation may accept grants, gifts, donations from the Central or State
Governments, local authority, or any individual or body whether incorporated or not,
for all, or any of the purposes of this Act.
 A Bank account in the name of Employees’ State Insurance Fund shall be opened
with the Reserve Bank of India or any other Bank approved by the Central
Government.
 Such account shall be operated on by such officers who are authorised by the
Standing Committee with the approval of the Corporation.

PURPOSES FOR WHICH THE FUND MAY BE EXPENDED [SECTION

28]
Fund shall be expended only for the following purposes:

 payment of benefits and provisions of medical treatment and attendance to insured

persons and, where the medical benefit is extended to their families, in accordance
with the provisions of this Act and defraying the charge, and costs in connection
therewith;
 payment of fees and allowances to members of the Corporation, the Standing
Committee and Medical Benefit Council, the Regional Boards, Local Committees and
Regional and Local Medical Benefit Councils;
 payment of salaries, leave and joining time allowances, travelling and compensatory
allowances, gratuities and compassionate allowances, pensions, contributions to
provident or other benefit fund of officers and servants of the Corporation and
meeting the expenditure in respect of officers and other services set up for the purpose
of giving effect to the provisions of this Act;

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  establishment and maintenance of hospitals, dispensaries and other institutions and
the provisions of medical and other ancillary services for the benefit of insured
persons and where the medical benefit is extended to their families, their families;
 payment of contribution to any State Government, local authority or any private body
or individual towards the cost of medical treatment and attendance provided to
insured persons and where the medical benefit is extended to their families, their
families including the cost of any building and equipment, in accordance with any
agreement entered into by the Corporation;
 defraying the cost (including all expenses) of auditing the accounts of the Corporation
and of the valuation of the assets and liabilities;
 defraying the cost (including all expenses) of Employees Insurance Courts set up
under this Act;
 payment of any sums under any contract entered into for the purposes of this Act by
the Corporation or the Standing Committee or by any officer duly authorised by the
Corporation or the Standing Committee in that behalf;
 payment of sums under any decree, order or award, of any court or tribunal against
the Corporation or any of its officers or servants for any act done in execution of his
duty or under a compromise or settlement of any suit or any other legal proceedings
or claims instituted or made against the Corporation;
 defraying the cost and other charges of instituting or defending any civil or criminal
proceedings arising out of any action taken under this Act;
 defraying expenditure within the limits prescribed, on measure for the improvement
of the health and welfare of insured persons and for the rehabilitation and re-
employment of insured persons who have been disabled or injured; and
 Such other purposes as may be authorised by the Corporation with the previous
approval of the Central Government.

CONTRIBUTIONS [SECTION 40]

 The contributions have to be paid at such rates as may be prescribed by the Central
Government.
 The present rates of contribution are 4.75 percent and 1.75 percent of workers wages
by employers and employees respectively.
 The wage period in relation to an employee shall be the unit in respect of which all
contributions shall be payable. The contributions payable in respect of each wage

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 period shall ordinarily fall due on the last day of the wage period and where an
employee is employed for part of the wage period, or is employed under two or more
employers during the same wage period, the contributions shall fall due on such days
as may be specified in the regulations.
 Principal employer to pay contributions in the first instance
 It is incumbent upon the principal employer to pay in respect of every employee
whether directly employed by him or by or through an immediate employer, both the
employer’s contributions and the employee’s contribution.
 However, he can recover from the employee (not being an exempted employee) the
employees contribution by deduction from his wages and not otherwise.
 The principal employer has to bear the expenses of remitting the contributions to that
Corporation.
 According to Section 39(5) of the Act, if any contribution payable is not paid by the
principal employer on the date on which such contribution has become due, he shall
be liable to pay simple interest at the rate of 12% per annum or at such higher rate as
maybe specified in the regulations, till the date of its actual payment.
 Higher interest specified in the regulations should not exceed the lending rate of
interest charged by any scheduled bank. It may be noted that any interest recoverable
as stated above may be recovered as an arrear of land revenue or under newly
introduced Sections 45-C to 45-I of the Act.

RECOVERY OF CONTRIBUTION FROM IMMEDIATE EMPLOYER

[SECTION 41]

Principal employer who has paid contribution in respect of an employee employed by

or through an immediate employer is entitled to recover the amount of contribution so paid
(both employers and employees contribution) from the immediate employer either by
deduction from any amount payable to him by the principal employer under any contract or
as a debt payable by the immediate employer.

However the immediate employer is entitled to recover the employees’ contribution

from the employee employed by or through him by deduction from wages and not otherwise.

The immediate employer is required to maintain a register of employees employed by

or through him as provided in the Regulations and submit the same to the principal employer

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before the settlement of any amount payable. He is not required to have separate account with
ESI.

METHOD OF PAYMENT OF CONTRIBUTION [SECTION 43]

The Corporation to make regulations for payment and collection of contribution payable
under this Act and such regulations may provide for:

 the manner and time for payment of contribution;

 the payment of contributions by means of adhesive or other stamps affixed to or
impressed upon books, cards or otherwise and regulating the manner, times and
conditions in, at and under which, such stamps are to be affixed or impressed;
 the date by which evidence of contributions having been paid is to be received by the
Corporation;
 the entry in or upon books or cards or particulars of contribution paid and benefits
distributed in the case of the insured persons to whom such books or card relate; and
 The issue, sale, custody, production, inspection and delivery of books or cards and the
replacement of books or cards which have been, lost, destroyed or defaced.

BENEFITS [SECTION 46]

The insured persons, their dependants are entitled to the following benefits on prescribed
scale:

 periodical payments in case of sickness certified by medical practitioner;

 periodical payments to an insured workman in case of
 confinement or miscarriage or sickness arising out of pregnancy, confinement;
 periodical payment to an insured person suffering from disablement as a result of
employment injury;
 periodical payment to dependants of insured person;
 medical treatment and attendance on insured person;
 Payment of funeral expenses on the death of insured person at the prescribed rate of.

GENERAL PROVISIONS RELATING TO BENEFITS

 Right to receive benefits is not transferable or assignable. When aperson receives
benefits under this Act, he is not entitled to receive benefits under any other
enactment.

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  An insured person is not entitled to receive for the same period more than one benefit,
e.g. benefit of sickness cannot be combined with benefit of maternity or disablement,
etc.

TYPES OF BENEFITS UNDER THE ACT

The act provides for six types of benefit to insured workmen: A) Sickness benefit B)
Maternity benefits C) Disablement benefit D) Dependent's benefit E) Medical benefit F)
Funeral benefit. Benefits are receivable during the benefit period, which is defined as follows.
Benefit period means such period, being not less than 25 but not more than 27 consecutive
weeks or 6 consecutive months corresponding period as may be specified in the regulation
framed under the act. For the first benefit period a shorter or longer period may be fixed.

1. SICKNESS BENEFIT
Sickness benefit represents periodical payments made to an insured person for the
period of certified sickness after completing nine months insurable employment. To quality
for this benefits contribution should have been paid for at least 78 days in the relevant
contribution period. The maximum duration for availing sickness benefit is 91 days in two
consecutive benefit periods. There is waiting period of 2 days which I waived if the insured
person is certified sic within 15 days of the last spell for which sickness benefit period was
last paid. The daily rate of sickness benefit in respect of a person during any benefit period
shall be 20 percent more than “Standard benefit rate”

2. MATERNITY BENEFIT
Maternity benefit implies cash payment to an insured woman in case of confinement
or miscarriage or sickness arising out of pregnancy, premature birth of child as certified by a
duly appointed medical officer or midwife. For entitlement to maternity benefit, the insured
woman should have contributed for not less than 70 days in the immediately preceding two
consecutives contribution periods corresponding to the benefit period in which the
confinement occurs or is expected to occur. The daily rate of benefit doubles the standard
sickness benefit rate i.e full wages. Maternity benefit is normally payable for a maximum
period of 12 weeks in case of confinement, 6weeks in case of miscarriage or medical
termination of pregnancy which can be extended up to one additional month in case of
sickness arising out of confinement and duly certified by an authorized medical officer.
Maternity benefit continues to be payable even in the event of the death of an insured woman,

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during her confinement, or during the period of 6 weeks immediately following her
confinement leaving behind a child for the whole of that period , and in case the child also
dies, during the said period, until the death of the child.

3. DISABLEMENT BENEFIT
In case of temporary disability arising out of an employment injury, disablement benefit
is admissible to an insured person for the entire period so certified by an insurance medical
officer/ practitioner for which the insured person does not work for wages. The benefit is not
subject to any contributory condition and is payable at the daily rate of 15 percent more than
the standard benefit rate. The benefit is, however, not payable if the incapacity is less than 3
days excluding the rate date of accident.

4. DEPENDENT’S BENEFIT
Periodical pension is paid to the dependent of a deceased insured person where death
occurs as a result of an employment injury or occupational diseases. The daily rate of
dependents shall be 15 percent more than the standard benefit rate. The widow receives
monthly pension for life or until remarriage, at a fixed rate equivalent to 3/5th of the
disablement benefit rate and each dependent child is paid an amount equivalent 2/5th thereof
until he/she attains 18 years of ages, provide that, in case of infirmity, the benefit continues to
be paid till infirmity.

However, it is subject to the condition that the total dependents’ benefit distributed among
the widow and legitimate or adopted children of the deceased insured persons, does not
exceed, at any time, the full rate of disablement benefit. In case it exceeds the given ceiling;
the share of each of the dependents is, proportionately reduced. The benefit is not payable to
married daughter.

In case the insured person does not leave behind any widow or child, the benefit is
payable to other dependents including parents.

5. MEDICAL BENEFIT
An insured person and his family member become entitled to medical care from the date
he enters the insurable employment and the entitlement continues as long as the insured
person is in insurable employment or is qualified to claim sickness, maternity, or disablement
benefit. The entitlement to medical care is extended up to two years to persons suffering from
any specified chronic or long-term diseases. Medical treatment to persons, who go out of

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coverage during the period of treatment, is not discontinued till the spell of sickness ends. All
insured persons and member of there are entitled to free, full and comprehensive medical care
under the scheme. The package covers all aspects of health care from comprehensive medical
care facilities, such as

I. Out- patient treatment.

II. X- ray and laboratory investigation.

III. Ambulance service or conveyance.

IV. Family welfare services and other national health programme services.

V. Medical certification and

VI. Special provision including super-specialty treatment

6. FUNERAL BENEFIT:
Funeral expenses are in the nature of a lump sum payment up to three thousand rupees
made to defray the expenditure of the funeral of deceased insured person. The amount is paid
either to the eldest surviving member of the family or, in his absence, to the person who
actually incurs the expenditure on the funeral

EMPLOYEES’ INSURANCE COURT (E.I. COURT)

CONSTITUTION [SECTION 74]

 The State Government shall by notification in the Official Gazette constitute an
Employees’ Insurance Court for such local area as may be specified in the
notification.
 The Court shall consist of such number of judges as the State Government may think
fit. Any person who is or has been judicial officer or is a legal practitioner of 5 years
standing shall be qualified to be a judge of E.I. Court.
 The State Government may appoint the same Court for two or more local areas or two
or more Courts for the same local area and may regulate the distribution of business
between them.

MATTERS TO BE DECIDED BY E.I. COURT

ADJUDICATION OF DISPUTES

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 The Employees’ Insurance Court has jurisdiction to adjudicate disputes, namely,
whether any person is an employee under the Act, rate of wages/contribution, as to who is or
was the principal employer, right of a person to any benefit under the Act.

ADJUDICATION OF CLAIMS
 The EI Court also has jurisdiction to decide claims for recovery of contribution from
principal employer or immediate employer, action for failure or negligence to pay
contribution, claim for recovery of any benefit admissible under the Act.
 Proceedings in both the above cases can be initiated by filing application in the
prescribed form by the employee or his dependent or employer or the corporation
depending who has cause of action.
 No Civil Court has power to decide the matters falling within the purview/
jurisdiction of E.I. Court.

EXEMPTIONS
 The appropriate Government may exempt any factory/establishment from the purview
of this Act, as well as any person or class of persons employed in any
factory/establishment, provided the employees employed therein are in receipt of
benefits superior to the benefits under the Act.
 Such exemption is initially given for one year and may be extended from time to time.
 The applicant has to submit application justifying exemption with full details and
satisfy the concerned Government.

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 UNIT – IV

THE MATERNITY BENEFIT ACT 1961

INTRODUCTION:

Women at the reproductive stage are exposed to special risks during pregnancy and
child bearing, and maternal morbidity and mortality are factors which require special
consideration. The Act was passed to regulate the employment of women in certain
establishment for certain periods before and after child-birth and to provide for maternity
benefit and certain other benefits. It extends to the whole of India [Sec 1(2)]. The latest
amendment to the Act was made in 1988. The Amendment Act of 1988 came into force with
effect from january10, 1989.

SCOPE AND COVERAGE OF THE ACT (SEC.2)

The Act applies, in the first instance—

a. To every establishment being a factory, mine or plantation including any such

establishment belonging to Government and to every establishment wherein
persons are employed for the exhibition of equestrian, acrobatic and other
performances.
b. To every shop or establishment within the meaning of any law for the time
being in force in employees, on any day of the preceding 12 months.

The Act prohibits the working of pregnant women for a specified period before and
after delivery. It also provides for maternity leave and payment of certain monetary benefits
to be paid to woman employees during the period when they are out of employment on
account of their pregnancy. Further, the service of a woman employee cannot be terminated
during the period of her absence on account of pregnancy, except for gross misconduct.

SALIENT FEATURES OF THE MATERNITY BENEFIT

(AMENDMENT) BILL, 2016 ARE:-

1. Duration of maternity leave: The 1961 Act states that every woman will be entitled
to maternity benefit of 12 weeks. The 2016 Bill will increase this to 26 weeks.

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2. Maternity benefit prior to expected delivery: Under the 1961 Act, this
maternity benefit should not be availed before 6 weeks from the date of expected delivery.
The 2016 Bill changes this to 8 weeks.

3. Maternity benefit for a woman having two or more children: If a woman

has two or more children, the maternity benefit will continue to be 12 weeks, which cannot be
availed before 6 weeks from the date of the expected delivery.

4. Maternity benefit to adopting mother and commissioning mother: As per

the 2016 Bill a woman who legally adopts a child below the age of three months or a
commissioning mother shall be entitled to maternity benefit for a period of 12 weeks from the
date the child is handed over to the adopting mother or the commissioning mother.

5. Provision for Crèche facility: The 2016 Bill introduces a provision which requires
every establishment with 50 or more employees to provide crèche facilities within a
prescribed distance. The woman will be allowed four visits to the crèche in a day. This will
include the interval of rest allowed to her.

6. Option to Work from Home: The 2016 Bill introduces a provision that states that
an employer may permit a woman to work from home. This would apply if the nature of
work assigned to the woman permits her to work from home. This option can be availed of,
after the period of maternity leave, for a duration that is mutually decided by the employer
and the woman.

7. Informing women employees of the right to maternity leave: The 2016 Bill
introduces a provision which requires every establishment to intimate a woman at the time of
her appointment of the maternity benefits available to her. Such communication must be in
writing and electronically

IMPORTANT POINTS ABOUT MATERNITY LEAVE IN INDIA

If you are a pregnant working female, you must be searching for a complete guide of
the Maternity Benefit Act 2016. Before applying for leave, you must be aware of many
important points to avail the services. It does not matter if you are working in a private or a
government company; you are entitled to a paid maternity leave of 26 weeks. Below are the
complete details about maternity leave rules in India:

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ELIGIBILITY FOR MATERNITY LEAVE IN INDIA
You must have been working as an employee in the organization for at least 80 days
in the past 12 months.

Every company which has more than 10 employees comes under this rule and are
supposed to provide maternity benefits to the pregnant working women.

You can avail the benefits only for the first two children. The usual 12 weeks paid
maternity leave is applicable for the third or later child.

The managers should be informed within 12 to 15 weeks of conception to avail

maternity leave benefits.

You should not be pregnant at the time of joining the services, giving maternity
benefits in such cases depends on the decision of the organization.

MATERNITY BENEFIT RULES

An increment in the duration of paid maternity leaves: As per the new

Maternity Benefit Act 2016, the pregnant working woman is entitled to 26 weeks paid
maternity leave. The lady can avail maternity leave for a period of extending up to a
maximum of 8 weeks before the expected delivery date and approximately 18 weeks after the
childbirth. However, it completely depends on the choice of the woman and circumstances.

Work from home option: Under this new rule, a new “work from home option” has
been introduced. It enables the woman to work from home after the approximate 26 week’s
leave period. But, it is available only after having mutual consent with the employer. If the
employer does not agree, you may have to return to work after availing maternity leaves.

Crèche facility: After the enactment of the Maternity Benefit Act 2016, every
organization that has more than 50 employees is to provide crèches facility within a
prescribed distance. The mother will be allowed to visit crèche four times a day to look after
the child.

Maternity leave in India for adoptive and commissioning mothers: If you are
an adopting mother and the age of the child is less than 3 months, you are entitled to take 12
weeks paid maternity leave. If you are planning to have your baby through surrogacy, the
doctor will need to plant your egg into another woman. In this case, you are the
commissioning mother and eligible for 12weeks paid leave.

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Awareness about Maternity Benefits: It is the responsibility of the organization to
spread awareness about maternity benefits. Every female in the organization should be
informed through written, electronic or digital mode. There should be clear transparency
around this.

Employment of, or work by women, prohibited during certain periods

(Sec.4): An employer is prohibited from knowingly employing any women in any
establishment during the 6 weeks immediately following the day of her delivery or her
miscarriage. Likewise, a woman is prohibited from working in any establishment during this
period of 6 weeks. Further, if a pregnant woman makes a request, she shall not be given any
work of the following nature during the specified period:

1. Any work which is of arduous nature.

2. Any work which involves long hours of standing.

3. Any work which in any way is likely to interfere with her pregnancy or the normal
development of foetus or is likely to cause her miscarriage or otherwise adversely affect her
health.

The specified period shall be—

(a) The period of 1 month immediately preceding the period of 6 weeks before the
date of her expected delivery; or

(b) Any period during the said period of 6 weeks for which the pregnant woman does
not avail of the leave of absence under sec.6.

RIGHT TO PAYMENT OF MATERNITY BENEFIT (SEC. 5)

Subject to the provision of the Act, every woman shall be entitled to, and her
Employer shall be liable for, the payment of maternity benefit. Maternity benefit is a payment
to a woman at the rate of the average daily wage for the period of her actual absence, that is
to say, the period immediately proceeding the day of her delivery and any period immediately
following that day.

Average daily wage: It means the average of the woman’s wages payable to her for the
days on which she has worked during the period of 3 calendar months immediately preceding
the date from which she absents herself on account of maternity, the minimum rate of wage
fixed or revised under the Minimum Wages Act, 1948, or Rs.10, whichever is the highest.

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CONDITIONS FOR PAYMENT OF MATERNITY BENEFIT:

The following conditions must be fulfilled before maternity benefit becomes payable
to a woman employee in an establishment.

1. Work for not less than 80 days to have been put in: The woman must have
actually worked in an establishment of the employer from whom she claims maternity benefit
for a period of not less than 80 days in the 12 months immediately preceding the date of her
expected delivery.

2. Maternity benefit for a maximum period of 12 weeks: The maximum period

for which the woman shall be entitled to maternity benefit shall be 12 weeks of which not
more than 6 weeks shall precede the date of her expected delivery.

3. Death: If the woman does during this period of 12 weeks, the maternity benefit shall be
payable only for the days up to and including the day of her death. Where the woman delivers
a child, then dies during her delivery or during the period immediately following the date of
her delivery for which she is entitled for the maternity benefit, leaving behind the child, the
employer shall be liable for payment of maternity benefit for that entire period. If the child
also dies during the said period, the employer shall be liable for the payment of maternity
benefit for the days up to and including the date of the death of the child.

NOTICE OF CLAIM FOR MATERNITY BENEFIT AND PAYMENT

THEREOF (SEC.6)

Any woman employed in an establishment and entitled to maternity benefit under the
provisions of the Act may give notice to her employer. The notice shall be in writing and in
the prescribed form. It shall also state that she will not work in any establishment during the
period of which she receives maternity benefit. In the case of a woman who is pregnant, the
notice shall state the date from which she will be absent from work. This date will not be
earlier than 6 weeks from which she will be absent from work. This date will not be earlier
than 6 weeks from the date of her expected delivery. If she has not given the notice when she
was pregnant, she may give such notice as soon as possible after the delivery.

Permission for absence: On receipt of the notice, the employer shall permit the woman
to absent herself from the establishment during the period for which she receives the
maternity benefit.

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PAYMENT OF MATERNITY BENEFIT IN CASE OF DEATH OF A
WOMAN (SEC.7)

If a woman entitled to maternity benefit or any other amount dies receiving the
maternity benefit or the amount, or where the employer is liable for maternity benefit after
the death of the woman, the employer shall pay such benefit or amount to the person
nominated by the woman in the notice given under sec.6. In case there is not such nominee,
the maternity benefit will be paid to her legal representative.

PAYMENT OF MATERNITY BENEFIT IN CERTAIN CASES (SEC 5-B)

Every woman—

(a) Who is employed in a factory or other establishment to which the provisions of the
Employees State Insurance Act, 1948 apply;

(b) Whose wages (excluding remuneration for overtime work) for a month exceed
Rs.1.600; and

(c) Who has worked for not less than 80 days in the 12 months immediately the date
of her expected delivery;

NO DEDUCTION OF WAGES IN CERTAQIN CASES (SEC.13)

No deduction from the normal and usual daily wages of a woman entitled to maternity
benefit under the provisions of the Act shall be made for the reason that—

(a) The nature of work assigned to her of arduous nature, or that the pregnant woman
has been different nature of work, or

(b) Specified breaks for nursing the child are allowed to her.

MEDICAL BONUS (SEC.8)

Every woman entitled to maternity benefit under the Act shall also be entitled to
receive from her employer a medical bonus of Rs.250 if no pre-natal confinement and post-
natal care is provided for by the employer free of charge.

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LEAVE FOR MISCARRIAGE (SEC.9)
In case of miscarriage, a woman shall, on production of the prescribed proof, be
entitled to leave with wages at the rate of maternity benefit, for a period of 6 weeks
immediately following the day of her miscarriage.

OTHER LEAVE (SEC.10)

A woman suffering from illness arising out of pregnancy, delivery, premature birth of
a child or miscarriage shall, on production of the prescribed proof, be entitled to leave with
wages at the rate of maternity benefit for a maximum period of 1 month. This leave is in
addition to the period of absence allowed to her under Sec. 6 or under Sec.9.

NURSING BREAKS (SEC.11)

Where a woman, after having delivered a child, returns to duty after such delivery,
she shall be allowed in the course of her daily work 2 breaks of the prescribed duration for
nursing the child until the child attains the age of 15 months. These nursing breaks shall be in
addition to the interval for rest allowed to her.

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 THE EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS
PROVISIONS ACT, 1952

INTRODUCTION

Provident fund is a welfare scheme for the benefits of the employees. Under this
scheme both the employee & employer contribute their part but whole of the amount is
deposited by the employer. Employer deducted the employee share from the salary of the
employee. The interest earned on this investment is also credited in pf account of the
employees. At the time of retirement, the accumulated amount is given to the employees, if
certain conditions are satisfied.

The schemes of provident funds, as a social measure, are meant to include employees
to save a portion from their present earnings for a rainy day.

SCOPE AND OBJECT OF THE ACT

The Act and Employees Provident Funds Scheme were brought into force from
November, 1952. Initially the Act applied to industries engaged in the manufacture of
cement, cigarettes, electrical, mechanical or general engineering products, iron and steel,
paper and textiles. Ordinarily factories and establishments employing 50 or more persons
were covered under the Act. The minimum limit for coverage under the Act was reduced to
20 or more persons with effect with from December 31, 1960. The membership of the
employees‟ provident fund scheme was initially restricted to employees whose monthly pay
did not exceed Rs.3000. This pay limit has been raised from time to time bearing in kind the
fall in the value of money due to inflation. The present limit is Rs.6, 500.

EMPLOYEES PROVIDENT FUND SCHEME (1952)

ESTABLISHMENT OF FUND (SEC.5)

Established the Employees Provident Fund in accordance with the provisions of the
Act and the Employees Provident Fund Scheme The fund shall vest in, and be administrated
by , the Central Board constituted under Sec. 5-A. Any of the provisions of the Employees
Provident Fund Scheme shall take effect either prospectively or retrospectively on such date
as may be specified in this behalf in the Scheme.

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CONTRIBUTION (SEC.6)
The object of the Act, as already seen, is to provide for the institution of the provident
funds for employees in factories and other establishments. The principle duty is laid upon the
employer to put the Employees Provident Fund and Family Pension Schemes into operation
and to make contributions of both their and employees share to the Funds and to deduct from
the wages of the employees their share.

The employers contribution to the Employees Provident Fund shall be 10 per cent of
the basic wages, dearness allowance and retaining allowance for the time being payable to
each of the employees.

If any employees so desires, his contribution may be an amount exceeding 10 Percent

of his basic wages, dearness allowance and retaining allowance, subject to the condition that
the employer shall not be under an obligation to pay any contribution over and above his
contribution payable under Sec.6.

EMPLOYEES’ PENSION SCHEME AND FUND (1995)

In exercise of the powers conferred by Sec. 6-A, the Central Government made the
Employees’ Pension Scheme, 1995, vide its notification dated 16thNovember, 1995. The
scheme came into force retrospectively on 16th day of November, 1995 Establishment of
Employees Pension Fund. The central government frame a scheme to be called the
Employees’ Pension Scheme for the purpose of providing for—

a. Superannuation pension or permanent total disablement pension to the

employees of any establishment or class of establishment to which this Act
applies;
b. Widows pension, children pension or orphan pension payable to the
beneficiaries of such employees.

EMPLOYEES’ DEPOSIT-LINKED INSURANCE SCHEME AND FUND

(1976)

FRAMING OF EMPLOYEES’ DEPOSIT- LINKED INSURANCE

SCHEME (SEC.6C)

The Central government may, by notification in the Official Gazette, frame a scheme
to be called the Employees‟ Deposit-linked Insurance Scheme for the purpose of providing

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life insurance benefits to the employees of any establishment or class of establishments to
which this Act applies.

ESTABLISHMENT OF EMPLOYEES’ DEPOSIT-LINKED

INSURANCE FUND
The employer shall pay into the Insurance Fund from time to time in respect of his
employees an amount not exceeding 1 per cent of the aggregate of the basic wages, dearness
allowance and retaining allowance as the Central Government may, by notification in the
Official Gazette, specify. He shall also pay into the Insurance Fund such further sum of
money, not exceeding 1/4th of the contribution which he is required to make as the Central
Government may, from time to time determine.

The Insurance Fund shall vest in the Central Board and be administered by it such
manner as may be specified in the Insurance Scheme. The Insurance Scheme may provide for
all or any of the matters specified in Schedule IV.

MODIFICATION OF SCHEME (SEC.7)

The Central Government may, by notification in the Official Gazette, add to, amend
or vary, either prospectively or retrospectively the Employees Provident Fund Scheme, the
Pension Scheme or the Employees Deposit-linked Insurance Scheme.

CLARIFICATION PERTAINING TO CONTRIBUTIONS

After revision in wage ceiling from Rs.5000 to Rs.6500 per month, the government
will continue to contribute 1.16 per cent into the actual wage or maximum Rs.6500 per month
towards Employees’ Pension Scheme. The employers share in the Pension Scheme will be
Rs.541, 1-6-2001.

Under Employees Deposit- Linked insurance Scheme the contribution 0.50 per cent is
required to be paid up to a maximum limit Rs.6500. The employer will pay administrative
charges 0.01 per cent on a maximum limit of Rs.6500.The employer also will pay
administrative charges 0.01 per cent on maximum limit of Rs.6500 whereas an exempted
establishment will pay inspection charges 0.005 per cent out of the total wages paid.

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 ADMINISTRATION OF THE SCHEMES

Central Board (Sec. 5-A):

A Board of trustees called the Central Board for administering the Employees
Provident Fund, Pension Fund and Employees Deposit-linked Insurance Fund established
under the schemes.

Executive Committee (Sec. 5-AA):

To assist the Central Board in the discharge of its functions, the Amendment Act of
1988 has made a provision for the setting up of an Executive Committee by introducing new
Sec. 5-AA to the Act.

State Board (Sec.5-B)

Any state a Board of Trustee called the State Board in consultation with that state
Government, by notification in the Official Gazette. The State Board shall exercise such
powers and perform such duties as the Central Government may assign to it from time to
time.

Appointment of Officers (Sec.5D)

Appointment of Central Provident Fund Commissioner, Appointment of a Financial
Advisor and Chief Accounts Officer, Appointment in consultation with the Union Public
Service Commission in some cases, Appointment of Additional Deputy Regional and
Assistant Provident Fund Commissioners.

APPELLATE TRIBUNAL

EMPLOYEES’ PROVIDENT FUNDS APPELLATE TRIBUNAL

Constitute one or more Appellate Tribunals to be known as the Employees, Provident
Funds Appellate Tribunal. The Tribunal shall exercise the powers and discharge the functions
conferred on it by this Act. Every such Tribunal shall have jurisdiction in respect of
establishments situated in such area as may be specified in the notification constituting the
Tribunal.

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RECOVERY OF MONEYS DUE FROM EMPLOYERS (SEC.8)
Any of the some amounts due from an employer in relation to an establishment to
which any Provident Fund Scheme or Employees‟ Deposit-linked Insurance Scheme applies,
may, if the amount is in arrears.

(a) Any contribution payable to the Employees‟ Provident Fund or, as the case may
be, the Employees‟ Deposit-linked Insurance Fund.

(b) Accumulations required to be transferred under Sec.15 or under Sec17.

(c) Damages recoverable under Sec.14-B

(d) Any charges payable by the employer under any of the provision of the Act or of
any provision of the Employees Provident Fund Scheme or the Employees Deposit-
linked Insurance scheme.

EMPLOYER NOT TO REDUCE WAGES (SEC.12)

The Provident Fund Scheme or Insurance Scheme reduces, whether directly or
indirectly, the wages of any employee to whom the Provident Fund Scheme or the Insurance
Scheme applies. He shall also not reduce the total quantum of benefits in the nature of old age
pension, gratuity or provident fund or life insurance to which the employee is entitled under
the terms of his employment, express or implied.

INSPECTORS (SEC.13)
The appropriate Government appoint such persons as it thinks fit to be Inspectors for
the purpose of the Act, the Employees Provident Fund Scheme, the Pension Scheme or the
Employees Deposit-linked Insurance Scheme. It may also define jurisdiction of the Inspectors

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 PAYMENT OF BONUS ACT, 1965
INTRODUCTION
Bonus is defined as something given in addition what is ordinarily received by or due
to the recipient. The main object of the payment of Bonus Act is to provide for the payment
of bonus to persons employed in certain establishments on the basis of profits or on the basis
of production or productivity and for matters connected therewith.

BONUS MEANING:

'Bonus' is a payment made by an employer to maintain the industrial harmony and to

give Philip to the employees to exert their utmost to keep up the industry active and aloft. The
concept of payment of bonus is not the product of any generosity of the employer but it is one
paid in the interest of industrial peace and to make available to every employee a living wage
which is generally more than the actual wages. Bonus is based on the ground that the
workman should have a share in the prosperity of the concern for which they have their
contribution

DEFINITION OF BONUS:
The term 'Bonus' is not defined anywhere under the Payment of Bonus Act, 1965.
According to Webster's dictionary, "bonus is something which is given in addition to the
wages". Bonus is paid in the terms of money to the employees as a gift or reward in addition
to their wages.

KINDS OF BONUS:
There are four kinds of bonus which are as follows -

(1) Production bonus: Production bonus depends upon the production in a particular
year

(2) Profit bonus: Profit bonus depends upon the extent of Profit obtained in the relevant
year.

(3) 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)

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(4) Bonus as an implied term of the contract: This type of Bonus may be claimed
as a matter of right. This right based on an implied agreement between the employer and the
employees.

OBJECT AND SCOPE OF THE ACT

The object of the Act is to provide for the payment of bonus to persons employed in
certain establishments and for matters connected therewith.

Case:-Jalan Trading Co. (Pvt.) Ltd. v. Mill Mazdor Sabha

In this case Shah J. observed that the “object of the Act being to maintain peace and
harmony between labour and capital by allowing the employees to share the prosperity of the
establishment and prescribing the maximum and minimum rates of bonus together with the
scheme of “set-off” and “set on” not only secures the right of labour to share in the profits but
also ensures a reasonable degree of uniformity”.

Case: - Kamgar Sabha v. Abdulbhai Faizullabhai

 In this case the Supreme Court observed that “bonus” is a word of many generous
connotations.
 There is profit based bonus which is one specific kind of claim and perhaps the most
common.
 There is customary or traditional bonus which has its emergence from long.
 There is attendance bonus.
 The Bonus Act speak and speaks as a whole Code on the sole subject of profit based
bonus but is silent and cannot, therefore, annihilate by implication, other distinct and
different kinds of bonuses, such as the one oriented on custom.
 The Bonus Act, 1965 as it then stood does not bar claims to customary bonus or those
based on conditions of service.
 Held, a discerning and concrete analysis of the scheme of the Bonus Act and
reasoning of the Court leaves no doubt that the Act leaves untouched customary
bonus.

Case:-Hukamchand Jute Mills Limited v. Second Industrial Tribunal

The provisions of the Act have no say on customary bonus and cannot, therefore, be
inconsistent therewith. Conceptually, statutory bonus and customary bonus operate in two
fields and do not clash with each other.

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APPLICABILITY OF THE ACT
Section 1(2) - the Act extends to the whole of India,

Section 1(3) the Act shall apply to

 every factory; and

 Every other establishment in which 20 or more persons are employed
on any day during an accounting year.
 The appropriate Government may, after giving not less than 2 months’
notice of its intention so to do, by notification in the Official Gazette
apply the provisions of this Act with effect from such accounting year
as may be specified in the notification to any establishment specified
but shall in no case be less than 10.

In relation to the State of Jammu and Kashmir, instead of the reference to the
accounting year commencing on any day in the year 1964 and every subsequent accounting
year shall be construed as reference to the accounting year commencing on any day in the
year 1968 and every subsequent accounting year.

An establishment to which this Act applies shall continue to be governed by this Act
notwithstanding that the number of persons employed therein falls below 20, or, as the case
may be, the number specified in the notification issued under the proviso to sub-section (3).

ACT NOT TO APPLY TO CERTAIN CLASSES OF EMPLOYEES

[SECTION 32]
 employees employed by any insurer carrying on general insurance business and the
employees employed by the Life Insurance Corporation of India;
 seamen as defined in clause (42) of Section 3 of the Merchant Shipping Act, 1958;
 employees registered or listed under any scheme made under the Dock Workers
(Regulation of Employment) Act, 1948 and employed by registered or listed
employers;
 employees employed by an establishment engaged in any industry called on by or
under the authority of any department of Central Government or a State Government
or a local authority;
 employees employed by

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  the Indian Red Cross Society or any other institution of a like nature
including its branches;
 universities and other educational institutions;
 institutions (including hospitals, chambers of commerce and social
welfare institutions) established not for the purpose of profit;
 employees employed by the Reserve Bank of India;
 the Industrial Finance Corporation of India;
 any Financial Corporation established under Section 3, or any Joint Financial
Corporation established
 under Section 3A of the State Financial Corporations Act, 1951;
 the Deposit Insurance Corporation;
 the National Bank for Agriculture and Rural Development;
 the Unit Trust of India;
 the Industrial Development Bank of India;
 (the Small Industries Development Bank of India established
 under Section 3 of the Small Industries Development Bank of India Act, 1989;
 the National Housing Bank;
 any other financial Institution (other than Banking Company)being an establishment
in public sector, which the Central Government may by notification specify
 Employees employed by inland water transport establishments operating on routes
passing through any other country.
 Apart from the above, the appropriate Government has necessary powers under
Section 36 to exempt any establishment or class of establishments from all or any of
the provisions of the Act for a specified period having regard to its financial position
and other relevant circumstances and if it is of the opinion that it will not be in the
public interest to apply all or any of the provisions of this Act thereto. It may also
impose such conditions while according the exemptions as it may consider fit to
impose.

IMPORTANT DEFINITIONS

ACCOUNTING YEAR [SECTION 2(1)]

Means

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  in relation to a corporation, the year ending on the day on which the books and
accounts of the corporation are to be closed and balanced;
 in relation to a company, the period in respect of which any profit and loss account of
the company laid before it in annual general meeting is made up, whether that period
is a year or not;
 in any other case
 the year commencing on the 1st day of April; or
 if the accounts of an establishment maintained by the employer thereof are closed
and balanced on any day other than the 31st day of March, then, at the option of
the employer, the year ending on the day on which its accounts are so closed and
balanced;
 Option once exercised by the employer shall not again be exercised except with
the previous permission in writing of the prescribed authority and upon such
conditions as that authority may think fit.

ALLOCABLE SURPLUS [SECTION 2(4)]

Means –

a. in relation to an employer, being a company (other than a banking company),

67% of the available surplus in an accounting year;
b. in any other case 60% of such available surplus.

AVAILABLE SURPLUS [SECTION 2(6)]

It means the available surplus under Section 5.

AWARD [SECTION 2(7)]

Means an interim or a final determination of any industrial dispute or of any question

relating thereto by any Labour Court, Industrial Tribunal or National Tribunal Constituted
under the Industrial Disputes Act, 1947 or by any other authority constituted under any
corresponding law relating to investigation and settlement of industrial disputes in force in a
State and includes an arbitration award made under Section 10A of that Act or under that law.

CORPORATION [SECTION 2(11)]

Means anybody corporate established by or under any Central, Provincial or State Act
but does not include a company or a co-operative society.

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 EMPLOYEE [SECTION 2(13)]
Means

 any person (other than an apprentice) employed on a salary or wages not exceeding
Rs.21,000/- per in any industry to do any skilled or unskilled, manual, supervisory,
managerial, administrative, technical or clerical work of hire or reward, whether the
terms of employment be express or implied.
 Part time permanent employees working on fixed hours are employees.

EMPLOYER [SECTION 2(14)]

Includes:

 in relation to an establishment which is a factory, the owner or occupier of the factory,

including the agent of such owner or occupier, the legal representative of a deceased
owner or occupier, and where a person has been named as a manager of the factory,
the person so named; and
 in relation to any other establishment, the person who, or the authority which, has the
ultimate control over the affairs of the establishment and where the said affairs are
entrusted to a manager, managing director or managing agent, such manager,
managing director or managing agent.

ESTABLISHMENT IN PRIVATE SECTOR [SECTION 2(15)]

It means any establishment other than an establishment in public sector.

ESTABLISHMENT IN PUBLIC SECTOR [SECTION 2(16)]

It means an establishment owned, controlled or managed by:

 a Government company
 a corporation in which not less than 40% of its capital is held(whether singly or taken
together) by:
 the Government; or
 the Reserve Bank of India; or
 a corporation owned by the Government or the Reserve Bank of India.

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SALARY OR WAGE [SECTION 2(21)]
Means

 all remuneration (other than remuneration in respect of over-timework) capable of

being expressed in terms of money, which would, if the terms of employment, express
or implied, were fulfilled, be payable to an employee in respect of his employment or
of work done in such employment

And includes

 dearness allowance (that is to say, all cash payments, by whatever name called, paid
to an employee on account of a rise in the cost of living)

But does not include:

 any other allowance which the employee is for the time being entitled to;
 the value of any house accommodation or of supply of light, water, medical
attendance or other amenity or of any service or of any concessional supply of food
grains or other articles;
 any travelling concession;
 any bonus (including incentive, production and attendance bonus);
 any contribution paid or payable by the employer to any pension fund or provident
fund or for the benefit of the employee under any law for the time being in force;
 any retrenchment compensation or any gratuity or other retirement benefit payable to
the employee or any ex-gratia payment made to him;
 Any commission payable to the employee.
 where an employee is given in lieu of the whole or part of the salary or, wage payable
to him, free food allowance or free food by his employer, such food allowance or the
value of such food shall, for the purpose of this clause, be deemed to form part of the
salary
 or wage of such employee.

Case: - Chalthan Vibhag Sahakari Khand Udyog v. Government

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LABOUR OFFICER
The definition is wide enough to cover the payment of retaining allowance and also
dearness allowance paid to the workmen. It is nothing but remuneration. Subsistence
allowance given during suspension is not wages. However lay-off compensation is wages.

ESTABLISHMENT [SECTION 3]
Includes

 All its departments, undertakings and branches wherever it has so whether situated in
the same place or in different places and the same shall be treated as parts of the same
establishment for the purpose of computation of bonus under this Act:
 Where for any accounting year, a separate balance-sheet and profit and loss account
are prepared and maintained in respect of any such department or undertaking or
branch then such department, undertaking or branches shall be treated as a separate
establishment for the purpose of computation of bonus under this Act for that year,
unless such department, or undertaking or branch was, immediately before the
commencement of that accounting year treated as part of establishment for the
purpose of computation of bonus.

CALCULATION OF AMOUNT PAYABLE AS BONUS

Step 1: Gross Profit is calculated as per First or Second Schedule.

Step 2: From this Gross Profit, the sums deductible under Section 6 are deducted.

Step 3: To this figure, we add the sum equal to the difference between the direct tax
calculated on gross profit for the previous year and direct tax calculated on gross profit
arrived at after deducting the bonus paid or payable to the employees.

Step 4: The figure so arrived will be the available surplus.

Step 5: Of this surplus, 67% in case of company (other than a banking company) and 60%
in other cases shall be the “allocable surplus” which is the amount available for payment of
bonus to employees.

THE DETAILS OF SUCH CALCULATIONS ARE GIVEN BELOW.

(I) COMPUTATION OF GROSS PROFITS [SECTION 4]

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Gross profits derived by an employer from an establishment in respect of any accounting year
shall:

 In the case of banking company be calculated in the manner specified in the First
Schedule.
 In any other case, be calculated in the manner specified in the Second Schedule.

(II) DEDUCTIONS FROM GROSS PROFITS [SECTION 6]

Sums deductible from gross profits include

 any amount by way of depreciation admissible in accordance with the provisions of

Section 32(1) of the Income-tax Act, or in accordance with the provisions of the
Agricultural Income-tax Law, as the case may be:
 Any amount by way of development rebate, investment allowance, or development
allowance which the employer is entitled to deduct from his income under the Income
Tax Act.
 Subject to the provisions of Section 7, any direct tax which the employer is liable to
pay for the accounting year in respect of his income, profits and gains during the year.
 Such further sums as are specified in respect of the employer in the Third Schedule.

(III) CALCULATION OF DIRECT TAX PAYABLE BY THE

EMPLOYER [SECTION 7]
Under, any direct tax payable by the employer for any accounting year shall, subject
to the following provisions, be calculated at the rates applicable to the income of the
employer for that year, namely:

(a) in calculating such tax no account shall be taken of any loss incurred by the
employer in respect of any previous accounting year and carried forward under any
law for the time being in force relating to direct taxes;

a) any arrears of depreciation which the employer is entitled to add to the amount
of the allowance for depreciation for any following accounting year or years
under sub-section (2) of Section 32 of the Income-tax Act;
b) any exemption conferred on the employer under Section 84 of the Income-tax
Act or of any deduction to which he is entitled under sub-section (1) of
Section 101 of that Act, as in force immediately before the commencement of
the Finance Act, 1965;

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 (b) where the employer is a religious or a charitable institution to which the provisions
of Section 32 do not apply and the whole or any part of its income is exempt from tax
under the Income-tax Act, then, with respect to the income so exempted, such
institution shall be treated as if it were a company in which the public are
substantially interested within the meaning of that Act;

(c) Where the employer is an individual or a Hindu undivided family the tax payable
by such employer under the Income-tax Act shall be calculated on the basis that the
income derived by him from the establishment is his only income.

(IV)COMPUTATION OF AVAILABLE SURPLUS

The available surplus in respect of any accounting year shall be the gross profits for
that year after deducting there from the sums referred to in Section 6.

ELIGIBILITY FOR BONUS AND ITS PAYMENT

(I) ELIGIBILITY FOR BONUS (SECTION 8)

Every employee shall be entitled to be paid by his employer in an accounting year,

bonus, in accordance with the provisions of this Act, provided he has worked in the
establishment for not less than 30working days in that year.

Case:-Project Manager, Ahmedabad Project, ONGC v. Sham Kumar Sahegal

An employee suspended but subsequently reinstated with full back wages cannot be
treated to be ineligible for bonus for the period of suspension.

(II) DISQUALIFICATION FOR BONUS (SECTION 9)

An employee shall be disqualified from receiving bonus under this Act, if he is

dismissed from service for:

 fraud; or
 riotous or violent behaviour while on the premises or the establishment; or
 Theft, misappropriation or sabotage of any property of the establishment.

This provision is based on the recommendations of the Bonus Commission which

observed “after all bonuses can only be shared by those workers who promote the stability
and well-being of the industry and not by those who positively display disruptive tendencies.
Bonus certainly carries with it obligation of good behaviour”.

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Case:-Pandian Roadways Corpn. Ltd. v. Preseding Officer, Principal

Labour Court

If an employee is dismissed from service for any act of misconduct enumerated in

Section 9, he stands disqualified from receiving any bonus under the Act, and not the bonus
only for the accounting year in which the dismissal takes place.

(III) PAYMENT OF MINIMUM BONUS [SECTION 10]

Every employer shall be bound to pay to every employee in respect of any accounting
year a minimum bonus which shall be 8.33 % of the salary or wage earned by the employee
during the accounting year or100 rupees whichever is higher, whether or not the employer
has any allocable surplus in the accounting year:

Where an employee has not completed fifteen years of age at the beginning of the
accounting year, minimum bonus which shall be 8.33 %of the salary or wage earned by the
employee during the accounting year or 60 rupees whichever is higher.

Case: - State v. Sardar Singh Majithia

Section 10 of the Act is not violates of Articles 19 and 301 of the Constitution. Even
if the employer suffers losses during the accounting year, he is bound to pay minimum bonus
as prescribed by Section 10.

(IV) MAXIMUM BONUS

 Where in respect of any accounting year referred to in Section 10, the allocable
surplus exceeds the amount of minimum bonus payable to the employees under that
Section, the employer shall, in lieu of such minimum bonus, be bound to pay to every
employee in respect of that accounting year bonus which shall be an amount in
proportion to the salary or wage earned by the employee during the accounting year
subject to a maximum of 20% of such salary or wage.
 In computing the allocable surplus under this Section, the amount set on or the
amount set off under the provisions of Section 15 shall is taken into account in
accordance with the provisions of that Section. (Section 11)

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(V) CALCULATION OF BONUS WITH RESPECT TO CERTAIN
EMPLOYEES (SECTION 12)

Where the salary or wages of an employee exceeds 7000 rupees or the minimum wage
for the scheduled employment, as fixed by the appropriate Government, whichever is higher
per the bonus payable to such employee under Section 10 or, as the case may be, under
section 11, shall be calculated as if his salary or wages were 7000 rupees or the minimum
wage for the scheduled employment, as fixed by the appropriate Government, whichever is
higher.

(VI) PROPORTIONATE REDUCTION IN BONUS IN CERTAIN CASES

(SECTION 13)
Where an employee has not worked for all the working days in an accounting year,
the minimum bonus of 100 rupees or, as the case maybe, of sixty rupees, if such bonus is
higher than 8.33 per cent of his salary or wage for the days he had worked in that accounting
year, shall be proportionately reduced.

(VII) COMPUTATION OF NUMBER OF WORKING DAYS (SECTION

14)
For the purposes of Section 13, an employee shall be deemed to have worked in an
establishment in any accounting year also on the days on which:

 he has been laid off under an agreement or as permitted by standing orders under the
Industrial Employment (Standing Orders) Act, 1946 or under the Industrial Disputes
Act, 1947 or under any other law applicable to the establishment;
 he has been on leave with salary or wage;
 he has been absent due to temporary disablement caused by
 accident arising out of and in the course of his employment; and
 The employee has been on maternity leave with salary or wage, during the accounting
year.

(VIII) SET ON AND SET OFF OF ALLOCABLE SURPLUS (SECTION

15)

 Where for any accounting year, the allocable surplus exceeds the amount of
maximum bonus payable to the employees in the establishment under Section 11,

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 then, the excess shall, subject to a limit of 20% of the total salary or wage of the
employees employed in the establishment in that accounting year, be carried forward
for being set on in the succeeding accounting year and so on up to and inclusive of the
fourth accounting year to be utilized for the purpose of payment of bonus in the
manner illustrated in the Fourth Schedule.
 Where for any according year, there is no available surplus or the allocable surplus in
respect of that year falls short of the amount of minimum bonus payable to the
employees in the establishment under Section 10, and there is no amount or sufficient
amount carried forward and set on under sub-section (1) which could be utilized for
the purpose of payment of the minimum bonus, then, such minimum amount or the
deficiency, as the case may be, shall be carried forward for being set off in the
succeeding accounting year and so on up to and inclusive of the fourth accounting
year in the manner illustrated in the Fourth Schedule.
 The principle of set on and set off as illustrated in the Fourth Schedule shall apply to
all other cases not covered by sub-section (1) or sub-section (2) for the purpose of
payment of bonus under this Act.
 Where in any accounting year any amount has been carried forward and set on or set
off under this Section, then, in calculating bonus for the succeeding accounting year,
the amount of set on or set off carried forward from the earliest accounting year shall
first be taken into account.
 Apart from the provisions contained in Section 15(1), there is no statutory obligation
on an employer to set apart any part of the profits of the previous year for payment of
bonus for subsequent years.

(IX) ADJUSTMENT OF CUSTOMARY OR INTERIM BONUS

(SECTION 17)

Where in any accounting year

 an employer has paid any Puja bonus or other customary bonus to an employee; or
 an employer has paid a part of the bonus payable under this Act to an employee
before the date on which such bonus becomes payable; then, the employer shall be
entitled to deduct at the amount of bonus so paid from the amount of bonus payable
by him to the employee under this Act in respect of that accounting year and the
employee shall be entitled to receive only the balance.

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Case: - Hukam Chand Jute Mills Ltd. v. Second Industrial Tribunal, West Bengal

The Supreme Court held that the claim for customary bonus is not affected by 1976
Amendment Act. In fact, it has left Section 17 intact which refers to puja bonus or other
customary bonus.

Section 31A speaks about productivity bonus but says nothing about other kinds of
bonuses. The contention that all agreements inconsistent with the provisions of the Act
become inoperative has no substance vis - a-vis customary bonus.

Conceptually statutory bonus and customary bonus operate in two fields and do not
clash with each other.

(X) DEDUCTIONS OF CERTAIN AMOUNTS FROM BONUS

(SECTION 18)
Where in any accounting year, an employee is found guilty of misconduct causing
financial loss to the employer, then, it shall be lawful for the employer to deduct the amount
of loss from the amount of bonus payable by him to the employee under this Act, in respect
of that accounting year only and the employee shall be entitled to receive the balance, if any.

(XI) TIME LIMIT FOR PAYMENT OF BONUS (SECTION 19)

 Where there is a dispute regarding payment of bonus pending before any authority
under Section 22, all amounts payable to an employee by way of bonus under this Act
shall be paid in cash by his employer, within a month from the date from which the
award becomes enforceable or the settlement comes into operation, in respect of such
dispute;
 In any other case, the bonus should be paid within a period of 8months from the close
of the accounting year. However, the appropriate Government or such authority as the
appropriate Government may specify in this behalf may, upon an application made to
it by the employer and for sufficient reasons, by order, extend the said period of 8
months to such further period or periods as it thinks fit, so, however, that the total
period so extended shall not in any case exceed two years.

(XII) RECOVERY OF BONUS 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

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 authorised 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:
 Every such application shall be made within one year from the date on which the
money becomes due to the employee from the employer.
 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.

BONUS LINKED WITH PRODUCTION OR PRODUCTIVITY

[SECTION 31A]
 A scheme of bonus payment linked to production or productivity in lieu of bonus
based on profits under the general formula enshrined in the Act. However, bonus
payments under Section31A are also subject to the minimum 8.33 %and maximum 20
%.
 In other words a minimum of 8.33 per cent is payable in any case and the maximum
cannot exceed 20 per cent.

Power of exemption (Section 36)

If the appropriate Government, having regard to the financial position and other
relevant circumstances of any establishment or class of establishments, is of opinion that it
will not be in public interest to apply all or any of the provisions of this Act thereto, it may,
by notification in the Official Gazette, exempt for such period as may be specified therein and
subject to such conditions as it may think fit to impose, such establishment or class of
establishments from all or any of the provisions of this Act.

Case: - J.K.Chemicals v. Maharashtra

Government should consider public interest, financial position and whether workers
contributed to the loss, before grant of exemption from this Act for payment of bonus.

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PENALTIES (SECTION 28)
If any person contravenes any of the provisions of this Act or any rule made there
under; he shall be punishable with imprisonment for a term which may extend to

 6 months, or
 Fine which may extend to 1000 rupees,
 or with both.

If any person, to whom a direction is given or a requisition is made under this Act, fails to
comply with the direction or requisition, he shall be punishable with imprisonment for a term
which may extend to

 6 months, or
 Fine which may extend to 1000 rupees,
 or with both.

OFFENCES BY COMPANIES (SECTION 29)

 If the person committing an offence under this Act is 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 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.
 If an 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 also be proceeded
against and punished accordingly.
 For the purpose of Section 29, ‘company’ means anybody corporate and includes a
firm or other association of individuals, and ‘director’, in relation to a firm, means a
partner in the firm.

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 THE PAYMENT OF GRATUITY ACT 1972

INTRODUCTION

Gratuity is a kind of retirement benefit, like provident fund or pension. It is a payment

which is intended to help an employee after his retirement whether the retirement is the result
of the rules of superannuation or of some physical disability. The general principle
underlying gratuity schemes is that by faithful service over a long period the employee is
entitled to claim a certain amount as retirement benefit.

The payment of Gratuity Act, 1972, a long-awaited and progressive social security
measure, was passed by parliament in August, 1972, a long-awaited and progressive social
security measure, was passed by parliament in August, 1972. The Act came into force on
16th September, 1972. It was amended twice in 1984. The latest amendment to the Act was
made in 2010.

COVERAGE OF THE ACT

The Act applies to every factory, mine, oilfield, plantations, port and Railway
Company and to every shop or establishment in which 10 or more persons are employed, or
were employed, on any day of the preceding 12months.

The Act makes all persons employed in the above establishments eligible for gratuity
irrespective of their wages.

APPROPRIATE GOVERNMENT [Sec 2(a)]

In relation to any of the following establishments, appropriate Government‟ means
the Central Government.

(a) An establishment belonging to, or under the central of, the Central Government,

(b) An establishment having branches in more than one State,

(c) An establishment of a factory belonging to, or under the control of, the Central
Government,

(d) An establishment of a major port, mine, oilfield or railway company. In any other
case, appropriate Government means the State Government. Where an industrial unit is taken
over by the Central Government under the Industries (Development and Regulation) Act,

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`1951 and its management is entrusted to State Government undertakings, the appropriate
Government is the State Government.

COMPLETED YEAR OF SERVICE [SEC 2(B)]

It means continues service for 1`year.

CONTROLLING AUTHORITY [SEC 2(D)]

Controlling authority means an authority appointed by the appropriate Government.
Under Sec.3, the appropriate Government may, by notification published in the Official
Gazette, appoint any officer to be a controlling authority, who shall be responsible for the
administration of the Act. Different controlling authorities may be appointed for different
areas.

RATE OF GRATUITY

For every completed year of service or part thereof in excess of 6 months, the
employer shall pay gratuity to an employee at the rate of 15 days wages based on the rate of
wages last drawn by the employee concerned[Sec.4(2)]. In the case of a monthly rated
employee 15 days wages shall be calculated by dividing the monthly rate of wages last drawn
by him by 26 and multiplying the quotient by 15.

MAXIMUM GRATUITY [Sec. 4(5)]

The amount of gratuity payable to an employee shall not exceed Rs.10, 00,000.

COMPULSORY INSURANCE (Sec.4-A)

The Indian Labour Conference held in November 1985 had recommended that a
provision for compulsory insurance of employer’s liability and setting up of gratuity fund for
payment of gratuity be incorporated in the Act. In view of this recommendation, then
Amendment Act of 1987 has made provision for compulsory insurance of employer’s
liability to pay gratuity under the Act or in the alternative for the setting of a gratuity fund in
relation to establishments employing 500 or more employees. This has been done by
introducing a new Sec. 4-A in the Act.

PROTECTION OF GRATUITY (Sec.13): No gratuity under this Act and no

gratuity payable to an employee employed in any establishment, factory, mine, oilfield,

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plantation, port, Railway Company or shop exempted under Sec. 5 shall be liable to
attachment in execution of any decree or order of any civil, revenue or criminal court.

(1) Nomination within 90 days: Each employee, who has completed 1year of service
shall make within 90 days of completion of 1 year of service, a nomination.

(2) Distribution of amount of gratuity: An employee may, in the nomination,

distribute the amount of gratuity payable to him under the Act amongst more than one
nominee.

(3) Nomination in favour of family members: If an employee’s has a family at the

time of making a nomination, the nomination shall be made in favour of one more members
of his family. To protect the interests of the family, it has been specifically provided that any
nomination made by such employee in favour of a person who is not member of his family
shall be void. Determination of the amount of gratuity (Sec.7) Application for gratuity— An
employee who is eligible to receive gratuity under the Act, or any person authorised, in
writing, to any on his behalf, shall send an application to the employer ordinarily within 30
days from the date the gratuity became payable for payment of such gratuity. But where the
date of superannuation or retirement of an employee is known, the employee may apply to
the employer before 30 days of the date of superannuation or retirement.

The other rules relating to application for gratuity are as follows.

1. A nominee of an employee who is eligible for payment of gratuity shall apply

ordinarily within 30 days from the date the gratuity became payable to him.

2. A legal heir of an employee who is eligible for payment of gratuity shall apply
ordinarily within 1 year from the date the gratuity became payable to him by the
employer.

3. An application for payment of gratuity field after the expiry of the periods specified
shall be entertained by the employer, if the application adduces sufficient cause for
the delay.

DETERMINATION OF GRATUITY: As soon as gratuity becomes payable the

employer shall determine the amount of gratuity and give notice in writing to the person to
whom the gratuity is payable. Notice is also to be given to the controlling authority
specifying the amount of gratuity so determined, irrespective of the fact whether an
application for payment of gratuity has been made or not.

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ADMINISTRATION: The Act is administrated by a controlling authority appointed by
the appropriate Government.

BENEFITS: Under the Act gratuity is payable to an employee on the termination of his
employment after he has rendered continuous service for not less than five years. The
completion of continuous service of five years is, however, not necessary where the
termination of the employment is due to death or disablement.

Gratuity is payable at the rate of 15 days‟ wages based on the rate of wages last
drawn by the employee for every completed year of service or part thereof in excess of six
months. But the amount of gratuity payable to an employee shall not exceed Rs.1 lakh.

SOURCES OF FUND: Under the Act gratuity is payable entirely by the employer. For
this purpose he is required either (i) to obtain insurance with the life insurance corporation or
(ii) to establish a gratuity fund. Thus it is his liability to pay the premium in the first case and
to make the contribution in the second case.

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 UNIT V

FACTORIES ACT, 1948

INTRODUCTION:

The first factories Act in India was passed in 1881. It was designed primarily to
protect children and to provide for some health and safety measures. The Act of 1934 was
passed to implement the recommendations of the Royal Commission on Labour in India.
Hence the Factories Act of 1948. The Act makes detailed provisions regarding health, safety
and welfare of workers, working hours of adults, employment of young person’s which
include children and adolescents, annual leave with wages, and so on. The Act of 1948 not
only consolidated but also amended the law regulating labour in factories. It came into force
on 1st April, 1949.

The Factories Act 1948, an Act of Parliament, was enacted with the prime object of
protecting workmen employed in factories against industrial and occupational hazards, and,
with that intent it imposes on the owners and occupiers certain obligations to protect the
workers and give themselves working conditions. The object of the Act was to protect human
beings from being subject to unduly long hours of body strain and manual labour. It provides
that employees should work in healthy and sanitary conditions and that precaution should be
taken for their safety and for prevention of accidents (Commercial Law Publications, 1998).
The Act also calls upon the Governments to provide adequate infrastructure for
implementation of the Act and lays down procedures for detection and punishment of
defaulting employers

The object of the Act is to secure health, safety, welfare, proper working hours, and
other benefits to workers. The Act requires that workers should work in healthy and sanitary
conditions and for that purpose; it provides that, precaution should be taken for safety of
workers and prevention of accidents.

APPLICABILITY OF THIS ACT

 The Act is applicable to all the factories, defined under Section 2(m) of the Act and
extends to whole of India including Jammu & Kashmir.
 Unless otherwise provided it is also applicable to factories belonging to Central/State
Governments. (Section 116).

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IMPORTANT DEFINITIONS

FACTORY
Factory means any premises, including the precincts thereof, in any part of which
manufacturing process is carried on with or without the aid of power, provided that at least 10
or 20 persons respectively are employed or were employed on any day of the preceding 12
months.

ESSENTIAL ELEMENTS OF A FACTORY:

(1) There must be premises.

(2) There must be a manufacturing process which is being carried on or is so

ordinarily carried on in any part of such a premises.

(3) There must be ten or more workers who are/were working in such a premises on
any day of the last 12 months where the said manufacturing process is carried on with the aid
of power. But where the manufacturing process is carried on without the aid of power, the
required number of workers working should be twenty or more.

The following are not covered by the definition of factory:

(i) Railway running sheds,

(ii) mines,

(iii) mobile units of armed forces,

(iv) hotels, eating places or restaurants.

MANUFACTURING PROCESS
Any process for:

• making, altering, repairing, ornamenting, finishing, packing, oiling, washing,

cleaning, breaking up, demolishing, or otherwise, treating or adopting any article or substance
with a view to its use, sale, transport, delivery or disposal; or

• pumping oil, water or sewage or any other substance; or

• generating, transforming, transmitting power; or

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 • composing types for printing, printing by letter-press, lithography, photogravure or
other similar process, or book-binding; or

• constructing, reconstructing, repairing, refitting, finishing or breaking up ships or

vessels; or

• preserving or storing any article in cold storage.[Section 2(k)]

The definition is quite important and it has been the subject of judicial interpretation in large
number of cases.

Case - In Re. Seshadrinatha Sharma

The Madras High Court held that to constitute a manufacture there should not be
essentially some kind of transformation of substance.

Case - Shri Laxmi Dass Premji Ghee Merchant v. Inspector of Factories Gantur

Where ghee brought from various customers was sampled chemically, analysed and
packed in tins for transportation to the Head Office of the concern for sale in the market, the
court held that manufacturing process was going in the premises.

Case - Bharati Udyog v. Regional Director ESI Corpn

The cutting of the woods or converting the wood into planks is essentially a part of
the manufacturing activity.

Case - Employers Association of Northern India v. Secretary for Labour U.P. Govt

In the case it was observed that the word ‘ordinarily’ used in the definition of factory
cannot be interpreted in the sense in which it is used in common parlance. It must be
interpreted with reference to the intention and purposes of the Act. Therefore, seasonal
factories or factories carrying on intermittent manufacturing process do not cease to be
factories within the meaning of the Act. (e.g. - Sugar factory to be a factory when no
manufacturing process is carried on during the offseason).

PREMISES AND PRECINCTS

 “Premises” is a generic term meaning open land or land with building or building
alone.
 “Precincts” is usually understood as a space enclosed by walls.

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  Expression ‘premises’ including precincts does not necessarily mean that the premises
must always have precincts. It merely shows that there may be some premises with
precincts and some premises without precincts.

Case - Ardeshir H. Bhiwandiwala v. State of Bombay

The Supreme Court observed that the legislature had no intention to discriminate
between workers engaged in a manufacturing process in a building and those engaged in such
a process on an open land and held that the salt works, in which the work done is of
conversion of sea water into crystals of salt, come within the meaning of the word ‘premises’.

OCCUPIER OF FACTORY [SECTION 2(N)]

Occupier of factory means a person who has ultimate control over affairs of factory.

 in the case of a firm or other association of individuals, any one of the individual
partners or members thereof shall be deemed to be the occupier;
 in the case of a company, any one of the directors, shall be deemed to be the occupier;
 in the case of a factory owned or controlled by the Central Government or any State
Government, or any local authority, the person or persons appointed to manage the
affairs of the factory by the Central Government, the State Government or the local
authority, as the case may be, shall be deemed to be the occupier.
 in the case of a ship which is being repaired, or on which maintenance work is being
carried out, in a dry dock which is available for hire; owner of the dock ship or his
agent or master or other officer-in-charge of the ship or any person who contracts with
such owner, agent or master or other officer-in-charge to carry out the repair or
maintenance work shall be deemed to be occupier.

Case - J.K. Industries Ltd. v. Chief Inspector of Factories

 In this case the Supreme Court has held that only a member of Board of Directors of
the Company can be occupier of the factory of the Company. The ultimate control of
factory owned by company vests in Board of Directors Ultimate control which vests
in Board of Directors cannot be vested in any one else. Company owing factory
cannot nominate its employees or officers except Director of the company as occupier
of its factory.
 Therefore an employee of company or factory cannot be occupier.

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  The occupier shall ensure, as far as possible health, safety, and welfare of workers
while they are working in a factory. The name of the occupier of the factory is
required to be informed to the Chief Inspector of Factories. The occupier will be held
responsible if the provisions of the Factories Act, 1948 are not complied with.

GENERAL DUTIES OF THE OCCUPIER [SECTION 7A]

 Every occupier shall ensure, so far as is reasonably practicable, the health, safety and
welfare of all workers while they are at work in the factory.
 Without prejudice to the generality of the provisions, the matters to which such duty
extends shall include:
 The provision and maintenance of plant and systems of work in the factory that are
safe and without risks to health;
 the arrangement in the factory for ensuring safety and absence of risks to health in
connection with the use, handling, storage and transport of articles and substances;
 the provisions of such information, instruction, training and supervision as are
necessary to ensure the health and safety of all workers at work;
 the maintenance of all places of work in the factory in a condition that is safe and
without risks to health and provisions and maintenance of such means of access to,
and egress from, such places as are safe and without such risks;
 the provision, maintenance or monitoring of such working environment in the factory
for the workers that is safe, without risks to health and adequate as regards facilities
and arrangements for their welfare at work.

NOTICE BY OCCUPIER [SECTION 7]

Occupier of a factory shall send a written notice, containing prescribed particulars, to
the Chief Inspector at least 15 days before an occupier begins to occupy or use a premises as
a factory and at least 30 days before the date of resumption of work in case of seasonal
factories, i.e. factories working for less than 180 days in a year.

A NOTICE MUST CONTAIN FOLLOWING PARTICULARS:

(1) The name and situation of the factory.

(2) The name and address of the occupier.

(3) The name and address of the owner of the premises or building

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 (4) The address at which communication relating to the factory should be sent.

(5) The nature of manufacturing process to be carried on in the factory during next 12
months.

(6) The total rated horse power installed or to be installed in the factory which shall
not include the rated horse power of any separate stand by plant.

(7) The name of the Manager of the factory for the purpose of this Act.

(8) The number of workers likely to be employed in the factory.

(9) Such other particulars as may be prescribed.

Whenever a new manager is appointed, the occupier shall send to the Inspector a
written notice and to the Chief Inspector a copy thereof, within 7 days from the date on which
such person takes over charge. Where no such person is found the occupier should be deemed
to be the manager of the factory.

GENERAL DUTIES OF MANUFACTURERS ETC. [SECTION 7B]

(a) Ensure, that the article is so designed and constructed as to be safe and without
risks to the health of the workers when properly used;

(b) Carry out such tests and examination as may be considered necessary for the
effective implementation of the provisions of clause (a);

(c) Take such steps as may be necessary to ensure that adequate information will be
available:

(i) In connection with the use of the article in any factory;

(ii) About the use for which it is designed and tested; and

(iii) About any condition necessary to ensure that the article, when put to such use,
will be safe, and without risks to the health of the workers.

Where an article is designed or manufactured outside India, it shall be obligatory on the part
of the importer to see:

(a) That the article (including plant and machinery) conforms to the same standards if
such article is manufactured in India, or

(b) if the standards adopted in the country outside for the manufacture of such article
is above the standards adopted in India, that the article conforms to such standards.

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MEASURES TO BE TAKEN BY FACTORIES FOR HEALTH

1. CLEANLINESS [SECTION 11] - Factory is kept clean.

 All the accumulated dirt and refuse on floors, staircases and passages in the factory
shall be removed daily by sweeping or by any other effective method. Suitable
arrangements should also be made for the disposal of such dirt or refuse.
 Once in every week, the floor should be thoroughly cleaned by washing with
disinfectant or by some other effective method.
 Effective method of drainage shall be made and maintained for removing water, to the
extent possible, which may collect on the floor due to some manufacturing process.
 White wash or colour wash should be carried at least once in every period of 14
months.
 Where surface has been painted or varnished, repair or varnished should be carried
out once in every five years, if washable then once in every period of six months;
 Where they are painted or varnished or where they have smooth impervious surface, it
should be cleaned
 Once in every period of 14 months by such method as may be prescribed.
 All doors, windows and other framework which are of wooden or metallic shall be
kept painted or varnished at least once in every period of five years.
 The dates on which such processes are carried out shall be entered in the prescribed
register.
 If the State Government finds that a particular factory cannot comply with the above
requirements due to its nature of manufacturing process, it may exempt the factory
from the compliance of these provisions and suggest some alternative method for
keeping the factory clean.

2. VENTILATION AND TEMPERATURE (SEC.13): Adequate Ventilation by

the circulation of fresh air, and such a temperature as will secure to workers therein
reasonable conditions of comfort and prevent injury to health. Standard of adequate
ventilation and temperature to be prescribed and provision of measuring instruments

3. DUST AND FUMES (SEC.14): Where dust or fumes or impurity of such a nature
as is likely to be injuries or offensive to the workers is given off as a result of the
manufacturing process being carried on in a factory, effective measures shall be taken in the
factory for prevention of inhalation or accumulation of dust and fumes in workrooms.

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4. ARTIFICIAL HUMIDIFICATION (SEC.15): Ventilation and cooling of air. In
respect of all factories in which the humidity of the air is artificially increased, the State
Government may make rules prescribing standards of humidification.

5. OVERCROWDING (SEC.16): Overcrowding incurious to health of workers to be

avoided. There shall not be overcrowding in any room of the Factory so as to injurious to the
health of the workers employed therein.

6. LIGHTING (SEC.17): In every part of a factory where workers are working or

passing, there shall be provided and maintained sufficient and suitable lighting, natural or
artificial, or both.

7. DRINKING WATER (SEC.18): In every factory, effective arrangements shall be

made to provide and maintain at suitable points conveniently situated for all workers
employed there in a sufficient supply of wholesome drinking water. Cooling of drinking
water where more than 250 workers employed.

8. LATRINES AND URINALS (SEC.19): (1) Separate latrines and urinals male and
female workers conveniently situated and adequately lighted and ventilated.

9. SPITTOONS [SECTION 20]

MEASURES TO BE TAKEN BY FACTORIES FOR SAFETY

SAFETY:

The safety provisions are absolute and obligatory in their character and the occupier
of every factory is bound to follow them.

1. FENCING OF MACHINERY (SEC.21): (a) Every moving part of a prime

mover, and every fly-wheel connected to a prime mover, whether the prime mover of fly-
wheel is in the engine house or not;

(a) The headrace and tailrace of every water-wheel and water-turbine;

(b) Any part of a stock-bar which projects beyond the headstock of a lathe;

(c) Every part of an electric generator, a motor or rotary convertor;

(d) Every part of transmission machinery; and

(e) Every dangerous part of any other machinery.

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2. WORK ON NEAR MACHINERY IN MOTION (SEC.22): (1) Examination
of machinery in motion by a trained adult male worker. The clothing shall be supplied by the
occupier. The name of the person so engaged shall be entered in the prescribed register.

3. EMPLOYMENT OF YOUNG PERSON ON DANGEROUS MACHINE

(SEC 23): (1) Restriction on young person to work on dangerous machines. (a) He has
been fully instructed as to the dangerous arising in connection with the machine and the
precautions to be observed; and He has received sufficient training to work on the machine or
is under adequate supervision by a person who has a thorough knowledge and experience of
the machine.

4. STRIKING GEAR AND DEVICES FOR CUTTING OFF POWER

(SEC.24): In every factory, suitable striking gear or other efficient mechanical appliance
shall be provided and maintained. Suitable devices for cutting off power in emergencies from
running machinery these shall be provided and maintained in every workroom.

5. SELF-ACTING MACHINES (SEC.25): No traversing part of a self-acting

machine in any factory and no material carried thereon shall be allowed to run on its outward
or inward traverse within a distance of 45 centimetres from any fixed structure which I not
part of the machine.

6. CASING OF NEW MACHINERY (SEC.26): (1) Casing to prevent danger. All

machinery driven by power and installed in any factory after 1st April, 1949, every set screw,
bolt or key on any revolving shaft, spindle, wheel or pinion shall be so sunk, encased or
otherwise effectively guarded as to prevent danger.

7. PROHIBITION OF EMPLOYMENT OF WOMEN AND CHILDREN

NEAR COTTON-OPENERS (SEC. 27): No woman or child shall be employed in
any part of a factory for pressing cotton in which a cotton-opener is at work.

8. HOISTS AND LIFTS (SEC.28): (1) Hoists and lifts to be of good mechanical
construction and to be properly maintained and examined once in every 6months.

9. LIFTING MACHINES, CHAINS, ROPES AND LIFTING TACKLES

(SEC.29): Cranes and lifting machines etc. to be of good construction and to be examined
once in every 12 months. Cranes and lifting machines not to be loaded beyond safe working

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load. Crane not to approach within 6 metres of a place where any person is employed or
working

10. PRESSURE PLANT (SEC.31): If in any factory any plant or any machinery or
part thereof is operated at a pressure above atmospheric pressure, effective measures shall be
taken to ensure that the safe working pressure is not exceeded.

11. FLOORS, STAIRS AND MEANS OF ACCESS (SEC. 32): In every

factorial floors, steps, stairs, passages and gangways shall be of sound construction and
properly maintained.

12. PITS, SUMPS, OPENING IN FLOORS, ETC. (SEC. 33): In every factory,
pits. Sumps, fixed vessels, tanks, openings in the ground or in the floor shall be securely
covered or securely fenced.

13. EXCESSIVE WEIGHTS (SEC.34): No person shall be employed in any factory

to lift, carry or move any load so heavy as to be likely to cause him injury.

14. PROTECTION OF EYES (SEC.35): In every factory, screen or suitable goggles

shall be provided for the protection of persons employed on, or in immediate vicinity of,
mechanical or other processes which involve any danger or injury to the workers eyesight.

15. PRECAUTIONS AGAINST DANGEROUS FUMES (SEC.36): No person

shall be required or allowed to enter any chamber, tank, vat, pit, pipe, flu or other confined
space in any factory in which any Gas, fume, vapour or dust is likely to be present to such an
extent as to involve risk to persons.

16. PRECAUTIONS REGARDING THE USE OF PORTABLE

ELECTRIC LIGHT (SEC.36-A): No portable electric light or any other electric
appliance of voltage exceeding 24 volts shall be permitted for use inside any chamber, tank,
vat, pit, flue or other confined space in a factory, unless adequate safety devices are provided.

17. PRECAUTIONS IN CASE OF FIRE (SEC.38):Safe means of escape for all

persons in the event of a fire, and the necessary equipment and facilities for extinguishing
fire.

18. SAFETY OF BUILDING AND MACHINARY (SEC.40): The Inspector

may serve on the occupier or the manager or both of the factory an order in writing

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specifying the measures which in his opinion shall be adopted and requiring them to be
carried out before a specified date.

19. SAFETY OFFICERS (SEC. 40-B): In every factory (i) wherein 1,000 or more
workers are ordinarily employed.

MEASURES TO BE TAKEN BY FACTORIES FOR WELFARE

WELFARE
Chapter V (Sections. 42 to 50) of the Act deals with facilities for the welfare of
workers. The various provisions in this regard are as follows:

1. WASHING FACILITIES (SEC. 42): In every factory (a) adequate and suitable
facilities (separately and adequately screened for the use of male and female workers) shall
be provided and maintained for the use of the workers therein; and (b) such facilities shall be
conveniently accessibly and shall be kept clean.

2. FACILITIES FOR STORING AND DRYING CLOTHING (SEC.

43).The State Government may make rules requiring the provision of suitable places for
keeping clothing of workers not worn during working hours and for the drying of wet
clothing in respect of any factory or class of factories.

3. FACILITIES FOR SITTING (SEC. 44).

(1) Provision of sitting arrangement for workers obliged to work in a

standing position. In every factory, suitable arrangements for sitting shall be provided
and maintained for all workers who are obliged to work in a standing position. This has been
done in order that the workers may take advantage of any opportunities for rest which may
occur in the course of their work [Sec. 44 (1)].

(2) Provision of seating arrangement for workers doing work which can be
done in a sitting position. If the workers in any factory engaged in a particular
manufacturing process or working in a particular room are able to do their work efficiently in
a sitting position, the Chief Inspector may require the occupier of the factory to provide such
seating arrangements as may be practicable [Sec. 44 (20].

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(3) Exemption. The State Government may, by notification in the Official Gazette,
exempt any factory or class of factories or manufacturing process from the application of the
provisions of Sec. 44 [Sec. 44 (3)].

4. FIRST-AID APPLIANCES (SEC. 45).

(1) At least one first-aid box with prescribed contents for every 150
workers. There shall in every factory be provided and maintained so as to be readily
accessible during all working hours, first-aid boxes or cupboards with the prescribed
contents. There shall be at least one such box for every 150 workers ordinarily employed at
any one time in the factory [Sec. 45 (1)].

(2) First-aid box to have prescribed contents.

Only the prescribed contents shall be kept in a first-aid box or cupboard [Sec. 45 (2)].

(3) First-aid box to be in the charge of responsible person.

Each first-aid box or cupboard shall be kept in the charge of a separate responsible
person who holds a certificate in the first-aid treatment recognized by the State Government.
Further, such person shall always be readily available during the working hours of the factory
[Sec. 45 (3)].

(4) Ambulance room in a factory employing more than 500 workers.

In every factory wherein more than 500 workers are ordinarily employed there shall
be provided and maintained an ambulance room containing the prescribed equipment. The
room shall be in the charge of such medical and nursing staff as may be prescribed and those
facilities shall always be made readily available during the working hours of the factory [Sec.
45 (4)].

5. CANTEENS (SEC. 46)

(1) Canteen in factory employing more than 250 workers—the State

Government may make rules.

The State Government may make rules requiring that in any specified factory where
in more than 250 workers are ordinarily employed; a canteen or canteens shall be provided
and maintained by the occupier for the use of the workers [Sec. 46 (1)].

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(2) Provisions in rules. The rules made by the State Government as to canteens may
provide for

(a) The date by which canteen shall be provided,

(b) The standards in respect of construction, accommodation, furniture and other

equipment of the canteen,

(c) The foodstuffs to be served therein and the charges which may be made thereof,

(d) The constitution of a managing committee for the canteen and representation of
the workers in the management of the canteen,

(e) The items of expenditure in the running of the canteen which are not to be taken
into account in fixing the cost of foodstuffs and which shall be borne by the employer,
and

(f) The delegation to the Chief Inspector, subject to such conditions as may be
prescribed, of the power to make rules under Clause (c) [Sec. 46 (2)].

6. SHELTERS, REST ROOMS AND LUNCH ROOMS (SEC. 47).

(1) Provision for shelters, rest rooms, lunch rooms in factories employing
more than 150workers.
 In every factory wherein more than150 workers are ordinarily employed, there shall
be a provision for shelters, rest rooms and a suitable lunch room where workers can
eat meals brought by them with provision for drinking water.
 However, any canteen maintained in accordance with the provisions of Sec. 46 shall
be regarded as part of this requirement. Where a lunch room exists, no worker shall
eat any food in the workroom [Sec. 47 (1)].

(2) Shelters, etc. to be sufficiently lighted, ventilated and cooled.

The shelters or rest rooms or lunch rooms shall be sufficiently lighted and ventilated
and shall be maintained in a cool and clean condition [Sec. 47 (2)].

7. CRÈCHES (SEC. 48).

(1) Provision of crèches in factories employing more than 30 women

workers.

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 In every factory wherein more than 30 women workers are ordinarily employed, there
shall be provided and maintained a suitable room or rooms for use of children under the age
of 6 years of such women [Sec. 48 (1)].

(2) Crèches to be adequately lighted and ventilated and to be under the

charge of trained women.
Rooms for use of children shall provide adequate accommodation, shall be adequately
lighted and ventilated. Further they shall be maintained in a clean and sanitary condition and
shall be under the charge of women trained in the care of children and infants [Sec.48 (2)].

(3) Prescription of rules by the State Government.

The State Government may make rules prescribing the location and the standards in
respect of construction, accommodation, furniture and other equipment of rooms for use of
children. It may also make rules for the provision of additional facilities for the care of
children belonging to women workers, including suitable provision of facilities

(a) For washing and changing their clothing,

(b) Of free milk or refreshment or both for the children, and

(c) For the mothers of children to feed them at the necessary intervals. [Sec 48 (3)]

8. WELFARE OFFICERS (SEC. 49).

(1) Employment of welfare officers in factories employing 500 or more

workers.

In every factory wherein 500 or more workers are ordinarily employed the occupier
shall employ in the factory such number of welfare officers as may be prescribed [Sec. 49
(1)].

(2) Duties, qualifications and conditions of service to be prescribed by the

State Government.

The State Government may prescribe the duties, qualifications and conditions of
service of welfare officers [Sec. 49 (2)].Even if a factory (say, a sugar factory) employs over
500 workers only for a few months in the year and not continuously, the occupier shall
employ the prescribed number of welfare officers [Employers’ Assn. of Northern India v.
Secretary of Labour].

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Case - Kanpur Suraksha Karmachari Union v. Union of India

Employees working in canteens in industrial establishments run by Managing

Committee are not employees of the Managing Committee, but are employees of occupier.

Case - Tamil Manila Thozilalar Sangam v. Chairman TNEB

Where the statute casts an obligation to own a canteen in the factory and the
establishment runs a canteen through a contractor who brings the workers for the canteen
would be part and parcel of the establishment and the canteen workers would be deemed to
be regular employees of the establishment entitled to arrears of salary and other monetary
benefits

FACILITIES AND CONVENIENCES – IN SUMMERY

• Factory should be kept clean.

• There should be arrangement to dispose of wastes and effluents.

• Ventilation should be adequate.

• Reasonable temperature for comfort of employees should be maintained.

• Dust and fumes should be controlled below permissible limits.

Artificial humidification should be at prescribed limits.

• Overcrowding should be avoided.

• Adequate lighting, drinking water, toilets, and spittoons should be provided.

ADDITIONAL FACILITIES IN CASE OF LARGE FACTORIES – IN

SUMMERY
• Ambulance room, if 500 or more workers are employed.

• Canteen, if 250 or more workers are employed.

• Rest rooms/Centres with drinking facility, if 150 or more workersare employed.

• Creches, if 30 or more women workers are employed.

• Full time Welfare Officer, if 500 or more workers are employed.

• Safety Officer, if 1000 or more workers are employed.

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WELFARE MEASURES – IN SUMMERY
• All machines should be properly fenced to protect workers when machinery is in
motion.

• Hoist and lifts should be in good condition and tested periodically.

• Pressure Plant should be checked as per the rules.

• Floor, stairs, and means of access should be of sound construction and free from
obstructions.

• Safety appliances for eyes, dangerous dust, gas, fames should be provided.

• In case of hazardous substances, additional safety measures have to be taken.

• Adequate fire fighting equipment should be available.

• Safety Officer should be appointed if number of workers in factory is 1000 or more.

WORKING HOURS
• A worker cannot be employed for more than 9 hours in a day.

• A worker cannot be employed for more than 48 hours in a week.

• At least ½ hour rest should be provided after every 5 hours.

• Total period of work including rest interval cannot be more than10.5 hours.

• Weekly holiday is compulsory, if the worker is asked to work on weekly holiday, he should
avail the holiday on one of the 3 days immediately after the normal day of holiday.

OVERTIME WAGES
• If a worker works beyond 9 hours a day and 48 hours a week, overtime wages are paid at
double the rate of normal wages.

• Overtime wages are not payable on tour.

• Total working hours including overtime should not exceed 60hours in a week.

• Total overtime hours in a quarter should not exceed 50 hours.

LEAVE
• Worker is entitled in every calendar year annual leave with wages.

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• At the rate of day for every 20 days of work performed in the previous calendar year
provided that he had worked for 240 days or more in the previous calendar year.

• Child worker (who is 14 years and above but less than 15 years) is entitled to 1 day leave
with wages for every 15 days.

• While calculating 240 days earned leave, maternity leave up to 12weeks and lay off days
will be considered but leave shall not be earned on those days.

• Leave can be accumulated up to 30 days in the case of an adult and 40 days in the case of a
child.

• Leave admissible is exclusive of holidays occurring during or at either end of leave period.
Leave cannot be taken for more than 3times in a year.

• Above-mentioned benefits are the minimum benefits. Employer can of course provide
additional or higher benefits.

EMPLOYMENT OF WOMEN
• A women worker cannot be employed beyond 6 a.m. to 7 p.m.

• State Government can grant exemption to any factory from such provisions but in no case a
woman can be permitted to work during 10 p.m. to 5 a.m.

• Shift change can be done only after weekly or other holiday and not in between.

YOUNG PERSON AND ADULT

• "Young Person" means a person who is either a child or an adolescent.

• Child - A person of 14 years of age but below 15 years of age.

• Adolescent - A person of 15 years of age but below 18 years of age.

• "Adult" means a person who has completed his eighteenth year of age.

EMPLOYMENT OF CHILDREN
• Children below 14 years of age cannot be employed.

• A child of age 14 years but below 15 years can be employed for only 4.5 hours per day.

• He should be certified fit by certifying surgeon.

• He cannot be employed during night from 10 p.m. to 6 a.m.

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• A person of 15 years of age but below 18 years of age is termed as adolescent. He can be
employed as an adult if he has certificate of fitness for a full day’s work from a certifying
surgeon.

• An adolescent is not permitted to work between 7 p.m. to 6 a.m.

DISPLAY ON NOTICE BOARD

A Notice containing an abstract of the Factories Act, 1948 and the rules made there
under in English and local language shall be displayed by employer.

The name and address of Inspector of factories and Certifying Surgeon shall also be
displayed on the Notice Board.

PUNISHMENT TO WELFARE OFFICER

No punishment can be imposed on Welfare Officer without prior sanction of Chief
Commissioner of Factories. However, simple order of termination as per terms of
appointment is not punishment and such termination order is valid.

Case - Arun Kumar Bali v. Government, NCT of Delhi

POWERS OF INSPECTOR (SEC 9)

An Inspector may, within the local limits for which he is appointed,--

(a) Enter, with assistant who are in the service of the Government or any local or
other public authority or with an expert, the premises of a factory;

(b) Make examination of the premises, plant, machinery, article or substance;

(c) Inquire into any accident or dangerous occurrence, whether resulting in bodily
injury, disability or not, and take on the spot or otherwise statements of any person
which he may consider necessary for such inquiry;

(d) Require the production of any prescribed register or any other document relating
to the factory;

(e) seize, or take copies of, any register, record or other document or any portion
thereof, as he may consider necessary in respect of any offence under this Act, which
he has reason to believe, has been committed:

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 (f) Direct the occupier that any premises or any part thereof, or anything lying therein,
shall be left undisputed (whether generally or in particular respects) for so long as in
necessary for the purpose of any examination under Clause (b):

(g) Take measurements and photographs and make such recordings as he considers
necessary for the purpose of any examination under Clause (b) taking with him any
necessary instrument or equipment:

(h) in case of any article or substance found in any premised, being an article or
substance which appears to him as having caused or is likely to cause danger to the
health or safety of the workers, direct it to be dismantled or subject it to any process
of test (but not so as to damage or destroy it unless the same is necessary for carrying
out the purposes of the Act.) Further, he may take possession of any such article or
substance or a part thereof, and detain it for so long as is necessary for such
examination; and

(i) Exercise such other powers as may be prescribed. The above powers of an
inspector are subject to any rules which may be made by the State Government in this
behalf.

SPECIAL PROVISIONS RELATING TO HAZARDOUS PROCESSES

HAZARDOUS PROCESS
"Hazardous process" means any process or activity in relation to an industry specified
in the First Schedule where, unless special care is taken, raw materials used therein or the
intermediate or finished products, bye products, wastes or effluents thereof would

• Cause material impairment to the health of the persons engaged in or connected therewith;
or

• result in the pollution of the general environment;

CONSTITUTION OF SITE APPRAISAL COMMITTEES

A Committee under the name Site Appraisal Committee shall be constituted by the
State Government to advise the Government in the matter of examination of applications for
establishment of factories involving hazardous processes. The constitution of the site
appraisal committee consisting of committee has been specified therein.

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The Site Appraisal Committee shall examine an application for the establishment of a factory
involving hazardous process and make its recommendation to the State Government within a
period of ninety days in the prescribed form.

COMPULSORY DISCLOSURE OF INFORMATION BY THE

OCCUPIER
It is compulsory on the part of the occupier of every factory involving a hazardous
process to disclose all information regarding dangers, including health hazards to the workers
employed in the factory, the Chief Inspector, the local authority within whose jurisdiction the
factory is situated and the general public in the vicinity.

SPECIFIED RESPONSIBILITY OF THE OCCUPIER IN RELATION

TO HAZARDOUS PROCESSES
Accurate and up-to-date health records or medical records of the workers of the
factory who are exposed to any chemical toxic or any other harmful substances which are
manufactured, stored, handled or transported and such records shall be maintained by the
occupier of a factory involving any hazardous process.

INQUIRY COMMITTEE

In the event of occurrence of an extraordinary situation, the Central Government may

appoint an Inquiry Committee to inquire into the standards of health "and safety observed in
the factory with a view to finding out the causes of any failure or neglect in the adoption of
any measures prescribed for the health and safety of the workers or the general public.

Emergency standards: The Director-General of Factory Advice Service and Labour

Institutes may be directed by the Central Government to lay down emergency standards in
respect of hazardous process.

Permissible limits of exposure of chemical and toxic substances: The Second

Schedule added to the Act, indicates maximum permissible threshold limits of exposure of
chemical and toxic substances in manufacturing processes in any factory.

Workers Participation in safety management: The occupier in every factory shall

set up a safety committee consisting of equal number of representatives of workers and
management to promote co-operation between the workers and the management in

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maintaining proper safety and health at work and to review periodically the measures taken in
that behalf where hazardous process is involved.

Warning about imminent danger: If there is reasonable apprehension regarding

likelihood of imminent danger to the lives or health of the workers employed in a factory,
they may bring the same to the notice of the occupier, agent, manager, etc.

PENALTIES AND PROCEDURES

(1) General penalties for offences: If there is any contravention of any of the
provisions of this Act or any rules or order made there under, the occupier and manager shall
each be guilty of an offence and punishable with imprisonment for a term which may extend
to two years or with fine which may extend to Rs. one lakh or with both and if the
contravention is continued after conviction, with a further fine of Rs. One thousand for each,
day till contravention continues. The provisions of Section 92 further provides penalty for
contravention of any of the provisions of Chapter IV or any rule made there under or under
section 87 which has resulted in an accident causing death or serious bodily injury, the fine
shall not be less than 25,000 in the case of an accident causing death and 5,000 in case of
serious bodily injury. Explanation to this Section defines serious bodily injury, which
involves the permanent loss of the use of or permanent injury to any limb or sight or hearing
or the fracture of any bone excluding the fracture (not being fracture of more than one) bone
or joint of any phalanges of the hand or foot.

Section 94 stipulates for enhanced penalty for any person who has already been
convicted under Section 92 of the Act, and is again guilty of an offence involving
contravention of the same provisions. Punishment for subsequent conviction includes
imprisonment for a term which may extend to three years or with fine which may not be less
than 10,000 but which may extend tp Rs. two lakhs or with both. Provided that the Court
may, for any adequate and special reasons to be mentioned in the judgement impose a fine of
less than 10,000. Provided further, that where contravention of any of the provisions of
Chapter IV or any rule made there under or under Section 87 has resulted in an accident
causing death or serious bodily injury, the fine shall not be less than 35,000 in case of death
and 10,000 in the case of an accident causing serious bodily injury.

No cognizance shall be taken of any conviction made more than two years before the
commission of the offence for which the person is subsequently convicted.

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(2) Liabilities of owner of premises in certain circumstances: Section93
provides that where in any premises separate building are being leased out by the owner to
different occupiers for use as separate factories, the owner of the premises shall be
responsible for the provision and maintenance of common facilities and services such as
approach roads, drainage, water-supply, lighting and sanitation.[Section 93(1)]

Where in any premises, independent floors or flats are leased to different occupiers
for use as separate factories, the owner shall be liable as if he were the manager or occupier
of a factory for any contravention of the provisions of this Act in respect of

 latrines, urinals, washing facilities and common supply of water for this purpose;
 fencing of machinery and plant belonging to the owner and not entrusted to the
custody or use of an occupier
 safe means of access to floors or flats and maintenance and cleanliness of staircase
and common passages
 precautions in case of fire;
 maintenance of hoists and lifts; and
 maintenance of any other common facilities provided in the premises. [Section 93(3)]

But the liability of the owner [under Section 93(3) arises only where in any premises,
independent rooms with common latrine, urinals and washing facilities are leased to different
occupiers for use as separate factories so that the owner should also comply with the
provisions of maintaining such facilities. (Section 93(5)]

For the purposes of sub-sections (5) and (7) computing the total number of workers
employed, the whole of the premises shall be deemed to be single factory. [Section 93(3)]

The Chief Inspector has been empowered to issue orders to the owners in respect of the
carrying out of the provisions as mentioned above but subject to the control of the State
Government.

(3)Penalty for obstructing Inspector: Section 95 lays down penalty of imprisonment

for six months or fine of `10,000 or with both for wilfully obstructing an inspector in the
exercise of any power conferred on him by or under this Act or fails to produce any registers
or other documents to him on demand or concealing or preventing any worker from
appearing before or being examined by an Inspector.

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(4)Penalty for wrongfully disclosing of results of analysis under Section 91:
Section 96 provides imprisonment extending up to a term of six months and fine up to 10,000
or both for the wrongful disclosure of results of analysts of the analysis done under Section
91 of the Act.

(4A) Penalty for contravention of Sections 41B, 41C and 41H: Section96A
provides punishment of 7 yean imprisonment or fine which may extend to Rs. two lakhs for
the non-compliance with or contravention of any of the provisions of Section 41B, 41C, or
41H or rules made there under by any person. In case the failure or contravention continues,
with additional fine which may extend to five thousand rupees for everyday during which
such failure or contravention continues after the conviction for the first such failure or
contravention. If such failure, contravention continues beyond a period of one year after the
date of conviction, the offender shall be punishable with imprisonment for a term which may
extend to ten years.

(5) Offences by workers and penalties there for:

(i) Section 97 lays down that if any worker contravenes the provision of this Act or any rules
or orders made there under imposing any duty or liability on workers he will be punishable
with fine which may extend to 500/-

(ii) Section 98 imposes penalty for using false certificate of fitness.

Such punishment involves imprisonment for such a term which may not extend to two
months or with fine which may extend to1, 000/- or with both.

(6) Penalty for permitting double employment of child by parents or guardians is

stipulated under Section 99. Such an act is punishable with fine extending up to `1,000 unless
it appears to the Court that the child so worked without consent and connivance of such
parents, guardian or person.

(7) Onus of providing limits of what is practicable etc: Onus of proving is on the
person who is alleged to have failed to comply with such duty etc. to prove that he has taken
all measures or it was not reasonable practicable. (Section 104A)

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 THE TAMIL NADU SHOPS AND ESTABLISHMENT ACT 1947

There is no enactment in this Province regulating the conditions of work of employees

in shops, commercial undertaking, restaurants, etc. The Weekly Holidays Act, 1942(Central
Act XVIII of 1942), which has been brought into force in this Province from January, 1947 is
limited in scope in that it provides only for the grant of holidays and does not contain
provisions for various other matters affecting them, such as hours of work, payment of
wages, health and safety.
It is considered that there should be a comprehensive measure in this Province to
regulate these matters on the lines of similar enactments in force in other Provinces. The Bill
is intended to give effect to this object. Its main features are set out below. The provisions of
the Bill will come into force in the first instance in the City of Madras and in all
municipalities on a day to be fixed by the Government for this purpose.
Power has also been taken by the Government to bring the provisions into force in
other areas, when necessary.
DEFINITIONS: In this Act, unless there is anything repugnant in the subject or context-
1) ‘Child´ means a person who has not completed fourteen years.

2) ’closed´ means not open for the service of any customer or open to any business connected
with the establishment.

3) ‘commercial establishment´ means an establishment which is not a shop but which carries
on the business of advertising, commission, forwarding or commercial agency, or which is a
clerical department of a factory or industrial undertaking or which is an insurance company,
joint stock company, bank, broker’s office or exchange and includes such other
establishments as the state government by notification may by notification declare to be a
commercial establishment for the purposes of this Act.

4) ‘day´ means the period of twenty-four hours beginning at midnight. Provided that in the
case of a person employed, whose hours extend beyond midnight, day means the period of
twenty-fours beginning from the acting in the time when such employment commences.

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5) ‘employer´ means a person owning or having charge of the business of an establishment
and includes the manager, agent or other persons acting in the general management or control
of an establishment;

6) ‘establishment´ means a shop. Commercial establishment, restaurant, eating house, theatre

or any place of public amusement or entertainment and includes such establishment as the
State Government for the purposes of this Act;

7) ‘factory´ means any premises which is a factory within the meaning of the Factories Act,
1948.

8) ‘inspector´ means an Inspector appointed under section 42;

9) ‘notification´ means a notification in the Fort St. George Gazette;

10)‘opened’ means opened for the service of any customer.

 ‘restaurant’ or ‘eating house’ means any premises in which is carried on wholly or
principally the business of the supply of refreshments or meals to the public or a class
of the public for consumption on the premises but does not include a restaurant
attached to a theatre.
 ‘shop’ means any premises where any trade or business is carried on or where
services are rendered to customers and includes offices, store rooms, godowns and
warehouses, whether in the same premises or otherwise, used in connection with such
business but does not include a restaurant or commercial establishments.
 ‘theatre’ includes any place intended wholly or principally for the representation of
moving pictures or for dramatic performances.
REFERENCES TO TIME OF DAY
Reference to time of day in this act is references to India Standard time which is five and a
half hours ahead of Greenwich Mean Time

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POWER TO GOVERNMENT TO APPLY ACT TO EXEMPTED
PERSONS OR ESTABLISHMENTS
Notwithstanding anything contained in section 4, the Government may, by notification
apply or any of the provisions of this Act to any class of persons or establishment mentioned in
that section, other than those mentioned in clause (c) and (f) of sub-section (1), and modify or
cancel any such notification
Exemptions
The Government may, by notification, exempt either permanently or for any specified
period, any establishment or class of establishments or person or class of persons, from all or any
of the provisions of this Act, subject to such conditions as the Government deem fit.
SHOPS
OPENING AND CLOSING HOURS OF SHOPS
(1) Save as provided by order or under other enactment for the time being in force, no
shop shall on any date be opened earlier or closed later than such hours as may be
fixed by the (State) Government, by a general or special order in that behalf: Provided
that any customer who was being served or was waiting to be served in any shop at
the hour fixed for its closing may be served during the quarter of an hour immediately
following such hour.
(2) Before passing an order under sub section (1), the (State) government shall hold
an inquiry in the prescribed manner.
(3) The (State) government may, for the purpose of this section, fix different hours for
different shops or different classes of shops or for different areas or for different times
of the year.
SELLING OUT SIDE SHOPS PROHIBITED AFTER CLOSING HOUR
Save as provided by or under any other enactment for the time being in force, no
person shall carry on, in or adjacent to a street or public place, the sale of any goods after the
hour fixed under section 7 for the closing of shops dealing in the same class of goods in the
locality in which such street or public place is situated: Provided that nothing in this section
shall apply to the sale of newspapers.
DAILY AND WEEKLY HOURS OF WORK IN SHOPS
(1) Subject to the provision of this Act, no person employed in any shop shall be required or
allowed to work therein for more than eight hours in any day and

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forty eight hours in any week: Provided that any such person may be allowed to work in such
shop for any period in excess of the limit fixed under this sub section subject to payment of
overtime wages, if the period of work including overtime work, does not exceed ten hours in
any day and in the aggregate fifty-four hours in any week.
(2) No person employed in any shop shall be required or allowed to work therein for more
than four hours in any day unless he has had an interval for rest of at least one hour.
SPREAD OVER OF PERIODS OF WORK
The periods of work of a person employed in a shops hall are so arranged that, along
with his intervals for rest, they shall not spread over more than twelve hours in a day.
CLOSING OF SHOPS AND GRANT OF HOLIDAYS
(1) Every shop shall remain entirely close on one day of the week which day shall be
specified by the shopkeeper in a notice permanently exhibited in a conspicuous place
in the shop; and the day so specified shall not be altered by the shopkeeper more often
than once in three months.
(2) Every person employed in a shop shall be allowed in each week a holiday of one
whole day; Provided that nothing in this sub section shall apply to any person whose
total period of employment in the week, including any days spent on authorized leave,
is less than six days, or entitle a person who has been allowed a whole holiday on the
day on which the shop has remained closed in pursuance of sub section (1), to an
additional holiday
(3) (a) The (State) government may, by notification, require in respect of shops or any
specified class of shops, that they shall, in addition to the day provided for by
subsection(1), be closed at such hour in the afternoon of one week f\day in every
week at such hour as may be fixed by the (State) Government.
(b) Every person employed in any shop to which a notification under clause (a)
applies, shall be allowed in each week an additional holiday of one half day
commencing at the hour in the afternoon fixed for the closing of the shop under clause
(a)
(4) The (state) government may, for the purpose of sub section (3), fix different hours
for different shops or different classes of shops or for different areas or for different
times of the year.
(5) The weekly day on which a shop is closed in pursuance of requirement under
subsection (3) shall be specified by the shop keeper in a notice permanently exhibited

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 in a conspicuous place in the shop, and shall not be altered by the shopkeeper more
often than once in three months.
(6) No deduction shall be made from the wage of any person employed in a shop on
account of any day or part of a day on which it has remained closed or a holiday has
been allowed in accordance with this section ; and if such person is employed on the
basis that he would not ordinarily receive wages for such day or part of a day, he shall
nonetheless be paid for such day or part of a day the wages he would have drawn, had
the shop not remained closed, or had the holiday not been allowed, on that day or part
of a day.

ESTABLISHMENTS OTHER THAN SHOPS

APPLICATION OF THIS CHAPTER TO ESTABLISHMENTS OTHER
THAN SHOPS:
The provisions of this chapter shall apply only to establishments other than shops.
OPENING AND CLOSING HOURS:
(1) Save as provided by or under any other enactment for the time being in force ,no
establishment shall be opened earlier or closed later than such hour as may be fixed
by the Government, by general or special order in that behalf: Provided that in the
case of a restaurant or eating house, any customer who was being served or was
waiting to be served therein at the hour fixed for the closing may be served during the
quarter of an hour immediately following such hour.
(2) Before passing an order under sub- section (1), the Government shall make an
inquiry in the prescribed manner
(3) The Government may, for the purposes of this section, fix different hours for
different hours for different establishments or for different areas or for different times
of the year

DAILY AND WEEKLY HOURS OF WORK:

(1) Subject to the provisions of this Act, no person employed in any establishment
shall be required or allowed to work for more than eight hours in any day and forty-
eight hours in any week: Provided that any such person may be allowed to work in
such establishment for any period in excess of the limit fixed under this sub- section
subject to payment of overtime wages, if the period of work, including overtime work,

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 does not exceed ten hours in any day and in the aggregate fifty- four hours in any
week
(2) No person employed in any establishment shall be required or allowed to work in
such establishment for more than four hours in any day unless he has had an interval
for rest of at least one hour.
SPREAD OVER OF PERIODS OF WORK:
The periods of work of a person employed in an establishment shall be so arranged
that along with his intervals for rest, they shall not spread over more than twelve hours in any
day.
HOLIDAYS:
(1) Every person employed in an establishment shall be allowed in each week a
holiday of one whole day: Provided that nothing in this sub- section shall apply to any
person whose total period of employment in the week, including any days spent on
authorized leave, is less than six days.
(2) The Government may, by notification, require in respect of any establishment or
any specified class of establishments, that every person employed therein shall be
allowed in each week an additional holiday of one half day commencing at such hour
in the afternoon as may be fixed by the Government
(3) The Government may, for the purposes of sub- section (2), fix different hours for
different classes of establishments or different classes of establishments or for
different areas or for different times of the year.
(4) No deduction shall be made from the wages of any person employed in an
establishment on account of any day or part of a day on which a holiday has been
allowed in accordance with this section; and if such person is employed on the basis
that he would not ordinarily receive wages for such day or part of a day, he shall non
ether less be paid for such day or part of a day the wages he would have drawn, had
the holiday not been allowed on that day or part of a day.
EMPLOYMENT OF CHILDREN AND YOUNG PERSONS CHILDREN
NOT TO WORK IN ESTABLISHMENTS:
No child shall be required or allowed to work in any establishment.
YOUNG PERSONS TO WORK ONLY BETWEEN 6 A.M. AND 7 P.M.:
No young person shall be required to work in any establishment before 6a.m. and
after 7 p.m.

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DAILY AND WEEKLY HOURS OF WORK FOR YOUNG PERSONS:
Notwithstanding anything contained in this Act, no young person shall be required or
allowed to work in any establishment for more than seven hours in any day and forty- two
hours in any week nor shall such person be allowed to work overtime.

APPOINTMENT, POWERS AND DUTIES OF INSPECTORS

Appointment of Inspectors
The State Government may, by notification, appoint such officers of the State
Government or of any local authority as they think fit to be Inspectors for the purposes of this
Act, within such local limits as the State government may assign to them.
Powers and duties of Inspectors
Any inspector at all reasonable hours enter into any premises, which is , or which he
has reason to believe is, an establishment, with such assistants and make such examination of
the premises and of the prescribed registers, records or notices as may be prescribed.
Inspectors to be public servants
Every Inspector shall be deemed to be a public servant within the meaning of Section
21of the Indian Penal Code.
PENALTIES
1) Any employer who contravenes any of the provisions of Section 7, 9 to 11, 13
to23, 25, 26, 29 to 41 and 47 shall be punishable for a first offence, with fine which
may extend to 25 rupees, and for a second or subsequent offence, with fine which
may extend to Rs.250.
2) Whoever contravenes the provisions of section 8 shall be punishable, for a 1st
offence, with fine which may extend to Rs. 10 and for a subsequent offence with fine
which may extend to Rs.100.

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