by Aggarwals Associates | Jul 29, 2020 | General
The global pandemic and subsequent lockdown has drastically effect the various business sectors. To overcome the situation Indian Govt. has introduced some relief packages in different sectors. The latest one is the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 promulgated on 5th of June, 2020 with immediate effect. The ordinance seeks to amend the Insolvency and Bankruptcy Code, 2016. The main objective of this ordinance is to provide protection to the corporate entities that faced sudden halt in their business operation due to pandemic and consequently defaulted on their repayment obligations.
Impact of ordinance:
The ordinance introduces Section 10-A which suspends the operation of Section 7, 9, 10 of the Code which deals with insolvency application by financial creditor, by operational creditor and by the corporate debtor respectively for a period of 6 months. It is only applicable on the payment defaults that occurred on or after 25th March, 2020. However, Govt. can extend this period upto 1 year via notification.
Prohibition on filing insolvency application during suspension period:
The Ordinance put a ban on filling insolvency application during suspension period i.e. on or after 25th March, 2020 for 6 months and extendable upto 1 year. The extension period seems to give permanent immunity to such defaults from the Code. The Ordinance has also inserted an explanation to suggest that Section 10-A shall not have any application on defaults occurred before 25th March, 2020. Therefore creditors/ corporate are still entitled to file applications to initiate corporate insolvency resolution process for any default which have occurred before 25th March, 2020. This aspect will become
Explanation fails to specify the effect of Section 10-A after the expiry of suspension period. That situation required the judicial interpretation. This aspect may become a subject matter of litigation following the expiry of suspension period.
No distinction between Covid-19 and non-Covid-19 defaults:
The preamble of the Ordinance talks about the impact of Covid-19 on business, financial markets and economy. In opposite to that Section 10-A doesn’t link the defaults with Covid-19 pandemic. This ensures that unnecessary time shall not be spent by the parties proving whether default is related to Covid-19 pandemic before the adjudicating authority.
Ban on voluntary insolvency:
Ordinance also put ban on voluntary insolvency proceedings under Section 10 for default during the suspension period. The preamble of the Code suggests that suspension of insolvency proceedings is to prevent corporate persons experiencing distress, being pushed into insolvency proceedings.
Effect on other remedies under the Code:
The Ordinance doesn’t have impact on other remedies available under the Code such as security enforcement, recovery proceedings before the Debt Recovery Tribunal (DRT) and also contractual restructuring. Similarly the personal insolvency proceedings under the Code would continue to be available as an alternative remedy in respect of personal guarantors.
It may also be possible to proceed against corporate guarantor where the principal debtor’s default occurs during the suspension period.
Protection to directors/ partners of a corporate debtor:
Section 66 of the Code enables the resolution professional to take action against management in respect of fraudulent or wrongful trading. The Section 66(3) has been introduced by this ordinance which seems to protect the director/ partners of a corporate debtor in case of potential loss to the creditors of the corporate debtor during suspension period. Such an exemption may result in directors/partners of corporate debtors engaging into unlawful and illegal measures.
Conclusion:
Ordinance provides short term relief to businesses affected by the Covid-19 pandemic. The ordinance appears to encourage creditors to adopt alternative mechanisms such as restructuring, one time settlement and change in ownership etc. The amendment seeks to protect the persons/entities who are genuinely adversely impacted because of Covid-19 from being dragged to bankruptcy proceedings for the reasons that were beyond their control.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S Nagar, Mohali
by Aggarwals Associates | Jul 24, 2020 | General
The Code of Wages Act came into existence on 8th August, 2019. It consolidates the provisions of four labour laws concerning wage and bonus payments and make universal provisions for minimal wages and timely payment of wages for all workers in India. With the enactment of this Code, The Payment of Wages Act, 1936, The Minimum Wages Act, 1948, The Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976 are repealed.
The code is applicable to all industries and employers. It shall apply to the employees and workers in the organized and unorganized sector of the economy. As the Code repealed four legislations so it is important to discuss the effect of this Code on litigation pending under these repealed Acts.
What does Code explains about repeal?
Under Section 69 of the Code, it is provided that the Payment of Wages Act, 1936, The Minimum Wages Act, 1948, The Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976 are repealed. It is also provided that it shall not affect the previous operation of these repealed Acts.
Any notification, nomination, appointment, order or direction or any amount of wages provided in any provision of such repealed enactments shall be in force to the extent they are not contrary to the provisions of this Code till they are repealed under the corresponding provisions of this Code.
Under Sub-Section 3 of Section 69 of the Code, it is provided that Section 6 of the General Clauses Act, 1897 shall apply to the repeal of these enactments.
What is Section 6 of the General Clauses Act, 1897?
To understand the effect of repeal, it is important to go through with the provisions of Section 6 of the General Clauses Act, 1897. From the bare language of this Section, the following points came as effect of repeal of any legislation:
- It has prospective effect.
- Previous operation of any repealed enactment will not be affected.
- It will not affect any right, privilege, obligation or liability acquired, accrued or incurred under repealed enactment.
- It will not affect any penalty, forfeiture or punishment incurred in respect of any offence committed under any repealed enactment.
- It will not affect any investigation, legal proceedings or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or imprisonment.
- It will not affect any such investigation, legal proceeding or remedy which may be instituted, continued or enforced and penalty, forfeiture or imprisonment may be imposed under the repealed enactment.
So it is clear from the above discussed provisions that the effect of above stated repealed enactments will be prospective. Any legal proceedings which are instituted, continued or enforced under these repealed Acts will remain unaffected. The provisions of the Code will operate prospectively. It has no effect on the pending litigation under these repealed enactments. Any rights, privilege, obligation or liability acquired or imposed on the employee and employer under the enactments so repealed will not be affected. Any punishment, penalty imposed in respect of any offence committed against these repealed Acts will remain the same.
Conclusion:
The Code brings clarity by bringing the provisions of four legislations into one single piece. Legal provisions need to be complying with the development of society. The Code makes a decent effort by replacing the outdated provisions to keep pace with time. The repeal will have no effect on the pending litigations and other issues under the enactments so repealed.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali
by Aggarwals Associates | Jul 21, 2020 | General
The Code on Wages seeks to regulate wages and bonus payments in all employment where any activity of trade, business or manufacturing is carried out. The four labour legislations subsumed under the Code. It is a ray of hope for 195 million workers in India as it provides uniform provisions related payment of wages, bonus and minimum wages to the employees. There are certain things that are necessary to know for every employee employed in any establishment. These things are summarized as follows:
Who is an employee?
The Code provides the broader definition of employee as it covered all the persons who are doing any skilled, semi-skilled, unskilled, manual, supervisory, operational administrative, technical and clerical work. The employment terms can be oral or written, meaning thereby the employment bond may or may not be there. The persons who are employed in the Armed Forces Services are not employees under the Code.
Who is a worker?
The Code also provides the definition the worker which includes the persons who are doing any manual, skilled, unskilled, technical, operational, clerical or supervisory work. The Journalists, Sales Promotion Employees are worker under the Code. It specifically excludes the persons who are working in a managerial or administrative capacity and supervisory capacity earning exceeding 15 thousand rupees per month. The persons who are employed in Armed Forces, Police or prison service also don’t come under the definition of worker.
Who are covered under the Code?
Previously the Payment of Wages Act was applicable to the employees who are earning the salary below INR 24,000/- per month. However the Code does not specified any salary limit and the provisions related to payment of wages in the Code will be applicable to all the employees.
What is covered under the wages?
There are numerous definitions of wages under the different legislations of labour laws which creates difficulty in its implementation. The Code provides the uniform definition of the wages applies in the case of payment of wages, bonus and minimum wages. According to the definition under Code, wages includes all the remuneration whether by salaries, allowances or otherwise. Basic pay, dearness allowance and retaining allowance are covered under the definition of wages.
But certain allowances don’t come under the wages for example bonus, value of house-accommodation, contribution to any pension and provident fund, conveyance or travelling allowance, house rent, overtime allowance and gratuity amount etc.
What employer will receive if he worked for more classes of work?
If any employee worked for two or more classes of work to which different minimum rate of wages applies, then he will be entitled for wages to each class of work according to the time occupied for such work. Such wages shall not below the minimum rate of wages.
What employee will receive on overtime work?
If minimum wages of any employee are fixed under this Code, and such employee worked for overtime on any day then he will be entitled for double of his normal wages for such period he worked for overtime.
Who is eligible for bonus?
Every employee who is getting salary as per specified by the Govt. through notification will be eligible for bonus. The second condition to become eligible is that the employee must have worked for at least 30 days in an accounting year.
Who will become disqualified for bonus?
If any employee got dismissed from services for the following reasons then he will be disqualified for bonus:
- Fraud.
- Riotous or violent behaviour on the premises of establishment.
- Theft, misappropriation or sabotage of any property of the establishment.
- Conviction for sexual harassment.
The provisions related to payment of bonus shall not apply to the employees employed in the following establishments:
- Life Insurance Corporation of India.
- Seaman as defined under 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.
- Establishment under the authority of any department of the Central govt. or State govt. or local authority.
- Indian Red Cross Society or any other institution of a like nature including its branches.
- Universities and other educational institutions.
- Institutions including hospitals, chamber of commerce and social welfare institutions not for purpose of profit.
- Reserve Bank of India.
- Public sector financial institution other than a banking company, which the central govt. may, by notification, specify having regard to its capital structure, objectives and nature of its activities, the nature and extent of financial assistance or any concession given to it by the govt. and any other relevant factor.
- Inland water transport establishments operating on routes passing through any other country.
- Any other establishment which the appropriate govt. may exempt by notification.
Conclusion:
The Code on Wages is an appreciable step to provide legal protection to the entire employees employed in organized or unorganized sectors. It provides uniform definitions to bring transparency and accountability to the implementation of the law. While the Code made a distinction between the employee and worker. But the separate definition of worker leaves room for confusion as the term worker is nowhere used in the Code except under the definition clause. Under all the provisions of the Code the word employee is used.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, Mohali
by Aggarwals Associates | Jul 15, 2020 | General
Code of Wages is nice effort of legislature to compile the four labour law Acts into one single piece of legislation. The Code of Wages being a first code in labour laws received its assent on 8th of August, 2019. With this new legislation, there are some obligations of the every employer arises, which needs to know for smooth running of business. The Code is very wide in its nature, so it applies to all the industries, employer and employees. Here are some compliances for every employer under the Code:
Gender discrimination is prohibited:
It is prohibited for employer to make discrimination on gender in the matters related to wages in respect to same work or work of similar nature done by any employee. The same rule is applied on the recruitment process by the employer. Exception is provided in those cases, where employment of women in such work is prohibited by law.
How to pay the wages to the employees?
The Code provides the procedure to pay the wages to the employee by the employer. Employer can pay the wages through coin, currency notes, by cheque, by crediting into a bank account or by electronic mode. It is mandatory for employer to fix wage period of employee on daily, weekly, fortnightly or monthly and stipulates the time limit under each wage period. Time limit for payment of wages is given below:
- Daily basis: At the end of the shift
- Weekly basis: At the end of last working day of the week
- Fortnightly basis: Within 2 days after end of fortnight
- Monthly basis: Within 7 days of succeeding month
In case of removal, dismissal, retrenchment, resignation from services or in the case of unemployment due to closure of the establishment, the employer shall pay the payable wages to the employee within 2 working days. If employee worked for overtime, then employer shall pay him double of his/her normal wages.
What deductions employer can make from wages?
The employer can deduct the wages of his employee for reasons provided under the Code. These reasons include the fines, absence from duty, damage or loss of goods entrusted to the employee, house-accommodation if provided by the employer, amenities and services, recovery of advances (travelling or conveyance allowance), loans, income tax or any other statutory levy if court or any competent authority ordered the same, social security fund (Provident fund, pension, health insurance). It is condition under this code, that such deduction made by the employer shall not exceed 50% of the wages of the employee.
What is the procedure to pay bonus?
Every employer has to pay bonus to its employees if the employee strength of his establishment is 20 or more. Under the Payment of Bonus Act, such strength could be removed by the State Govt. However, under the Code there is no mentioning of power to reduce such strength. Now bonus can be paid only by crediting the amount in the bank account of concerned employee within a period of 8 months from closing of the accounting year. However the Govt. can extend such period upto 2 years for sufficient reason on application made by the employer.
When employer can make deductions from bonus?
Employer can deduct certain amount from bonus of the employee if due to the misconduct of such employee financial loss caused to the employer.
What kind of records have to be maintained by the employer?
It is mandatory for the employer under this Code to maintain a register containing the details of his employees, muster rolls and wages. A notice must be displayed at a prominent place of establishment containing the abstract of Code, category- wise wage rates of employees, wage period, day or time of payment of wages, and the name and address of the Inspector-cum-Facilitator who has the jurisdiction.
It is an obligation of the employer to issue salary slips to his employees. However, these provisions are not applicable on the employer who has less than 5 employees for agricultural or domestic purpose. But on demand of Inspector-cum-Facilitator, such employer has to show the proof of the payment of wages of persons so employed by him.
What are the penalties for employer?
The Code provides the enhancement of penalties in various offences under this piece of legislation. In case of non-payment of wages/less payment of wages the employer has to pay the fine upto Rs. 50,000/-, on repetition of the offence within 5 years the fine may extend to Rs. 1 lac and imprisonment upto 3 months. If any employer contravenes any other provision of this Code then such employer has to pay the fine upto Rs. 20,000/- and in case of repetition within 5 years it may extend to Rs. 40,000/- and imprisonment upto 1 month.
However the Inspector-cum-facilitator shall provide an opportunity to the employer to comply with the provisions of this Code within a certain period. If the employer violates the provisions of this Code within 5 year from date of first violation of similar nature, then he will lose the right of opportunity given by the Inspector-cum-facilitator.
On non-maintenance or improper maintenance of records in the establishment, the employer shall be punished with the fine upto Rs. 10,000/-. If offence is committed by company then every person who was incharge that may a director, manager, secretary or other officers of such company shall also be deemed to be guilty of that offence.
The offences under the Code can be compounded by a Gazetted Officer or Govt. before or after the institution of prosecution on receipt of 50 % of the maximum fine provided for such offence. Such compromise can be affected on the application made by the accused person. These provisions are not applicable if the employer committed the offence for second time within 5 year from commission of similar offence which was compromised or convicted earlier.
Conclusion:
The Code on wages intends to balance the interests of the employers and employees according to the need of hour. The Code contains the maximum portion of the repealed Act in simple terms, and makes a decent effort to replace the outdated provisions. The Code encourages digitalization in matters related to payment of wages, inspection procedure which is a nice effort of legislature to keep pace with time.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali
by Aggarwals Associates | Jul 13, 2020 | General
“Injustice anywhere is a threat to justice everywhere”
-Martin Luther King, Jr.
Public Interest Litigation (PIL) means a legal action initiated in a court of law for the enforcement of certain rights. Public Interest Litigation in India can be filed in the interest of the public where the class of community may or may not have pecuniary interest or any other interest by which their legal right are affected. One of the methods adopted for the enforcement of such rights is through Public Interest Litigation which was adopted by the Judiciary in the late 1980s. Ubi Jus, Ibi Idem Remedium is a Latin term which means that where there is a right, there is always a remedy. Legally a right means the standard of permitted action by law.
The remedy for enforcement of Rights guaranteed under the Constitution of India is embedded in Article 32 and 226 of the Constitution. Public Interest Litigation is a petition which is filed by an individual or citizen groups or a non-government organization in the court pursuing justice on a problem which has a broader public interest.
There are some common reasons for which a PIL can be filed include the following:
- Violation of the human rights of the poor.
- Regarding the content or conduct of government policy.
- To compel municipal authorities to perform a public duty.
- Violation of religious rights or other basic fundamental rights.
Where to file PIL in India?
Under Article 32 of the Indian Constitution, the affected individual has the right to file a Public Interest Litigation in the Supreme Court for the enforcement of rights or duties under the constitution. A PIL can be filed in the Supreme Court under Article 32 or before any of the High Courts under Article 226 of the Indian Constitution.
Against whom PIL can be filed?
A Public Interest Litigation can be filed against any other authority that comes within the meaning of a ‘State’ under Article 12 of the Indian Constitution. Article 12 of the Indian Constitution includes the following:
- The Government, Central and State.
- Parliament of India, Legislative assemblies, Councils of all States and Union Territories.
- Any local or other authorities within the delimitations of India and controlled directly or indirectly by the government.
- Other authorities.
What is the procedure of filing PIL in India?
It is important to conduct proper research before taking the decision to file a PIL in India. It is recommended to research properly regarding the matter and ensure that the PIL is not filed for a frivolous or unimportant matter. If the subject matter of a PIL is unimportant, the court can reject it. It is also seen recently that the court impose heavy penalties on people who have wasted time of the courts by presenting PILs with no substance.
A PIL is filed in the same manner as a writ petition filed in the Supreme Court or High Court. If the PIL is filed in High Court, 2 copies of the petition have to be filed with the court and if the PIL is filed in the Supreme Court, 5 copies of the petition have to be filed. It is also mandatory to send an advocate copy of the PIL to each opposite party and the proof of sending the copy of such PIL has to be attached with the petition.
A court fee per respondent has to be paid along with the Public Interest Litigation. The court process in a PIL hearing is the same as that in another case irrespective of its nature. However, during the PIL proceedings, the presiding judge can appoint a court commissioner to investigate the matter in question, if required.
Role of Judiciary:
In S.P. Gupta V. UOI AIR 1982 SC 149, SC held that, Where a legal wrong or a legal injury is caused to a person or to a determinate class of persons by reason of violation of any constitutional or legal right and such person or determinate class of persons is by reason of poverty, helplessness, or disability or socially or economically disadvantaged position, unable to approach the Court for relief, any member of the public can maintain an application for an appropriate direction, order or writ.
In Hussainara Khatoon V. State of Bihar 1979 AIR 1369, PIL was filed for the rights of prisoners and the attention of the Court was drawn to the trail pending upon them which resulted into an excess of detention period which was far exceeding the maximum punishment available under the law for which they were charged with.
In the case of M.C. Mehta V. UOI 1987 SCR (1) 819, where an industry named Shriram food fertilizers was producing chlorine and caustic as a subsidiary of Delhi Cloth Mills Limited. A major leakage of oleum gas took place from the industry in Dec, 1985. The leakage was caused due to the many mechanical and human errors in the unit, which resulted in the death of several innocent people and an advocate practicing at Tis Hazari Court died.
M.C. Mehta filed a PIL in the Supreme Court to get compensation for the people who have suffered loss in the matter and requested to shut down the unit and not to grant permission for restart.
In Vishaka & Ors.V. State of Rajasthan AIR 1997 SC 3011, the victim was not getting any justice under criminal trial, failures to tangible remedies and restore dignity Naina Kapoor a lawyer made a petition of PIL in this case and challenged the sexual harassment in the workplace. A writ petition was also filed for the same on the name of five NGO against the state government. The judgement clearly depicted and stated that sexual harassment is a clear violation of the fundamental rights of equality, non-discrimination, life and liberty. And given certain guidelines which must be followed in every workplace by the employer and employees.
In Pt. Parmanand Katara V. UOI & Ors. 1989 AIR 2039, a writ petition was filed in the Supreme Court on the basis of newspaper report where a scooter rider was hit by a car and doctors refused to treat and attend him. They directed him to go to another hospital which was 20 km away from that place which could handle medico-legal cases. In this case, SC issues certain guidelines and held that, “Preservation of human’s life is of paramount importance. Every doctor has an obligation to save the life of a person and extend his service to protect his life. ”
A letter can be treated as a PIL?
Initially, where the situation was not providing an opportunity to party to approach the PIL, in that scenario a letter was considered as PIL by the Court.
In D.K. Basu V. State of West Bengal 1997 (1) SCC 416, a letter brought the focus of the Court about the custodial death in the Court premises of the West Bengal. In Hindustan times V. Central Pollution Board (2000) 10 SCC 587, where a newspaper cutting was considered as a PIL by the Court.
Problems with PIL:
Anyone can file public interest litigation, if there is any violation of Fundamental Right. With this development, it seems like the misuse of PIL has reached to peak level, where it is going to overshadow the bright side. There are numerous cases where the misuse of PIL can be clearly depicted.
In case of Subhash Kumar V. State of Bihar & Ors. 1991 AIR 420, the court held that petition is not in public interest but for personal interest. Public Interest Litigation should be resorted to by a person genuinely interested in the protection of society. Personal interest cannot be enforced in the garb of public interest litigation. Entertainment of petitions satisfying personal grudge is abuse of process of the Court duty of the Court is to discharge such petitions.
Conclusion:
The rise in the number of PILs in India is a direct result of judicial activism. It has become a weapon to deal with public issues before the court plays an important role in protecting the fundamental rights of the public as a whole. Public Interest Litigation is for that section of society who was not able to fight for their rights and protect their interests.
Nowadays the same is being misused by the upper class of the society for their own needs. The court has to be extremely cautious in such situations whereby it has to examine whether the petition is for public or private interest. This sacred jurisdiction has to be invoked very carefully in favour of a vigilant litigant and not for sake of publicity or to serve private ends.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali
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