Industrial Employment (Standing Order) Act, 1946

Objective & Scope of Industrial Employment (Standing Order) Act, 1946

Pre-History

An Industrial worker has the right to know the terms and conditions under which he is employed and the rules of discipline which he is expected to follow. Before Industrial Employment (Standing Order) Act, 1946[Here onwards IESOA] condition of service of industrial employees were invariably ill- defined and were hardly ever known with even a slight degree of precession to the employees. – U.P State Electricity Board v. Hari Shankar Jain (1978). The rule of services in Industries are not definitely set out so Industries have adopted Standing Order and rules to govern the day-to-day relation between the employers & workers. The act was enacted to curb the power of the employer to offer such conditions of services as would result in exploitation and bring about uniformity in conditions of services amongst the employees working in different industrial establishments in the same industry. Whereas industrial undertaking in private sector enjoys the power to offer conditions of services to its employees as deemed just and proper by it.

Statement of Object and Reason says that “Standing Order Defines the condition of recruitment, discharge, disciplinary action, holidays, leaves etc. go a long way towards minimizing friction between the management and workers in an industrial undertaking. This act requires the management to define and give knowledge to the employee with sufficient precision and clarity about the conditions of employment under which the workmen were working in their establishment.

In S.S Rly Co. v. Workers’ Union AIR 1969 Supreme Court said that Industrial Employment (Standing Order), 1946 is an act specially designed to define the terms of employment of workmen in industrial establishments to give the workmen collective voice in defining the terms of employment and to subject the terms of employment to the scrutiny of quasi- judicial authorities by the application of the test of fairness and reasonableness.

Concept of Industrial Employment [Standing Orders] Act, 1946

Following are the matter which are referred in this act:

1. Classification of workmen: permanent, temporary apprentices or probationers.

2. Manner goes intimating to workmen periods and hours of work, holidays, pay- days and wage rates.

3. Shift working

4. Attendance and late coming

5. Condition, Procedure, and authority which may grant leave and holidays.

6. Requirements to enter premises by certain gates and liability to search.

7. Closing & re-opening of sections of industry, temporary stoppage of work and right and liabilities of the employer and workmen arising therefrom.

8. Termination of employment, and notice thereof to be given by employer and workmen.

9. Suspension or dismissal for misconduct, and acts or omission which conduct misconduct.

10. Means of redress for workmen against unfair treatment or wrongful exactions by the employer or his agents or servants.

11. Any other matter which may be prescribed.

Coverage of This Act and Exclusion

Section 1(3) clearly states that this act applies to every industrial establishment wherein one hundred or more workmen are employed, or were employed on any day of the preceding 12 months.

In Balakrishna Pillai v. Anant Engineering Works Pvt. Ltd. 1975 Division Bench of Bombay High Court give reasons and ruled that if in an industrial establishment workmen number fall below 100 at any time in One year then also the Act will be completely applicable.

But there are certain industrial establishment which are excluded from the scope of this act:

Section 1(4) nothing in this Act shall apply to—

(i) any industry to which the provisions of Chapter VII of the Bombay Industrial Relations Act, 1946 apply; or

(ii) any industrial establishment to which the provisions of the Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961 apply:

Provided that notwithstanding anything contained in the Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961, the provisions of this Act shall apply to all industrial establishments under the control of the Central Government.

Section 13B says:

Nothing in this Act shall apply to an industrial establishment in so far as the workmen employed therein are persons to whom the Fundamental and Supplementary Rules, Civil Services (Classification, Control and Appeal) Rules, Civil Services (Temporary Services) Rules, Revised Leave Rules, Civil Service Regulations, Civilians in Defense Service (Classification, Control and Appeal) Rules or the Indian Railway Establishment Code or any other rules or regulations as may be notified in this behalf by the appropriate Government in the Official Gazette, apply.

Section 14: Gives Power to government to exempt

The appropriate Government may by notification in the Official Gazette exempt, conditionally or unconditionally, any industrial establishment or class of industrial establishments from all or any of the provisions of this Act.

 

Nature of Standing Order Act

IESOA is of following nature:

i. Statuary in nature

Earlier the High Courts were divided on the issue whether IESOA is statuary in nature or not. While most of Courts titled on the side of statutory nature of the contract, like in the case of Tata Chemical Ltd. v. Kailash C. Adhvaryu 1965 (Gujarat) & Behar Journals Ltd. v. Ali Hasan 1959 (Patna).

Both High Court said that “…the certified Standing Orders have statutory force …. And it is binding on the employer and the workmen, therefore it could not be possible in law for parties…to enter into a contract overriding the statutory contract under certified Standing Order and any contract contrary to this orders must be ignored.”

These views of High Court received the approval of Supreme Court in Bagalkot Cement Company Ltd. v. Pathan (K. K.). 1962 followed by Workmen of Dewan Tea Estate v. Their Management 1964 in which Court held that: Standing Orders can only be overridden by a specific provision of the Act, which may have been introduced after the Standing Order was certified.

In Sudhir Chandra Sarkar v. Tata Iron and Steel Company 1984 it was clearly stated by Supreme Court that the conditions of service laid down in the Standing Order is either Statutory in character or has the statutory flavor.

ii. A special kind of contract

The Other view is that of the Standing Orders is a special kind of contract. In Buckingham and Carnatic Co. v. Venkatayga 1964, Justice Gajendragadkar said: “ The certified standing order represent the relevant terms and conditions of service in a statutory form and they are binding on the parties at least as much, if not more, as private contract embodying similar terms and conditions of services”.

In Mettur Industries v. Verma 1958, Madras High Court observed that: "Reading the Act as a whole it is clear that the Standing orders form part of the contract between the management and every one of its employees".

iii. Award

This is argued on the basis of Section 4(b) which says that “it shall be function of certifying officer … to adjudicate upon the fairness and reasonableness of the provisions of any standing orders”.

In Indian Air Gases Mazdoor Sangh v. Indian Air Gases Ltd. 1977 in which it was ruled that the function of the certifying officer is quasi – judicial.

However, under Section 2(b) of the Industrial Disputes Act, 1947 Standing Orders cannot be an "award". 

Workmen and Employer - Defined

Section 2(s) "workman"  means  any  person  (including  an  apprentice)  employed in  any  industry  to  do  any  manual,  unskilled,  skilled,  technical, operational,  clerical or  supervisory  work  for  hire  or  reward, whether the terms of employment be express or implied, and for  the purposes  of any  proceeding under  this Act  in  relation  to  an  industrial dispute,  includes any  such person who has been dismissed,  discharged or  retrenched in  connection with, or as a consequence of, that dispute,  or whose  dismissal, discharge or retrenchment has led  to that dispute, but does not include any such person—

(i) Who is subject to the Air Force Act, 1950 or the  Army Act,  1950 or the Navy Act, 1957; or             

(ii) Who  is employed in the police service or as an officer or other employee of a prison; or             

(iii) Who   is  employed   mainly  in   a   managerial or administrative capacity; or             

(iv) Who,  being employed  in a  supervisory capacity, draws wages exceeding  one thousand  six hundred  rupees  per month or exercises, either by the nature of the duties attached to  the office  or by  reason  of  the  powers vested  in   him,  functions  mainly  of  a  managerial nature. 

Section 2 (d) define employer:

“Employer” means the owner of an industrial establishment to which this Act for the time being applies, and includes— 

(i) In a factory, any person named under 4[clause (f) of sub-section (I) of section 7, of the Factories Act, 1948 (63 of 1948)], as manager of the factory;

(ii) In any industrial 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;

(iii) In any other industrial establishment, any person responsible to the owner for the supervision and control of the industrial establishment.

Certification Process

According to section 3(1) of IESOA requires every employer of an "industrial establishment" to submit draft Standing Orders i.e., "rules relating to the matter set out in the Schedule” proposed by him for adoption in his industrial establishment.

Section 4 sets out certain condition for certification of Standing Orders which are as follows:

a) Provision is made therein for every matter set out in the schedule which is applicable to the industrial establishment; and

b) They are otherwise in conformity with the provisions of this Act; and

c) They are fair and reasonable.

The draft of standing orders should contain every matter set out in the schedule of the Act with the additional matter prescribed by the Government as are applicable to the industrial establishment.

In Indian Express Employees Union v. Indian Express (Madurai) Ltd. 1998 the Kerala High Court held that the framing of the Standing Orders is to be conformity with the provisions of the Act. In Rashtriya Chemicals and Fertilizers Ltd. v. General Secretary, FCI Workers Union 1997 the Division Bench of the Bombay High Court held that the word ‘conformity’ means that it should not be inconsistent.

Prior to 1956, the Certifying Officer has no power to question the reasonableness and fairness of the draft standing orders submitted to him by the employers, his only function was to see that the draft must incorporate all matters contained in the schedule and that it was otherwise certifiable under the Act. In 1956, the Parliament amended the Act and thereby not only considerably widened the scope of the Act through Section 4 which imposed a duty upon the Certifying Officer and the appellate authority to adjudicate upon the fairness and reasonableness of the Standing Orders. If they find some provisions are unreasonable they must refuse to certify the same. (A.G. Mazdoor Sangh v. Indian Air Gases Ltd. 1997)

Procedure for Certification of Standing Orders (Section 5)

1. On receipt of the draft Standing Order, the Certifying Officer shall forward a copy to the trade union of the workmen if any, or where there is no such trade union, to the workmen in such manner as may be prescribed, together with a notice in the prescribed form requiring objections, if any, which the workmen may desire to make to the draft standing orders to be submitted to him within fifteen days from the receipt of the notice.

2. After giving the employer and the trade union or such other representatives of the workmen as may be prescribed, an opportunity of being heard, the Certifying Officer shall decide whether or not any modification of or addition to the draft submitted by the employer is necessary to render the draft standing orders certifiable under this Act, and shall make an order in writing accordingly.

3. The Certifying Officer shall thereupon certify the draft standing orders, after making any modifications therein which his order under sub-section (2) may require, and shall within seven days thereafter send copies of the certified standing orders authenticated in the prescribed manner and of his order under sub-section (2) to the employer and to the trade union or other prescribed representatives of the workmen.

Appeal – Section 6

An aggrieved party may appeal to the appellate authority within thirty days from the date on which the copies of the standing orders were sent to it by the certifying officer. The order of the authority shall be final.

Section 6(1) empowers the appellate authority to do only two things:

I. Confirm the standing orders in the form certified by the certifying officer

II. Confirm the standing orders after amending them by making the necessary modifications or additions.

The certified standing orders become enforceable on the expiry of 30 days from the date on which the authenticated copies of the same are sent to the parties by the certifying officer. If an appeal has been filed, it shall come into operation on the expiry of 7 days from the date on which copies of the order of the appellate authority are sent to the parties.

Modification of Standing Orders

Section 10 deals with Duration and modification of standing orders which says that Standing Orders finally certified under IESOA cannot be modified except on agreement b/w the employer and the workmen or a trade union or other representative body of the workmen before the expiry of 6 months from the date on which the Standing Orders or last modification became operative. The object of providing time limit was that the Standing Orders or their modification should be given a fair trial.

Who can apply for Modification?

Prior to 1956, the right to apply for modification was only conferred on the employer, but later through amending the act of 1956, it permitted both the employer and the workmen to apply for modification of the Standing Orders. Later through 1982 – amendment it also included trade union or other representatives of the worker eligible who can apply for modification.

Section 10 (2) reads as follows:

“Subject to the provisions of sub-section (1), an employer or workman [or a trade union or other representative body of the workmen] may apply to the Certifying Officer to have the standing orders modified and such application shall be accompanied by five copies of [***] the modifications proposed to be made, and where such modifications are proposed to be made by agreement between the employer and the workmen [or a trade union or other representative body of the workmen] a certified copy of that agreement shall be filed along with the application.”

In Indian Express Employees Union v. Indian Express(Madurai) Ltd, 1999 it was held that if there are 2 trade union one major another minor, then if an application for modification is made by a minority union, the majority union can object to such modification. Kerala High Court also held that as there is no time limit is given in Section 19(2) for making modification application so after the expiry of 6 months from the last modification. A modification application can also be made even after a decade.

Procedure for Modification- Section 10(2)

The application of modification should be accompanied by 5 copies of the modification proposal to be made and where such modification proposed to be made by agreement b/w the employer and the workmen, a certified copy of that agreement shall be filed along with the application. This provision is applicable in rest India except in State of Gujrat and Maharashtra (Section 10 (4)).

Temporary Application of Model Standing Orders – Section 12A

This Section provides that the Model Standing Orders will be applicable to an Industrial Establishment during the period commencing on the date on which the Act becomes applicable to that Establishment and the date on which the Act becomes applicable to that Establishment and the date on which the Standing Orders as finally certified under this Act, came into operation.

Section 12A. Temporary application of model standing orders.— 

(1) Notwithstanding anything contained in sections 3 to 12, for the period commencing on the date on which this Act becomes applicable to an industrial establishment and ending with the date on which the standing orders as finally certified under this Act come into operation under section 7 in that establishment, the prescribed model standing orders shall be deemed to be adopted in that establishment, and the provisions of section 9, sub- section (2) of section 13 and section 13A shall apply to such model standing orders as they apply to the standing orders so certified.

(2) Nothing contained in sub-section (1) shall apply to an industrial establishment in respect of which the appropriate Government is the Government of the State of Gujarat or the Government of the State of Maharashtra.

Model Standing Order

Under this Act, model Standing Orders are framed and as soon as the Act applies to an industrial establishment the employer is under an obligation to submit a draft amendment to the model Standing Orders as desired by him but the certifying officer has to certify the same. These model standing orders provide for minimum decent conditions of services. These model standing orders were framed as early as 1948 and there are minor amendments here or there.

The model standing order does not provide for any method or manner of recruitment, promotion, transfer or grievance procedure. Today the employer enjoys an arbitrary discretion or an unfettered power of recruiting anyone as he likes. This definitely results in favoritism, nepotism, and class of loyal workers. It becomes counter- productive to the healthy trade Union activity.

Under Section 15 (2) (b) it is said that "as far as it is practicable." The employer should submit draft Standing Order which has conformity with it. But it does not mean that the draft standing order must be in identical words but it means that in substance it must conform to the model prescribed by the appropriate government. [Associated Cement v. P. D. Vyas op. cit.,]

Interpretation of Standing Orders – Section 13A

Section 13A. Interpretation, etc., of standing orders.—

“If any question arises as to the application or interpretation of a standing order certified under this Act, any employer or workman or a trade union or other representative body of the workmen may refer the question to any one of the Labour Courts constituted under the Industrial Disputes Act, 1947, and specified for the disposal of such proceeding by the appropriate Government by notification in the Official Gazette, and the Labour Court to which the question is so referred shall after giving the parties an opportunity of being heard, decide the question and such decision shall be final and binding on the parties”.

In Messrs Deoria Sugar Mills Ltd. v. Deputy Labour Commissioner 1977 the Allahabad High Court held that under Section 13A it is permissible for the workmen concerned to produce any evidence which is relevant and related to workmen concerned and what was its probative value and whether it was sufficient to rebut the initial presumption in favor of the entry in the provident fund records.

Power of Labour Court under Section 13A

The Gujrat High Court has held that “there are no words in Section 13A which empowers the Labour Court to grant redress for violation of the rights and obligations created under the Standing Orders.” The Court added that no power to grant relief by way of enforcement of the rights and obligations created by the Standing Orders can be implied merely from the conferment of the power on the Labour Court to decide any question as to the application or interpretation of standing orders which might be referred to it by the employer or workmen. The Court held that the Labour Court is not competent under Section 13A to grant a declaration that the dismissal of the concerned workmen was illegal and that he continued in the employment of employer. Further, the Court ruled that Labour Court is authorized to direct the employer to pay to workmen concerned his emoluments from the date of dismissal to the date of reinstatement.

Legal status of Standing Orders -The Full Bench of the Rajasthan High Court in Bhanwar Lal v. Rajasthan State Road Transport Corporation 1984 was invited to consider whether clause 13 of the Standing Orders was violative of Article 14 and 16 of Constitution. Lodha J., who delivered the majority judgment, held that clause 13 had the force of law like any other statutory instrument and was liable to test trail and scrutiny of the equality under Article 14.

PENALTIES

Section 13(1) prescribes a fine extending to rupees 5,000 on those employers who fail to submit draft Standing Orders under Section 3, or who modifies his Standing Orders otherwise than in accordance with Section 10. If the offence is continuing one, he shall be liable for further fine extending to rupees 200 every day after the first during which the offence continues.

The Act also imposes a fine extending to rupees 100 upon the employer who contravenes any provision for the finally certified Standing Orders under the Act. If the offence is a continuing one he shall be liable to a further fine extending to 25 rupees every day after the first during which the offence continues.[Section 13(2)].

But in order to be prosecuted for the aforesaid offence the prior sanction of the appropriate Government is essential [Section 13(3)]. However, no Court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the second class shall try any offence under this Section [Section 13(4)].

However, IESOA does not invest the Labour Court with the power to grant relief in the enforcement of the rights and liabilities created by the Standing Orders.

*Disclaimer: The contents of the blog are not intended to convey any legal advice to the reader neither the blog creates any attorney-client relationship. You may contact an enrolled legal practitioner for assistance with your legal needs.*