Legal aspects

of Business
Business law

Submitted by:
Aditya Agrawal
Aditya Kotyala
Ankit Jaiswal
Ankit Shah
Ankur Jaiswal
Archana Nair
Aritra Chatterjee

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1401002
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Business Law Case Analysis

Contents
Acknowledgements....................................................................................................................2
Executive Summary...................................................................................................................3
Case Background.......................................................................................................................4
Parties involved in solving the legal issues:...............................................................................6
Nature of the legal issue.............................................................................................................6
Issue raised by employees:......................................................................................... 6
Responses and actions by management:.........................................................................7
Actions taken by both the parties:................................................................................. 7
Measures taken by the business in addressing the business issue:....................7
Kind and nature of legal assistance sought to address the issue:......................7

Impact of legal issue on the business.........................................................................................8

Measures taken by the company to reduce losses:............................................9
Measures taken by legal experts in addressing this issue:.................................9

Impact on the business due to the measures so taken:.............................................................11

Legislations..............................................................................................................................11
Indian Employment Standing Orders Act, 1946................................................11
Trade Unions Act, 1946..................................................................................... 12
Factories Act, 1948................................................................................................. 12
THE CONTRACT LABOUR (REGULATION AND ABOLITION) ACT, 1970................13
Social Security legislations..................................................................13
The Employees Provident Funds and Miscellaneous Provisions Act, 1952
(EPFA)............................................................................................................ 13
The Payment of Gratuity Act, 1972...............................................................14
The Employees State Insurance Act, 1948...................................................14
The Industrial Disputes Act, 1947 Section 2A...................................................15
The Industrial Disputes Act, 1947 - Section 33 2 C...........................................15

Terms and Conditions of the Lease..........................................................................................17

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Business Law Case Analysis

Acknowledgements

We would like to express our gratitude to the management of the company. For his guidance
and constant supervision and providing us with the information necessary for completion of
the project.
We would also like to sincerely thank Dr.Nityananda KV for providing us the opportunity to
gain in-depth knowledge about the intricacies of the legal system which often go unnoticed
by young managers like us. The learning assimilated from this project has been immense and
it will go a long way in helping us in our respective careers.

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Business Law Case Analysis

Executive Summary
Business law encompasses all of the laws that dictate how to form and run a business as well
as the rights, relations and conduct of people engaged in business activities. This includes all
of the laws that govern how to start, buy, manage and close or sell any type of business in
order to safeguard the interests of individuals or a company. Generally speaking, business
laws establish the rules that all businesses should follow.
In this report we have attempted to understand some of the basic laws using a case from a
company in the Tiruchirappalli district of Tamil Nadu. We have approached a company and
found out the issue they had faced earlier. Prior to the issue, there was no stringent
recruitment policy and no background checks were done. As a result, people were recruited
from nearby locality on a requirement basis.
The problem with the employees started in the year 1995 when junior employees demanded a
pay, equivalent to that received by senior employees. The management did not agree to the
request and this further deteriorated the situation and led to a number of problems in the
workplace and the output reduced. The machinery was tampered with, resulting in financial
problems. With the failure of negotiations, the management had no option other than go by
the law and resolve the issue through court.
One of the key learnings for us in this case was that if the company is in alignment with the
necessary legal rules and procedures then despite union revolutions/ strikes or anything in
that nature, the company can easily approach the legal route and benefit from the same.

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Business Law Case Analysis

Case Background
As requested by the management to maintain their anonymity, the owners will be referred to
using the term management and the individual companies will be referred to as company1
and company2.
In the district of Thuvakudi, Tiruchirappalli , there are two companies owned by the same
family .The companies are:
1) Company 1.
2) Company 2.
Company 1 was established in 1985 and the Managing director is the husband from the
family. Company 2 was established in 1987 and wife of the family is the Managing Director.
Both the companies are situated in the same locality but have separate identities such as
factory license, sales tax registration, Income Tax accounts etc. Both the companies are
ancillaries or sub-contractors for BHEL (Bharat Heavy Electricals Limited) Tiruchirappalli.
The case discussed had taken place in the company 1. However we are mentioning both the
companies in the summary as a single union had been formed for the employees of both the
companies.
Initially, there was no stringent recruitment policy and no background checks were done
while recruiting. The process of recruiting was done on blind faith. As a result, people were
recruited from nearby locality on a requirement basis. The problems with the employees
started in the year 1995. The salary of the employee increases with the seniority. In this
context junior employees were paid less than senior employees. The junior employees had
problems with the management. They wanted similar salary and benefits as the experienced
employees. The management did not agree to the request and this further deteriorated the
situation. This led to a number of problems in the workplace and the output reduced. The
machinery was tampered with resulting in financial problems. This resulted in strict reaction
by the management and warnings were given that strict action would be taken against the
trouble makers. However, it did not result in any positive response from the employees. At
this point of time, there was no official union. However, there were a few key employees who
exerted influence over rest of the working population. These few key employees were
primarily responsible for most of the problems happening in the company 1.
When the problems escalated, Union of ***** group (name not disclosed to preserve the
anonymity as requested by the client) was formed. The leader of this union is not a worker in
the factory but an external person. The important point to be noticed is that a single union
was formed for the employees of both the factories. Forming a union is right of the
employees but recognizing of union is the right of the management. Since the company was
incurring heavy losses due to the reduced orders and it was not economically viable to run the
company, the management decided to close the company 1. The management also was of the
opinion that the even if a settlement (financial or otherwise) is reached currently, there is a
high probability that there might be problems caused in the future due to the employees and
the union. To prevent this, the management had also inclined towards settling the dispute
legally and to get rid of the problem causing employees. Being vendor to BHEL, the vendor
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was subject to a set of regulations. Hence, the management had to very careful in dealing
with this issue so as to not lose business.
Reconciliations with the employees were attempted through the labour commissioner as per
the regulations. Both the parties had declined to meet face to face for the negotiations. The
labour union used to give a document containing their demands to the labour commissioner
which was passed on to the management. The management used to reply in a similar fashion
through a letter which was passed on to the labour union by the labour commissioner.
Agreement was not reached by both the parties. The management had consulted with a
prominent lawyer (Mr. Jaya Ram of M/s Deepak Sabharwal &Associates) and the lawyer
informed the management that they are not at fault and that they can go to court over the
issue with a good probability of winning the case. However, he had suggested them that it can
take a minimum time period of six months to be resolved and questioned whether the
management can sustain for such period. The management decided to go ahead with the legal
case and to suspend the operations. Also, once the suspension was in place, the management
had decided to close the company. Since the company is not under any debt, it was relatively
easier to close the company. The information about closure was sent to PF authorities,
Factory Inspector etc, as required by law. The management had approached BHEL and had
informed them about the problem and also that they would be suspending manufacturing
activities and requested the permission of BHEL and had obtained it.
In accordance with the decision, notice was issued to all members about the suspension. This
was done after consulting with the labour commissioner. The conciliation failure report was
obtained from the labour commissioner. In case of suspension, the employees have to be
given one month notice or one month salary as compensation. The management opted to pay
a one month salary and suspend the operations with immediate effect as they felt that giving a
time period of one month after issuing the notice may lead to more problems with the
employees. Two employees had accepted the settlement but the rest of them opted to fight the
case in the labour court. The labour union initially filed the case in the civil court. The
management replied that the case pertains to labour laws and is out of the jurisdiction of the
civil court based on human rights. The union had also filed a case in the labour court as they
wanted salary for the whole period of the jurisdiction, equal wages irrespective of experience.
In spite of the factory inspector certifying that the facilities of the company were sufficient to
meet the needs of the workforce, they employees wanted additional and unfair facilities from
the management. The labour court was expecting instructions from the civil court and the
civil court was also expecting the instructions from labour court resulting in a deadlock. In
both the courts, the case kept getting adjourned. This stalemate continued for almost seven
years till 2001-02. The labour union wanted the labour court to resolve the issues first. But
the primary concern of the management was the jurisdiction issue of civil court. The
management had filed a case in the high court regarding the jurisdiction of civil court in a
labour case. The high court had issued orders to the civil court to first decide on the
jurisdiction issues before the labour court can proceed on the case. In accordance with the
instructions of the high court, the civil court had tried the case and had ruled that they do not
have any jurisdiction in the case. Now, with the ruling of the civil court, it was up to the
labour court to decide on the issues.
During the case, the union also tried to recover the salary of the employees during the
duration of the case. But since the company was closed, it was not applicable. While
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suspending operations and closing the company, the management had to inform all authorities
like the PF board, ESI etc. This clause was followed by the management making it easier for
them during the proceedings of the labour court. Then the union wanted to include BHEL in
the case. In the court, BHEL administration had supported the management in the decision to
suspend the operations. During this time, a new factory license was obtained and the factory
was given on the lease to another party with the condition that the lessee cannot take any
order from BHEL. This is to prevent any further issue with the labour union or with the
clauses related to court as prior to the case, the company A was taking contracts from BHEL.
In the labour court, the lease agreement and other evidences were produced in front of the
judge. The court had ruled in the favour of management in 2003-04.
The labourers had an option to escalate the case to higher courts but there is a condition that
they should not employed anywhere else. Since the case was in court was almost 9 years, it
became financially difficult for the employees to escalate the case. Hence they had agreed to
take the settlement that the management was willing to offer. The settlement was done by the
management in the phased manner in the presence of labour commissioner. At this point of
time, the management can cancel the lease agreement and take back control of the factory and
resume operations. However, if the operations were resumed within a span of 6 months, then
the management has to take the same employees back into employment. Since the
management didnt want to take the former employees back into employment due to the
issues faced earlier, the management had decided to continue with the existing lease
arrangement. Thus, the had let the lease continue for a period of 3 years after the court ruling
and after three years, they had taken control of company A and recruited a new set of
employees. This time, there is a stringent recruitment policy in place to prevent any issues
henceforth.

Parties involved in solving the legal issues:

The management consulted the law firm: M/s Deepak Sabharwal &Associates for the
business issue.
Started in the year 1967, Deepak Sabharwal & Associates is a full service National &
International specialist Law Firm with an expertise in Intellectual Property, Litigation,
Mergers & Acquisitions, Labour Laws, Arbitration and Corporate Services.
Mr.Jaya Ram, advocate from Deepak Sabharwal &Associates headed the case. Mr.Jaya Ram
of specialises in Criminal cases and Civil cases.

Nature of the legal issue

Issue raised by employees:

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Initially, there was a dispute between a group of employees and management of the company.
The group of employees was not too skilled and relatively had lesser experience than
companys existing employees. But this group of junior employees was demanding equal
salary that of experienced and skilled employees of the company. Their demand of equal
salary was neither logical nor rational. Management of the company, by using their power
rejected their demand because their demand was invalid and irrational. On later point of time,
this group of employees with the help of external people (some unknown persons) got an idea
to form a union and bother the management.

Responses and actions by management:

As per law it is companys right to either recognize the union or not. Keeping this law in
mind the company decided not to recognize the union and took action against all the
employees involved in this issue. Management decided to terminate all the employees
involved in this issue. Before, giving notification of termination, the management tried their
best to explain the reason of their termination to all other employees. Management notified
those employees and also stated they will provide one month salary along with the
compensations for the same.

Actions taken by both the parties:

The group of employees was not satisfied with the response of the management and filed a
case against company in labour court. Moreover, this group of employees also filed the same
case in the civil court as well to seek remedy. This group of employees invoked Sec.2-A of
the Industrial Disputes Act regarding termination. On the other hand, the management
approached the labour office to give his views and seek remedy and after that company
responded against all the petitions filed in civil and labour court.

Measures taken by the business in addressing the business issue:

Since the company is a vendor to BHEL, they had to take utmost care to ensure that all the
issues are lawfully resolved. Any breach of law would lead to cancellation of their vendor
registration with BHEL. Hence the management had approached BHEL and had informed
them about the problem and also that they would be suspending manufacturing activities.
They requested the permission of BHEL and were successful in getting it.
Besides this, labour commissioner had obtained a reconciliation failure report. The
management were supposed to give the employees one month notice or one month salary as
compensation. The management immediately opted to provide a month salary and suspend
the operations. Only two of the labours accepted it and rest of them filed a case against the
management in labour court.
The management thus was looking forward to do away with the labourers at any cost and at
the same time they did not want their reputation to get affected to BHEL.

Kind and nature of legal assistance sought to address the issue:

The labour union had filed a case in the civil court, the law firm advised the management that
civil court does not have jurisdiction in the case and to file the case in the labour court. Also
when due to the confusion between civil and labour courts over the jurisdiction issue, the law
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firm had advised the management to file a case in the high court to decide over the
jurisdiction of the civil court on the issue.
The law firm also assisted the company to inform all the authorities of the provident fund and
employee state insurance about the suspension of the operations of the company while the
case was in progress. They wanted the company should totally abide by the laws during the
suspension of the labourers.
Also, when the factory was given on lease, Mr. Jaya Ram advised the company to sign a
contract with the lessee that it cannot indulge in any commercial activities with BHEL.
The labour union wanted to indulge BHEL in the case in order to bring a bad name for the
company, however the good selves of BHEL stated in favour of the company which further
strengthened the case in favour of the management.
Under the guidance of M/s Deepak Sabharwal &Associates , all the necessary documents
were produced to the judge of Trichy District court and in 2003-04, the court ruled in favour
of management.

Impact of legal issue on the business

As management did not agree to the demand of junior employees, they started creating
numerous problems at workplace. They started wasting lot of time during breaks of lunch and
tea. As per management they were feeling the situation of cold war. Management was very
much annoyed by those employees. Business was heavily impacted by actions of these
employees. The finances of the company are negatively affected and losses were piling up.
The situation had deteriorated to such a situation that the management had to close the
company. Company bore these losses in two phases:Before fi ling the case

Productivity reduced drastically

Tampering of machinery by the employees
Distrust in employees as they were not satisfied with managements decision
Involvement of outsider started troubling to management
Close the company 1

After fi ling the case

Company closed its manufacturing unit, which was creating machinery parts for
BHEL
Capital investment made by company stopped giving any return
BHEL cancelled all its order with the company
Company was not able to participate in any other project as manufacturing unit closed
Loss of goodwill as the appeal in courts send wrong impression in market
Wastage of time of highly paid employees in court hearings and managing documents
for the same
Company completing back order during closer time

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Measures taken by the company to reduce losses:

To cut down loss, after few month company leased its manufacturing unit so that they can
receive some monetary value on their investment.

Seeking Legal Help

As per the legal process, the Labour union first filed a petition with Labour Commissioner
against the management. This caused a notice to be sent to the management. The
management then approached a prominent Labour court lawyer to seek assistance on as to
what has to be done, though this does not require any interference directly from the lawyer.
This is because the management has to represent their response directly to the Labour
Commissioner.
Once the case was filed in Labour Court, it was evident that the management needed a
Labour Court Lawyer to represent their case. Therefore they approached the same lawyer for
representation from whom they consulted previously.
Subsequently as the case was taken to Civil Court and High Court, prominent lawyers from
respective judicial body were approached to represent the managements case.
The information with regards to consultation fees, representation fees, appearance fees, filing
fees etc. charged by these different lawyers, were not disclosed by the management.

Measures taken by legal experts in addressing this issue:

There were certain measures taken by legal experts at different scenarios that helped the
company in their proceedings of the case at different point in time. The major ones are:

When the petition was filed by Labour Union with the Labour Commissioner, the
management received a notice from them seeking for reconciliation. However, the
management took the measure of not recognizing the Labour Union and not agreeing
for reconciliation after the advice from their lawyer. They could do so because the
Labour Union was formed by employees of two companies and not one, therefore the
management had the right of not recognizing the Labour Union.

As the case was filed by Labour Union in Labour Court, the management took the
position of suspending the manufacturing operations of the company stating the
reason that it was economically not viable for them to continue operations because of
the threat from employees not performing to their potential. Subsequently, the

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workers went to civil court for reinstating of their job and they also filed the case in
the labour court to claim the full wages for the period of the closure. They also wanted
to claim full wages during the time the case dragged on inn the civil court and the
labour court. One important point to note here is the company has the right to
suspend the operations or closure, when the worker strength is less than hundred.
However if the strength is more than hundred, government interference is required
before any such step is taken.

Subsequent to this another measure taken was to get an approval from BHEL that the
company would not be able to supply further. As they are suspending the company
operations because of it not being economically viable for them.

The expert also suggested to issue a notice to the employees of the company that they
are suspending the company and therefore a compensation of one month will be given
to all. The company could have either given them a notice of one month and kept
them employed before suspending or they could have given compensation for one
month and suspend immediately. The company opted for the second choice as per the
suggestion from the lawyer.

For suspension of operations the company also got clearance from the PF Board and
ESI.

When the case was filed by Labour Union in Civil Court as well, the management
took the position of it not being a suitable case to be taken-up by Civil Court.

This made the case to stretch for a longer duration and hence the management took
this case to the High Court as a measure. The High Court issued notice to Civil Court
to resolve the jurisdiction issue first and it sped up the process. The Civil Court
dismissed the case in favor of management and mentioned the correct jurisdiction as
the Labour Court.

As the duration of the case was too long, meanwhile the management obtained a new
factory license and it was given on lease to another party with a measure that lessee
cannot take any order from BHEL. This ensured that the company did not incur losses
due to non-operations.

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Further when this issue was raised in Labour Court, due to the above measures taken
by the management with the help and advice from their legal experts, the case was at
last ruled in favor of the management.

Another measure that the company took even after the case was closed, was not to end
lease and take back the operations to itself immediately. As, if they would have started
within six months they had to take the old employees as its employees. However, they
took back the company only after 3 years after the closure as a measure.

The current process of recruitment is more stringent in the company as a measure to

not repeat such mistakes in future.

Impact on the business due to the measures so taken:

Though, the case had a major impact on business as well as reputation of the company.
Measures taken by the management as described above, provided the company with a few
advantages in terms of managing their business alternatively and also to sustain some
reputation among the clients.

Not recognizing the Labour Union gave them an edge in the hearings of the court. As
the court also did not perceive the employees as a single unit.

Suspension of operations provided safety from more clashes with the employees and
also the losses that they could have incurred by inefficient operations.

Approval for suspension from BHEL, provided support to their reputation and also
helped them in the court hearing.

Issuing of notice clarified that the company is transparent in its proceedings and
decision making.

Getting a clearance from authorities like PF Board, ESI, etc. helped them save any
legality issue related to processes at a later point in time.

The managements position of challenging the jurisdiction of the case, although may
have stretched the case but in the end the ruling of the court justified this position.

To speed up the process this jurisdiction related issue was raised to the high court and
it fetch them the desired results. The information about closure was sent to PF/factory
inspector and all necessary documents were produced at the time of ruling. In
addition, the directions were obtained from local municipal court.

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The managements decision to put the factory on lease was quite beneficial as it
provided financial support during the suspension of operations. It also helped them
fetch new clients.

By waiting for a period of three years before taking up the factory operations, the
management made sure that the old employees cannot claim anything else from the
company.

New recruitment processes and contracts are helping the company to develop good
relations with employees and providing a safety net for the company as well.

Legislations
Indian Employment Standing Orders Act, 1946
To avoid friction amongst the employers and workmen employed in an industry is the
principal aim of Indian Legislation in India. It was considered that the society had a vital
interest in the settlement of terms of employment of Industrial Labour and also settlement of
Labour problems. Therefore, the steps were taken by the Central Government to enact
Industrial Employment (Standing Orders) Act, 1946 with a view to afford protection to the
workmen with regard to conditions of employment.
1. The purpose of having Standing Orders at the plant level and other commercial
establishments is to regulate industrial relations.
2. This Orders regulate the conditions of employment, grievances, misconduct etc. of the
employees employed in industrial undertakings.
3. Unsolved grievances can become industrial disputes.
Standing Orders mean rules relating to matters set out in the Schedule to the Act [Sec.2(g)]
to be covered and in respect of which the employer has to draft for submission to the
Certifying Commissioner, are matters specified in the Schedule.
This act was pivotal to the case. It contained all provisions to the settlement of disputes.
Provided after giving not less than a months notice of its intention so to do, by notification in
the official Gazette, apply the provision of this Act to any industrial establishment employing
less than one hundred employees

Trade Unions Act, 1946

This Act provides for the registration of Trade Unions and in certain respects to define the
law relating to registered Trade Unions

Seven or more persons can get together to form a Trade Union.

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In order for the Trade Union to register it has to have at least ten percent or one
hundred of the workmen whichever is less as its members.

Section 9 - On registration the Registrar will issue a Certificate of Registration.

Section 19 agreement between members will not be void or voidable merely by

reason that the object of the agreement amounts to restraint of trade.

Recognition of Trade Unions is solely on the discretion of management.

The Trade Unions formed in this company were unofficial and were not recognized by the
management as they were less than 7 in number. But unofficial trade unions formed in this
organization hampered productivity. The company argued in court that all provisions required
for the establishment had not been fulfilled.

Factories Act, 1948

Employers are required to follow stringent licensing and safety measures.

Factory is defined as a place where manufacturing process is carried out using 10

employees using electrical power or 20 employees without power.

Manufacturing processes also includes petrol pumps, retail workshops, handicraft

industries etc.

Post Bhopal tragedy (Union Carbide case) special chapter (IVA) has been added
making disclosures mandatory for hazardous processes.

Under the Act the occupier is responsible for all compliances and in the case of an
incorporated company the Director on the board of the company must be designated for the
purpose of an occupier. Failing which all directors could be held liable.
The company falls under the Factories Act as they had the requisite number of employees.
They were not in violation of the Act as the factory had all necessary rules and regulations in
place. The company was also regularly inspected and it also had regularly emission checks in
place.

The Contract Labour (regulation and abolition) Act, 1970

An Act to regulate employment of contract labour in certain establishments and to

provide for its abolition in certain circumstances and for matters connected therewith

Allows Employers (principal Employers) to use Contractors for supply of labour.

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It applies to establishments employing twenty or more persons.

It does not apply to establishments where nature of work is intermittent or casual.

Principal Employer as well as the Contractor have to register themselves.

The Contractor has to provide amenities and facilities which include canteens, restrooms, first-aid facilities etc.

In case the Contractor fails to provide the facilities the Principal Employer will have
to provide the same and adjust and recover the expense from the Contractor.

Both the Principal Employer and the Contractor have to maintain Registers and
Records of the Contract Labour employed.

The appropriate Government in consultation with the Central and State Board can prohibit
employment of contract labour in any process, operation and establishment- if it is of the
view that it is perennial in nature, the work can be carried out by regular workmen.
The company after the case regularly employed contract labours. The primary reason being
that it leads to a reduction of costs. Also there is a single point of contact in such cases which
leads to less headache on the part of management.

Social Security legislations

The Employees Provident Funds and Miscellaneous Provisions Act, 1952 (EPFA).

EPFA applies to establishments and factory employing 20 or more persons.

Employee drawing salary upto Rs.6,500/- per month has to become member of the
provident fund.

EPFA in provident fund scheme provides wherein 12% is contributed by both the
employee and the employer with administration charge of 1.5%.

In Pension/Superannuation fund scheme a part of the contribution to the provident

fund (8.33%) is diverted to this scheme.

The Deposit Linked Insurance Fund Scheme is for providing Life Insurance benefits.
The employer contributes 0.5% and 0.01% towards administrative cost of the basic
wages.

The company had proper documents for EPF being paid. It wanted to settle the dues but
the workers were not ready to accept the settlement. The company produced the necessary
documents at the time of jurisdiction.
The Payment of Gratuity Act, 1972

It applies to factories, mine, oilfield, plantation, port , railway, Shops and

Establishments employing ten or more persons.

Applicable to employees who have rendered continuous service for five years.

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Employees with less than five years will be entitled in case of death or disablement.

Employer has to pay within 30 days from the date it becomes payable to the
employee.

Total amount of gratuity payable shall not exceed Rs.3,50,000/- to 10 Lakhs unless
there is a contract to the contrary.

Compulsory insurance is necessary towards gratuity from Life Insurance Corporation,

unless employer exempted from the Government.

Gratuity is calculated at the rate of 15 days wages for every completed year of service
or a part thereof exceeding six months.
The company also wanted to settle the proper gratuity payments and it had necessary
documents for the same.

The Employees State Insurance Act, 1948

The contribution under this Act of an employee comprises of contribution payable by

the employer and the employee.

Presently every insured employee and his employer have to pay the Employees State
Insurance Corporation at the rate of 1.75% and 4.75% respectively of the wage of the
employee.

Under the Act, the employer is liable to pay compensation to workmen incapacitated
due to an accident arising out and in the course of employment.

The Industrial Disputes Act, 1947 Section 2A

IDA - is an Act to make provision and settlement of Industrial Disputes with the objective to
maintain industrial peace and economic justice. It categories employees into workman and
non-workman. Section 2 (s) of IDA defines workman as :- Workman means any person
employed in any industry to carry out manual, skilled and unskilled, technical, operational,
clerical or supervisory work for hire or reward. The definition specifically excludes persons
employed in managerial or administrative capacity and also those persons (otherwise falling
within the definition of workman)
One of the major citations that is referenced quite often in the case notes are in The Industrial
Disputes Act, 1947 particularly Section 2ADismissal, etc., of an individual workman to be
deemed to be an industrial dispute.- Where any employer discharges, dismisses, retrenches,
or otherwise terminates the services of an individual workman, any dispute or difference
between that workman and his employer connected with, or arising out of, such discharge,
dismissal, retrenchment or termination shall be deemed to be an industrial dispute
notwithstanding that no other workman nor any union of workmen is a party to the dispute.
The entire case to do with the company and management can be resolved or a consensus can
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be reached by this particular section of the Industrial disputes act. The employees in this case
could be suspended provided they are given one month notice or one month salary as
compensation. The management opted to pay a one month salary and suspend the operations
with immediate effect. seems to be a legal move.
The object of the act however is to make provisions for investigation and settlement of
industrial disputes. However, it makes other provisions in respect of lay off, retrenchment,
closure etc. the purpose is to bring the conflicts between employer and employees to an
amicable settlement. [the act is achieving exactly opposite]. the act provides machinery for
settlement of disputes, if dispute cannot be solved through collective bargaining.
Industry under industrial disputes act the definition of industry is as follows industry
means any business, trade, undertaking, manufacture or calling of employers and includes
any calling, service, employment, handicraft or industrial occupation or avocation of
workmen [section 2(j)]. Thus, the definition is very wide. - - the scope is much wider than
what is generally understood by the term industry.

The Industrial Disputes Act, 1947 - Section 33 2 C

As per section 33-c of the industrial disputes act, 1947

Where any money is due to a workman from an employer under a settlement or an

award or under the provisions of (chapter va or chapter vb) the workman himself or
any other person authorised by him in writing in this behalf, or,
In the case of the death of the workman, 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 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 arrears of land revenue.

Some other important legislation under Industrial Disputes Act, 1947 regarding:
Closure

An employer who intends to close down an industrial undertaking wherein 50

workmen or more but less than 100 are employed or were employed during the
preceding 12 months has to serve a notice to the government at least 60 days before
the date of intended closure stating the reasons for the proposed closure as laid down
under section 25 FFA of the industrial disputes act, 1947.
In respect of an industrial undertaking employing 100 or more workmen on an
average in the preceding 12 months, the employer has to obtain prior approval of the
government at least 90 days before the date of intended closure by giving an
application to secretary to government (labour court) as stipulated under section
25(O)(1) of the industrial disputes act, 1947. A copy of the application shall be served
simultaneously on the representatives of the workmen also.

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The government shall grant such approval, if it is satisfied with regard to the
'genuineness and adequacy of the reasons' stated for closure, the interests of the
general public and all other relevant factors. The government will communicate the
order within 60- days from the date of application for closure by the employer.

Retrenchment

Under clause (C) of sub-section (1) of section 25 N, in respect of an industrial

establishment employing 100 or more workmen on an average in the preceding 12
months, the employer has to obtain prior approval of the government at least 60 days
before the date of intended retrenchment by giving an application to secretary to
government (labour court)
No workman employed in any industry who has been in continuous service for not
less than one year under an employer shall be retrenched by that employer until
The workman has been given one month's notice in writing indicating the reason for
retrenchment and the period of notice has expired, or the workman has been paid in
lieu of such notice, wages for the period of the notice;
The workman has been paid, at the time of retrenchment, compensation which shall
be equivalent to fifteen days average pay ( for every completed year of continuous
service) or any part thereof in excess of six months; and
Notice in form P is served on the secretary to government (labour court).
The employer is also required to serve three months' notice of his intention to retrench
the workman with reasons for the same, to every workman who is being so
retrenched. Alternatively, the employer may pay wages for the period of the notice, in
lieu thereof. The company and management brought up these sections during the
proceedings of the case.

Terms and Conditions of the Lease

While the case was ongoing the current factory space was given on lease as mentioned in the
previous sections and the lease was extended for about 2 years after that. The terms and
conditions of the lease were as follows:

To pay rent hereby reserved on the day and in the manner aforesaid to the lessor.

To pay all taxes, cess, impositions, assess company payments, dues and 9, duties
payable in respect of the demised premises and the building to be constructed thereon
to the Government or the Municipal Corporation or any other local authority or public
body.

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Not to sub-let, sell, dispose of or assign the demised premises or the house
constructed on the demised premises without the consent of the lessor in writing.

To keep the building constructed on the demised premises in good and tenantable
condition.

To permit the lessor or his duly authorized agent or agents to enter the demised
premises at all convenient times for inspection of the building.

To insure and to keep insured the building that may be constructed on the demised
premises against the loss or damages by d fire, earthquake, riot or affray with an
insurance company approved in writing by the lessor in the joint names of lessor and
lessee for an amount which shall not be less the specified amount.

To use the demised premises for construction of house, which will be used for
residential purpose only.

Not to use the demised premises or the building constructed or any part thereof for
any illegal purpose.

All the above rules and regulations are particularly applicable to our case. In the beginning
the company did not employ labour on the basis of any fixed contracts. It appointed labours
based on the demand it was facing. Though it took proper care for the welfare of its
employees as in paying proper remuneration, the employees starting indulging in counterproductive activities. The newly employed demanded equal remuneration as against senior
people in the organization. They often stalled productivity and posed unfair demands which
were not possible to satisfy. Though the company had been certified to have adequate
infrastructure facilities the trade unions formed raised unfair issues about infrastructure and
facilities. Though the trade unions were not acknowledged they continued to have strikes and
also served as a point of contact. The vendor did not need to pay any PF as it was less than 5
years old at that time. Still the employer applied for PF licensing from the very first year of
its operations. Moreover, any information routed to employees had to be done through the
trade union leaders. When the employees were asked to leave they demanded unfair
compensation packages which were not feasible. So a manufacturing units operations were
suspended and a notice was served. A case was filed against the vendor by the employees
both in Civil Court and Labour Court. The factory rules states that if you close down a unit,
reopening it will mandate you to employ the same employees. So it was necessary that the
employers take the settlement else the same set of people would have to employed. Thus the
case dragged on and ultimately it was ruled in the companys favour.

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