Labour Law and Industrial Relations II Notes | LL.B. (3 years) Semester 5 | Mumbai University | munotes

The Central Government issued the notification on 21 November 2025. It is S.O. 5319(E), published in the Gazette of India, Extraordinary, Part II, section 3(ii). Three other notifications of the same date, S.O. 5320(E), S.O. 5321(E) and S.O. 5322(E), brought the other three Codes into force on the same day.

Three dates, not one. Because section 1(3) permits it, this Code came into force in three instalments, and a student who says "the Code commenced on 21 November 2025" is right about almost all of it but should know the exceptions:

A corrigendum of 19 December 2025 was issued because S.O. 5319(E) had left the picture ambiguous. Read on its own, S.O. 5319(E) commences "items 1 and 2 and items 4 to 9" of section 164(1) and says nothing about item 3, which reads as though the Employees' Provident Funds and Miscellaneous Provisions Act 1952 had escaped repeal. It had not. Item 3 had already been brought into force on 3 May 2023. The corrigendum says so. The whole of section 164(1) is in force and all nine Acts are repealed.

What the Code repealed

Section 164(1) of the Code repeals nine enactments. Learn this list. It is the sort of thing that is asked as a short note, and it is also the reason so much of what a student will read elsewhere on this subject is now out of date.

A word about what "repealed" does and does not mean. When an Act is repealed it ceases to be law. It does not mean that everything done under it disappears. Section 164(2)(a) provides that anything done or any action taken under the repealed Acts, including any rule, regulation, notification, scheme, appointment, order or direction, is deemed to have been done under the corresponding provision of this Code and remains in force so far as it is not contrary to the Code, until it is itself repealed.

Section 164(2)(b) is narrower and carries a time limit. It keeps the Employees' Provident Funds Scheme 1952, the Employees' Deposit Linked Insurance Scheme 1976, the Employees' Pension Scheme 1995, the Tribunal (Procedure) Rules 1997 and the schemes, rules and regulations made under the Employees' State Insurance Act 1948 in force, so far as they are not inconsistent with the Code, for a period of one year from the date of commencement of this Code.

Do not confuse the two. Neither provision revives a repealed Act. Both keep subordinate instruments working while the new ones are made under the Code. Saying "the Provident Funds Act still applies" is wrong; saying "the Provident Fund Scheme framed under it continues for the time being" is right.

Section 164(3) then applies section 6 of the General Clauses Act 1897, which is the general law on the effect of repeals. Its practical effect is that a right accrued, a liability incurred or a proceeding begun under a repealed Act is not destroyed by the repeal.

The salient features

This is the part most likely to be set as a short note, and the safest way to answer is to organise it around what the Code actually changed.

1. One Act in place of nine. The Code has 164 sections in fourteen Chapters and seven Schedules. Chapter I is preliminary, Chapter II sets up the organisations, Chapters III to IX carry the seven benefits, and Chapters X to XIV carry money, enforcement, offences, employment information and the miscellaneous provisions.

2. One definition of wages for all four Codes. Section 2(88) defines "wages" in terms that are identical in the Code on Wages, the Industrial Relations Code and the OSH Code. It has an inclusive part, an excluded list of eleven items, and a proviso capping the excluded items at one half of all remuneration. Under the old law each Act defined its own wage base and litigation followed. This is taken up in [Definitions under the Social Security Code].

3. Coverage extended beyond the organised sector. Chapter IX brings unorganised workers, and for the first time in Indian law gig workers and platform workers, within a statutory social security framework. Section 2(35) and section 2(61) define them. This is the Code's genuine novelty and it is dealt with in the gig and platform workers chapter of Module II.

4. Aadhaar based registration. Section 142 allows an employee or worker to be required to establish identity through the Aadhaar number for the purpose of registering, receiving benefits, or withdrawing from a fund. It is the provision that has been in force longest, since 3 May 2021.

5. A Social Security Fund. Section 141 provides for a Social Security Fund for the welfare of unorganised workers, gig workers and platform workers, into which amounts including penalties recovered under the Code are credited.

6. Aggregator contributions. Section 114(4) allows a scheme for gig and platform workers to be funded partly by contributions from aggregators, at a rate between one and two per cent of turnover, subject to a cap of five per cent of the amount paid to those workers. Nothing like this existed before.

7. Fixed term employment gets gratuity without the five year wait. Section 53(1)(d) read with its second proviso entitles a fixed term employee to gratuity on the expiry of the term, and expressly removes the requirement of five years' continuous service. See [Gratuity: Entitlement and Continuous Service].

8. Inspector-cum-Facilitator in place of the Inspector. Section 122 renames and re-conceives the enforcement officer, whose duties now include advising employers on compliance as well as inspecting them. Section 137 requires that an employer be given an opportunity to comply before prosecution for most offences.

9. Common registration and one set of records. Section 3 provides for electronic registration of establishments and section 123 for maintenance of records and returns in the prescribed manner, in place of the separate registers each old Act required.

How the Code is arranged

A student who knows the shape of the Code can find anything in it. The order below is the order of the sections, and it is also the order of this book.

MU's syllabus splits this Code across two modules and the split falls between Chapter VI and Chapter VII. Module I is Chapters I to VI. Module II is Chapter VII onwards. The split is the syllabus's, not the Code's.

Application: who the Code covers

Section 1(2) extends the Code to the whole of India. But the Code does not apply to every establishment in the same way, and this is where students lose marks by over generalising.

Section 1(4) makes the applicability of the Chapters listed in the First Schedule depend on what column (3) of that Schedule says for each one. Read that column carefully: it is not a table of numbers. Some rows give a headcount, some name a kind of establishment and give no number, and some do both. Students who memorise "ten or more" as the general rule get Chapters V, VI and VIII wrong.

Four further sub-sections widen this. Section 1(5) lets the Central Provident Fund Commissioner apply Chapter III to a smaller establishment where the employer and a majority of the employees agree, and lets them come out again on the same footing. Section 1(7) does the same for Chapter IV through the Director General of the Corporation. Section 1(6) lets the Central Government apply the Code to any establishment employing not less than a notified number of persons, after giving at least two months' notice of its intention.

Section 1(8) is the one to remember, because it is the sticky one. Notwithstanding section 1(4), an establishment to which any Chapter applies at the first instance shall continue to be governed by it thereafter, even if the number of employees at any subsequent time falls below the threshold in the First Schedule for that Chapter.

So coverage is a one way door. An establishment which once crossed the line stays covered when it shrinks back below it. A student who answers a problem by counting today's headcount alone, without asking whether the Chapter ever applied, gets it wrong.

A worked example

Meera runs a garment unit in Bhiwandi with fourteen workers on the rolls, stitching on powered machines. She wants to know which parts of the Code bind her on 1 January 2027.

Step 1. Is the Code in force? Yes. It commenced on 21 November 2025 under S.O. 5319(E), except for the provisions already in force from 2021 and 2023.

Step 2. What kind of establishment is it? This has to be settled first, because three rows of the First Schedule turn on it rather than on a headcount. Section 2(32)(a) defines a factory as premises where ten or more employees work and a manufacturing process is carried on with the aid of power. Meera has fourteen and uses power. Her unit is a factory. Had she stitched by hand, clause (b) would have required twenty, and with fourteen hand workers she would not have had a factory at all.

Step 3. Chapter III, provident fund? No. That row of the First Schedule does set a number, twenty or more employees, and Meera has fourteen. But note section 1(5): if she and a majority of her fourteen agree, the Central Provident Fund Commissioner may apply Chapter III to her unit by notification.

Step 4. Chapter IV, employees' state insurance? Yes. That row sets ten or more persons, and a garment unit is not a seasonal factory.

Step 5. Chapter V, gratuity? Yes, and note why. Clause (a) of that row covers every factory outright, with no number attached. Meera is covered because her unit is a factory under step 2, not because she has more than ten employees. The ten figure in clause (b) governs shops and other establishments, which hers is not.

Step 6. Chapter VI, maternity benefit? Yes, and for the same reason: clause (a) of that row covers every establishment being a factory, mine or plantation, with no headcount.

Step 7. Chapter VII, employees' compensation? For her employees covered by Chapter IV, no. That row applies Chapter VII, subject to the Second Schedule, to the employers and employees to whom Chapter IV does not apply, because those under Chapter IV are already insured. This is the point students most often miss.

Step 8. Does the old law help her? No. The Employees' State Insurance Act 1948, the Payment of Gratuity Act 1972 and the Maternity Benefit Act 1961 were all repealed on 21 November 2025 by section 164(1). A compliance manual written on those Acts is a historical document.

What this does NOT mean

It does not mean the old case law is worthless. Where the Code carries forward the same words, decisions on the repealed Act still explain what those words mean. Where the Code changes the words, they do not. Every case in this book states which statute it was decided under, and why it survives, for exactly this reason.

It does not mean the Code is fully operational in every practical sense. The Code is in force, but rules and schemes under it are made separately by the Central and State Governments, and section 164(2) keeps the old subordinate instruments alive in the meantime. In an exam, the Code is the law. In an office, the rules are still arriving.

It does not mean that "Code" implies a mere compilation. A consolidating Act reproduces existing law in one place; an amending Act changes it. Section 164's long title describes this as an Act "to amend and consolidate", and it does both. Do not describe it as a mere restatement.

Limits and criticism

The Code has been criticised on four grounds worth knowing, because a good answer on "salient features" that also states the criticism reads as though the student has thought about it.

The thresholds survive. Chapter III still needs twenty employees and most of the rest still need ten. A very large part of the workforce is employed in units below those numbers and remains outside the mandatory chapters, reachable only through the schemes in Chapter IX.

Chapter IX is enabling, not conferring. Sections 109 and 114 empower the appropriate Government to frame schemes. Until a scheme is framed and funded, an unorganised or gig worker has a place in the statute rather than a benefit in hand.

Much is left to delegated legislation. The Code repeatedly says "as may be prescribed", and the wage ceiling in section 2(89), the maximum gratuity in section 53(3) and the rate of contribution are all to be notified rather than fixed in the Code.

The definitions of employee, worker and wages are common but not identical in effect. Different Chapters use "employee" and "worker" differently, and the aggregator provisions use a third vocabulary again, so the promised simplification is real but partial.

Quick revision

• The Code on Social Security 2020 is Act 36 of 2020. Assent 28 September 2020. Commenced 21 November 2025 by S.O. 5319(E), with section 142 from 3 May 2021 and the pension provisions from 3 May 2023.
• It extends to the whole of India: section 1(2).
• Section 1(3) allows different dates for different provisions, which is why there are three commencement dates.
• 164 sections, 14 Chapters, 7 Schedules.
• Section 164(1) repeals nine Acts. Section 164(2)(a) saves things done under them; section 164(2)(b) saves the EPF, EDLI, EPS and ESI schemes for one year from commencement; section 164(3) applies section 6 of the General Clauses Act 1897.
• Section 1(8): coverage is sticky. Once a Chapter applies, it keeps applying even if the headcount later falls below the threshold.
• Applicability is in the First Schedule, and it is not a table of numbers. Twenty or more for Chapter III. Ten or more for Chapter IV. Chapters V and VI cover a factory, mine or plantation with no headcount, and use ten only for shops and other establishments. Chapter VII covers those to whom Chapter IV does not apply. Chapter VIII states no number at all.
• Salient features to name: one Act for nine, one definition of wages, gig and platform workers covered, Aadhaar, Social Security Fund, aggregator contributions, gratuity for fixed term employees, Inspector-cum-Facilitator.

Test yourself

1. The Code received assent on 28 September 2020. Was it law in 2023? Almost entirely no. Assent is not commencement. Section 1(3) requires a notification, and the general notification came only on 21 November 2025. The exceptions are section 142, in force from 3 May 2021, and the Employees' Pension Scheme provisions, in force from 3 May 2023.

2. Name the nine Acts repealed by section 164(1). Employee's Compensation Act 1923; Employees' State Insurance Act 1948; Employees' Provident Funds and Miscellaneous Provisions Act 1952; Employment Exchanges (Compulsory Notification of Vacancies) Act 1959; Maternity Benefit Act 1961; Payment of Gratuity Act 1972; Cine-Workers Welfare Fund Act 1981; Building and Other Construction Workers' Welfare Cess Act 1996; Unorganised Workers' Social Security Act 2008.

3. An employer says the Employees' Provident Funds Scheme 1952 is dead because its parent Act is repealed. Is he right? No. Section 164(2)(b) expressly keeps the Scheme in force, so far as it is not inconsistent with the Code, for one year from the date of commencement. The parent Act is repealed; the Scheme is preserved for that period.

4. An establishment has twelve employees. Does Chapter III apply? Not automatically. The First Schedule sets the provident fund threshold at twenty. But under section 1(5), if the employer and a majority of the employees agree, the Central Provident Fund Commissioner may apply Chapter III by notification.

5. Distinguish assent from commencement in one sentence each. Assent is the President's approval, which completes the enactment of a Bill into an Act. Commencement is the date from which the Act, or a specified provision of it, has legal effect, fixed here by notification under section 1(3).

6. Why does it matter, for this paper, that the Code commenced on 21 November 2025? Because the whole of Modules I and II is now live law rather than a proposed reform, and because every one of the nine Acts a student may have been taught instead stands repealed from that date.

Four things in that clause repay attention. It reaches a person engaged through a contractor, so contract labour is not outside the Code. It covers managerial and supervisory work, so seniority does not put a person outside it. It covers implied terms, so the absence of a letter of appointment proves nothing. And the only excluded categories are apprentices under the 1961 Act and the Armed Forces.

The proviso is where the money is. For the purposes of Chapter III, except in the case of the Employees' Provident Fund Scheme, and for Chapter IV, "employee" means only an employee drawing wages less than or equal to the wage ceiling notified by the Central Government. So provident fund and employees' state insurance are, by design, wage capped benefits. A second proviso deals with counting: for deciding whether an establishment is covered at all under Chapters III and IV, employees earning more than the ceiling are still counted.

Do not carry the wage ceiling across into gratuity, maternity benefit or compensation. It belongs to Chapters III and IV alone.

"Employer", section 2(27). A person who employs one or more employees in his establishment, whether directly or through any person. The clause then names five people who are included, and it is the inclusion list that gets examined:

For a Government department it is the authority specified by the head of the department or, if none is specified, the head of the department; for a local authority, its chief executive.

"Unorganised worker", section 2(86), and the definitions it depends on. An unorganised worker is a home-based worker, a self-employed worker or a wage worker in the unorganised sector, and it also includes a worker in the organised sector who is not covered by the Industrial Disputes Act 1947 or by Chapters III to VII of this Code.

That definition is a chain, so follow it:

• "Unorganised sector", section 2(85): an enterprise owned by individuals or self-employed workers, engaged in producing or selling goods or providing service of any kind, and where it employs workers, fewer than ten of them.
• "Organised sector", section 2(54): an enterprise which is not an unorganised sector. The Code defines it by exclusion and nothing more.
• "Home-based worker", section 2(36): a person engaged in producing goods or services for an employer in his own home or other premises of his choice, other than the employer's workplace, for remuneration, whether or not the employer supplies the equipment, materials or inputs.

"Gig worker", section 2(35). A person who performs work, or participates in a work arrangement, and earns from such activities outside of traditional employer-employee relationship. This is the first time an Indian statute has defined the term.

"Platform work", section 2(60), and "platform worker", section 2(61). Platform work is a work arrangement outside a traditional employer employee relationship in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or provide specific services, in exchange for payment. A platform worker is a person engaged in or undertaking platform work.

"Aggregator", section 2(2). A digital intermediary or a marketplace for a buyer or user of a service to connect with the seller or the service provider. This is the entity that pays the contribution under section 114(4).

The relationship between the last three is worth stating plainly, because it is a favourite short question. Every platform worker is a gig worker; not every gig worker is a platform worker. Gig work is defined by being outside the traditional employment relationship. Platform work is the subset of it that is mediated by an online platform. A freelance electrician found by word of mouth is a gig worker. The same electrician taking jobs through an app is also a platform worker, and the app is the aggregator.

"Inter-State migrant worker", section 2(41). A person employed in an establishment who either was recruited, directly by the employer or through a contractor, in one State for employment in an establishment in another State; or who came on his own from one State and obtained employment in an establishment in another State, or afterwards changed establishments within that destination State, under an agreement or arrangement, and draws wages not exceeding eighteen thousand rupees a month or such higher amount as the Central Government may notify.

The wage limit attaches only to the second limb, the self-migrant. Read the clause carefully in a problem question: a worker recruited across State lines by a contractor falls in the first limb and no wage limit is stated for him.

"Fixed term employment", section 2(34). The engagement of an employee under a written contract for a fixed period. The provisos matter more than the definition: his hours, wages, allowances and other benefits must not be less than those of a permanent employee doing the same or similar work, and he is entitled to all benefits available to a permanent employee proportionately to the service he has rendered, even where his employment does not last the qualifying period. That second proviso is what makes gratuity payable to a fixed term employee without five years' service.

2. Where the Code applies: establishment, factory and the rest

"Establishment", section 2(29). Three limbs. A place where any industry, trade, business, manufacture or occupation is carried on; or a factory, motor transport undertaking, newspaper establishment, audio-visual production, building and other construction work or plantation; or a mine, port or vicinity of a port where dock work is carried out. An Explanation adds that for Chapter III, departments and branches, whether in the same place or different places, are all parts of the same establishment.

"Factory", section 2(32). Premises, including the precincts, where either ten or more employees work or worked on any day of the preceding twelve months and a manufacturing process is carried on with the aid of power, or twenty or more where the manufacturing process is carried on without the aid of power. It excludes a mine, a mobile unit of the Armed Forces, a railway running shed, and a hotel, restaurant or eating place. Explanation 1 requires all employees in different groups and relays in a day to be counted.

Ten with power, twenty without. Reversing those two numbers is the single commonest mistake in this paper.

"Seasonal factory", section 2(74). A factory exclusively engaged in one or more of cotton ginning, cotton or jute pressing, decortication of ground-nuts, or the manufacture of indigo, lac or sugar including gur, or any manufacturing process incidental to or connected with those; and it includes a factory engaged for a period not exceeding seven months in a year in a manufacturing process notified by the Central Government. The definition matters because the Chapter IV threshold in the First Schedule excludes a seasonal factory.

"Contract labour", section 2(19), and "contractor", section 2(20). Contract labour means a worker deemed to be employed in or in connection with the work of an establishment when he is hired for that work by or through a contractor, with or without the knowledge of the principal employer, and it includes an inter-State migrant worker. It does not include an employee, other than a part time employee, who is regularly employed by the contractor for an activity of the contractor's own establishment, whose employment is governed by mutually accepted standards including engagement on a permanent basis, and who gets periodical increments, social security coverage and other welfare benefits.

A contractor is a person who either undertakes to produce a given result for the establishment through contract labour, other than by merely supplying goods or articles of manufacture, or supplies contract labour for any work of the establishment as mere human resource; and it includes a sub-contractor.

The exclusion in section 2(19) is the important half. A contractor's own permanent, properly benefited workforce is not "contract labour" merely because it is deployed at somebody else's premises. What the clause targets is the supply of people as a commodity.

3. What triggers a benefit: injury, disablement and dependant

"Employment injury", section 2(28). A personal injury to an employee caused by accident or an occupational disease arising out of and in the course of his employment. The clause then says, for both Chapter IV and Chapter VII, that it applies whether the accident occurs or the disease is contracted within or outside the territorial limits of India.

The phrase "arising out of and in the course of" is the most litigated in this subject and is worked in full in the employer's liability chapter of Module II.

Three kinds of disablement. Learn these together, because they are distinguished from each other and the distinctions carry marks.

"Dependant", section 2(24), decides who receives compensation when the employee dies. It is a graded list rather than a single class, and it is set out in the key concepts chapter of Module II where it is applied.

"Social security", section 2(78). The Code defines its own subject. Social security means the measures of protection afforded to employees, unorganised workers, gig workers and platform workers to ensure access to health care and to provide income security, particularly in old age, unemployment, sickness, invalidity, work injury, maternity or loss of a breadwinner, by means of rights conferred and schemes framed under the Code. It is a good sentence to open an essay with.

4. The money: wages

"Wages", section 2(88), is the most important definition in all four labour Codes, because the same wording appears in each of them. A single wage base now runs across wages, industrial relations, social security and occupational safety.

The clause has three parts.

The general words. Wages means all remuneration, whether by way of salaries, allowances or otherwise, expressed in money or capable of being so expressed, which would be payable to a person employed in respect of his employment or of work done in that employment if the terms of employment, express or implied, were fulfilled.

What is included: basic pay; dearness allowance; and retaining allowance, if any. Three items only.

What is excluded: eleven items. Statutory bonus not forming part of contractual remuneration; the value of house accommodation, light, water, medical attendance or other amenity excluded by order of the appropriate Government; employer's contribution to a pension or provident fund and interest on it; conveyance allowance or the value of a travelling concession; sums paid to defray special expenses entailed by the nature of the employment; house rent allowance; remuneration under an award, settlement or order of a court or Tribunal; overtime allowance; commission; gratuity payable on termination; and retrenchment compensation, other retirement benefit or ex gratia payment on termination.

Then the proviso that changes everything. If the payments falling under exclusions (a) to (i) exceed one half of all remuneration, or such other percentage as the Central Government may notify, the amount exceeding that half is deemed to be remuneration and is added back into wages.

A second proviso provides that for equal wages to all genders and for payment of wages, the excluded items at (d), (f), (g) and (h), that is conveyance, house rent, award remuneration and overtime, are taken into account. An Explanation adds that remuneration in kind, up to fifteen per cent of total wages, is deemed to form part of wages.

Why the proviso exists. Because employers had learned to shrink the wage base. If provident fund is payable on basic pay and dearness allowance, an employer can pay a small basic and a large bundle of allowances, and the contribution shrinks with it. The courts had attacked this by construction.

Regional Provident Fund Commissioner (II) West Bengal v. Vivekananda Vidyamandir, (2019) 6 SCC 240, is the leading modern decision.

Facts. A group of appeals raised one question: whether allowances such as canteen, conveyance, management, medical, night shift, rent, special and travel allowances formed part of "basic wages" under section 2(b) of the Employees' Provident Funds and Miscellaneous Provisions Act 1952, so that provident fund had to be paid on them. The provident fund authority and the appellate authority had found, as a fact, that the allowances were essentially part of the basic wage camouflaged as allowances so as to avoid contribution.

Held. Those wages which are universally, necessarily and ordinarily paid to all employees across the board are basic wages. The crucial test is one of universality. Where a payment is available only to those who avail an opportunity more than others, or is variable, or is linked to an incentive for production beyond the norm, it falls outside: overtime and leave encashment are the Court's own examples. The establishments had produced no material to show the allowances were variable, incentive linked, or not paid across the board, and the concurrent findings of fact were not disturbed.

Why it matters here. Twice over. It explains the mischief the first proviso to section 2(88) now meets by arithmetic instead of by construction: an employer who loads more than half the package into excluded allowances has the excess added back automatically, with no need to prove universality. But note the limit of the case. It was decided under the 1952 Act, which item 3 of section 164(1) has repealed, and on the phrase "basic wages", which the Code does not use. Cite it for the reasoning and the history, not as the current test. The current test is the proviso.

5. Who administers: the organisations and officers

These are worth knowing by name so that later Chapters read easily. "Social Security Organisation", section 2(79), is the collective term. "Central Board", section 2(10), is the Board of Trustees of the Employees' Provident Fund. "Corporation", section 2(22), is the Employees' State Insurance Corporation. "National Social Security Board", section 2(49), and "State Unorganised Workers' Board", section 2(81), are the unorganised sector bodies, and "Building Workers' Welfare Board", section 2(8), the construction one. "Inspector-cum-Facilitator", section 2(37), is the enforcement officer. "Competent authority", section 2(16), decides compensation claims; "Authorised Officer", section 2(5), and "Recovery Officer", section 2(68), handle assessment and recovery.

"Appropriate Government", section 2(3), decides which Government makes the rules and runs the scheme. It is the Central Government for an establishment carried on by or under the authority of the Central Government, for a notified controlled industry, and for railways including metro railways, mines, oilfields, major ports, air transport service, telecommunication, banking and insurance companies, bodies established by a Central Act, central public sector undertakings and their subsidiaries, autonomous bodies owned or controlled by the Central Government, any company in which the Central Government holds not less than fifty-one per cent of the paid up share capital, and establishments of contractors for any of those; and for an establishment with departments or branches in more than one State. Otherwise it is the State Government.

A worked example

Ravi drives for a ride hailing app in Mumbai. He owns his car, logs in when he likes, and the app takes a percentage of each fare. Separately he spends two evenings a week doing accounts for a neighbourhood shop that employs six people, for a fixed monthly payment.

Is Ravi an employee under section 2(26) in his driving work? Almost certainly not. Section 2(26) requires a person employed on wages by an establishment. He chooses his own hours, supplies his own vehicle and is paid per fare.

Is he a gig worker under section 2(35)? Yes. He performs work and earns from it outside a traditional employer-employee relationship, which is exactly the clause.

Is he a platform worker under section 2(61)? Yes. The work reaches him through an online platform, which is platform work under section 2(60).

What is the app? An aggregator under section 2(2), a digital intermediary connecting the user of a service with the provider. If it falls within a category in the Seventh Schedule it may be required to contribute under section 114(4).

What about the shop work? The shop employs six people, so it is an enterprise employing fewer than ten and is an unorganised sector enterprise under section 2(85). Ravi is a wage worker in it, and therefore an unorganised worker under section 2(86).

So what does Ravi actually get? Registration under section 113 and the benefit of any scheme framed under section 109 or section 114. Note what he does not get: Chapters III to VII, the mandatory benefits, do not reach him, because those attach to an employee of a covered establishment. This is the honest answer and it is the one that earns marks. The Code brings Ravi inside the statute; it does not by itself put money in his hand.

What these definitions do NOT mean

"Employee" is not confined to workmen. Managerial, supervisory and administrative work is expressly inside section 2(26). The old habit of asking whether someone is a "workman" belongs to industrial dispute law, not here.

The wage ceiling is not general. It appears in the first proviso to section 2(26) and governs Chapters III and IV only.

"Unorganised sector" is not simply "small". It is an enterprise owned by individuals or self-employed workers which, if it employs anyone, employs fewer than ten. A ten person subsidiary of a large company is not an unorganised sector enterprise.

"Wages" is not "everything the employer pays". Eleven categories are excluded. But neither is it merely basic pay, because the first proviso adds the excess back once the excluded items pass one half.

Limits and criticism

The definitions are common across the four Codes but the thresholds are not. A worker can be an employee for one Code and outside the benefit chapters of this one.

Two definitions point at repealed Acts. Section 2(86) defines an unorganised worker partly by reference to a worker "not covered by the Industrial Disputes Act, 1947", and the Industrial Disputes Act was itself repealed by the Industrial Relations Code 2020. The reference has to be read through section 8 of the General Clauses Act 1897, which construes a reference to a repealed enactment as a reference to the corresponding provision of the re-enacting law.

"Gig worker" is defined negatively. It tells you what the relationship is not, rather than what it is, which leaves the boundary between a gig worker and a disguised employee to be worked out case by case.

The wage ceiling is not in the Code. Section 2(89) leaves it to be notified, so the coverage of Chapters III and IV is set by executive action.

Quick revision

• Section 2 has ninety-one definitions and opens "unless the context otherwise requires".
• Employee, 2(26): any person employed on wages, directly or through a contractor, on work of any kind including managerial; excludes apprentices under the 1961 Act and the Armed Forces; wage ceiling proviso for Chapters III and IV only.
• Employer, 2(27): includes the occupier of a factory, the owner or manager of a mine, the person with ultimate control, the contractor, and a deceased employer's legal representative.
• Factory, 2(32): ten with power, twenty without.
• Establishment, 2(29): three limbs; branches are one establishment for Chapter III.
• Wages, 2(88): includes basic pay, dearness allowance, retaining allowance; excludes eleven items; first proviso adds back the excess over one half.
• Gig worker 2(35) is outside the traditional relationship; platform worker 2(61) is the online subset; the aggregator 2(2) is the intermediary.
• Unorganised sector 2(85): owned by individuals or self-employed workers, employing fewer than ten.
• Inter-State migrant worker 2(41): recruited across States, or self-migrated and drawing not more than eighteen thousand rupees a month.
• Three disablements: temporary 2(83), permanent partial 2(55), permanent total 2(56).

Test yourself

1. Define "employee" under the Code and state the one limit that applies to provident fund. Section 2(26): any person, other than an apprentice under the Apprentices Act 1961, employed on wages by an establishment, directly or through a contractor, to do skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical, clerical or other work, on express or implied terms; excluding members of the Armed Forces. For Chapter III, except the Employees' Provident Fund Scheme, and for Chapter IV, only an employee drawing wages up to the notified wage ceiling is an employee.

2. A unit has fifteen workers and does its manufacturing entirely by hand. Is it a factory? No. Without the aid of power section 2(32)(b) requires twenty or more. With power, ten would have sufficed.

3. Distinguish a gig worker from a platform worker. A gig worker under section 2(35) is anyone who works and earns outside a traditional employer-employee relationship. A platform worker under section 2(61) is a person doing platform work under section 2(60), that is work reaching him through an online platform. Platform workers are a subset of gig workers.

4. An employer pays basic pay of 10,000 rupees and allowances of 20,000 rupees, all of which fall within the exclusions in section 2(88). What are the wages? Total remuneration is 30,000 rupees and one half of it is 15,000. The excluded payments are 20,000, which exceeds that half by 5,000. Under the first proviso that 5,000 is deemed to be remuneration and added back, so wages are 15,000 rupees.

5. Is a contractor's own permanent workforce "contract labour"? No, provided the exclusion in section 2(19) is satisfied: the worker must be regularly employed by the contractor for an activity of the contractor's establishment, on mutually accepted standards including permanence, with periodical increments, social security coverage and other welfare benefits. A part time employee is outside the exclusion.

6. Who is the "employer" of a factory for the purposes of the Code? Under section 2(27)(a), the occupier of the factory.

7. Why can Vivekananda Vidyamandir not simply be quoted as the present law on wages? Because it construed "basic wages" in section 2(b) of the Employees' Provident Funds and Miscellaneous Provisions Act 1952, and that Act stands repealed by item 3 of section 164(1) of the Code. The Code uses a different word, "wages", defined in section 2(88), and settles the same problem by the arithmetic of the first proviso rather than by the universality test. The case explains why the proviso exists.

Section 3(3). The manner of applying for cancellation, the conditions subject to which registration is to be cancelled, the procedure of cancellation and other related matters, are to be prescribed by the Central Government.

Broken down

Read as a test, the section has four elements and one exception.

1. Who must register. Only an establishment "to which this Code applies". That is not every establishment in India. It is decided by section 1(4) read with the First Schedule, and Chapter by Chapter. So the first question in any problem is never "must this employer register?" but "does any Chapter of the Code reach this establishment?" If the answer is no, section 3 never arises.

2. In what form. "Electronically or otherwise." The Code prefers an electronic filing and permits another mode. It does not make electronic registration compulsory on the face of the section.

3. By when, and how. Both are left to rules made by the Central Government. Note that it is the Central Government here and not the appropriate Government, so the timing and manner of registration are uniform across India even for establishments whose appropriate Government is a State.

4. The single exception. An establishment already registered under any other Central labour law is not required to register again, and its existing registration is deemed to be registration under this Code. Two consequences follow from the word "deemed". The employer need do nothing at all, because the deeming happens by force of the proviso rather than on application. And the existing registration is good for every purpose of this Code, not merely as evidence of good standing.

Cancellation is narrower than registration. Registration under section 3(1) is owed by every covered establishment. Cancellation under section 3(2) is available only to an establishment to which Chapter III or Chapter IV applies, that is provident fund or employees' state insurance, and only where its business activities are in the process of closure. An establishment covered only by Chapter V or VI has no cancellation route stated in the section.

Note also what section 3(2) does not say. It gives a right to apply, not a right to have the registration cancelled. Whether it is cancelled depends on conditions to be prescribed under section 3(3).

A worked example

Farida owns a bakery in Kurla with twelve employees, all of whom use powered mixers and ovens.

Step 1. Does the Code apply to her at all? Her premises are a factory under section 2(32)(a), because ten or more employees work there and a manufacturing process is carried on with the aid of power. The First Schedule brings her within Chapter IV, ten or more persons, and within Chapters V and VI, which cover a factory outright. She is not within Chapter III, which needs twenty.

Step 2. Must she register under section 3(1)? Yes. The Code applies to her establishment, so the obligation attaches. The time and manner are those prescribed by the Central Government.

Step 3. She has already registered under the Occupational Safety, Health and Working Conditions Code 2020. Must she register again? No. The proviso to section 3(1) exempts her, and that existing registration is deemed to be registration for the purposes of this Code. This is the practical value of the proviso and it is the answer examiners are looking for.

Step 4. Two years later she is winding the bakery up. Can she apply to cancel? Chapter IV applies to her and her business activities are in the process of closure, so section 3(2) is available and she may apply. Had she been covered only by Chapters V and VI, section 3(2) would not have reached her on its own terms.

Step 5. Does applying end her liability? No. Section 3(2) gives a right to apply and section 3(3) leaves the conditions and procedure to rules. Liabilities already incurred are unaffected, and recovery under Chapter XI is a separate matter altogether.

What this does NOT mean

Registration is not the same as coverage. An establishment is covered because section 1(4) and the First Schedule reach it, not because it registered. An employer who never registers is still liable; he has simply added an offence to his liability. Nor does registering an establishment the Code does not reach make the Code apply to it.

Registration of an establishment is not registration of a worker. Section 3 registers the workplace. Sections 106, 111, 112 and 113 register people, and they are separate provisions with separate purposes.

Cancellation is not closure. The two are different events. The Code lets an employer apply once closure is in process; it does not treat cancellation as proof that the business has closed, and it does not make cancellation automatic on closure.

Limits and criticism

Almost everything is left to rules. The section fixes no period, no form, no fee and no consequence. Until rules are notified under section 3(1) and section 3(3), the obligation exists but its content does not, and section 164(2)(a) keeps the old registrations alive in the meantime.

The cancellation right is oddly narrow. There is no obvious reason why an establishment covered only by Chapter V or Chapter VI should have no route to cancellation while one covered by Chapter III or IV does.

"In the process of closure" is undefined. The Code does not say who decides that the process has begun, or on what evidence.

Quick revision

• Section 3(1): every establishment to which the Code applies must be registered, electronically or otherwise, in the time and manner prescribed by the Central Government.
• Proviso: an establishment already registered under any other Central labour law need not register again, and that registration is deemed to be registration under this Code.
• Section 3(2): an establishment to which Chapter III or Chapter IV applies, whose business activities are in the process of closure, may apply for cancellation.
• Section 3(3): manner, conditions and procedure of cancellation are prescribed by the Central Government.
• Coverage comes from section 1(4) and the First Schedule, not from registration.

Test yourself

1. State the obligation in section 3(1) in one sentence. Every establishment to which the Code applies must be registered, electronically or otherwise, within the time and in the manner prescribed by the Central Government.

2. An employer registered under the Code on Wages 2019 is told to register afresh under this Code. Is that right? No. The proviso to section 3(1) exempts an establishment already registered under any other Central labour law, and deems that registration to be registration for the purposes of this Code.

3. Which establishments may apply for cancellation, and in what circumstance? Only those to which Chapter III or Chapter IV applies, and only where their business activities are in the process of closure: section 3(2).

4. An establishment covered by the Code never registers. Is it outside the Code? No. Coverage flows from section 1(4) and the First Schedule. Failure to register is a breach of section 3, not an escape from the Code.

5. Who prescribes the manner of registration, and why is that worth noticing? The Central Government. It is worth noticing because much of the Code speaks of the "appropriate Government", which may be a State; here the power is central, so the manner of registration is uniform throughout India.

Section 4: the Central Board

The Central Government may, by notification, constitute a Board of Trustees of the Employees' Provident Fund, called the Central Board, for the purposes of Chapter III, to administer the funds vested in it.

Composition, section 4(1). It is a tripartite body:

Its legal character, section 4(2). The Central Board is a body corporate with perpetual succession and a common seal, and it may sue and be sued in its own name.

Its committees, sections 4(3) and 4(4). The Central Government may constitute an Executive Committee from among the Board's members to assist it. The Board itself may constitute one or more further committees by order.

Delegation, section 4(5). The Central Board may by order delegate its powers and functions to its Chairperson, to its Executive Committee, or to any of its officers. A State Board constituted under section 12 may delegate to its Chairperson or to any of its officers. Either delegation may be made subject to conditions and limitations.

Tenure, section 4(6). Terms and conditions including tenure are prescribed by the Central Government, with a proviso that a member continues in office after his tenure expires until his successor is appointed. The point of that proviso is that the Board never lapses for want of members.

Section 5: the Employees' State Insurance Corporation

The Central Government may, by notification, constitute the Employees' State Insurance Corporation, called the Corporation, for the purposes of Chapter IV.

Composition, section 5(1). Larger than the Central Board, and it is the only one of the five with medical representation:

Its legal character, section 5(2). Also a body corporate with perpetual succession and a common seal.

The Standing Committee, sections 5(3) and 5(4). The Central Government may constitute a Standing Committee from among the Corporation's members. Subject to the Corporation's general superintendence and control, the Standing Committee administers the affairs of the Corporation and may exercise any of its powers and perform any of its functions; it must submit specified cases and matters to the Corporation for decision, and may in its discretion submit any other matter.

That is worth pausing on. The Corporation is a large body which meets occasionally; the Standing Committee is the body that actually runs the insurance scheme day to day. The relationship between the two is a favourite short question, and the answer is the phrase "subject to the general superintendence and control of the Corporation".

Section 6: the National Social Security Board and the State Board

Section 6(1) is drafted differently from sections 4 and 5, and the difference matters. The Central Government shall, by notification, constitute a National Social Security Board for unorganised workers. Sections 4 and 5 say "may". Section 6 says shall, so the Board is mandatory.

Composition, section 6(2). Chaired by the Union Minister for Labour and Employment, with the Secretary of the Ministry as Vice-Chairperson, the Director General Labour Welfare as Member-Secretary ex officio, and forty nominated members made up as follows: seven representing unorganised sector workers; seven representing employers of the unorganised sector; seven eminent persons from civil society; two from the Lok Sabha and one from the Rajya Sabha; ten representing concerned Central Government Ministries and Departments; five representing State Governments; and one representing the Union territories.

Qualification and representation. Section 6(3) requires all members except the Chairperson to be persons of eminence in labour welfare, management, finance, law or administration. The proviso to section 6(4) requires adequate representation to Scheduled Castes, Scheduled Tribes, minorities and women.

Term and meetings. Section 6(5) fixes the Board's term at three years. Section 6(6) requires it to meet at least thrice a year.

Functions, section 6(7). Six of them, and they are advisory and supervisory rather than executive:

1. recommend to the Central Government the framing of suitable schemes for different sections of unorganised workers, gig workers and platform workers;
2. advise the Central Government on matters arising out of the administration of the Code referred to it;
3. monitor social welfare schemes for unorganised, gig and platform workers administered by the Central Government;
4. review the record keeping functions performed at the State level;
5. review the expenditure from the fund and account;
6. undertake such other functions as the Central Government assigns.

Read that list carefully. The National Social Security Board recommends, advises, monitors and reviews. It does not frame schemes, and it does not pay anybody. Sections 109 and 114 give the scheme framing power to the Government. A student who writes that the Board frames schemes for unorganised workers has stated the one thing the Code deliberately withheld from it.

The State Unorganised Workers' Board is constituted by the State Government under the same section and performs the corresponding functions at State level.

A second role. Section 114(6) provides that the National Social Security Board constituted under section 6(1) shall be the Board for the purposes of the welfare of gig workers and platform workers. When it sits for that purpose the members in section 6(2)(c) and (d) are replaced by five representatives of aggregators, five of gig and platform workers, the Director General of the Corporation, the Central Provident Fund Commissioner, expert members, five State Government representatives and a Joint Secretary as Member Secretary. One Board, two memberships.

Section 7: the Building Workers' Welfare Board

Every State Government shall constitute a Board known as the (name of State) Building and Other Construction Workers' Welfare Board, to exercise the powers and perform the functions assigned to it under section 7 and Chapter VIII. It is a body corporate.

Composition, section 7(3). A chairperson nominated by the State Government, one member nominated by the Central Government, and not more than fifteen other members appointed by the State Government. The proviso requires an equal number of members representing the State Government, the employers and the building workers, and requires that at least one member be a woman.

That woman member requirement appears in section 7 and nowhere else among the five constitutions. It is the kind of specific that makes a good answer.

Officers, section 7(5). The Board appoints a Secretary, who is its chief executive officer, and such other officers and employees as it considers necessary.

Functions, section 7(6). Unlike the National Social Security Board, this one pays. Ten functions:

1. provide death and disability benefits to a beneficiary or his dependants;
2. pay pension to beneficiaries who have completed sixty years of age;
3. pay premium for a Group Insurance Scheme for beneficiaries, as prescribed;
4. frame educational schemes for beneficiaries' children;
5. meet medical expenses for treatment of major ailments of a beneficiary or dependant;
6. pay maternity benefit to beneficiaries;
7. frame skill development and awareness schemes;
8. provide transit accommodation or hostel facility;
9. formulate any other welfare scheme for building worker beneficiaries, by the State Government in concurrence with the Central Government;
10. provide and improve such other welfare measures and facilities as the Central Government prescribes.

Advisory committees, section 7(7). The State Government may constitute one or more advisory committees on matters relating to building workers.

A worked example

Anil is a mason on a construction site in Thane. His employer also runs a small engineering workshop with twenty-five employees. Anil wants to know who is responsible for what.

For the workshop's provident fund, the workshop has twenty-five employees so Chapter III applies, and the body administering it is the Central Board under section 4, through the Central Provident Fund Commissioner.

For the workshop's insurance, Chapter IV applies at ten or more persons, and the body is the Corporation under section 5, running day to day through its Standing Committee.

For Anil as a building worker, the money side of building work is Chapter VIII, and the body is the Maharashtra Building and Other Construction Workers' Welfare Board under section 7. It is that Board which would pay him a disability benefit, a pension at sixty, or maternity benefit to a woman beneficiary.

Who speaks for Anil nationally? If he is also an unorganised worker, the National Social Security Board under section 6 recommends schemes for him and monitors them, and the State Unorganised Workers' Board does so in Maharashtra. Neither pays him.

If Anil drives for an app at weekends, the same National Social Security Board is the body for gig and platform workers under section 114(6), but with the different membership that provision substitutes.

What this does NOT mean

These are not courts. None of the five adjudicates a claim. Disputes under Chapter IV go to the Employees' Insurance Court under section 48, and compensation claims go to the competent authority under section 91.

They are not all funded the same way, and they do not all pay benefits. The Central Board and the Corporation hold and disburse contributory funds. The Building Workers' Welfare Board pays welfare benefits out of cess. The National Social Security Board and the State Unorganised Workers' Board pay nothing at all.

"Social Security Organisation" is a defined term, not a description. Section 2(79) lists exactly these bodies. The Inspector-cum-Facilitator, the competent authority and the Recovery Officer are officers under the Code but they are not Social Security Organisations, and sections 8 to 13 do not apply to them.

Limits and criticism

Two constitutions are permissive. Sections 4 and 5 say the Central Government "may" constitute the Central Board and the Corporation, while sections 6 and 7 say "shall". Nothing in the Code compels the two contributory bodies into existence, although both plainly exist as continuations of the bodies under the repealed Acts, preserved by section 164(2)(a).

The unorganised sector bodies have no executive power. They advise, monitor and review. The workers they exist for are the workers whose benefits depend entirely on a scheme being framed and funded by Government.

Worker representation is thin where the numbers are largest. Seven members represent unorganised sector workers on a forty member Board, for by far the largest group of workers the Code covers.

Quick revision

• Five Social Security Organisations, defined in section 2(79).
• Section 4, Central Board: provident fund, Chapter III; Chairperson and Vice-Chairperson, up to 5 officials, up to 15 State representatives, 10 employers, 10 employees, and the Central Provident Fund Commissioner ex officio; body corporate; Executive Committee under 4(3).
• Section 5, Corporation: insurance, Chapter IV; adds 2 medical members and 3 members of Parliament, and 1 per State; Standing Committee administers its affairs subject to the Corporation's general superintendence and control.
• Section 6, National Social Security Board: shall be constituted; Union Labour Minister chairs; 40 nominated members; term three years; meets thrice a year; functions are to recommend, advise, monitor and review, never to frame or to pay. Also the Board for gig and platform workers under section 114(6), with a different membership.
• Section 7, Building Workers' Welfare Board: every State shall constitute one; chairperson by the State, one member by the Centre, up to fifteen others, equal representation of State, employers and building workers, at least one woman; the Secretary is chief executive; ten functions, and this Board does pay, including pension at sixty.

Test yourself

1. Name the five Social Security Organisations and the section constituting each. Central Board of Trustees of the Employees' Provident Fund, section 4; Employees' State Insurance Corporation, section 5; National Social Security Board and State Unorganised Workers' Board, section 6; State Building and Other Construction Workers' Welfare Board, section 7.

2. Who actually administers the affairs of the Corporation from day to day? The Standing Committee, constituted under section 5(3), subject to the general superintendence and control of the Corporation: section 5(4)(a).

3. Does the National Social Security Board frame schemes for unorganised workers? No. Under section 6(7)(a) it recommends to the Central Government that schemes be framed. The power to frame is in sections 109 and 114 and belongs to the Government.

4. What does the proviso to section 7(3) require about the membership of a Building Workers' Welfare Board? An equal number of members representing the State Government, the employers and the building workers, and at least one woman member.

5. A Board's term has expired and successors have not been appointed. Does the Central Board cease to exist? No. The proviso to section 4(6) keeps a member in office, notwithstanding the expiry of his tenure, until his successor is appointed.

6. Which of the five Organisations pays a pension, and at what age? The Building Workers' Welfare Board, to beneficiaries who have completed sixty years of age: section 7(6)(b).

Note the reach of clause (a): "is or at any time has been". A discharged insolvent is still disqualified. Contrast clause (c), which is drafted to the same effect, "is or has been convicted", and clause (d), which speaks only in the present tense.

Two Explanations. Explanation 1: if a question arises whether a person is disqualified under clause (d), it is referred to the appropriate Government, whose decision is final. Explanation 2: clause (f) does not apply to a person who is a member of the Organisation ex officio by virtue of being a Minister. That second Explanation is necessary because otherwise the Union Labour Minister, who chairs the National Social Security Board under section 6(2)(a), would disqualify himself by being a Minister.

Section 8(2) is removal, which is a different thing. Disqualification operates by law; removal is an act of Government. The Central Government, for the Central Board, the Corporation and the National Social Security Board, and the State Government for the State Unorganised Workers' Board and the Building Workers' Welfare Board, may remove a member who:

1. is or has become subject to any disqualification in section 8(1);
2. is absent, without leave of the Organisation, from more than three consecutive meetings of the Organisation or a Committee of it;
3. has, in that Government's opinion, so abused the position of his office as to make his continuation detrimental to the public interest, or is otherwise unfit or unsuitable to continue.

The proviso is the natural justice safeguard. No person may be removed under grounds (b) or (c) unless he has been given an opportunity to show cause why he should not be removed. Notice that the proviso does not extend to ground (a). Where the member has become disqualified by law, there is nothing to explain.

Section 9: procedure for transacting business

Four rules, each of one sentence, and all four are examinable.

Section 9(1), meetings and quorum. An Organisation or Committee shall meet at such intervals and observe such procedure for transacting business at its meetings, including the quorum, as the Central Government prescribes. So the Code fixes no quorum itself.

Section 9(2), authentication. All orders and decisions are authenticated by the Central Provident Fund Commissioner, the Director General, the Director General Labour Welfare, the State Principal Secretary or Secretary (Labour) of the respective Organisation, or such other officer as the appropriate Government notifies. All other instruments issued by the Organisation are authenticated by the signature of an officer authorised by order of that Organisation.

Section 9(3), validation. No act done or proceeding taken by an Organisation or Committee shall be questioned merely on the ground of the existence of any vacancy in it, or any defect in its constitution.

This is the provision most likely to appear as a problem. An employer resisting an assessment cannot defend himself by pointing out that two seats on the Board were unfilled. The word "merely" is the whole answer: the vacancy alone will not do.

Section 9(4), fees. Members are entitled to such fee and allowances as the Central Government prescribes.

Section 10: the executive heads

The Central Provident Fund Commissioner and the Director General shall be the whole-time officers of the Central Board and the Corporation respectively, and such officer shall not undertake any work unconnected with his office without the prior approval of the Central Government.

Two ideas in one sentence. The head of each contributory body is a full time officer, and he cannot moonlight. Both matter for a body that holds a fund.

Section 11: supersession

Section 11(1), the grounds and who acts. The Central Government, in the case of the Central Board, the Corporation or the National Social Security Board, and the State Government in the case of the State Unorganised Workers' Board or the Building Workers' Welfare Board, may by notification supersede that body, or any Committee of it, and reconstitute it in the prescribed manner, if of opinion that it:

1. is unable to perform its functions; or
2. has persistently made delay in the discharge of its functions; or
3. has exceeded or abused its powers or jurisdiction.

The proviso. Before issuing such a notification the Government shall give the body an opportunity to show cause why it should not be superseded, and shall consider the explanations and objections raised and take appropriate action on them. Supersession is therefore never summary.

Section 11(2), continuity. After supersession and until reconstitution, the Government shall make such alternate arrangements for administering the relevant provisions of the Code as may be prescribed. The scheme does not stop because the Board has gone.

Section 11(3), accountability. The Government shall cause a full report of the action taken and the circumstances leading to it to be laid before each House of Parliament or the State Legislature, at the earliest opportunity and in any case not later than three months from the date of the notification of supersession.

Three months, before the legislature, is a specific worth remembering. Supersession is an executive act made answerable to the elected house.

Section 12: State Boards, Regional Boards and local committees

Section 12(1). The Central Government may by notification, after consultation with the Government of a State, constitute for that State a Board of Trustees, called a State Board, which exercises such powers and performs such functions as the Central Government assigns by notification from time to time; and may specify the manner of its constitution, the terms and conditions of appointment of its members and the procedure of its meetings.

Section 12(2). The Corporation may by order appoint Regional Boards and local committees in such areas and in such manner, to perform such functions and exercise such powers, as the regulations specify.

Two different bodies with two different parents. A State Board under section 12(1) is a provident fund body created by the Central Government after consulting the State. Regional Boards and local committees under section 12(2) are insurance bodies created by the Corporation itself. Neither is a Social Security Organisation as defined in section 2(79), and the delegation power in section 4(5) expressly reaches a State Board constituted under section 12.

Section 13: additional functions

Notwithstanding anything in the Code, the Central Government may by notification assign additional functions to a Social Security Organisation, including the administration of any other Act or scheme relating to social security, subject to what the notification specifies; and may specify the terms and conditions of discharging them.

Two provisos follow. Where such an additional function is assigned, the officer or authority to whom it is assigned exercises the powers under that other enactment or scheme in the manner the notification specifies. And the Organisation may assign the additional function to existing officers, or appoint or engage new officers, if the function cannot be performed with its existing personnel.

The practical point is that the Code lets the Government put a new welfare scheme through an existing machine rather than build another one. That is how a body set up to run a provident fund can be asked to run something else entirely.

A worked example

The Maharashtra Building and Other Construction Workers' Welfare Board has not met for a year, has a backlog of unpaid disability claims, and three of its fifteen seats are vacant. A contractor, assessed for cess by that Board, wants the assessment set aside because of the vacancies.

Can the contractor succeed on the vacancies? No. Section 9(3) provides that no act done or proceeding taken shall be questioned merely on the ground of a vacancy or a defect in constitution. The vacancy by itself is not a ground.

Who can act about the backlog? The Building Workers' Welfare Board is a State body, so under section 11(1) it is the State Government that may supersede it, not the Central Government.

On what ground? That it is unable to perform its functions, or has persistently delayed the discharge of them. A year without a meeting and a claims backlog goes to both.

What must the State Government do first? Give the Board an opportunity to show cause why it should not be superseded, and consider its explanations and objections: the proviso to section 11(1).

What happens to the unpaid claimants meanwhile? Section 11(2) requires the State Government to make alternate arrangements for administering the relevant provisions until the Board is reconstituted.

Is anyone answerable? Yes. Under section 11(3) a full report of the action and the circumstances must be laid before the State Legislature, at the earliest opportunity and within three months of the notification.

And if a member of the Board turns out to be an employer who has defaulted on his own dues? He is disqualified under section 8(1)(d) and may be removed under section 8(2)(a). If it is disputed whether he has defaulted, Explanation 1 to section 8(1) sends the question to the appropriate Government, whose decision is final.

What this does NOT mean

Disqualification and removal are not the same. A disqualification under section 8(1) operates by law and bars a person from being chosen or continuing. Removal under section 8(2) is a discretionary act of Government, and for two of its three grounds it requires a show cause opportunity first.

Section 9(3) is not a general cure. It saves an act from challenge on the ground of a vacancy or defect in constitution and nothing else. An act beyond the body's powers, or taken without the prescribed quorum, is not protected.

Supersession is not dissolution. Section 11(1) speaks of superseding and reconstituting. The body is replaced, not abolished, and section 11(2) keeps the administration running in between.

A State Board is not a State Unorganised Workers' Board. The first is a provident fund body under section 12(1); the second is one of the five Social Security Organisations under section 6.

Limits and criticism

"Unfit or unsuitable" is very wide. Section 8(2)(c) allows removal on the Government's opinion that a member is otherwise unfit or unsuitable, without any stated standard. The show cause proviso is the only real check.

The quorum is not in the Code. Section 9(1) leaves meetings, procedure and quorum entirely to rules, so how few members can bind a Board holding a national fund is set by the executive.

Explanation 1 to section 8(1) makes the Government the judge in its own list. Whether a member has defaulted on dues is decided finally by the appropriate Government, with no appeal stated.

Section 13 has no outer limit. Any other Act or scheme relating to social security may be loaded onto any Organisation by notification, with the resources question answered only by a proviso permitting new officers to be engaged.

Quick revision

• Section 8(1): six disqualifications. Insolvency, ever; unsound mind; conviction for moral turpitude; being a defaulting employer; ceasing to be a legislator; becoming a Minister, Speaker, Deputy Speaker or Deputy Chairman. Explanation 1: default questions go to the appropriate Government, final. Explanation 2: the Minister clause spares ex officio Ministers.
• Section 8(2): removal for disqualification, absence from more than three consecutive meetings without leave, or abuse of office or unfitness. Show cause required for the last two only.
• Section 9: meetings, procedure and quorum are prescribed; orders authenticated by the named officers; no act questioned merely for a vacancy or defect in constitution; members get fees.
• Section 10: the Central Provident Fund Commissioner and the Director General are whole-time officers and may take no unconnected work without prior Central Government approval.
• Section 11: supersession on three grounds, after show cause; alternate arrangements until reconstitution; full report to the legislature within three months.
• Section 12: State Boards by the Central Government after consulting the State; Regional Boards and local committees by the Corporation.
• Section 13: additional functions, including administering any other social security Act or scheme, may be assigned by notification.

Test yourself

1. An employer who was discharged from insolvency ten years ago is proposed for the Central Board. Is he eligible? No. Section 8(1)(a) disqualifies a person who "is or at any time has been" adjudged an insolvent, so a discharge does not restore eligibility.

2. A member has missed three consecutive meetings without leave. Can he be removed? Not on that ground alone. Section 8(2)(b) requires absence from more than three consecutive meetings. If he misses a fourth, he may be removed, and only after being given an opportunity to show cause.

3. Can a decision of the Corporation be set aside because two seats were vacant when it was made? No. Section 9(3) bars a challenge founded merely on a vacancy or a defect in constitution.

4. What must a Government do before superseding a Board, and after? Before: give the Board an opportunity to show cause and consider its explanations and objections, under the proviso to section 11(1). After: make alternate arrangements for administration under section 11(2), and lay a full report before the legislature within three months under section 11(3).

5. Distinguish a State Board under section 12(1) from a Regional Board under section 12(2). A State Board is a Board of Trustees constituted for a State by the Central Government, after consulting that State, exercising functions assigned by the Central Government. A Regional Board is appointed by the Corporation itself, for an area, with functions and powers specified in the regulations.

6. The Union Labour Minister chairs the National Social Security Board. Is he disqualified by section 8(1)(f) for being a Minister? No. Explanation 2 to section 8(1) provides that clause (f) does not apply to persons who are members of the Organisation ex officio by virtue of being a Minister.

That Explanation is the only place in the Code where the familiar abbreviation is given a legal meaning. The Employees' Provident Fund Organisation is not a separate body corporate; the body corporate is the Central Board under section 4(2), and the Organisation is its staff.

Section 14(2). The Commissioner is subject to the general control and superintendence of the Central Board in discharging his functions.

Section 14(3) and (4). The Central Government shall also appoint a Financial Advisor and Chief Accounts Officer to assist him. The Central Board may appoint Additional, Deputy, Regional and Assistant Provident Fund Commissioners and such other officers as it considers necessary.

Section 14(5), the Union Public Service Commission. No appointment to the post of Central Provident Fund Commissioner, Additional Central Provident Fund Commissioner, Financial Adviser and Chief Accounts Officer, or any other post under the Board carrying a scale equivalent to a Central Government Group A or Group B post, shall be made except after consultation with the Union Public Service Commission. The proviso excuses that consultation for an appointment not exceeding one year, or where the person appointed is already a member of the Indian Administrative Service or already in Central Government or Central Board service in a Group A or Group B post.

Section 14(6) and (7), pay. The Commissioner's and the Financial Adviser's salary and allowances are paid out of the Provident Fund itself. Other officers' conditions are specified by the Central Board in accordance with the rules applicable to Central Government officers on corresponding scales, with prior Central Government approval needed for any departure, and with their pay capped by the scales in the Provident Fund Scheme.

Section 15: the three schemes

The Central Government may, by notification, frame the following:

Section 15(2), the Fifth Schedule. The three main schemes may provide for the matters specified in Part A, Part B and Part C of the Fifth Schedule respectively: Part A for the Provident Fund Scheme, Part B for the Pension Scheme, Part C for the Insurance Scheme.

Section 15(3), retrospectivity. A scheme may provide that all or any of its provisions take effect prospectively or retrospectively from a date specified in it.

Clause (d) is easy to miss and worth noticing. It lets the Central Government frame a scheme for self-employed workers or any other class of persons, who are by definition not employees of anybody. Chapter III is therefore not sealed off from the unorganised sector.

Section 16: the three funds and the rates

This is the section that carries the numbers, and the numbers get asked.

The Provident Fund, section 16(1)(a).

• The employer's contribution is ten per cent of the wages for the time being payable to each employee, whether employed directly or by or through a contractor.
• The employee's contribution is equal to the employer's contribution in respect of him.
• An employee may contribute more than ten per cent if he wishes, but the employer is not obliged to match anything above his own statutory contribution.
• First proviso: for any establishment or class of establishments the Central Government may specify by notification, after such inquiry as it thinks fit, "ten per cent" is replaced by "twelve per cent" at both places where it occurs.
• Second proviso: the Central Government may, after such inquiry as it thinks fit, notify rates of employees' contributions and the period for which those rates apply, for any class of employee.

Read the first proviso carefully. The Code's own headline rate is ten per cent; twelve applies where notified. Students routinely state twelve as the rate in the Code, which is stating the proviso as the section.

The Pension Fund, section 16(1)(b). Established in the manner specified in the Pension Scheme, and paid into, for every employee who is a member of the Pension Scheme:

1. such sums out of the employer's contribution under clause (a), not exceeding eight and one-third per cent of the wages, or such percentage as the Central Government notifies;
2. such sums as the Pension Scheme specifies, payable by employers of establishments exempted under section 143 to which the Pension Scheme applies;
3. such sums as the Central Government specifies, after due appropriation by Parliament.

The eight and one third per cent is diverted out of the employer's contribution, not added to it. That is the single most misunderstood figure in this Chapter. The employer pays ten (or twelve), and part of what he pays, up to eight and one third of wages, is routed to the Pension Fund instead of the Provident Fund.

The Insurance Fund, section 16(1)(c). The employer pays, for every employee in relation to whom he is the employer, an amount not more than one per cent of the wages, or such percentage as the Central Government notifies. The proviso requires the employer to pay in further sums not exceeding one fourth of that contribution, as the Central Government determines from time to time, to meet the expenses of administering the Insurance Scheme, other than the cost of the benefits themselves.

Section 16(2), vesting. The Provident Fund, the Pension Fund and the Insurance Fund vest in, and are administered by, the Central Board in the manner specified in the respective schemes.

A summary of the money:

A worked example

Sunil earns wages of 20,000 rupees a month at an establishment with sixty employees. No notification has raised the rate to twelve per cent for his establishment.

Step 1. Does Chapter III apply? Yes. The First Schedule brings in every establishment with twenty or more employees, and this one has sixty.

Step 2. Is Sunil an "employee" for this Chapter? Only if his wages are at or below the wage ceiling notified under section 2(89), because the first proviso to section 2(26) restricts "employee" for Chapter III, except the Provident Fund Scheme, and for Chapter IV, to employees drawing wages up to that ceiling. Assume he is.

Step 3. What does the employer pay? Ten per cent of 20,000, so 2,000 rupees: section 16(1)(a).

Step 4. What does Sunil pay? An equal amount, 2,000 rupees. If he wants to save more he may put in, say, 3,000, but his employer is not obliged to go above 2,000.

Step 5. How much of the employer's 2,000 goes to the pension? Up to eight and one third per cent of wages, that is up to 1,666.67 rupees of the 2,000, is paid into the Pension Fund under section 16(1)(b)(i). The balance stays in the Provident Fund. The employer's outgoing is unchanged; only its destination is split.

Step 6. And the insurance? The employer pays not more than one per cent of wages, so up to 200 rupees, into the Deposit-Linked Insurance Fund under section 16(1)(c), plus up to a further quarter of that, that is up to 50 rupees, towards administering the scheme.

Step 7. Who holds the money? All three funds vest in the Central Board under section 16(2), and are administered by it in the manner the respective schemes specify.

What this does NOT mean

The employer does not pay ten per cent plus eight and one third per cent plus one per cent of wages towards pension and provident fund separately. The pension money comes out of the ten per cent. Only the insurance contribution under clause (c) is additional.

Twelve per cent is not the rate in the Code. Ten is. Twelve is what the first proviso substitutes for establishments the Central Government notifies.

The employee cannot force the employer to match a higher contribution. Section 16(1)(a) says in terms that the employer is under no obligation to pay anything above his own statutory contribution.

The Employees' Provident Fund Organisation is not the Central Board. The Board is the body corporate under section 4(2). The Organisation, defined in the Explanation to section 14(1), is the body of its officers and employees.

A scheme is not a rule. Schemes are framed under section 15 and carry the working detail of the benefit; rules are made under sections 154 to 156. The Fifth Schedule tells you what a scheme may contain.

Limits and criticism

Almost every number can be changed by notification. The ten per cent, the employees' rates, the eight and one third per cent and the one per cent are each subject to a power to notify something else. The Code fixes the architecture and leaves the arithmetic to the executive.

Retrospective scheme making is a strong power. Section 15(1)(e) and section 15(3) allow a scheme, and a modification of a scheme, to operate retrospectively. That is unusual in delegated legislation and it is a fair point of criticism in an essay.

The wage ceiling is not in the Code. Section 2(89) leaves it to be notified, so the Chapter's coverage in practice is executive rather than legislative.

Consultation with the Union Public Service Commission has wide exceptions. The proviso to section 14(5) dispenses with it for appointments up to a year and for anyone already in the Indian Administrative Service or in Group A or Group B service.

Quick revision

• Section 14: Central Provident Fund Commissioner is Chief Executive Officer of the Central Board and head of the Employees' Provident Fund Organisation, which the Explanation defines as the Board's officers and employees; he is under the Board's general control and superintendence; UPSC consultation for senior posts, with three exceptions; his salary comes out of the Provident Fund.
• Section 15: three schemes, plus a residual power. (a) Provident Fund Scheme; (b) Pension Scheme, covering superannuation, retiring and permanent total disablement pension, widow or widower's, children's, orphan and nominee pension; (c) Deposit Linked Insurance Scheme; (d) any other scheme for self-employed workers or any other class; (e) modification, prospective or retrospective. Contents are in Parts A, B and C of the Fifth Schedule.
• Section 16: employer ten per cent of wages, twelve where notified; employee an equal amount, more if he wishes without matching; up to eight and one third per cent diverted out of the employer's contribution to the Pension Fund; not more than one per cent to the Insurance Fund, plus up to a further one fourth of that for administration. All three funds vest in the Central Board.

Test yourself

1. State the employer's and the employee's rates of contribution under section 16(1)(a). The employer pays ten per cent of the wages payable to each employee, whether employed directly or through a contractor, and the employee pays an equal amount. Where the Central Government so notifies for an establishment or class of establishments, the first proviso substitutes twelve per cent at both places.

2. An employee wants to contribute fifteen per cent. May he, and must the employer match it? He may. Section 16(1)(a) expressly allows an employee who so desires to contribute more than ten per cent. The employer is under no obligation to pay any contribution over and above his own statutory contribution.

3. Where does the money in the Pension Fund come from? Principally from the employer's own contribution under clause (a), to the extent of sums not exceeding eight and one third per cent of wages or such percentage as is notified: section 16(1)(b)(i). It also receives sums from employers of establishments exempted under section 143 to which the Pension Scheme applies, and sums specified by the Central Government after appropriation by Parliament.

4. Name the three schemes under section 15 and one kind of pension the Pension Scheme provides. The Employees' Provident Fund Scheme, the Employees' Pension Scheme and the Employees' Deposit Linked Insurance Scheme. The Pension Scheme provides superannuation pension, retiring pension, permanent total disablement pension, widow or widower's pension, children pension, orphan pension and nominee pension.

5. In whom do the three funds vest? In the Central Board, which also administers them in the manner specified in the respective schemes: section 16(2).

6. Can a scheme framed under section 15 operate from a past date? Yes. Section 15(1)(e) permits modification prospectively or retrospectively, and section 15(3) permits a scheme to provide that all or any of its provisions take effect prospectively or retrospectively from a date specified in it.

Section 17(2). A contractor from whom those amounts may be recovered may in turn recover from the employee the employee's contribution only, by deduction from the wages payable to him.

Section 17(3). Notwithstanding any contract to the contrary, no contractor shall be entitled to deduct the employer's contribution, or the administration charges, from the wages payable to an employee, or otherwise to recover them from the employee.

Put the three together and the design is clear. The employer is liable in the first place, whoever the worker is engaged through. He may pass the cost down to the contractor. The contractor may pass down only the employee's own share. The employer's share can never reach the worker's wage packet, and section 17(3) says so with a non obstante clause so that no contract can arrange otherwise.

That is the answer to the commonest problem on this section: a contract clause saying "the worker shall bear all statutory contributions" is void to the extent it touches the employer's contribution.

Section 18: recognition under the Income-tax Act

For the purposes of the Income-tax Act 1961, the Provident Fund shall be deemed to be a recognised provident fund within the meaning of clause (38) of section 2 of that Act. The proviso adds that nothing in the Income-tax Act operates to render ineffective any provision of the Provident Fund Scheme which is repugnant to that Act or its rules.

The practical point is that the statutory fund does not have to apply for recognition; it has it by force of section 18. And where the Scheme and the tax law conflict, the Scheme prevails.

Section 19: priority over other debts

Notwithstanding anything in any other law, any amount due under Chapter III shall be a charge on the assets of the establishment to which it relates, and shall be paid in priority in accordance with the provisions of the Insolvency and Bankruptcy Code 2016.

Two halves, and both matter. The dues are secured on the establishment's assets rather than being a bare personal claim. And the priority is not free standing: it operates in accordance with the Insolvency and Bankruptcy Code, so the order of payment in an insolvency is the one that Code lays down.

Section 20: establishments outside the Chapter

Section 20(1) puts four categories outside Chapter III altogether:

Clause (a) has two conditions and both must be met: fewer than fifty persons and working without the aid of power. A co-operative society with thirty workers using power is not excluded. Reading the two as alternatives is the standard mistake.

Clause (d) is a transitional protection and should be read with section 164(2). It keeps employees already receiving provident fund benefits under an earlier enactment where they were.

Section 20(2), executive exemption. If the Central Government is of opinion that, having regard to the financial position of a class of establishments or other circumstances, it is necessary or expedient, it may by notification and subject to conditions exempt that class, prospectively or retrospectively, from the operation of the Chapter, for a specified period.

Section 21: employers who may keep their own accounts

Section 21(1). On an application made by the employer and the majority of employees in relation to an establishment employing one hundred or more persons, the Central Government may, by order in writing, authorise the employer to maintain a provident fund account for the establishment, in the prescribed manner and on the terms specified in the Provident Fund Scheme.

The proviso is the integrity test. No such authorisation shall be made if the employer had committed any default in the payment of provident fund contribution, or any other offence under this Code, during the three years immediately preceding the date of authorisation.

Section 21(2). An authorised employer must maintain the account, submit returns, deposit contributions, provide facilities for inspection, pay administrative charges and abide by the other terms specified in the Provident Fund Scheme.

Section 21(3). The Central Government may cancel the authorisation by order in writing if the employer fails to comply with any term or condition, or commits any offence under the Code. The proviso requires that before cancelling, the employer be given a reasonable opportunity of being heard.

Note the three safeguards packed into one short section: joint application by employer and a majority of employees, a clean record for three years, and a hearing before cancellation. That combination is a good short answer.

Section 22: transfer of accounts

Where an employee:

• (a) employed in an establishment to which the Chapter applies relinquishes that employment and obtains employment in any other establishment, whether or not the Chapter applies to it; or
• (b) employed in an establishment to which the Chapter does not apply relinquishes it and obtains employment in an establishment to which the Chapter does apply,

then his accumulated amount in the provident fund account or pension account is transferred or dealt with in the manner specified in the Provident Fund Scheme or the Pension Scheme.

The two clauses between them cover movement in either direction, into and out of coverage. The section does not itself say what happens to the money; it sends the question to the scheme. That is the pattern of the whole Chapter: the Code fixes the entitlement and the scheme carries the mechanics.

Section 23: appeal to the Tribunal

Section 23(1), what may be appealed. A person aggrieved by an order of any authority may appeal to the Tribunal constituted by the Central Government in two matters only:

1. determination and assessment of dues under section 125 relating to Chapter III; and
2. levy of damages under section 128 relating to Chapter III.

Section 23(2), form. The appeal is filed in such form and manner, within such time, and with such fees as the Central Government prescribes.

Section 23(3), the pre-deposit. No appeal against a determination under clause (a) shall be entertained from an employer unless he has deposited with the Social Security Organisation concerned twenty-five per cent of the amount due from him as determined under section 125.

Section 23(4), time. The Tribunal shall endeavour to decide the appeal within one year from the date it was preferred.

Three precise points, all examinable. The appeal lies in two matters only. The pre-deposit is twenty-five per cent and applies to the assessment appeal, not to the damages appeal. And the one year in section 23(4) is an endeavour, not a limit: nothing happens to the appeal if it takes longer.

The wages on which all of this is computed

Every figure in this Chapter is a percentage of "wages", so the definition decides the money. Section 2(88) is worked in [Definitions under the Social Security Code], but the reason it reads as it does belongs here.

Regional Provident Fund Commissioner (II) West Bengal v. Vivekananda Vidyamandir, (2019) 6 SCC 240, is the leading modern decision.

Facts. A group of appeals raised one common question: whether allowances such as canteen, conveyance, management, medical, night shift, rent, special and travel allowances formed part of "basic wages" under section 2(b) of the Employees' Provident Funds and Miscellaneous Provisions Act 1952, so that provident fund contributions had to be paid on them. The provident fund authority and the appellate authority had found as a fact that these allowances were essentially part of the basic wage, camouflaged as allowances so as to avoid contribution.

Held. Wages which are universally, necessarily and ordinarily paid to all employees across the board are basic wages, and the crucial test is one of universality. A payment available only to those who avail an opportunity more than others, or which is variable, or which is linked to an incentive for production beyond the norm, falls outside: overtime and leave encashment are the Court's own examples. Since the establishments had produced no material to show that these allowances were variable, incentive linked or not paid across the board, the concurrent findings of fact stood.

Why it matters here. Because it names the abuse this Chapter is exposed to. If contributions are computed on a narrow wage, an employer can shrink the base by paying a small basic salary and a large bundle of allowances, and the retirement savings of every employee shrink with it. But note carefully what the case can and cannot be used for now. It construed "basic wages" under the 1952 Act, which item 3 of section 164(1) has repealed, and the Code does not use that phrase. Under section 2(88) the same abuse is met arithmetically: if the excluded payments exceed one half of all remuneration, the excess is deemed to be remuneration and added back into wages. Cite the case for the mischief and the history. Cite the first proviso to section 2(88) for the present test.

A worked example

Deepak works at a warehouse run by Zeta Logistics, which has 140 employees. He is on the roll of Metro Manpower, a contractor. His wages are 18,000 rupees a month and no notification raises the rate to twelve per cent.

Step 1. Who is liable for the contribution? Zeta, as the employer. Section 16(1)(a) fixes the employer's contribution on wages payable to each employee "whether employed by him directly or by or through a contractor". Engaging Deepak through Metro does not move the primary liability.

Step 2. Can Zeta get the money back from Metro? Yes. Under section 17(1) Zeta may recover the contributions and administration charges from Metro, either by deducting them from what is payable under the contract or as a debt.

Step 3. Can Metro get the money back from Deepak? Only the employee's share, 1,800 rupees, by deduction from his wages: section 17(2).

Step 4. Metro's contract with Deepak says he bears all statutory contributions. Effect? None, so far as the employer's contribution and the administration charges are concerned. Section 17(3) operates notwithstanding any contract to the contrary and forbids the contractor from deducting or otherwise recovering them from the employee.

Step 5. Zeta wants to keep the provident fund accounts itself. It employs 140 persons, so it clears the hundred person threshold in section 21(1). It needs an application by the employer and the majority of employees, and it must not have defaulted on a contribution or committed any offence under the Code in the three years immediately preceding.

Step 6. Zeta is assessed for arrears of 6,00,000 rupees under section 125 and wants to appeal. It may appeal to the Tribunal under section 23(1)(a), but the appeal will not be entertained unless it first deposits twenty-five per cent, that is 1,50,000 rupees, with the Social Security Organisation concerned: section 23(3).

Step 7. Zeta goes into insolvency owing provident fund dues. Under section 19 the amount is a charge on the establishment's assets and is paid in priority in accordance with the Insolvency and Bankruptcy Code 2016.

Step 8. Deepak leaves and joins an establishment Chapter III does not cover. His accumulated balance is transferred or dealt with as the Provident Fund Scheme or the Pension Scheme specifies: section 22(a), which covers a move to any other establishment whether or not the Chapter applies to it.

What this does NOT mean

Engaging workers through a contractor does not shift the liability. Section 17 is a right of recovery given to the employer, not a transfer of the obligation. If the contractor does not pay, the employer is still liable.

Section 19 does not put provident fund dues ahead of everything. It creates a charge and directs priority in accordance with the Insolvency and Bankruptcy Code 2016, so the statutory waterfall in that Code governs.

Section 20(1)(a) does not exclude all co-operative societies. Only those employing fewer than fifty persons and working without the aid of power.

Section 21 does not let a large employer opt out of the Chapter. He remains bound by it and merely maintains the accounts himself, on terms, under inspection, and subject to cancellation.

Section 23 is not a general appeal. It lies only against determination and assessment under section 125 and levy of damages under section 128, so far as they relate to Chapter III.

Limits and criticism

The pre-deposit can be a barrier. Twenty-five per cent of a disputed assessment must be paid before the appeal is even entertained, which weighs hardest on the small employer with the weakest cash position, and it is required whether or not the assessment turns out to be wrong.

The one year in section 23(4) is unenforceable. It is an endeavour, with no consequence attached to failure.

Section 20(2) allows retrospective exemption of a whole class by notification, which can remove accrued coverage by executive act.

The exclusion in section 20(1)(a) is dated. A power threshold and a fifty person threshold for co-operative societies made sense in 1952 and are hard to justify as a distinction now.

Quick revision

• Section 17: employer liable even where the worker comes through a contractor; employer may recover from the contractor; contractor may recover only the employee's share from the employee; section 17(3), notwithstanding any contract, the contractor may never deduct the employer's contribution or administration charges from wages.
• Section 18: the Provident Fund is deemed a recognised provident fund under section 2(38) of the Income-tax Act 1961; the Scheme prevails over repugnant tax rules.
• Section 19: dues are a charge on the assets, paid in priority in accordance with the Insolvency and Bankruptcy Code 2016.
• Section 20: four exclusions. Co-operative societies with fewer than fifty persons and no power; Government establishments whose employees already have contributory provident fund or old age pension; establishments under other laws with the same; employees already receiving provident fund benefits at commencement. Section 20(2): class exemption by notification, prospective or retrospective.
• Section 21: employer of one hundred or more may be authorised to keep his own accounts, on joint application with a majority of employees, only if no default or offence in the preceding three years; cancellation only after a reasonable opportunity of being heard.
• Section 22: accumulations transferred on change of employment, in either direction, as the Scheme specifies.
• Section 23: appeal to the Tribunal against section 125 determination and section 128 damages only; twenty-five per cent pre-deposit for the assessment appeal; decision to be endeavoured within one year.

Test yourself

1. A contractor deducts both his own and the principal employer's share of provident fund from a worker's wages, relying on a clause in the worker's contract. Is that lawful? No. Section 17(3) provides that notwithstanding any contract to the contrary, no contractor is entitled to deduct the employer's contribution or the administration charges from the wages payable to the employee, or otherwise to recover them from him. Only the employee's own contribution may be deducted, under section 17(2).

2. Is a co-operative society with forty employees, using power, within Chapter III? Yes. Section 20(1)(a) excludes such a society only if it employs fewer than fifty persons and works without the aid of power. Both conditions must be satisfied and only one is.

3. What must an employer show before he may keep his own provident fund accounts? That the establishment employs one hundred or more persons; that the application is made by the employer and the majority of employees; and that he has not defaulted in payment of provident fund contribution or committed any other offence under the Code during the three years immediately preceding: section 21(1) and its proviso.

4. An employer is assessed under section 125 for 4,00,000 rupees. What must he do before appealing? Deposit twenty-five per cent of the amount due as determined, that is 1,00,000 rupees, with the Social Security Organisation concerned. Without it the Tribunal will not entertain the appeal: section 23(3).

5. Against which orders does an appeal lie under section 23? Only two: determination and assessment of dues under section 125 relating to Chapter III, and levy of damages under section 128 relating to Chapter III.

6. Why can Vivekananda Vidyamandir not be quoted as the present test for what wages the contribution is computed on? Because it construed "basic wages" in section 2(b) of the Employees' Provident Funds and Miscellaneous Provisions Act 1952, an Act repealed by item 3 of section 164(1) of the Code, and the Code uses "wages" as defined in section 2(88). The present answer to the same abuse is the first proviso to section 2(88), which adds back into wages any excluded payments exceeding one half of all remuneration.

Section 24(6), removal. The Central Government may at any time remove either officer, and shall do so if removal is recommended by a resolution of the Corporation passed at a special meeting called for the purpose and supported by the votes of not less than two thirds of the total strength of the Corporation.

That sub-section contains both a discretion and a duty, and the difference is the answer to a good short question. Government may remove of its own motion. Government must remove where the Corporation itself has resolved, at a special meeting, by a two thirds majority of total strength, not merely of those present.

Section 24(7), other staff. The Corporation may employ such other officers and employees as are necessary. The proviso requires the sanction of the Central Government for creating any post whose maximum monthly salary exceeds the prescribed figure.

Section 24(8), conditions of service. Specified in the regulations, in accordance with the rules applicable to Central Government officers on corresponding scales. Three provisos: medical specialists and super specialists notified by the Central Government are to have terms similar to their equivalents in the All India Institute of Medical Sciences, the Post Graduate Institutes of Medical Sciences and Research or similar Central institutions; prior Central Government approval is needed for any departure from those rules; and the sub-section does not apply to consultants and specialists appointed on contract.

The medical parity proviso is easy to pass over and it is worth a sentence in an essay. The Corporation runs hospitals, and it cannot recruit specialists at clerical scales.

Section 24(9) and (10), the Union Public Service Commission. Every appointment to posts corresponding to Group A and Group B Gazetted posts under the Central Government must be made in consultation with the Union Public Service Commission, except medical, nursing and para-medical posts. The provisos exempt an officiating or temporary appointment not exceeding one year, and provide that such an appointment confers no claim to regular appointment and does not count towards seniority or minimum qualifying service. If a question arises whether a post corresponds to Group A or B, it goes to the Central Government, whose decision is final.

Section 25: the Employees' State Insurance Fund

Section 25(1). All contributions and user charges paid under Chapter IV, and all other moneys received on behalf of the Corporation, are paid into a fund called the Employees' State Insurance Fund, held and administered by the Corporation for the purposes of the Code. The proviso deems user charges collected from the other beneficiaries referred to in section 44 to be contributions forming part of the Fund.

Section 25(2). The Corporation may accept grants, donations, Corporate Social Responsibility Fund and gifts from the Central Government, any State Government, a local authority, or any individual or body, incorporated or not, for any purpose of the Chapter.

Section 25(3). All moneys accruing or payable to the Fund are deposited in such bank or banks as the Central Government approves, to the credit of an account styled the account of the Employees' State Insurance Fund.

Section 25(4). The Fund, or any other money held by the Corporation, is deposited or invested in the manner prescribed by the Central Government, and the account is operated by such officers as the Standing Committee authorises with the approval of the Corporation.

Section 26: what the Fund may be spent on

Subject to the Chapter and the rules and regulations, the Fund shall be expended only for the following purposes. The word "only" is the point of the section.

There are twelve heads, clauses (a) to (l):

If the list will not fit in an answer, group it: benefits and medical care (a, d, e); the machinery and people who deliver them (b, c, g); the Corporation's legal and financial obligations (f, h, i, j); welfare and rehabilitation (k); and the residual head (l), which alone needs the previous approval of the Central Government.

Section 27: holding of property

Four sub-sections, and the last two are the ones students forget.

Section 27(1). Subject to conditions prescribed by the Central Government, the Corporation may acquire and hold property, movable and immovable, sell or otherwise transfer any such property vested in or acquired by it, and do all things necessary for the purposes for which it is established.

Section 27(2). Subject to prescribed conditions, it may from time to time invest any moneys not immediately required for expenses properly defrayable under the Code, and re-invest or realise those investments.

Section 27(3). With the previous sanction of the Central Government and on prescribed terms, it may raise loans and take measures for discharging them.

Section 27(4). It may constitute, for the benefit of its own officers and staff or any class of them, such provident or other benefit fund as it thinks fit.

Sub-section (1) is what makes the Corporation able to own the hospitals through which it delivers the medical benefit rather than buying the service from somebody else. Sub-section (4) is a small irony worth noticing: the body that administers other people's provident fund neighbour Chapter may set up one for its own staff.

A worked example

The Corporation wants to build a new hospital in Nashik, appoint a cardiologist to run its cardiac unit, and remove a Director General it has lost confidence in.

Can it own the hospital? Yes. Section 27 permits the Corporation to acquire and hold immovable property, subject to prescribed conditions.

Where does the money come from? The Employees' State Insurance Fund. Section 26 permits expenditure on the establishment and maintenance of hospitals and other medical and surgical services, so the purpose is within the exhaustive list.

Must the cardiologist's appointment go to the Union Public Service Commission? No. Section 24(9) excepts medical, nursing and para-medical posts from the consultation requirement.

Can he be paid more than a Central Government officer on the corresponding scale? Yes, if he is a specialist or super specialist notified by the Central Government: the first proviso to section 24(8)(a) requires his terms to be similar to those of the equivalent post at the All India Institute of Medical Sciences or a comparable Central institution.

How does the Corporation remove the Director General? It cannot remove him itself. Under section 24(6) removal is by the Central Government. The Corporation's route is a resolution at a special meeting called for the purpose, supported by not less than two thirds of its total strength, on which the Central Government is then bound to remove him.

Suppose a philanthropic trust offers a donation for a dialysis unit. Section 25(2) permits the Corporation to accept grants, donations, Corporate Social Responsibility Fund and gifts from any individual or body, incorporated or not, for the purposes of the Chapter.

What this does NOT mean

The Fund is not the Corporation's to spend as it thinks best. Section 26 says it shall be expended only for the listed purposes, and the residual head requires the previous approval of the Central Government.

The Corporation cannot remove its own Principal Officers. It can resolve, by a two thirds majority of total strength at a special meeting, and that resolution obliges the Central Government to act. The act of removal is the Central Government's.

Two thirds of total strength is not two thirds of those present. Section 24(6) says total strength, so absentees count against the majority.

Consultation with the Union Public Service Commission is not universal. Medical, nursing and para-medical posts are outside it altogether, and short officiating or temporary appointments up to a year are exempt.

Limits and criticism

The rates and much of the substance sit outside the Code. Section 24 leaves salaries, powers and duties to rules and regulations; section 25(4) leaves investment to rules; section 26's residual head leaves the outer edge of expenditure to the Corporation with Central approval.

The five year cap is on the term, not on the tenure. The proviso to section 24(2) allows re-appointment without limit, so the cap is softer than it looks.

User charges are deemed to be contributions. The proviso to section 25(1) treats money paid by non-contributing beneficiaries under section 44 as contributions, which quietly widens what the insurance fund is.

Quick revision

• Section 24: Director General and Financial Commissioner are the Principal Officers, appointed by the Central Government for not more than five years, re-appointable; disqualified by anything in section 8; the Central Government may remove at any time and must remove on a resolution of the Corporation at a special meeting carried by two thirds of total strength; Central sanction for high salaried posts; medical specialist parity; UPSC consultation for Group A and B, except medical, nursing and para-medical, and except officiating or temporary appointments up to one year.
• Section 25: all contributions and user charges go into the Employees' State Insurance Fund, held and administered by the Corporation; user charges under section 44 are deemed contributions; grants, donations, Corporate Social Responsibility Fund and gifts may be accepted; deposited in Central Government approved banks; invested as prescribed; account operated by officers authorised by the Standing Committee with the Corporation's approval.
• Section 26: the Fund is expended only for the twelve purposes in clauses (a) to (l): benefits and medical care; committee fees; staff pay and offices; hospitals and dispensaries; contributions to a State Government, local authority, private body or individual for treatment; audit and valuation; the Employees' Insurance Courts; contractual sums; decrees, orders and awards; the cost of litigation; welfare and rehabilitation within prescribed limits; and other purposes authorised by the Corporation with the previous approval of the Central Government.
• Section 27: the Corporation may (1) acquire, hold, sell or transfer property; (2) invest and re-invest money not immediately required; (3) raise loans with the previous sanction of the Central Government; and (4) constitute a provident or other benefit fund for its own staff.

Test yourself

1. Who are the Principal Officers of the Corporation and for how long do they hold office? The Director General and the Financial Commissioner, appointed by the Central Government for such period not exceeding five years as the order of appointment specifies, and eligible for re-appointment if otherwise qualified: section 24(1) and (2).

2. The Corporation resolves by a bare majority at an ordinary meeting that the Director General should go. Must the Central Government remove him? No. Section 24(6) obliges the Central Government to remove only where the resolution is passed at a special meeting called for the purpose and supported by not less than two thirds of the total strength of the Corporation. Neither condition is met.

3. May the Employees' State Insurance Fund be spent on anything the Corporation considers beneficial to workers? No. Section 26 provides that the Fund shall be expended only for the purposes it lists, and the residual purpose requires the previous approval of the Central Government.

4. Must the appointment of a staff nurse be made in consultation with the Union Public Service Commission? No. Section 24(9) excepts medical, nursing and para-medical posts from that requirement.

5. Where do user charges collected from beneficiaries under section 44 go? Into the Employees' State Insurance Fund, and by the proviso to section 25(1) they are deemed to be contributions and form part of it.

6. Who authorises the officers who operate the Fund's bank account? The Standing Committee constituted under section 5(3), with the approval of the Corporation: section 25(4).

"Insurable" covers the employee who ought to have been insured but was not, because the employer failed to register him. He is still an Insured Person if contributions were payable in respect of him. The employer's default does not strip the worker of the status.

"Are or were payable" covers the employee whose contributions have stopped. A person does not cease to be an Insured Person the moment the last contribution is made, because entitlement to some benefits looks back to an earlier contribution period.

Section 42 reinforces this, and it is taken in [ESI Enforcement and Schemes for Others]: the Corporation has rights where an employer fails to register.

Section 29: contributions

Section 29(1). The contribution payable in respect of an employee comprises the employer's contribution and the employee's contribution, and is paid to the Corporation.

Section 29(2). Both contributions are paid at such rates as may be prescribed by the Central Government.

Note what the Code does not do here. Unlike section 16(1)(a), which fixes ten per cent for provident fund on the face of the Code, section 29(2) fixes no figure at all for insurance. Both ESI rates are entirely delegated. A student who quotes a percentage for ESI out of the Code is quoting something that is not in it.

Section 29(3), the wage period. The wage period in relation to an employee is the unit specified in the regulations, in respect of which all contributions are payable.

Section 29(4), when they fall due. Contributions for each wage period ordinarily fall due on the last day of the wage period. Where an employee is employed for part of a wage period, or is employed under two or more employers during the same wage period, they fall due on such days as the regulations specify.

Section 30: administrative expenses

The types of expense that count as administrative expenses, and the percentage of the Corporation's income which may be spent on them, are prescribed by the Central Government, and the Corporation shall keep its administrative expenses within the limit so prescribed.

Short, and worth a line in an essay. An insurance fund whose running costs are uncapped is an insurance fund that pays smaller benefits. The Code caps the running cost as a proportion of income and makes the cap binding on the Corporation.

Section 31: how the contributions are actually paid

This is the operative section and it has nine sub-sections. Take them as a chain.

Section 31(1), the primary liability. The employer shall pay, in respect of every employee, whether directly employed by him or by or through a contractor, both the employer's contribution and the employee's contribution.

That is the heart of it. The employer pays both, and he pays for the contractor's people too. Everything that follows is about who may recover what from whom afterwards.

Section 31(2), recovering the employee's share. Notwithstanding any other law, but subject to the Code and the rules and regulations, the employer is entitled, in the case of an employee directly employed by him and not being an exempted employee, to recover the employee's contribution by reduction from his wages and not otherwise.

The proviso limits the deduction twice. No deduction may be made from wages other than those relating to the period, or part of the period, in respect of which the contribution is payable, nor in excess of the sum representing the employee's contribution for that period. So an employer cannot recover an old arrear out of this month's wages, and cannot deduct more than the share itself.

Section 31(3), the absolute bar. Notwithstanding any contract to the contrary, neither the employer nor the contractor is entitled to deduct the employer's contribution from any wages payable to an employee, or otherwise to recover it from him.

Section 31(4), the trust. Any sum deducted by the employer from wages under the Chapter is deemed to have been entrusted to him by the employee for the purpose of paying the contribution for which it was deducted.

This converts a failure to remit from a mere non-payment into a breach of an entrustment. It is the provision to cite when an employer has deducted from wages and kept the money.

Section 31(5), the cost of remitting. The employer bears the expenses of remitting the contributions to the Corporation.

Section 31(6), recovery from the contractor. An employer who has paid contributions for an employee employed by or through a contractor may recover the amount so paid, the employer's contribution as well as the employee's contribution if any, from the contractor, either by deduction from any amount payable to him under a contract or as a debt payable by the contractor.

Section 31(7), the contractor's register. The contractor shall maintain a register of employees employed by or through him, as provided in the regulations, and submit it to the employer before the settlement of any amount payable under sub-section (6).

Section 31(8), the contractor's recovery from the worker. The contractor may recover the employee's contribution from the employee by deduction from wages and not otherwise, subject to the same conditions as the proviso to sub-section (2).

Section 31(9). The Corporation may make regulations on any matter relating or incidental to payment and collection of contributions.

How section 31 differs from section 17

Both sections deal with the same commercial situation and they are not the same. This table is the safest way to keep them apart.

If an exam asks about deduction of contributions, check first which Chapter is in play. The insurance provisions are the fuller of the two.

A worked example

Kavita is employed at a hospital laundry with sixty workers. She is directly employed. Ramesh works alongside her on the roll of Shine Contractors. The wage period is a month. Assume both are within the wage ceiling.

Are they insured? Yes, both. Section 28(1) insures every employee in an establishment to which the Chapter applies, and section 2(26) defines an employee to include one employed through a contractor. They are Insured Persons under section 28(2).

Who pays? The employer of the establishment, for both of them, and both contributions in each case: section 31(1).

Can the employer recover Kavita's share? Yes, by reduction from her wages and not otherwise, provided the deduction relates to the same period and does not exceed her share: section 31(2) and its proviso.

The employer forgot to deduct for March and tries to take two shares out of April's wages. Lawful? No. The proviso to section 31(2) forbids a deduction from wages other than those relating to the period in respect of which the contribution is payable, and forbids a deduction exceeding the employee's contribution for that period.

The employer deducted Kavita's share and never remitted it. What is the position? Under section 31(4) the sum deducted is deemed to have been entrusted to him by her for the purpose of paying the contribution. The failure is a breach of that entrustment, not simply an unpaid bill.

Can the employer recover Ramesh's contributions from Shine Contractors? Yes, both of them, by deduction from what is payable under the contract or as a debt: section 31(6). But Shine must first give the employer the register of employees it is required to keep, before settlement of any amount: section 31(7).

Can Shine then deduct the employer's share from Ramesh's wages? No. Section 31(3) forbids it notwithstanding any contract to the contrary, and section 31(8) allows Shine to recover only the employee's contribution, by deduction from wages and not otherwise.

Ramesh was never registered by anybody. Is he outside the scheme? No. He is insurable under section 28(1), and section 28(2) makes an insurable employee in respect of whom contributions were payable an Insured Person. The employer's default does not remove his status.

What this does NOT mean

The rates are not in the Code. Section 29(2) leaves both rates entirely to the Central Government. Quoting a percentage as the Code's rate is wrong.

"Insured Person" is not the same as "employee". An employee becomes an Insured Person when contributions are or were payable in respect of him and he is by reason of that entitled to a benefit. The Code uses the two terms differently throughout Chapter IV.

The employer's ability to recover is not a shift of liability. Sections 31(2), (6) and (8) create rights of recovery. The obligation to pay the Corporation stays where section 31(1) puts it.

Section 31(2) does not apply to every employee. It is confined to an employee directly employed by the employer and not being an exempted employee. The contractor's people are dealt with by sub-sections (6) to (8).

Limits and criticism

Everything about the money is delegated. The rates under section 29(2), the wage period under section 29(3), the due days for part periods under section 29(4) and the administrative expense cap under section 30 are all outside the Code.

The wage ceiling is not in the Code either. Because the first proviso to section 2(26) limits "employee" for this Chapter to those at or below the notified wage ceiling, the reach of the entire insurance scheme is set by notification.

Section 31(4) creates a deemed entrustment but states no remedy. The consequences have to be found in Chapter XII and in the general law.

The register in section 31(7) is the only real check on contractor supplied labour, and it is owed to the employer rather than to the Corporation.

Quick revision

• Section 28(1): every employee in a covered establishment shall be insured, electronically or otherwise as prescribed. Section 28(2): an employee insured or insurable, in respect of whom contributions are or were payable, and who is thereby entitled to a benefit, is an Insured Person.
• Section 29: contribution comprises the employer's and the employee's, paid to the Corporation, at rates prescribed by the Central Government; wage period is fixed by regulations; contributions ordinarily fall due on the last day of the wage period.
• Section 30: administrative expenses and the percentage of income spent on them are prescribed, and the Corporation must stay within the limit.
• Section 31: the employer pays both contributions for every employee, direct or through a contractor; he may recover the employee's share by reduction from wages and not otherwise, only for the same period and not exceeding the share; neither employer nor contractor may ever pass on the employer's share, notwithstanding any contract; sums deducted are deemed entrusted; the employer bears the cost of remitting; he may recover from the contractor by deduction or as a debt; the contractor must produce a register of employees before settlement; the contractor may recover only the employee's share, by deduction from wages.

Test yourself

1. An employer never registered a worker and never paid contributions for him. Is that worker an Insured Person? Yes, if contributions were payable in respect of him and he is thereby entitled to a benefit. Section 28(2) covers an employee who is insured or insurable and in respect of whom contributions are or were payable, so the employer's default does not remove the status.

2. What rate of contribution does the Code fix for employees' state insurance? None. Section 29(2) provides that both the employer's and the employee's contributions are paid at such rates as may be prescribed by the Central Government.

3. An employment contract says the worker will bear both contributions. Effect? The clause is ineffective so far as the employer's contribution is concerned. Section 31(3) operates notwithstanding any contract to the contrary and forbids either the employer or the contractor from deducting the employer's contribution from wages, or otherwise recovering it from the employee.

4. What are the two limits on deducting the employee's contribution from wages? By the proviso to section 31(2), the deduction may not be made from wages other than those relating to the period, or part of the period, in respect of which the contribution is payable, and may not exceed the sum representing the employee's contribution for that period.

5. An employer deducts a worker's share and spends it. What does section 31(4) add? It deems the sum deducted to have been entrusted to the employer by the employee for the purpose of paying that contribution, so the money is held on trust rather than owed as a simple debt.

6. What must a contractor produce before the employer settles amounts payable to him under section 31(6)? The register of employees employed by or through him, maintained as provided in the regulations: section 31(7).

The proviso to clause (f) does two things and both get asked. The amount shall not exceed such amount as may be prescribed by the Central Government. And the claim shall be made within three months of the death, or within such extended period as the Corporation or an authorised officer or authority may allow.

Notice the drafting of clause (f). The primary recipient is the eldest surviving member of the family, not the person who paid. Only where there is no family, or the deceased was not living with it, does the money follow the person who actually spent it.

Section 32(2), the family. The Corporation may, subject to conditions laid down in the regulations, extend the medical benefits to the family of an Insured Person. Note that only the medical benefit is extendable in this way; the cash benefits are not.

Section 32(3), delegation. The qualification of a person to claim sickness, maternity, disablement and dependants' benefit, the conditions subject to which it may be given, and the rate and period of it, are prescribed by the Central Government.

Section 32(4). The Corporation may make regulations for any matter relating or incidental to the accrual and payment of benefits.

Section 33: welfare and rehabilitation

The Corporation may, in addition to the benefits specified in the Chapter, promote measures for the improvement of the health and welfare of Insured Persons and for the rehabilitation and re-employment of Insured Persons who have been disabled or injured, and may incur expenditure on those measures from the Employees' State Insurance Fund within limits prescribed by the Central Government.

The words "in addition to" matter. Section 33 is not a seventh benefit an individual can claim; it is a power to spend on collective measures, and the money for it is expressly authorised by clause (k) of section 26.

Section 38: dependants' benefit

Section 38(1). If an Insured Person dies as a result of an employment injury sustained as an employee under the Chapter, whether or not he was receiving temporary disablement payments for that injury, dependants' benefit is payable to his dependants specified in sub-clause (a) and sub-clause (b) of clause (24) of section 2, at such rates, for such periods and subject to such conditions as the Central Government prescribes.

Section 38(2). If he dies without leaving those dependants, the benefit is paid to the other dependants of the deceased, on the same delegated terms.

So the Code creates a two tier scheme. The first tier is the dependants in section 2(24)(a) and (b). The second tier, reached only if the first is empty, is the remaining dependants in that definition.

Section 38(3), review. A decision awarding dependants' benefit may be reviewed at any time by the Corporation if it is satisfied by fresh evidence that the decision was given in consequence of non-disclosure or misrepresentation of a material fact by the claimant or anyone else, whether or not fraudulent; or that the decision is no longer in accordance with the Chapter because of a birth, a death, a marriage, a re-marriage, the ceasing of an infirmity, or a claimant attaining the age of twenty-five years.

Section 38(4). On such a review the Corporation may direct that the benefit be continued, increased, reduced or discontinued.

The list in section 38(3) is worth learning because it explains what a dependants' pension really is: a payment tied to a continuing state of dependence, which the Corporation may revisit when that state changes. Note especially that non-disclosure need not be fraudulent.

Section 39: medical benefit

Section 39(1) and (2). An Insured Person, or a member of his family where medical benefit is extended to the family, whose condition requires medical treatment and attendance, is entitled to receive medical benefit. It may be given as out-patient treatment in a hospital, dispensary, clinic or other institution, by visits to the home of the Insured Person, or as in-patient treatment.

Section 39(3) leaves qualification, conditions, scale and period to the Central Government, and then adds four provisos which are the examinable part:

1. a person in respect of whom contribution ceases to be payable may be allowed medical benefit for such period and of such nature as the regulations provide;
2. an Insured Person who has attained the age of superannuation, a person who retires under a Voluntary Retirement Scheme or takes premature retirement, and his spouse, are eligible for medical benefits subject to payment of contribution and other conditions specified in the regulations;
3. an Insured Person who ceases to be in insurable employment because of permanent disablement caused by employment injury shall continue to receive medical benefits, subject to payment of contribution and other prescribed conditions;
4. the conditions for granting medical benefits during employment injury are as specified in the regulations.

The second and third provisos are the socially important ones. Medical cover does not simply stop at retirement, and it does not stop for the worker whose employment ended because of the injury the scheme exists to cover.

Section 39(4) and (5), medical education. The Corporation may establish medical education institutions, including colleges, dental colleges, nursing colleges and training institutes for its own officers and staff, to improve the quality of their services. Those institutions shall require students to furnish a bond to serve the Corporation for such time and in such manner as the regulations specify. They may be run by the Corporation itself, or at its request by the Central Government, a State Government, a public sector undertaking of either, or any other body notified by the Central Government. The Explanation defines "other body" as any organisation of persons the Central Government considers capable of running such colleges and institutes.

Section 39(6), surveys. The Corporation may carry out occupational and epidemiological surveys and studies to assess the health and working conditions of Insured Persons, as a preventive and curative measure.

Section 40: who actually provides the treatment

Section 40(1). The State Government shall provide for Insured Persons in the State, and their families where the benefit is extended to them, reasonable medical, surgical and obstetric treatment. The proviso lets the State Government, with the Corporation's approval, arrange treatment at the clinics of medical practitioners on agreed terms.

Section 40(2), sharing the excess. Where the incidence of sickness benefit payment in a State exceeds the all-India average, the excess is shared between the Corporation and the State Government in such proportion as they agree. The proviso lets the Corporation waive the whole or part of the State's share.

Section 40(3) and (4), agreement and arbitration. The Corporation may agree with a State Government about the nature and scale of treatment, including buildings, equipment, medicines and staff, and the sharing of cost. In default of agreement, the nature and extent of treatment and the sharing proportions are determined by an arbitrator appointed by the Central Government in consultation with the State Government.

Section 40(5) and (6), a State organisation. A State Government may, with the previous approval of the Central Government, establish an organisation, by whatever name called, to provide certain benefits to employees in cases of sickness, maternity and employment injury. The proviso provides that a reference to the State Government in this Chapter includes a reference to that organisation once established. Its structure, functions, powers and activities are prescribed by the Central Government.

Section 40(7). The Corporation may itself establish and maintain hospitals, dispensaries and other medical and surgical services in a State.

Section 41: the general rules about benefits

This section is the one that governs all six, and it contains the rules examiners like because each is a clean proposition.

No commutation, section 41(1). Save as the regulations provide, no person is entitled to commute for a lump sum any disablement benefit.

No benefit for a day you worked, section 41(2). Save as the regulations provide, no person is entitled to sickness benefit or to disablement benefit for temporary disablement on any day on which he works, or remains on leave or on a holiday in respect of which he receives wages, or on any day on which he remains on strike.

Duties of a person on benefit, section 41(3). A person receiving sickness benefit or disablement benefit other than for permanent disablement:

• (a) shall remain under medical treatment at a dispensary, hospital, clinic or other institution provided under the Chapter, and shall carry out the instructions of the medical officer or attendant in charge;
• (b) shall not, while under treatment, do anything which might retard or prejudice his chances of recovery;
• (c) shall not leave the area in which treatment is being given, without permission;
• (d) shall allow himself to be examined by a duly appointed medical officer or other authorised person.

No doubling up, section 41(4) and (5). An Insured Person shall not receive for the same period both sickness benefit and maternity benefit, or both sickness benefit and temporary disablement benefit, or both maternity benefit and temporary disablement benefit. Where he is entitled to more than one, he chooses which to receive.

Death during a benefit period, section 41(6). If a person dies during a period for which he is entitled to a cash benefit, the amount up to and including the day of death is paid to the person he nominated in writing in the form specified in the regulations, or, if there is no nomination, to his heir or legal representative.

Section 41(7), the bar between Chapters. Learn this one.

• (a) A person eligible for dependants' benefit or disablement benefit under this Chapter shall not be entitled to claim Employees' Compensation from his employer under Chapter VII.
• (b) A woman employee eligible for maternity benefit under this Chapter shall not be entitled to claim maternity benefit from her employer under Chapter VI.

This is the provision that keeps the Code's benefits from overlapping, and it explains something a student will otherwise find puzzling: why the First Schedule applies Chapter VII only to those to whom Chapter IV does not apply. Where the insurance scheme covers a worker, the insurance scheme pays, and the employer is not separately liable to him.

Wrongly received benefits, section 41(8) to (10). A person who receives a benefit or payment he is not lawfully entitled to is liable to repay the Corporation its value or amount, and on his death his legal representative is liable to repay from the assets that devolved on him. The value of a non-cash benefit is determined by the authority specified in the regulations, whose decision is final. The amount is recoverable in the manner specified in sections 129 to 132.

A worked example

Nitin is an Insured Person. He falls ill with an infection unconnected with work, is off for three weeks, and during that time takes two days of paid leave. In the same month his wife has a baby. Later that year he is permanently disabled in an accident at the factory, and eighteen months after that he dies of the injury, leaving a widow and a son aged twenty-four.

Sickness benefit for the three weeks? Yes, for the days he was neither working nor on paid leave. Section 41(2) bars sickness benefit on a day he works, or remains on leave or a holiday in respect of which he receives wages, so the two paid leave days are excluded.

Maternity benefit for his wife's confinement? No. Section 32(1)(b) gives maternity benefit to an Insured Person being a woman. His wife may receive medical benefit if the Corporation has extended it to the family under section 32(2), but the cash maternity benefit is not his to claim.

Disablement benefit after the factory accident? Yes, under section 32(1)(c), the injury being an employment injury sustained as an employee.

Can he take the disablement benefit as a lump sum? Not as of right. Section 41(1) bars commutation of disablement benefit save as the regulations provide.

He stops being employed because of the disablement. Does his medical cover end? No. The third proviso to section 39(3) provides that an Insured Person who ceases to be in insurable employment on account of permanent disablement caused by employment injury shall continue to receive medical benefits, subject to payment of contribution and prescribed conditions.

Can he also sue the employer for compensation under Chapter VII? No. Section 41(7)(a) bars a person eligible for disablement benefit under Chapter IV from claiming Employees' Compensation from his employer under Chapter VII.

On his death, who gets dependants' benefit? His dependants specified in section 2(24)(a) and (b), under section 38(1), at prescribed rates.

His son turns twenty-five. What happens? The Corporation may review the award under section 38(3), attainment of the age of twenty-five by a claimant being one of the listed grounds, and under section 38(4) may direct that the benefit be continued, increased, reduced or discontinued.

Who receives funeral expenses? The eldest surviving member of his family under section 32(1)(f), and the claim must be made within three months of the death unless extended.

What this does NOT mean

Medical benefit does not automatically extend to the family. Section 32(2) makes it something the Corporation may do, subject to conditions in the regulations. The cash benefits are not extendable to the family in this way at all.

Section 33 is not a seventh benefit. It is a power to spend on collective health, welfare, rehabilitation and re-employment measures.

Funeral expenses do not automatically go to whoever paid. They go to the eldest surviving member of the family, and only where there is no family, or the deceased was not living with it, to the person who actually incurred the expenditure.

A review under section 38(3) does not require fraud. The sub-section says non-disclosure or misrepresentation "whether the non-disclosure or misrepresentation was or was not fraudulent", and a change of circumstances is an independent ground.

Section 41(7) is not a bar on all other remedies. It bars a claim under Chapter VII against the employer where the worker is eligible for dependants' or disablement benefit, and a claim under Chapter VI for maternity benefit. It says nothing about a common law action for negligence against a third party.

Limits and criticism

The amounts are entirely outside the Code. Section 32(3) delegates qualification, conditions, rate and period for four of the six benefits, and the proviso to section 32(1)(f) delegates the ceiling on funeral expenses.

Two provisos to section 39(3) make continued medical cover conditional on paying a contribution, including for the person who was permanently disabled by an employment injury.

The delivery of medical benefit depends on a State Government. Section 40(1) places the duty on the State, with the cost split by agreement and, failing agreement, by an arbitrator. Quality of treatment therefore varies with the State.

Section 41(2) bars benefit on a strike day even where the worker is genuinely sick, unless the regulations provide otherwise.

Quick revision

• Six benefits, section 32(1): sickness (a), maternity (b, to a woman Insured Person), disablement (c, employment injury), dependants' (d, death from employment injury), medical (e), funeral expenses (f, to the eldest surviving member of the family, capped as prescribed, claim within three months).
• Section 32(2): only medical benefit may be extended to the family. Section 32(3): qualification, conditions, rate and period are prescribed.
• Section 33: welfare, rehabilitation and re-employment measures, in addition to the benefits.
• Section 38: dependants' benefit to those in section 2(24)(a) and (b) first, other dependants only if none; reviewable at any time on fresh evidence of non-disclosure or misrepresentation, fraudulent or not, or on birth, death, marriage, re-marriage, ceasing of infirmity or a claimant reaching twenty-five; may be continued, increased, reduced or discontinued.
• Section 39: medical benefit as out-patient, home visits or in-patient; four provisos, of which the key two continue cover for the superannuated or retired employee and his spouse and for one who left employment through permanent disablement from employment injury; the Corporation may run medical colleges with a service bond.
• Section 40: the State Government shall provide treatment; excess sickness benefit over the all-India average is shared; disputes go to an arbitrator appointed by the Central Government.
• Section 41: no commutation of disablement benefit; no benefit on a day worked, on paid leave or holiday, or on strike; four duties of a person on benefit; no doubling up of sickness with maternity, sickness with temporary disablement, or maternity with temporary disablement, and the worker chooses; cash benefit to the day of death goes to the nominee or the heir; section 41(7) bars a Chapter VII claim for one eligible for dependants' or disablement benefit and a Chapter VI claim for one eligible for maternity benefit here; benefits wrongly received are repayable, recoverable under sections 129 to 132.

Test yourself

1. Name the six benefits under section 32 and say which of them is not a cash payment. Sickness benefit, maternity benefit, disablement benefit, dependants' benefit, medical benefit and funeral expenses. Medical benefit is a service, that is treatment and attendance, not a payment.

2. Who is entitled to funeral expenses, and within what time must the claim be made? The eldest surviving member of the family of the deceased Insured Person, or, where he had no family or was not living with it at the time of death, the person who actually incurs the expenditure. The claim must be made within three months of the death, or within such extended period as the Corporation or an authorised officer or authority allows.

3. An Insured Person is sick on a day he is on strike. Is sickness benefit payable? No, save as the regulations may provide. Section 41(2) bars sickness benefit on any day on which he remains on strike.

4. A worker is eligible for disablement benefit under Chapter IV. Can he also claim employees' compensation from his employer? No. Section 41(7)(a) provides that a person eligible for dependants' benefit or disablement benefit under Chapter IV is not entitled to claim Employees' Compensation from his employer under Chapter VII.

5. On what grounds may an award of dependants' benefit be reviewed? Under section 38(3), on fresh evidence that the decision was given in consequence of non-disclosure or misrepresentation of a material fact, whether or not fraudulent; or that the decision is no longer in accordance with the Chapter because of a birth, a death, a marriage, a re-marriage, the ceasing of an infirmity, or a claimant attaining twenty-five years of age.

6. A worker loses his job because of permanent disablement caused by an employment injury. Does his medical benefit stop? No. The third proviso to section 39(3) provides that he shall continue to receive medical benefits, subject to payment of contribution and such other conditions as may be prescribed.

7. An Insured Person is entitled to both sickness benefit and temporary disablement benefit for the same period. What happens? He cannot receive both: section 41(4)(b). Under section 41(5) he is entitled to choose which benefit he will receive.

Section 34(2), rescue and emergency. An accident happening to an employee in or about any premises at which he is for the time being employed for the purposes of his employer's trade or business shall be deemed to arise out of and in the course of his employment, if it happens while he is taking steps, on an actual or supposed emergency at those premises, to rescue, succour or protect persons who are, or are thought to be or possibly to be, injured or imperilled, or to avert or minimise serious damage to property.

Note "supposed emergency". A worker who runs towards what he reasonably thinks is a fire is protected even if there was no fire.

Section 34(3), commuting. This is the important one. An accident occurring to an employee while commuting from his residence to the place of employment for duty, or from the place of employment to his residence after performing duty, shall be deemed to have arisen out of and in the course of employment if nexus between the circumstances, time and place in which the accident occurred and the employment is established.

Section 34(4), employer provided transport. An accident happening while an employee is, with the express or implied permission of his employer, travelling as a passenger by any vehicle to or from his place of work shall be deemed to arise out of and in the course of employment, notwithstanding that he is under no obligation to his employer to travel by that vehicle, if:

• (a) the accident would have been deemed so to arise had he been under such an obligation; and
• (b) at the time of the accident the vehicle (i) is being operated by or on behalf of his employer, or of some other person by whom it is provided under arrangements made with his employer, and (ii) is not being operated in the ordinary course of public transport service.

The Explanation provides that "vehicle" includes a vessel and an aircraft.

What section 34(3) does to the old commuting rule

Before the Code the commuting worker had no statutory provision at all. He had only the judge made doctrine of notional extension, and the leading case shows how narrow it was.

Saurashtra Salt Manufacturing Co. v. Bai Valu Raja, AIR 1958 SC 881.

Facts. Workers going home from a salt works crossed a creek by public boat. One capsized in bad weather in June 1952 and several were drowned. The boats belonged to nobody connected with the works, and the landing patch and footpath were open to anyone. So the men died on a public route, on a journey that was neither at the works nor at home. The facts are set out in full in [Employer's Liability for Compensation].

Held. The appeal was allowed and the award set aside. As a rule employment does not begin until the worker reaches the place of employment and does not continue after he leaves it, the journey to and from work being excluded. That rule is subject to the theory of notional extension of the employer's premises, which may extend the employment reasonably in both time and place. But a worker on a public road, in a public place or on public transport is there as any other member of the public, unless the very nature of the employment requires him to be there. Even assuming the notional extension reached the works' own boundary, it could not be stretched across the creek: once the worker left the far bank by boat, or had left the town side and not yet reached the far bank, he was not in the course of his employment.

Why it matters here. It is the leading Indian statement of notional extension and of its limit, and it shows exactly what the commuting worker faced. But note the statute carefully. Saurashtra Salt was decided under the Workmen's Compensation Act 1923, which contained no provision about commuting at all. Section 34(3) of this Code now does. For Chapter IV, a commuting accident is deemed to arise out of and in the course of employment once nexus between the circumstances, time and place of the accident and the employment is established. The question is no longer whether the employer's premises can be stretched to reach the worker; it is whether a nexus can be shown. On the facts of Saurashtra Salt the workers were commuting home after performing duty by the usual and ordinary route, which is the kind of nexus section 34(3) contemplates.

Do not overstate this. Section 34(3) requires nexus to be established, so it is not an automatic cover for every journey, and the reasoning in Saurashtra Salt about public places remains useful in deciding whether nexus exists. What has changed is that there is now a statutory route where before there was only a doctrine.

Section 35: accidents while breaking the law

An accident shall be deemed to arise out of and in the course of employment notwithstanding that the employee is at the time acting in contravention of any law applicable to him, or of any orders given by or on behalf of his employer, or is acting without instructions from his employer, if:

• (a) the accident would have been deemed so to arise had the act not been done in contravention, or without instructions; and
• (b) the act is done for the purpose of and in connection with the employer's trade or business.

The principle is that disobedience does not by itself break the connection with the employment; departure from the employer's business does. A worker who takes a forbidden shortcut across the shop floor to fetch a tool is still working. A worker who leaves the premises on his own errand is not, and clause (b) is what separates them.

Section 36: occupational disease

Section 36(1), the presumption. The Third Schedule is in three Parts, and the qualifying period differs in each:

Where those conditions are met, the contracting of the disease shall, unless the contrary is proved, be deemed to be an "employment injury" arising out of and in the course of employment.

Section 36(2), everything else. Save as provided by sub-section (1), no benefit is payable in respect of any disease unless the disease is directly attributable to a specific injury by accident arising out of and in the course of employment.

Section 36(3), a trap worth marking. The provisions of section 34(1) shall not apply to cases to which section 36 applies.

That last sub-section is easy to miss and it is exactly the sort of thing an examiner sets. The general presumption in section 34(1) is switched off for occupational disease cases, because section 36(1) supplies its own, more specific presumption. Applying both would double count.

The burden of proof, and how far inference can go

Sections 34 and 36 give the employee presumptions. They do not relieve him of proving the facts those presumptions rest on, and the leading authority on how far a tribunal may go in filling gaps is a case decided the other way.

Mackinnon Mackenzie & Co. Pvt. Ltd. v. Ibrahim Mahommed Issak, AIR 1970 SC 1906.

Facts. A deck-hand who had complained of chest pain three days earlier went missing from a ship at night in December 1961. Nobody saw what happened to him. His dependant claimed, and the question was how much a tribunal may infer when the only proved facts are that a man was aboard and then was not. The facts are set out in full in [Employer's Liability for Compensation].

Held. The appeal was allowed and the Commissioner restored. To fall within the Act the injury by accident must arise both out of and in the course of the employment. "In the course of employment" means in the course of the work the employee is engaged to do and what is incidental to it. "Arising out of the employment" means that the injury resulted from some risk incidental to the duties of the service which, but for the duty owed to the employer, it is reasonable to believe the employee would not have suffered; the phrase extends not merely to the nature of the employment but to its conditions, obligations and incidents. The onus of proving both limbs lies on the applicant, though both may be inferred where the proved facts justify the inference. The Commissioner must not surmise, conjecture or guess, but may draw an inference such as would induce a reasonable person to draw it.

Why it matters here. It is the standard statement of the two limbs and of the burden, and it marks the line between a legitimate inference and a guess, which is the line every disputed injury claim is argued along. Note two things before using it. It was decided under the Workmen's Compensation Act 1923, and the worker's dependant lost, which is the opposite of how the case is usually described.

Section 37: the medical board and the disablement question

Section 37(1), what a "disablement question" is. Four questions are determined by a medical board constituted under the regulations, and together they are called the disablement question:

1. whether the relevant accident has resulted in permanent disablement;
2. whether the extent of loss of earning capacity can be assessed provisionally or finally;
3. whether the assessment of the proportion of loss of earning capacity is provisional or final;
4. in the case of a provisional assessment, the period for which it holds good.

Section 37(2), reference. A case for permanent disablement benefit is referred by the Corporation to a medical board. Where loss of earning capacity is assessed provisionally, it must be referred again not later than the end of the period taken into account by that provisional assessment.

Section 37(3) and (4), review. A decision may be reviewed at any time if the board is satisfied by fresh evidence that it was given in consequence of non-disclosure or misrepresentation of a material fact, whether or not fraudulent. An assessment may also be reviewed if there has been a substantial and unforeseen aggravation of the results of the injury, but the proviso permits that only where the board thinks substantial injustice would be done by not reviewing it.

Section 37(5), the time bars on review for aggravation. Except with the leave of a medical appeal tribunal, an assessment shall not be reviewed under sub-section (4) on an application made less than five years from its date, or six months in the case of a provisional assessment. On such a review the revised assessment may not take into account any period before the date of the application.

Section 37(6). On review the board may deal with the case in any manner it could on an original reference, including making a provisional assessment even though the assessment under review was final.

Section 37(7), appeal. Learn the structure. If the Insured Person or the Corporation is aggrieved by a decision of the medical board, it may appeal, in the manner and within the time prescribed by the Central Government, either:

• (i) to the medical appeal tribunal constituted under the regulations; or
• (ii) to the Employees' Insurance Court directly.

Two provisos bar the appeal. No appeal lies from an Insured Person who has applied for commutation of disablement benefit on the basis of the board's decision and received the commuted value. No appeal lies from the Corporation where it has paid the commuted value on the basis of that decision.

Clause (b) is the part students get wrong. Where the party appealed to the medical appeal tribunal rather than going straight to the Employees' Insurance Court, he has a further right of second appeal to the Employees' Insurance Court, in the manner and time prescribed by the appropriate Government. So the choice at the first step is between one appeal and two.

A worked example

Farid works at a chemical plant. Four things happen to him over three years.

1. He slips on the stairs inside the plant and breaks his wrist. The accident arose in the course of his employment, so section 34(1) presumes it arose out of it. The employer may lead evidence to the contrary but has none. It is an employment injury.

2. He is knocked down by a car on his usual route home, twenty minutes after his shift. Under the old law this would have been fought on notional extension, and Saurashtra Salt shows how hard it was. Under section 34(3) it is deemed to arise out of and in the course of employment if nexus between the circumstances, time and place and the employment is established. Returning to his residence after performing duty, on his usual route, shortly after his shift, is the paradigm case for that nexus.

3. He is hurt while pulling a colleague away from a leaking valve which turns out not to be dangerous. Section 34(2) deems this to arise out of and in the course of employment. He was on premises where he was employed, and he acted on an actual or supposed emergency to rescue or protect a person thought to be imperilled. That the emergency was not real does not matter.

4. He develops a lung disease listed in Part B of the Third Schedule as peculiar to his employment. If he has been in that employment for a continuous period of not less than six months, section 36(1) deems the contracting of the disease to be an employment injury unless the contrary is proved. Note that section 34(1) does not also apply, because section 36(3) switches it off.

Suppose instead the disease is not in any Part of the Third Schedule. Section 36(2) then applies: no benefit is payable for the disease unless it is directly attributable to a specific injury by accident arising out of and in the course of employment.

The medical board assesses him at forty per cent loss of earning capacity, provisionally, for two years, and he disagrees. He may appeal under section 37(7)(a), choosing between the medical appeal tribunal and the Employees' Insurance Court directly. If he chooses the tribunal, he keeps a second appeal to the Insurance Court under clause (b). If he takes the commuted value of the benefit first, both provisos bar him from appealing at all.

What this does NOT mean

Section 34(1) does not presume that an accident happened at work. It presumes only the second limb. The employee must still establish that the accident arose in the course of the employment.

The presumptions are not all equally strong. Section 34(1) is a presumption rebuttable by evidence to the contrary. Sections 34(2), 34(3), 34(4) and 35 are deeming provisions: once their conditions are met the conclusion follows. Section 36(1) is a deeming "unless the contrary is proved", so it sits between the two.

Section 34(4) does not cover the ordinary bus. Sub-clause (b)(ii) requires that the vehicle not be operated in the ordinary course of public transport service. It covers the employer's own transport, or transport provided under arrangements with him, and not a public bus the worker chose to take.

Section 35 does not protect every disobedient worker. Clause (b) requires the act to be done for the purpose of and in connection with the employer's trade or business.

A Third Schedule disease is not automatically compensable. Part B requires six months' continuous employment and Part C such period as the regulations specify, and in every case the presumption yields if the contrary is proved.

Limits and criticism

"Nexus" in section 34(3) is undefined. The Code creates a statutory commuting cover and then leaves its central word to be worked out case by case, so the doctrine Saurashtra Salt built is likely to be reused in deciding what nexus means.

Section 36(3) is easily overlooked and reverses what a reader would expect, since the general presumption is switched off precisely where disease, the hardest thing to prove, is in issue.

The five year bar in section 37(5) may leave a worker whose condition worsens in year three without a review, unless the medical appeal tribunal grants leave.

The choice of appeal in section 37(7) is a trap for the unrepresented. Going straight to the Employees' Insurance Court is faster but gives up a tier, and the Code does not say so.

Quick revision

• Section 2(28): employment injury is a personal injury by accident or occupational disease arising out of and in the course of employment, within or outside India, for Chapters IV and VII.
• Section 34(1): an accident in the course of employment is presumed, absent evidence to the contrary, to arise out of it.
• Section 34(2): rescue on an actual or supposed emergency at the premises is deemed to arise out of and in the course of employment.
• Section 34(3): commuting to or from residence is deemed to arise out of and in the course of employment if nexus of circumstances, time and place with the employment is established.
• Section 34(4): employer provided transport, with express or implied permission, even with no obligation to use it, provided the vehicle is operated by or for the employer and not in the ordinary course of public transport; vehicle includes a vessel and an aircraft.
• Section 35: breach of law, of orders, or acting without instructions does not break the connection, if the act is done for the purpose of and in connection with the employer's trade or business.
• Section 36: Third Schedule Part A no minimum period, Part B six months continuous, Part C as regulations specify; deemed an employment injury unless the contrary is proved; otherwise a disease is covered only if directly attributable to a specific injury by accident; section 34(1) does not apply to section 36 cases.
• Section 37: the disablement question goes to a medical board; review on fresh evidence of non-disclosure or misrepresentation, fraudulent or not, or on substantial and unforeseen aggravation where substantial injustice would otherwise be done; review for aggravation barred before five years, or six months for a provisional assessment, except with leave of the medical appeal tribunal; appeal to the medical appeal tribunal or straight to the Employees' Insurance Court, with a second appeal only if the tribunal was chosen; no appeal after taking or paying the commuted value.

Test yourself

1. What exactly does the presumption in section 34(1) presume? Only that an accident which arose in the course of employment arose out of that employment, and only in the absence of evidence to the contrary. The employee must still prove the first limb.

2. A worker is knocked down on his way home from his shift. Is that an employment injury under Chapter IV? It is deemed to arise out of and in the course of employment under section 34(3), provided a nexus between the circumstances, time and place of the accident and the employment is established.

3. How does Saurashtra Salt Manufacturing Co. v. Bai Valu Raja stand today? It remains the leading statement of notional extension and of its limit, that a worker on a public road, in a public place or on public transport is there as any member of the public unless the nature of the employment requires him to be there. But it was decided under the Workmen's Compensation Act 1923, which had no commuting provision, and section 34(3) of the Code now supplies one for Chapter IV.

4. A worker is injured taking a shortcut expressly forbidden by his employer, while carrying goods for the employer's business. Is he covered? Yes, by section 35. The contravention of the employer's order does not prevent the accident from being deemed to arise out of and in the course of employment, provided the accident would have been so deemed had the act not been in contravention, and the act was done for the purpose of and in connection with the employer's trade or business.

5. What must an employee show to get the benefit of the presumption for an occupational disease listed in Part B of the Third Schedule? That he was employed in the employment specified in Part B for a continuous period of not less than six months, and contracted a disease specified therein as an occupational disease peculiar to that employment. The contracting of it is then deemed an employment injury unless the contrary is proved.

6. Does section 34(1) also apply to an occupational disease claim under section 36? No. Section 36(3) provides that section 34(1) shall not apply to cases to which section 36 applies.

7. An Insured Person appeals a medical board decision straight to the Employees' Insurance Court. Has he kept a second appeal? No. Under section 37(7)(b) the further right of second appeal to the Employees' Insurance Court exists only where the party first appealed to the medical appeal tribunal.

What follows. The Corporation may, on being satisfied in the prescribed manner that the benefit is payable, pay the employee the benefit at the rate to which he is entitled, or would have been entitled had the failure or neglect not occurred. It is then entitled to recover from the employer, subject to the employer being given an opportunity of being heard, the capitalised value of the benefit paid, calculated in the prescribed manner.

The proviso. The capitalised value may be adjusted for the payment of any contribution and interest or damages the employer is liable to pay for delay in payment or non-payment of the contribution.

Section 42(2), recovery. The amount may be recovered as if it were an arrear of land revenue, or in the manner specified in sections 129 to 132.

Three points worth carrying into an answer. The worker gets what he would have had, not a reduced amount. The employer gets a hearing before recovery, so this is not a summary confiscation. And the recovery is of the capitalised value, meaning the whole future cost of the benefit, which for a dependants' pension can be very large indeed. That is the deterrent.

Section 43: excessive sickness caused by insanitary conditions

Section 43(1), the claim. Where the Corporation considers that the incidence of sickness among Insured Persons is excessive by reason of:

• (a) insanitary working conditions in a factory or other establishment, or the neglect of its owner or occupier to observe health regulations enjoined on him by any enactment; or
• (b) insanitary conditions of tenements or lodgings occupied by Insured Persons, attributable to the neglect of the owner of those tenements or lodgings to observe such health regulations,

the Corporation may send the owner or occupier a claim for the amount of the extra expenditure it incurred as sickness benefit. If the claim is not settled by agreement, the Corporation may refer the matter, with a statement in support, to the appropriate Government.

Section 43(2), inquiry. If the appropriate Government is of opinion that a prima facie case for inquiry is made out, it may appoint a competent person or persons to hold an inquiry.

Section 43(3), determination. If it is proved to the satisfaction of the person holding the inquiry that the excess is due to the default or neglect of the owner or occupier, he shall determine the amount of the extra expenditure and who is to pay the whole or part of it to the Corporation.

Section 43(4), enforcement. A determination under sub-section (3) may be enforced as if it were a decree for payment of money passed in a suit by a Civil Court.

Section 43(5), who counts as owner. For this section, "owner" of tenements or lodgings includes any agent of the owner and any person entitled to collect the rent as a lessee of the owner.

Note that section 43 reaches the landlord as well as the employer. Housing is treated as part of the cause of industrial sickness, which is a point worth a sentence in an essay about the social purpose of the Chapter.

Section 44: schemes for other beneficiaries

Notwithstanding anything in the Chapter, the Central Government may by notification frame, amend, vary or rescind a scheme for other beneficiaries and the members of their families, for providing medical facility in any hospital established by the Corporation in any area which is underutilised, on payment of user charges, and prescribe the terms and conditions on which the scheme may be operated.

The Explanation defines the three terms:

• "other beneficiaries" means persons other than employees insured under section 28;
• "underutilised hospital" means any hospital not fully utilised by employees insured under section 28;
• "user charges" means the amount charged from other beneficiaries for medical facilities, as specified in the regulations after prior approval of the Central Government.

Read this with the proviso to section 25(1), which deems those user charges to be contributions forming part of the Employees' State Insurance Fund. The two provisions together let spare capacity in the Corporation's hospitals be sold to the public and the money returned to the insurance fund.

Section 45: schemes for unorganised, gig and platform workers

Notwithstanding anything in the Chapter, the Central Government may by notification frame a scheme for unorganised workers, gig workers and platform workers and the members of their families, for providing benefits admissible under the Chapter by the Corporation. The contribution, user charges, scale of benefits, qualifying and eligibility conditions and other terms are as specified in the scheme.

This is a small section with a large idea, and it is a second route into the Code for the unorganised sector alongside Chapter IX. The difference is worth stating: Chapter IX schemes are framed for those workers on their own footing; a section 45 scheme delivers Chapter IV's own benefits to them through the Corporation's existing machinery.

Section 46: exemption of Government establishments

The appropriate Government may, after consultation with the Corporation, by notification and subject to specified conditions, exempt any factory or other establishment belonging to the Government or any local authority from the operation of the Chapter, if the employees in it are otherwise in receipt of benefits substantially similar or superior to those the Chapter provides.

Note the condition. This is not a general power to exempt public employers; it applies only where the employees already have benefits substantially similar or superior. The purpose is to avoid duplication, not to reduce cover.

Section 47: priority of the Corporation's dues

Notwithstanding anything in any other law, any amount due under the Chapter shall be a charge on the assets of the establishment to which it relates, and shall be paid in priority in accordance with the provisions of the Insolvency and Bankruptcy Code 2016.

This is word for word the same rule as section 19 for provident fund. Cite whichever matches the Chapter in issue.

A worked example

Bright Metals employs thirty people. It never registered Vinod, who was hurt by a press in the third month of his employment and is permanently disabled.

Is Vinod outside the scheme? No. Section 28(1) insures every employee in a covered establishment, and section 28(2) makes an employee who is insurable, and in respect of whom contributions were payable, an Insured Person.

Who pays him? The Corporation. Section 42(1)(a) applies: the employer failed or neglected to insure him at the time of appointment, as a result of which he became disentitled to benefit. The Corporation may pay him the benefit at the rate to which he would have been entitled had the failure not occurred.

What does the employer face? Recovery by the Corporation of the capitalised value of the benefit paid, calculated as prescribed, after being given an opportunity of being heard, and adjusted under the proviso for contributions, interest and damages he owes. It is recoverable as an arrear of land revenue or under sections 129 to 132.

Suppose instead Bright Metals had registered Vinod the day after the accident. That is section 42(1)(b), and the consequence is the same.

Now suppose the Corporation notices that sickness among Bright Metals' workers is far above normal, because the workshop has no ventilation and no clean water. Section 43(1)(a) applies. The Corporation may claim the extra expenditure it incurred as sickness benefit, and if that is not settled by agreement it may refer the matter to the appropriate Government, which may order an inquiry if a prima facie case is made out. A determination is enforceable as a decree of a Civil Court.

And if the sickness comes from the insanitary chawl the workers rent nearby? Section 43(1)(b) reaches the owner of the tenements, and section 43(5) extends "owner" to his agent and to anyone entitled to collect the rent as his lessee.

Bright Metals goes into liquidation owing contributions. Section 47 makes the amount a charge on the assets, paid in priority in accordance with the Insolvency and Bankruptcy Code 2016.

What this does NOT mean

Section 42 does not punish the worker for the employer's default. The Corporation pays what the worker would have had.

Section 42 is not summary. Recovery of the capitalised value is expressly subject to the employer being given an opportunity of being heard.

Section 43 is not a penalty. What is recovered is the extra expenditure the Corporation actually incurred, determined on inquiry, and only where the excess is proved to be due to the default or neglect of the person charged.

Section 44 does not open the insurance scheme to the public. It opens underutilised hospital capacity to non-insured persons on payment of user charges. They do not become Insured Persons.

Section 46 is not a general exemption for Government employers. It requires that the employees be otherwise in receipt of benefits substantially similar or superior.

Limits and criticism

Section 42 depends on the Corporation noticing. The section is triggered by the Corporation being satisfied that a benefit is payable, which in practice usually means the worker has come forward after an accident.

Section 43 has a long route. Claim, then failure to agree, then reference to the appropriate Government, then a prima facie view, then an inquiry, then a determination. It is unsurprising that the section is rarely used.

Section 45 is enabling only. No unorganised, gig or platform worker gets a Chapter IV benefit until a scheme is framed and funded.

Section 44's user charges are deemed contributions by the proviso to section 25(1), which blurs the line between an insurance fund built from contributions and a fund partly built from paying patients.

Quick revision

• Section 42: three defaults, (a) failure to insure at appointment, (b) insuring on or after the accident, (c) failure to pay contributions. The Corporation pays the worker what he would have had, and recovers the capitalised value from the employer after a hearing, adjustable for contributions, interest and damages; recoverable as an arrear of land revenue or under sections 129 to 132.
• Section 43: excessive sickness from insanitary working conditions or insanitary tenements or lodgings; claim, reference to the appropriate Government, prima facie view, inquiry, determination of amount and payer; enforceable as a decree of a Civil Court; "owner" includes an agent and a rent collecting lessee.
• Section 44: schemes for other beneficiaries, meaning persons other than those insured under section 28, in underutilised Corporation hospitals, on user charges specified in regulations with prior Central Government approval.
• Section 45: schemes for unorganised, gig and platform workers and their families, delivering Chapter IV benefits through the Corporation.
• Section 46: exemption of a Government or local authority factory or establishment, after consultation with the Corporation, only where employees already have benefits substantially similar or superior.
• Section 47: dues are a charge on the assets, paid in priority in accordance with the Insolvency and Bankruptcy Code 2016. Same rule as section 19 for provident fund.

Test yourself

1. An employer never registered a worker who is later injured. What can the Corporation do? Under section 42(1)(a) it may pay the worker the benefit at the rate to which he would have been entitled had the failure not occurred, and then recover from the employer, after giving him an opportunity of being heard, the capitalised value of the benefit paid, calculated as prescribed.

2. How is that amount recovered? As if it were an arrear of land revenue, or in the manner specified in sections 129 to 132: section 42(2).

3. Who may be made liable under section 43, and for what? The owner or occupier of a factory or other establishment, or the owner of tenements or lodgings occupied by Insured Persons, for the extra expenditure the Corporation incurred as sickness benefit where the excessive incidence of sickness is due to insanitary conditions attributable to their neglect of health regulations. "Owner" includes an agent and a person entitled to collect the rent as a lessee.

4. Who are "other beneficiaries" under section 44? Persons other than employees insured under section 28, who may be given medical facilities in an underutilised Corporation hospital on payment of user charges.

5. On what condition may a Government establishment be exempted from Chapter IV? Only if its employees are otherwise in receipt of benefits substantially similar or superior to those provided by the Chapter, and only after consultation with the Corporation: section 46.

6. Compare sections 19 and 47. They are the same rule in two Chapters. Section 19 makes provident fund dues, and section 47 makes insurance dues, a charge on the assets of the establishment, paid in priority in accordance with the Insolvency and Bankruptcy Code 2016.

Section 49: what the Court decides

Section 49(1) lists thirteen matters, clauses (a) to (m). The safest way to hold them is in four groups.

Who and how much, the definitional questions:

• (a) whether any person is an employee within the meaning of the Chapter, or whether he is liable to pay the employee's contribution;
• (b) the rate of wages or average daily wages of an employee for the purposes of the Chapter;
• (c) the rate of contribution payable by an employer in respect of any employee;
• (d) who is or was the employer in respect of any employee.

Entitlement:

• (e) the right of any person to any benefit, and its amount and duration;
• (f) any direction issued by the Corporation on a review of any payment of dependants' benefit.

Money claims:

• (h) a claim for recovery of contributions from the employer;
• (i) a claim under section 41(8) for recovery of the value or amount of benefits received when not lawfully entitled;
• (j) a claim against an employer under section 42;
• (l) a claim by an employer to recover contributions from a contractor;
• (m) any other claim for the recovery of any benefit admissible under the Chapter.

Everything else, and an appeal:

• (g) any other matter in dispute between an employer and the Corporation, between an employer and a contractor, between a person and the Corporation, or between an employee and an employer or contractor, in respect of any contribution, benefit or other dues payable or recoverable under the Chapter;
• (k) an order of the appellate authority under section 126 in respect of Chapter IV.

Section 49(2), the fifty per cent deposit. No matter in dispute between an employer and the Corporation in respect of any contribution or other dues shall be raised by the employer in the Court unless he has deposited with that Court fifty per cent of the amount due from him as claimed by the Corporation.

The proviso is essential and is often forgotten. The Court may, for reasons to be recorded in writing, waive or reduce the amount to be deposited.

Three limits on that deposit are worth marking. It binds only the employer, so a worker raising a dispute deposits nothing. It applies only to a dispute with the Corporation about contributions or dues, not to every matter in section 49(1). And it is waivable or reducible by the Court for recorded reasons, which is what distinguishes it from the pre-deposit in section 23(3).

Section 49(3), the bar on civil courts. No Civil Court shall have jurisdiction to decide or deal with any question or dispute specified in sub-section (1), or to adjudicate on any liability which under the Chapter is to be decided by a medical board, a medical appeal tribunal or the Employees' Insurance Court.

Section 50: powers

Section 50(1). The Court has all the powers of a Civil Court for summoning and enforcing the attendance of witnesses, compelling the discovery and production of documents and material objects, administering oaths and recording evidence; and it is deemed to be a Civil Court within the meaning of section 195 and Chapter XXVI of the Code of Criminal Procedure 1973.

Section 50(2). It follows such procedure as the State Government prescribes.

Section 50(3). All costs incidental to a proceeding are in the discretion of the Court, subject to State Government rules.

Section 50(4). An order of the Court is enforceable by it as if it were a decree passed in a suit by a Civil Court.

The deeming in section 50(1) is narrow and specific. It makes the Court a Civil Court for section 195 and Chapter XXVI of the Code of Criminal Procedure, which govern prosecutions for offences relating to documents and to the administration of justice, such as giving false evidence before it. It does not turn the Court into a Civil Court for all purposes.

Section 51: proceedings

Section 51(1). The manner of commencing proceedings, the fees and the procedure are prescribed by the appropriate Government.

The first proviso is the limitation period. Learn it. The limitation for initiating proceedings by the aggrieved person in the Employees' Insurance Court shall be three years from the date on which the cause of action arises.

The second proviso leaves to the regulations when the cause of action arises for a claim by the Insured Person or dependants, for a claim by the Corporation to recover contributions including interest and damages from the employer, and for a claim by an employer to recover contributions from a contractor, and the time within which those claims and recoveries may be made.

Section 51(2), who may appear. Any application, appearance or act required to be made or done before the Court, other than the appearance of a person required for examination as a witness, may be made or done by:

• a legal practitioner; or
• an officer of a registered trade union authorised in writing by that person; or
• with the permission of the Court, any other person so authorised.

That middle limb matters practically. A worker need not brief an advocate; his union officer may appear for him as of right.

Section 51(3), reference to the High Court. The Court may submit any question of law for the decision of the High Court, and if it does so shall decide the question pending before it in accordance with that decision.

Section 52: appeal to the High Court

Section 52(1). Save as expressly provided in the section, no appeal shall lie from an order of an Employees' Insurance Court.

Section 52(2). An appeal lies to the High Court from an order of the Court if it involves a substantial question of law.

Section 52(3). The appeal shall be filed within sixty days from the date of the order.

Section 52(4). Sections 5 and 12 of the Limitation Act 1963 apply to such appeals. Section 5 permits condonation of delay on sufficient cause; section 12 excludes certain periods, such as the time taken to obtain a copy of the order, in computing the period.

Section 52(5). Where the Corporation has appealed, the Employees' Insurance Court may, and if so directed by the High Court shall, withhold payment of any sum directed to be paid by the order appealed against, pending the decision of the appeal.

Note the asymmetry in section 52(5). It operates only where the Corporation is the appellant. There is no corresponding power to withhold where an employer appeals.

Distinguishing the two forums

Chapter III and Chapter IV each have a forum, and they are not the same. This is a standard distinctions question.

A worked example

The Corporation claims 8,00,000 rupees of arrear contributions from Sunrise Textiles, which says most of the people counted were a contractor's employees and not its own.

Which forum? The Employees' Insurance Court. Whether a person is an employee is section 49(1)(a), who the employer was is section 49(1)(d), and a claim to recover contributions from the employer is section 49(1)(h).

Can Sunrise go to the civil court instead? No. Section 49(3) bars the civil court from any question or dispute specified in section 49(1).

What must Sunrise do before raising the dispute? Deposit with the Court fifty per cent of the amount claimed by the Corporation, that is 4,00,000 rupees: section 49(2). But it may apply to have that waived or reduced, and the Court may do so for reasons to be recorded in writing.

A worker in the same establishment disputes the rate of his disablement benefit. Must he deposit anything? No. Section 49(2) binds only an employer raising a dispute with the Corporation.

Who may appear for him? A legal practitioner, or an officer of a registered trade union authorised by him in writing, or with the Court's permission any other authorised person: section 51(2).

By when must he begin? Within three years from the date the cause of action arose: the first proviso to section 51(1).

The Court decides against Sunrise. Can it appeal? Only to the High Court, and only if the order involves a substantial question of law, within sixty days, with sections 5 and 12 of the Limitation Act 1963 available: section 52.

The Court orders the Corporation to pay a worker and the Corporation appeals. Must the money be paid meanwhile? The Employees' Insurance Court may, and if the High Court so directs shall, withhold payment pending the appeal: section 52(5).

A pure question of law arises midway and the Court is unsure. It may submit that question to the High Court and must then decide in accordance with the High Court's decision: section 51(3).

What this does NOT mean

The fifty per cent deposit is not absolute. The proviso to section 49(2) allows the Court to waive or reduce it for reasons recorded in writing.

The deposit does not apply to employees. It binds an employer raising a dispute with the Corporation about contributions or dues.

An appeal to the High Court is not available as of right on the facts. Section 52(1) bars appeals except as the section provides, and section 52(2) allows one only where a substantial question of law is involved.

Section 50(1) does not make the Employees' Insurance Court a Civil Court generally. It gives it the listed civil court powers and deems it a Civil Court for section 195 and Chapter XXVI of the Code of Criminal Procedure 1973.

Section 49(3) does not bar the civil court from everything. It bars the questions in section 49(1) and liabilities to be decided by the medical board, the medical appeal tribunal or this Court.

Limits and criticism

A fifty per cent deposit is a high price for access to justice, even with the waiver. An employer with a good defence and no cash is in difficulty until the Court exercises the discretion.

No time limit binds the Court. The Tribunal under section 23(4) is at least told to endeavour to decide within a year; nothing equivalent appears in sections 48 to 52.

The qualification for a Judge is low. A legal practitioner of five years' standing may be appointed to decide questions on which a worker's disablement pension depends.

Section 52(5) is one sided, allowing payment to be withheld only where the Corporation appeals.

Quick revision

• Section 48: the State Government shall constitute the Court for a local area; as many Judges as it thinks fit; qualification is a judicial officer, present or past, or a legal practitioner of five years' standing; one Court may serve several areas and several Courts one area, with business distributed by order.
• Section 49(1): thirteen matters, including who is an employee, wages, rate of contribution, who the employer is, the right to a benefit and its amount and duration, a review direction on dependants' benefit, recovery of contributions, a section 41(8) claim, a section 42 claim, an order of the appellate authority under section 126, an employer's claim against a contractor, and any other dispute between the parties named in clause (g).
• Section 49(2): fifty per cent deposit by an employer disputing contributions or dues with the Corporation, waivable or reducible for reasons recorded in writing.
• Section 49(3): the civil court is ousted.
• Section 50: civil court powers of summons, discovery, oath and evidence; deemed a Civil Court for section 195 and Chapter XXVI of the Code of Criminal Procedure 1973; procedure prescribed by the State Government; costs in its discretion; orders enforceable as a decree.
• Section 51: limitation three years from the cause of action; a registered trade union officer may appear; the Court may refer a question of law to the High Court and is bound by the answer.
• Section 52: appeal to the High Court only on a substantial question of law, within sixty days; sections 5 and 12 of the Limitation Act 1963 apply; payment may be withheld pending appeal only where the Corporation appeals.

Test yourself

1. Who constitutes the Employees' Insurance Court, and who may be its Judge? The State Government, by notification, for a specified local area: section 48(1). A person who is or has been a judicial officer, or who is a legal practitioner of five years' standing: section 48(3).

2. An employer wants to dispute a claim for 10,00,000 rupees of contributions. What must he do first, and is there any relief? He must deposit fifty per cent, that is 5,00,000 rupees, with the Court: section 49(2). The Court may waive or reduce that amount for reasons to be recorded in writing, under the proviso.

3. Can a worker sue in the civil court for a benefit he says the Corporation wrongly refused? No. The right of any person to a benefit and its amount and duration is a matter for the Employees' Insurance Court under section 49(1)(e), and section 49(3) bars the civil court from any question specified in section 49(1).

4. Within what time must proceedings be begun in the Employees' Insurance Court? Three years from the date on which the cause of action arises: the first proviso to section 51(1).

5. Must an injured worker engage an advocate? No. Under section 51(2) an officer of a registered trade union authorised in writing may appear for him, as may any other authorised person with the permission of the Court.

6. On what ground does an appeal lie to the High Court, and within what time? Only where the order involves a substantial question of law, within sixty days of the order: section 52(2) and (3), with sections 5 and 12 of the Limitation Act 1963 applying.

7. Distinguish the deposit under section 49(2) from that under section 23(3). Section 49(2) requires an employer to deposit fifty per cent of the amount claimed by the Corporation before raising a dispute in the Employees' Insurance Court, and the Court may waive or reduce it for recorded reasons. Section 23(3) requires an employer to deposit twenty-five per cent of the amount determined under section 125 before the Tribunal will entertain his provident fund appeal, and no power of waiver is stated.

Three provisos, and each is examinable.

First proviso, working journalists. For a working journalist as defined in clause (f) of section 2 of the Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act 1955, the expression "five years" shall be deemed to be three years.

Second proviso, when five years is not needed. Completion of five years' continuous service shall not be necessary where the termination is due to:

• death; or
• disablement; or
• expiration of fixed term employment; or
• the happening of a notified event.

Third proviso, death. On the death of an employee, gratuity payable to him is paid to his nominee, or if no nomination has been made, to his heirs; and where a nominee or heir is a minor, the minor's share is deposited with the competent authority, who invests it for the minor's benefit in a bank or financial institution until he attains majority.

Put clause (d) and the second proviso together and you have the change. A fixed term employee gets gratuity when his term expires, and he does not need five years. That is new, and it is the single most likely short question out of this Chapter.

Section 53(2), the rate. For every completed year of service, or part thereof in excess of six months, the employer shall pay gratuity at the rate of fifteen days' wages, or such number of days as the Central Government may notify, based on the rate of wages last drawn by the employee.

Three provisos to sub-section (2):

• for a piece-rated employee, daily wages are computed on the average of the total wages received for the three months immediately preceding the termination, and overtime wages are not taken into account;
• for an employee in a seasonal establishment who is not employed throughout the year, gratuity is paid at seven days' wages for each season;
• for an employee on fixed term employment, or a deceased employee, gratuity is paid on a pro rata basis.

Section 53(3), the ceiling. The amount of gratuity shall not exceed such amount as may be notified by the Central Government. The Code fixes no figure.

Section 53(4), disablement. Where an employee is employed after his disablement on reduced wages, his wages for the period before the disablement are taken as those he actually received then, and for the period after it as the reduced wages.

Section 53(5), better terms. Nothing in the section affects the right of an employee to better terms of gratuity under any award, agreement or contract with the employer.

Three Explanations. Explanation 1: for this Chapter, "employee" does not include a person holding a post under the Central or a State Government governed by another Act or by rules providing for payment of gratuity. Explanation 2: "disablement" means such disablement as incapacitates an employee for the work he was capable of performing before the accident or disease resulting in it. Explanation 3 is the arithmetic: for a monthly rated employee, fifteen days' wages are calculated by dividing the monthly rate of wages last drawn by twenty-six and multiplying by fifteen.

Section 53(6): forfeiture

Notwithstanding sub-section (1):

• (a) the gratuity of an employee whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer shall be forfeited to the extent of the damage or loss so caused;
• (b) the gratuity payable may be wholly or partially forfeited if the services of the employee have been terminated (i) for his riotous or disorderly conduct or any other act of violence, or (ii) for any act which constitutes an offence involving moral turpitude, provided the offence is committed by him in the course of his employment.

Learn the difference between (a) and (b). Under (a) forfeiture is mandatory ("shall be forfeited") but limited to the amount of the damage. Under (b) forfeiture is discretionary ("may be") but may be whole or partial.

And note the condition running through both: the services must have been terminated for the stated cause. That is the point of the leading case.

Jaswant Singh Gill v. Bharat Coking Coal Ltd., (2007) 1 SCC 663.

Facts. Jaswant Singh Gill was a Chief General Manager with Bharat Coking Coal. Disciplinary proceedings alleging misconduct were begun while he was in service and continued after he superannuated, under rules 34.2 and 34.3 of the company's conduct rules, which permitted the disciplinary authority to withhold gratuity during the pendency of proceedings. His gratuity was withheld.

Held. The appeal was allowed. The Payment of Gratuity Act prevails over non-statutory rules framed by the employer. Sub-section (6) of section 4 opens with a non obstante clause and permits forfeiture only where the employee's services have been terminated for one of the causes it lists. An employee who has retired on superannuation has not had his services terminated, so the condition on which the power to forfeit depends never arose, and the gratuity could not be withheld.

Why it matters here. Twice over. It establishes that gratuity is a statutory right which service rules cannot cut down. And it fixes the precondition for forfeiture, which is easy to state and easy to get backwards. Note the statute: it was decided on section 4(6) of the Payment of Gratuity Act 1972, repealed by item 6 of section 164(1) of this Code. Section 53(6) reproduces section 4(6) in the same terms, including the non obstante clause and the three grounds, so the reasoning applies to the Code without adjustment. Say so when you cite it.

Section 54: continuous service

Five years of "continuous service" does not mean five years without a day off. Section 54 defines it in three clauses.

Clause (A), the basic rule. An employee is in continuous service for a period if he has, for that period, been in uninterrupted service, including service interrupted on account of:

sickness; accident; leave; absence from duty without leave, so long as no order treating that absence as a break in service has been passed under the standing orders, rules or regulations governing the establishment; lay-off; strike; lock-out; or cessation of work not due to any fault of the employee;

and it does not matter whether that service was rendered before or after the commencement of the Code.

Two things there repay attention. Even unauthorised absence does not break service unless the employer has actually passed an order treating it as a break, under the governing standing orders or rules. And a strike does not break continuity.

Clause (B), the deeming rule for a non-seasonal establishment. Where an employee is not in continuous service under clause (A) for a period of one year or six months, he is deemed to be in continuous service for that period if he has actually worked for the employer:

The Explanation to clause (B) adds four categories to the days "actually worked":

1. days he was laid off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act 1946, or under the Industrial Disputes Act 1947, or under any other law applicable to the establishment;
2. days he was on leave with full wages, earned in the previous year;
3. days he was absent due to temporary disablement caused by accident arising out of and in the course of his employment;
4. in the case of a female, days she was on maternity leave, so however that the total period of such maternity leave does not exceed twenty-six weeks.

The fourth is worth naming in an answer on women and social security. Maternity leave up to twenty-six weeks counts as days worked for the purpose of qualifying for gratuity, so having a child does not cost a woman her service qualification.

Clause (C), seasonal establishments. Where an employee in a seasonal establishment is not in continuous service under clause (A) for one year or six months, he is deemed to be in continuous service for that period if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during that period.

A worked example

Shalini has worked at a garment factory for six years and eight months. Her last drawn wages, as defined in section 2(88), are 26,000 rupees a month. She resigns.

Is she entitled? Yes. She is resigning under section 53(1)(b) after more than five years' continuous service.

How many years count? Six completed years, plus eight months, which is a part in excess of six months, so it counts as a seventh. Seven years.

What are fifteen days' wages? Explanation 3 gives the arithmetic for a monthly rated employee: divide the monthly wages last drawn by twenty-six and multiply by fifteen. So 26,000 divided by 26 is 1,000, multiplied by 15 is 15,000 rupees.

Total gratuity? 15,000 multiplied by 7 years, that is 1,05,000 rupees, subject to the ceiling notified under section 53(3).

Now change the facts. Shalini was absent without leave for two months in her third year, and the employer never passed any order treating it as a break in service.

Does that break her continuity? No. Clause (A) of section 54 expressly includes absence from duty without leave within uninterrupted service, unless an order treating it as a break has been passed under the standing orders, rules or regulations governing the establishment. None was.

Change them again. Shalini was on a written two year fixed term contract which has just expired.

Does she get gratuity with only two years' service? Yes. Section 53(1)(d) covers termination of the contract period under fixed term employment, and the second proviso removes the five year requirement for expiration of fixed term employment. By the third proviso to section 53(2), it is paid pro rata.

And if she had been dismissed for setting fire to the employer's godown, causing 40,000 rupees of damage? Section 53(6)(a) applies: her services were terminated for an act causing damage to the employer's property, so her gratuity is forfeited to the extent of the damage, that is 40,000 rupees, and the balance remains payable.

If instead she superannuated while a disciplinary inquiry into that fire was still pending? Following Jaswant Singh Gill, her services have not been terminated for one of the listed causes; she retired on superannuation. The precondition for forfeiture under section 53(6) never arose and the gratuity cannot be withheld.

What this does NOT mean

Five years is not always required. The second proviso to section 53(1) removes it for death, disablement, expiry of fixed term employment and a notified event; and the first proviso reduces it to three years for a working journalist.

Continuous service is not continuous attendance. Sickness, accident, leave, unauthorised absence not treated as a break, lay-off, strike, lock-out and no-fault cessation are all included by clause (A).

Fifteen days' wages is not half a month's wages. Explanation 3 divides by twenty-six, not by thirty or thirty-one, because it counts working days.

Forfeiture is not automatic on misconduct. Both limbs of section 53(6) require that the services have been terminated for the stated cause, and clause (b)(ii) additionally requires that the offence involving moral turpitude was committed in the course of employment.

The Code fixes no maximum. Section 53(3) leaves the ceiling to notification.

Limits and criticism

The ceiling is executive. Section 53(3) caps gratuity at a notified amount, so the real value of the entitlement is set outside Parliament.

Five years remains a long qualifying period for a permanent employee, in a labour market where job tenure is short, even though fixed term employees are now relieved of it. The result is the odd position that a two year fixed term employee is entitled while a four year permanent employee is not.

Forfeiture under clause (b) is discretionary and unstructured. The Code says the gratuity "may be wholly or partially forfeited" and gives no criteria for choosing.

Clause (B) of section 54 rewards the six day week. An employee in an establishment working less than six days a week qualifies on 190 days, but one in a six day establishment needs 240.

Quick revision

• Section 53(1): gratuity on termination after five years' continuous service, on (a) superannuation, (b) retirement or resignation, (c) death or disablement, (d) expiry of fixed term employment, (e) a notified event.
• First proviso: working journalist, three years. Second proviso: no five year requirement for death, disablement, expiry of fixed term employment, or a notified event. Third proviso: on death, to the nominee, else the heirs; a minor's share goes to the competent authority to invest until majority.
• Section 53(2): fifteen days' wages for every completed year, or part over six months, on wages last drawn. Piece-rated: average of three months, excluding overtime. Seasonal: seven days' wages per season. Fixed term or deceased: pro rata.
• Explanation 3: monthly wages divided by twenty-six, multiplied by fifteen.
• Section 53(3): ceiling notified, not in the Code. Section 53(5): better terms under an award, agreement or contract are preserved.
• Section 53(6): (a) shall be forfeited to the extent of the damage where services terminated for an act, wilful omission or negligence damaging the employer's property; (b) may be wholly or partially forfeited for riotous or disorderly conduct or violence, or an offence involving moral turpitude committed in the course of employment. Both need termination of service: Jaswant Singh Gill.
• Section 54(A): continuous service includes sickness, accident, leave, unauthorised absence not treated as a break by order, lay-off, strike, lock-out, and no-fault cessation.
• Section 54(B): deemed continuous on 240 days in twelve months, or 190 below ground in a mine or in an establishment working less than six days a week; 120 days in six months, or 95 in those cases. Days worked include lay-off, earned leave with full wages, absence from temporary disablement by employment accident, and maternity leave up to twenty-six weeks.
• Section 54(C): seasonal establishment, seventy-five per cent of the days the establishment operated.

Test yourself

1. State the rate of gratuity and show how fifteen days' wages is computed for a monthly rated employee. Fifteen days' wages for every completed year of service, or part in excess of six months, based on the rate of wages last drawn: section 53(2). By Explanation 3, the monthly rate of wages last drawn is divided by twenty-six and the quotient multiplied by fifteen.

2. An employee on a written three year fixed term contract completes it and leaves. Is he entitled to gratuity? Yes. Section 53(1)(d) covers termination of the contract period under fixed term employment, and the second proviso to section 53(1) provides that five years' continuous service is not necessary where the termination is due to expiration of fixed term employment. It is paid pro rata under the third proviso to section 53(2).

3. A worker was on strike for six weeks. Does this break his continuous service? No. Clause (A) of section 54 includes service interrupted on account of a strike within uninterrupted service.

4. How many days must a worker actually work in twelve months to be deemed in continuous service for a year? 240 days in the ordinary case, or 190 days if he is employed below ground in a mine or in an establishment which works for less than six days in a week: section 54(B)(a).

5. Does maternity leave count as days actually worked? Yes, up to a total of twenty-six weeks: Explanation (iv) to clause (B) of section 54.

6. An employee is dismissed for causing 20,000 rupees of damage to the employer's machinery. What happens to his gratuity of 3,00,000 rupees? Under section 53(6)(a) it is forfeited to the extent of the damage caused, that is 20,000 rupees. The remaining 2,80,000 rupees is payable.

7. Can an employer withhold gratuity from an employee who retired on superannuation while a disciplinary inquiry was pending? No. Following Jaswant Singh Gill v. Bharat Coking Coal Ltd., forfeiture under what is now section 53(6) requires that the employee's services have been terminated for one of the listed causes. A retirement on superannuation is not such a termination, so the power never arises, and the employer's own service rules cannot enlarge the statutory position.

Section 55(4), acquiring a family later. If he has no family when he nominates, the nomination may be in favour of any person. But if he subsequently acquires a family, that nomination forthwith becomes invalid, and he shall make a fresh nomination in favour of one or more members of his family within the prescribed time.

Section 55(5) and (6), change. A nomination may be modified at any time, subject to sub-sections (3) and (4), after written intimation to the employer in the prescribed form. If a nominee predeceases the employee, that nominee's interest reverts to the employee, who must make a fresh nomination in respect of it.

Section 55(7), custody. Every nomination, fresh nomination or alteration must be sent by the employee to his employer, who shall keep it in his safe custody.

The design is that gratuity on death goes to the family and not to whomever the employee chose in a quarrel. A nomination outside the family is valid only while there is no family, and it dies automatically the moment one appears.

Section 56: determination, payment and dispute

This is the operative section of the Chapter, and it has nine sub-sections.

Section 56(1), application. A person eligible for gratuity, or someone authorised in writing to act for him, shall send a written application to the employer, within the time and in the form the appropriate Government prescribes.

Section 56(2), the employer's own duty. As soon as gratuity becomes payable, the employer shall, whether or not an application has been made, determine the amount and give notice in writing both to the person to whom it is payable and to the competent authority, specifying the amount determined.

That is the sub-section to quote when an employer says the worker never applied. The duty to determine and give notice is not conditional on an application.

Section 56(3), thirty days. The employer shall arrange to pay the amount within thirty days from the date it becomes payable.

Section 56(4), interest. If it is not paid within that period, the employer shall pay simple interest from the date it became payable to the date of payment, at such rate not exceeding the rate notified by the Central Government from time to time for repayment of long term deposits.

The proviso excuses that interest only where both conditions are met: the delay is due to the fault of the employee, and the employer has obtained permission in writing from the competent authority for the delayed payment on that ground.

Section 56(5), disputes. Where there is a dispute as to the amount, the admissibility of a claim, or who is entitled to receive the gratuity:

• (a) the employer shall deposit with the competent authority such amount as he admits to be payable;
• (b) the employer, the employee or any other person raising the dispute may apply to the competent authority in the prescribed form for a decision;
• (c) the competent authority shall, after due inquiry and after giving the parties a reasonable opportunity of being heard, determine the matter, and if any amount is found payable, direct the employer to pay it, or that amount as reduced by what he has already deposited;
• (d) the competent authority shall pay the amount deposited, including any excess, to the person entitled;
• (e) as soon as may be after a deposit, the competent authority shall pay it to the applicant where he is the employee, or where the applicant is not the employee, to the nominee, or the guardian of a minor nominee, or the heir, if satisfied there is no dispute as to the applicant's right.

Note the structure of clause (a). Even a disputing employer must pay in what he admits. The dispute is only about the difference.

Section 56(6), powers. For an inquiry under sub-section (5) the competent authority has the same powers as a court trying a suit under the Code of Civil Procedure 1908 in respect of: enforcing attendance and examining on oath; requiring discovery and production of documents; receiving evidence on affidavits; and issuing commissions for the examination of witnesses.

Section 56(7). Any such inquiry is a judicial proceeding within the meaning of section 193 and section 228, and for the purpose of section 196, of the Indian Penal Code 1860. In plain terms, lying to the competent authority is punishable as if it were lying to a court.

Section 56(8), appeal. A person aggrieved by an order under sub-section (5) may appeal, within sixty days of receiving the order, to the appropriate Government or such other authority as it specifies.

Two provisos. The appellate authority may extend the period by a further sixty days if satisfied the appellant was prevented by sufficient cause. And no appeal by an employer shall be admitted unless he either produces a certificate from the competent authority that he has deposited the amount required under sub-section (5), or deposits that amount with the appellate authority.

Section 56(9). The appellate authority may, after giving the parties a reasonable opportunity of being heard, confirm, modify or reverse the decision.

Section 57: compulsory insurance

Section 57(1), the obligation. With effect from such date as the appropriate Government notifies, every employer other than one belonging to or under the control of the Central or a State Government shall obtain insurance for his liability to pay gratuity, in the manner prescribed by the Central Government, from an insurance company regulated by the Authority as defined in section 2(1)(b) of the Insurance Regulatory and Development Authority Act 1999. The proviso permits different dates for different establishments, classes of establishments or areas.

Section 57(2), the exemptions. The appropriate Government may exempt from sub-section (1), subject to prescribed conditions:

• an employer who had already established an approved gratuity fund for his employees and wishes to continue that arrangement; and
• every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed.

Section 57(3), registration. Every employer shall, within the prescribed time, get his establishment registered with the competent authority, and no employer shall be registered unless he has taken the insurance or established an approved gratuity fund.

Section 57(4). The appropriate Government may provide for the composition of the Board of Trustees of an approved gratuity fund, and for recovery by the competent authority of the gratuity payable to an employee from the insurer, or from the Board of Trustees.

Section 57(5), the sanction. Where an employer fails to pay the premium or the contribution to an approved gratuity fund, he is liable to pay the amount of gratuity due, including any interest for delayed payment, forthwith to the competent authority.

The Explanation gives "approved gratuity fund" the meaning assigned in section 2(5) of the Income-tax Act 1961.

Section 57 is the answer to "what protects the worker if the employer goes broke?", and it is worth naming as a salient feature of the Code. The route is insurance first, an approved gratuity fund as the alternative for large or already provided employers, and registration made conditional on one or the other.

Section 58: the competent authority

Section 58(1). The appropriate Government may, by notification, appoint any officer of that Government having the prescribed qualifications and experience to be a competent authority for implementing any provision of the Chapter, for a specified area.

Section 58(2). Where more than one competent authority is appointed for an area, the appropriate Government may regulate the distribution of business by general or special order.

Section 58(3). A competent authority may, for deciding a matter referred to him, choose one or more persons possessing special knowledge of a relevant matter to assist him in holding the inquiry.

A worked example

Mohan retires on superannuation from a printing works on 30 April after eleven years. His gratuity works out to 2,20,000 rupees. He makes no application.

Must the employer wait for one? No. Section 56(2) requires the employer, as soon as gratuity becomes payable and whether or not an application has been made, to determine the amount and give written notice both to Mohan and to the competent authority.

By when must it be paid? Within thirty days from the date it became payable: section 56(3).

It is paid four months late. What follows? Simple interest from the date it became payable to the date of payment, at a rate not exceeding that notified by the Central Government for repayment of long term deposits: section 56(4). The employer escapes interest only if the delay was Mohan's fault and he obtained written permission from the competent authority for the delay on that ground.

The employer says only 1,50,000 rupees is due. Under section 56(5)(a) he must deposit with the competent authority the amount he admits, that is 1,50,000. Either party may then apply under clause (b), and the competent authority determines the dispute after due inquiry and a reasonable opportunity of being heard.

The competent authority holds 2,20,000 is due. The employer wants to appeal. He may, within sixty days of receiving the order, to the appropriate Government or the authority it specifies. But his appeal will not be admitted unless he produces a certificate that he has deposited the amount required under sub-section (5), or deposits it with the appellate authority: the second proviso to section 56(8).

He is seventy days late because he was in hospital. The first proviso allows an extension of a further sixty days where the appellate authority is satisfied he was prevented by sufficient cause.

The employer becomes insolvent before paying. Section 57(1) required him to insure his gratuity liability with a regulated insurer, unless exempted under section 57(2). Under section 57(4) the appropriate Government may provide for recovery by the competent authority from the insurer. If he never paid the premium, section 57(5) makes him liable to pay the gratuity, with interest, forthwith to the competent authority.

Now suppose Mohan had died in service, having nominated his brother while unmarried, and having married two years later. Under section 55(4) the nomination in favour of the brother became invalid forthwith when he acquired a family, and Mohan was required to make a fresh nomination in favour of a family member. Failing that, the third proviso to section 53(1) pays the gratuity to his heirs.

What this does NOT mean

An employee's failure to apply does not excuse the employer. Section 56(2) imposes the duty to determine and give notice regardless.

A dispute does not suspend the whole payment. Section 56(5)(a) requires the employer to deposit what he admits.

Interest is not discretionary. Section 56(4) says the employer "shall pay" it, and the proviso excuses it only on two cumulative conditions.

A nomination outside the family is not simply overridden later. If there was a family at the time, it is void under section 55(3). If a family is acquired afterwards, it becomes invalid forthwith under section 55(4).

Compulsory insurance is not yet universal in practice. Section 57(1) operates from a date to be notified, and the proviso allows different dates for different establishments, classes and areas.

Limits and criticism

Section 57 depends on notification. The protection it offers begins only from a notified date, and the proviso permits that date to differ across establishments and areas.

The employer's appeal deposit is heavy. He must have deposited or must deposit the amount required under section 56(5) before his appeal is even admitted.

"Any officer of that Government" is a wide qualification for a competent authority who exercises civil court powers and conducts a judicial proceeding under section 56(7).

The interest rate is capped by reference to long term deposit rates, which may be well below the commercial cost of the delay to the employee.

Quick revision

• Section 55: nomination by an employee who has completed one year; may be split among several nominees; must be to family if he has one, and a nomination outside the family is void; if he has no family it may be to anyone, but becomes invalid forthwith if he acquires one; modifiable on written intimation; a predeceasing nominee's interest reverts; the employer keeps it in safe custody.
• Section 56: employee applies, but the employer must determine and give notice to the employee and the competent authority whether or not he applies; pay within thirty days; simple interest for delay, excused only if the delay is the employee's fault and the competent authority permitted it in writing; on a dispute the employer deposits what he admits; the competent authority decides after due inquiry and a hearing, with Code of Civil Procedure powers, the inquiry being a judicial proceeding; appeal within sixty days, extendable by sixty more for sufficient cause; no employer's appeal admitted without the deposit; the appellate authority may confirm, modify or reverse.
• Section 57: compulsory insurance of the gratuity liability with an IRDA regulated insurer, from a notified date, except Government employers; exemption for an employer with an existing approved gratuity fund and for one employing five hundred or more who establishes one; registration conditional on insurance or a fund; recovery from the insurer or trustees; failure to pay the premium makes the gratuity payable forthwith to the competent authority.
• Section 58: the appropriate Government appoints any qualified officer as competent authority for an area; may distribute business between several; the authority may co-opt experts to assist an inquiry.

Test yourself

1. An employee never applied for his gratuity. Is the employer free of the obligation until he does? No. Under section 56(2) the employer must, as soon as gratuity becomes payable and whether or not an application has been made, determine the amount and give written notice to the person entitled and to the competent authority.

2. Within what time must gratuity be paid, and what follows if it is not? Within thirty days from the date it becomes payable: section 56(3). Otherwise the employer pays simple interest from the due date to the date of payment, at a rate not exceeding that notified by the Central Government for repayment of long term deposits: section 56(4).

3. On what two conditions is that interest excused? Both must be met: the delay must be due to the fault of the employee, and the employer must have obtained permission in writing from the competent authority for the delayed payment on that ground.

4. An unmarried employee nominates his cousin, then marries. What is the position? Under section 55(4) the nomination becomes invalid forthwith on his acquiring a family, and he must make a fresh nomination in favour of one or more members of his family within the prescribed time.

5. What must an employer do before his appeal under section 56(8) is admitted? He must either produce a certificate from the competent authority that he has deposited the amount required under section 56(5), or deposit that amount with the appellate authority: the second proviso.

6. What is the sanction if an employer never pays the premium on his gratuity insurance? Under section 57(5) he becomes liable to pay the amount of gratuity due, including any interest for delayed payment, forthwith to the competent authority.

7. Which employers may be exempted from compulsory insurance? Those belonging to or under the control of the Central or a State Government are outside section 57(1) altogether. Beyond that, the appropriate Government may exempt an employer who had already established an approved gratuity fund and wishes to continue it, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the prescribed manner: section 57(2).

Note that the prohibition runs both ways. Sub-section (1) binds the employer and sub-section (2) binds the woman. This is a health provision, not a right she may waive.

Section 59(3), arduous work. Without prejudice to section 62, no pregnant woman shall, on a request being made by her, be required by her employer to do any work which is of an arduous nature, or which involves long hours of standing, or which is in any way likely to interfere with her pregnancy or the normal development of the foetus, or likely to cause her miscarriage or otherwise adversely affect her health.

Section 59(4), when that protection operates. During:

• (a) the period of one month immediately preceding the period of six weeks before the date of her expected delivery; and
• (b) any part of that period of six weeks for which she does not take leave of absence under section 62.

The Explanation defines "any work of arduous nature" as work which involves or requires strenuous effort, or is difficult and tiring in nature.

Two things about section 59(3) are commonly stated wrongly. The protection operates on a request being made by her; it is not automatic. And the period in sub-section (4)(a) is not "one month before delivery": it is the month preceding the six weeks before the expected delivery, so it is roughly the tenth week before.

Section 60: the right, the rate and the length

Section 60(1), the entitlement and the rate. Every woman is entitled to, and her employer is liable for, payment of maternity benefit at the rate of the average daily wage for the period of her actual absence, that is the period immediately preceding the day of her delivery and any period immediately following that day.

The Explanation defines average daily wage as the average of the woman's wages payable for the days on which she has worked during the three calendar months immediately preceding the date from which she absents herself on account of maternity, subject to the minimum rate of wage fixed or revised under the Code on Wages 2019.

That floor matters. However low the three month average works out, the benefit cannot fall below the applicable minimum wage.

Section 60(2), the qualifying period. No woman is entitled to maternity benefit unless she has actually worked in an establishment of the employer from whom she claims it for not less than eighty days in the twelve months immediately preceding the date of her expected delivery.

The Explanation to sub-section (2) provides that in calculating those eighty days, the days actually worked, the days she was laid off, and days that were holidays declared under any law to be holidays with wages, in that twelve month period, are all taken into account.

Section 60(3), the maximum. The maximum period of maternity benefit is twenty-six weeks, of which not more than eight weeks may precede the expected date of delivery.

Three provisos, and all three get examined:

1. a woman having two or more surviving children is entitled to a maximum of twelve weeks, of which not more than six weeks may precede the expected date of delivery;
2. where a woman dies during this period, maternity benefit is payable only for the days up to and including the day of her death;
3. where a woman, having been delivered of a child, dies during her delivery or during the period immediately following it for which she is entitled to the benefit, leaving the child, the employer is liable for the maternity benefit for that entire period; but if the child also dies during that period, then only for the days up to and including the date of the child's death.

The Explanation provides that for this sub-section "child" includes a stillborn child.

Section 60(4), adoption and surrogacy. A woman who legally adopts a child below the age of three months, or a commissioning mother, is entitled to maternity benefit for twelve weeks from the date the child is handed over to her.

Section 60(5), work from home. Where the work assigned to a woman is of such a nature that she may work from home, the employer may allow her to do so after availing of the maternity benefit, for such period and on such conditions as the employer and the woman mutually agree.

Section 60(5) is permissive on both sides. It is not a right to work from home and it is not a power to require it. It operates only after the benefit has been taken, and only by agreement.

Section 61: continuance where the insurance Chapter arrives

Every woman entitled to maternity benefit under this Chapter shall, notwithstanding the application of Chapter IV to the factory or other establishment in which she is employed, continue to be so entitled until she becomes qualified to claim maternity benefit under section 32.

This is a bridging provision and it prevents a gap. If an establishment becomes covered by the employees' state insurance scheme, maternity benefit under that scheme requires the woman to satisfy its own contribution conditions, which takes time. Section 61 keeps her Chapter VI entitlement alive against her employer until she qualifies under section 32. Read it with section 41(7)(b), which bars her from claiming under Chapter VI once she is eligible under Chapter IV, and the two fit exactly: no gap, and no double payment.

Section 62: notice, payment and the effect of not giving notice

Section 62(1), the notice. A woman entitled to maternity benefit may give notice in writing to her employer, in the form prescribed by the Central Government, stating that her maternity benefit and any other amount due may be paid to her or to a person she nominates in the notice, and that she will not work in any establishment during the period for which she receives it.

Section 62(2), the date. In the case of a pregnant woman the notice shall state the date from which she will be absent, not being a date earlier than eight weeks from the date of her expected delivery.

Section 62(3), late notice. A woman who has not given notice while pregnant may give it as soon as possible after her delivery.

Section 62(4), the employer's duty. On receipt of the notice the employer shall permit her to absent herself during the period for which she receives the benefit.

Section 62(5), when the money is paid. The amount for the period preceding the expected date of delivery is paid in advance, on production of prescribed proof of pregnancy. The amount due for the subsequent period is paid within forty-eight hours of production of prescribed proof that she has been delivered of a child.

Section 62(6), the saving. This is the important one. Failure to give notice shall not disentitle a woman to maternity benefit or any other amount under the Chapter if she is otherwise entitled, and in such a case an Inspector-cum-Facilitator may, of his own motion or on her application, order payment within a period specified in the order.

Section 62(6) is the answer to the commonest problem question in this Chapter. The notice is a machinery provision, not a condition of entitlement. An employer who says "she never gave notice" has no defence.

Section 63: death before payment

If a woman entitled to maternity benefit or any other amount under the Chapter dies before receiving it, or where the employer is liable under the second proviso to section 60(3), the employer shall pay the benefit or amount to the person nominated by her in the notice given under section 62, and if there is no such nominee, to her legal representative.

The benefit follows the work, not the label

The leading case on Chapter VI's predecessor answers the question employers most often raise: does a casual or daily wage woman get maternity benefit at all?

Municipal Corporation of Delhi v. Female Workers (Muster Roll), AIR 2000 SC 1274.

Facts. Women engaged by the Municipal Corporation of Delhi on the muster roll, on daily wages, did heavy work on construction and road maintenance, including digging trenches. Maternity leave was given to regular female employees but refused to these women because their services had not been regularised. Their union took up their case, and the question whether muster roll women should be given maternity benefit was referred to the Industrial Tribunal, which decided in their favour. The Corporation challenged that award.

Held. The Special Leave Petition was dismissed and the award upheld. There is nothing in the Maternity Benefit Act which confines its benefits to regular employees and denies them to women engaged casually or on a daily wage basis. Article 42 of the Constitution, which speaks of just and humane conditions of work and of maternity relief, though not itself enforceable, is available for testing the legal efficacy of the action complained of. The principles in Article 11 of the Convention on the Elimination of All Forms of Discrimination against Women are to be read into the contract of service between the Corporation and its muster roll women, and so read those women become entitled to all the benefits of the Act.

Why it matters here. It is the authority that maternity benefit follows the work and not the form of the engagement, and it is the case to cite whenever a problem puts a pregnant woman on casual, daily wage, muster roll or temporary terms. Note the statute: it was decided under the Maternity Benefit Act 1961, repealed by item 5 of section 164(1) of this Code. The reasoning carries over because section 60(1) of the Code says "every woman" without qualification, and the qualifying condition in section 60(2) is expressed in days actually worked, not in the status of the appointment. Say so when you cite it.

A worked example

Priya works at a food processing unit. She has worked ninety days in the twelve months before her expected delivery. Her wages for the days worked in the three calendar months before she stops average 500 rupees a day. She has no other children.

Is she qualified? Yes. Section 60(2) requires not less than eighty days actually worked in the twelve months immediately preceding the expected date of delivery, and days laid off and statutory paid holidays count towards it.

How long may she take? Up to twenty-six weeks, of which not more than eight weeks may fall before the expected date of delivery: section 60(3).

At what rate? The average daily wage, that is 500 rupees, subject to the floor of the minimum rate of wage fixed or revised under the Code on Wages 2019.

When is she paid? The pre-delivery portion in advance on prescribed proof of pregnancy; the rest within forty-eight hours of prescribed proof that she has been delivered of a child: section 62(5).

She forgot to give notice. Is she out? No. Section 62(6) provides that failure to give notice does not disentitle her, and an Inspector-cum-Facilitator may order payment of his own motion or on her application.

Change the facts: Priya already has two surviving children. The first proviso to section 60(3) caps her at twelve weeks, of which not more than six weeks may precede the expected date of delivery.

Change them again: she has a miscarriage in the twentieth week. She may not work, and may not be employed, for the six weeks immediately following it: section 59(1) and (2). Her leave with wages at the rate of maternity benefit for that period comes from section 65(1), taken in the next chapter.

She is engaged on the muster roll on daily wages and the employer says the Chapter is for regular employees only. Following Municipal Corporation of Delhi v. Female Workers (Muster Roll), that is not the law. Section 60(1) says "every woman", and section 60(2) asks only how many days she actually worked.

She dies in childbirth, leaving the child alive. By the third proviso to section 60(3) the employer is liable for maternity benefit for that entire period. Had the child also died within the period, liability would run only to the date of the child's death. The money is paid to her nominee under section 62, failing which to her legal representative: section 63.

What this does NOT mean

Twenty-six weeks is not available to every woman. A woman with two or more surviving children is limited to twelve weeks by the first proviso to section 60(3).

The eighty days need not be continuous. Section 60(2) asks that she has "actually worked" for not less than eighty days in the twelve months, and the Explanation adds lay-off days and statutory paid holidays.

Notice is not a condition of entitlement. Section 62(6) says so in terms.

Section 59(3) is not automatic. The protection against arduous work operates "on a request being made by her".

A commissioning mother and an adopting mother do not get twenty-six weeks. Section 60(4) gives twelve weeks from the date the child is handed over, and the adoption must be of a child below three months.

Section 61 does not give a double benefit. It keeps the Chapter VI entitlement alive until the woman qualifies under section 32, and section 41(7)(b) then bars the Chapter VI claim.

Limits and criticism

The employer pays, so the employer has a reason not to hire. Twenty-six weeks of wages is a heavy cost on a small establishment, and there is no fund and no contribution behind it. This is the standard criticism of Chapter VI and it deserves a paragraph in any essay on it.

The two child limit is blunt. A woman with two surviving children gets less than half the leave, whatever her circumstances.

Adoption gets twelve weeks and only for a child under three months. A woman adopting a four month old child gets nothing under section 60(4).

Section 60(4) says nothing about the surrogate herself, as distinct from the commissioning mother.

Section 60(5) leaves working from home entirely to agreement, so it adds nothing a willing employer could not already do.

Quick revision

• Section 59: no employment and no work for six weeks after delivery, miscarriage or medical termination of pregnancy, binding on both employer and woman. On her request, no arduous work, long standing, or work likely to interfere with the pregnancy, during the month preceding the six weeks before expected delivery, and any part of those six weeks she does not take off.
• Section 60(1): average daily wage for the period of actual absence, computed over the three calendar months before she absents herself, subject to the minimum wage under the Code on Wages 2019.
• Section 60(2): eighty days actually worked in the twelve months before the expected date of delivery, counting lay-off days and statutory paid holidays.
• Section 60(3): twenty-six weeks, of which not more than eight before the expected date. Two or more surviving children: twelve weeks, not more than six before. Death of the woman: up to and including the day of death. Death after delivery leaving the child: the entire period, or to the child's death if the child also dies. "Child" includes a stillborn child.
• Section 60(4): twelve weeks for a woman legally adopting a child below three months, or a commissioning mother, from the date the child is handed over.
• Section 61: entitlement continues despite Chapter IV applying, until she qualifies under section 32.
• Section 62: notice in writing; a pregnant woman's date not earlier than eight weeks before expected delivery; late notice permitted after delivery; employer shall permit absence; pre-delivery amount in advance, the rest within forty-eight hours of proof of delivery; failure to give notice does not disentitle, and an Inspector-cum-Facilitator may order payment.
• Section 63: on death before receipt, payment to the nominee named in the section 62 notice, else to the legal representative.

Test yourself

1. State the qualifying condition for maternity benefit and what counts towards it. The woman must have actually worked in an establishment of the employer from whom she claims it for not less than eighty days in the twelve months immediately preceding her expected date of delivery: section 60(2). Days actually worked, days she was laid off, and days that were holidays declared under any law to be holidays with wages all count.

2. For how long is maternity benefit payable, and how much of it may fall before delivery? A maximum of twenty-six weeks, of which not more than eight weeks may precede the expected date of delivery: section 60(3). For a woman with two or more surviving children the maximum is twelve weeks, of which not more than six may precede.

3. A woman gave no notice under section 62. Can the employer refuse to pay? No. Section 62(6) provides that failure to give notice does not disentitle her if she is otherwise entitled, and an Inspector-cum-Facilitator may, of his own motion or on her application, order payment within a specified period.

4. What is a commissioning mother entitled to? Maternity benefit for twelve weeks from the date the child is handed over to her: section 60(4).

5. A woman dies in childbirth and the child survives. What is the employer liable for? By the third proviso to section 60(3), maternity benefit for that entire period. If the child also dies within the period, liability runs only to the days up to and including the date of the child's death.

6. Does the Chapter apply to a woman on the muster roll on daily wages? Yes. Section 60(1) speaks of "every woman" and section 60(2) asks only how many days she actually worked. That is also the effect of Municipal Corporation of Delhi v. Female Workers (Muster Roll), decided under the Maternity Benefit Act 1961, which held there is nothing in that Act entitling only regular employees to the benefit and denying it to those engaged casually or on a daily wage basis.

7. What does section 61 do? It keeps a woman's entitlement under Chapter VI alive, notwithstanding that Chapter IV has come to apply to her establishment, until she becomes qualified to claim maternity benefit under section 32, so that no gap opens between the two schemes.

It follows the main entitlement. It goes to "every woman entitled to maternity benefit under this Chapter", so a woman who fails the eighty day test in section 60(2) gets neither.

Section 65: leave for miscarriage, tubectomy and illness

Three separate entitlements, each with wages at the rate of maternity benefit, and each on production of such proof as the Central Government prescribes.

Section 65(3) is additional. It says so expressly: the leave is "in addition to the period of absence allowed to her under section 62, or, as the case may be, under sub-section (1)". So a woman who takes six weeks after a miscarriage and then falls ill because of it may take up to a further month.

Note the relationship with section 59. The six weeks after a miscarriage appear twice, from two different angles. Section 59(1) and (2) prohibit her working during them. Section 65(1) gives her leave with wages for them. One is a health rule, the other is a payment, and a full answer names both.

Section 66: nursing breaks

Every woman delivered of a child who returns to duty after such delivery shall, in addition to the interval for rest allowed to her, be allowed in the course of her daily work two breaks of such duration as the Central Government prescribes, for nursing the child until the child attains the age of fifteen months.

Three things to hold. There are two breaks. They are in addition to the ordinary rest interval, not carved out of it. They run until the child is fifteen months old.

Read this with section 69(b), taken in the next chapter, which forbids any deduction from a woman's normal and usual daily wages by reason only of nursing breaks allowed under section 66. The break is paid.

Section 67: creche

Section 67(1), the obligation. Every establishment to which the Chapter applies in which fifty employees, or such number as the Central Government prescribes, are employed shall have the facility of a creche within such distance as the Central Government prescribes, either separately or along with common facilities.

First proviso, visits. The employer shall allow four visits a day to the creche by the woman, which shall also include the intervals of rest allowed to her.

Second proviso, shared creches. An establishment may avail a common creche facility of the Central Government, a State Government, a municipality, a private entity, a non-Governmental organisation, or any other organisation, or of a group of establishments who pool their resources to set up a common creche in the manner they agree.

Section 67(2), the duty to tell her. Every establishment to which the Chapter applies shall intimate in writing and electronically to every woman at the time of her initial appointment about every benefit available under this Chapter.

Section 67(2) is easy to overlook and it is a genuinely modern provision. A right nobody is told about is not worth much. Notice that the duty arises at the time of initial appointment, not when the woman becomes pregnant, and that it must be done both in writing and electronically. It sits alongside section 71, which requires an abstract of the Chapter to be displayed in the establishment.

A worked example

Anjali works at a packaging unit employing sixty people. She qualifies for maternity benefit.

The employer runs no clinic and pays for no treatment. What does she get beyond her leave? A medical bonus of 3,500 rupees, or such amount as notified, under section 64, because no pre-natal confinement and post-natal care is provided by the employer free of charge.

Had the employer provided that care free of charge? No bonus. Section 64 is conditional on the absence of free care.

She returns to work and is still feeding the child. She is entitled under section 66 to two breaks in the course of her daily work, in addition to her ordinary rest interval, until the child is fifteen months old. Under section 69(b) no deduction may be made from her wages by reason only of those breaks.

Is there a creche? There must be. The unit has sixty employees, which is above the fifty in section 67(1), so the establishment shall have a creche within the prescribed distance, either its own or shared. Anjali is entitled to four visits a day, and those visits include her rest intervals.

The employer says a creche is impossible for a unit this size. The second proviso to section 67(1) allows him to use a common creche run by a Government, a municipality, a private entity or a non-Governmental organisation, or to pool resources with other establishments.

Nobody told Anjali about any of this when she joined. That is a breach of section 67(2), which requires the establishment to intimate every benefit under the Chapter in writing and electronically at the time of her initial appointment.

Now change the facts. Anjali has a miscarriage in the eighteenth week.

Can she work the following week? No. Section 59(1) and (2) prohibit both her employment and her working for the six weeks immediately following.

Is she paid? Yes. Section 65(1) entitles her, on production of prescribed proof, to leave with wages at the rate of maternity benefit for those six weeks.

She then develops an illness arising out of the miscarriage. Section 65(3) gives her, in addition, leave with wages at the rate of maternity benefit for a maximum of one month.

Later she undergoes a tubectomy. Section 65(2) gives her leave with wages at the rate of maternity benefit for two weeks immediately following the operation, on production of prescribed proof.

What this does NOT mean

The medical bonus is not automatic. It is payable only where the employer does not provide pre-natal confinement and post-natal care free of charge.

The nursing breaks are not part of the rest interval. Section 66 says "in addition to the interval for rest allowed to her", and section 69(b) makes them unpaid deductions unlawful.

The creche visits are not four extra breaks. The first proviso to section 67(1) says the four visits shall also include the intervals of rest allowed to her.

Section 65(3) is not an alternative to the other leave. It is expressly in addition to the absence allowed under section 62 or under section 65(1).

The creche threshold is not on women employees. Section 67(1) speaks of establishments in which fifty employees are employed, not fifty women.

Limits and criticism

The medical bonus figure is very low and has not been designed to track the cost of care. Section 64 leaves it to notification, and until a higher figure is notified the statutory sum is 3,500 rupees.

Section 67(2) carries no stated consequence. The Chapter creates a duty to inform every woman at appointment but says nothing about what follows if the employer does not.

The creche threshold of fifty employees leaves the great majority of Indian workplaces outside it.

Nothing in section 66 or section 67 addresses a father, so the whole burden of child care in the Chapter's design falls on the mother.

Quick revision

• Section 64: medical bonus of 3,500 rupees, or as notified, payable only if the employer does not provide pre-natal confinement and post-natal care free of charge; it goes to every woman entitled to maternity benefit.
• Section 65: leave with wages at the rate of maternity benefit, on prescribed proof: six weeks after miscarriage or medical termination of pregnancy; two weeks after tubectomy; up to one month for illness arising out of pregnancy, delivery, premature birth, miscarriage or medical termination, and this last is in addition to the others.
• Section 66: two nursing breaks a day, of prescribed duration, in addition to the rest interval, until the child is fifteen months old; unpaid deduction for them is barred by section 69(b).
• Section 67(1): creche where fifty employees, or as prescribed, are employed, within a prescribed distance, separately or shared; four visits a day, including the rest intervals; a common or pooled creche is permitted.
• Section 67(2): every woman must be told of every benefit under the Chapter, in writing and electronically, at the time of her initial appointment.

Test yourself

1. When is a medical bonus payable, and how much is it? Where the employer does not provide pre-natal confinement and post-natal care free of charge, to every woman entitled to maternity benefit. The amount is three thousand five hundred rupees, or such amount as the Central Government may notify: section 64.

2. How much leave does a woman get after a miscarriage, and at what rate? Six weeks immediately following the day of the miscarriage, with wages at the rate of maternity benefit, on production of prescribed proof: section 65(1). Section 59(1) and (2) separately prohibit her employment and her working during that period.

3. A woman has taken six weeks after a medical termination of pregnancy and then falls ill because of it. Is any further leave available? Yes. Section 65(3) entitles her, in addition to the absence already allowed, to leave with wages at the rate of maternity benefit for a maximum period of one month.

4. How many nursing breaks is a woman entitled to, and for how long? Two breaks in the course of her daily work, of such duration as the Central Government prescribes, in addition to her rest interval, until the child attains the age of fifteen months: section 66.

5. At what size must an establishment provide a creche, and how many visits are allowed? Where fifty employees, or such number as prescribed, are employed: section 67(1). The employer shall allow four visits a day, which shall also include the intervals of rest allowed to her.

6. What must an employer tell a woman when she joins? Every benefit available under Chapter VI, in writing and electronically, at the time of her initial appointment: section 67(2).

The second limb is the one that shows the section was drafted by somebody who had seen the trick. An employer who cannot dismiss her during the absence might otherwise time the notice so that it runs out while she is away. That is expressly caught.

The first proviso, the wider protection. The discharge or dismissal of a woman at any time during her pregnancy, where she would but for that discharge or dismissal have been entitled to maternity benefit or medical bonus, shall not have the effect of depriving her of the maternity benefit or medical bonus.

Read that carefully. It does not make the dismissal itself unlawful, and it is not confined to a dismissal connected with the pregnancy. What it does is sever the entitlement from the employment: the money survives the dismissal.

The second proviso, the exception. Where the dismissal is for any gross misconduct as may be prescribed by the Central Government, the employer may, by order in writing communicated to the woman, deprive her of the maternity benefit or medical bonus, or both.

Note the three conditions packed into it. The misconduct must be gross and of a kind prescribed by the Central Government. The deprivation must be by order in writing. And that order must be communicated to her.

Section 68(2), the appeal. A woman deprived of maternity benefit or medical bonus, or both, or discharged or dismissed, may within sixty days from the date the order is communicated to her appeal to the competent authority. The decision of that authority, on whether she should or should not be deprived, discharged or dismissed, shall be final.

Section 69: no deduction of wages

No deduction from the normal and usual daily wages of a woman entitled to maternity benefit shall be made by reason only of:

• (a) the nature of the work assigned to her by virtue of section 59, that is the lighter work she gets when she asks not to be given arduous work; or
• (b) breaks for nursing the child allowed under section 66.

The words "by reason only of" are the limit of the section. It does not make her wages unassailable for every purpose; it stops the employer from charging her for the two accommodations the Chapter itself requires him to make.

Section 70: forfeiture

A woman who works for remuneration during the period she has been permitted by an employer to absent herself for availing maternity benefit shall not be entitled to receive maternity benefit for such period.

Two points. The forfeiture is only for such period, so it does not destroy the whole entitlement. And the trigger is working for remuneration, which fits the undertaking she gives in the notice under section 62(1) that she will not work in any establishment during the period for which she receives the benefit.

Section 71: duties of employer

An abstract of the provisions of this Chapter and the rules relating to it, in the language or languages of the locality, shall be exhibited in a conspicuous place by the employer in every part of the establishment in which women are employed.

Read this with section 67(2), which requires the employer to tell each woman in writing and electronically at her initial appointment about every benefit under the Chapter. Between them the Code requires both a general notice on the wall and an individual notice to each woman.

Section 72: the Inspector-cum-Facilitator

Section 72(1), who may complain and about what. A complaint may be made to the Inspector-cum-Facilitator by:

• (a) any woman claiming maternity benefit or any other amount to which she is entitled under the Chapter, and any person claiming that a payment due under the Chapter has been improperly withheld;
• (b) a woman claiming that her employer has discharged or dismissed her during or on account of her absence from work in accordance with the Chapter.

Section 72(2), what he may do. On receiving such a complaint the Inspector-cum-Facilitator may make an inquiry or cause one to be made, and if satisfied:

• (a) that payment has been wrongfully withheld, may direct the payment to be made in accordance with his order in writing;
• (b) that she has been discharged or dismissed during or on account of such absence, may pass such orders as he deems just and proper according to the circumstances of the case.

Section 72(3), appeal. Any person aggrieved by such an order may, within thirty days from the date it is communicated, appeal to the authority prescribed by the appropriate Government.

Section 72(4), finality. The decision of that appellate authority, or of the Inspector-cum-Facilitator where no appeal is preferred, shall be final.

Clause (b) of section 72(2) is unusually wide for an officer's power: "such orders as he deems just and proper according to the circumstances of the case". It is the provision that allows an order beyond mere payment where a woman has been dismissed for taking her leave.

The two routes compared

A woman who has been badly treated under this Chapter has two doors, and they are not the same door.

The benefit does not depend on the label of the job

Municipal Corporation of Delhi v. Female Workers (Muster Roll), AIR 2000 SC 1274, is the case to reach for whenever an employer's answer is that the woman was not a regular employee.

Facts. Women engaged by the Municipal Corporation of Delhi on the muster roll, on daily wages, did heavy work on construction and road maintenance including digging trenches. Maternity leave was granted to regular female employees but refused to them because their services had not been regularised. Their union espoused their case and the question whether muster roll women should be given maternity benefit was referred to the Industrial Tribunal, which decided in their favour. The Corporation challenged that award.

Held. The Special Leave Petition was dismissed and the award upheld. There is nothing in the Maternity Benefit Act which entitles only regular women employees to the benefit and denies it to those engaged on a casual basis or on muster roll on daily wages. Article 42 of the Constitution, which speaks of just and humane conditions of work and of maternity relief, though not enforceable at law, is available for determining the legal efficacy of the action complained of. The principles in Article 11 of the Convention on the Elimination of All Forms of Discrimination against Women are to be read into the contract of service, and so read those women become entitled to all the benefits of the Act.

Why it matters here. Because the protections in sections 68 to 72 are only as wide as the entitlement they protect. If a casual or muster roll woman is entitled to maternity benefit, then her dismissal during her authorised absence is unlawful under section 68(1), and her complaint lies to the Inspector-cum-Facilitator under section 72. The case was decided under the Maternity Benefit Act 1961, repealed by item 5 of section 164(1) of this Code; the reasoning carries because section 60(1) of the Code says "every woman" and section 60(2) asks only about days actually worked.

A worked example

Sameera has worked at a courier depot for two years and qualifies for maternity benefit. She gives notice under section 62 and begins her leave.

Three weeks in, the employer sends her a letter of dismissal. That is unlawful under section 68(1): he has dismissed her during her authorised absence.

He says he posted the notice before she left, and it merely expires now. Also caught. Section 68(1) makes it unlawful to give notice of discharge or dismissal on such a day that the notice will expire during such absence.

He instead demotes her and cuts her grade with effect from her return. Caught again: section 68(1) forbids varying any of the conditions of her service to her disadvantage.

What can she do? Two things. She may appeal to the competent authority under section 68(2) within sixty days of the order being communicated to her, and that authority's decision is final. Or she may complain to the Inspector-cum-Facilitator under section 72(1)(b), who may inquire and pass such orders as he deems just and proper.

Change the facts. She is dismissed during her pregnancy but before any leave, for redundancy. Section 68(1) does not bite, because she was not absent in accordance with the Chapter. But the first proviso does: a discharge or dismissal at any time during her pregnancy does not deprive her of the maternity benefit or medical bonus she would otherwise have been entitled to. She loses the job and keeps the money.

Change them again. She is dismissed for gross misconduct. The second proviso allows the employer to deprive her of the benefit or bonus, or both, only if the misconduct is of a kind prescribed by the Central Government, and only by order in writing communicated to her. She may then appeal under section 68(2) within sixty days.

During her leave she takes paid weekend work at a shop. Under section 70 she is not entitled to receive maternity benefit for that period. The rest of her entitlement is unaffected.

On her return she is put on lighter duties under section 59 and takes her two nursing breaks, and the employer cuts her daily wage accordingly. Unlawful. Section 69 forbids any deduction from her normal and usual daily wages by reason only of the nature of the work assigned under section 59 or the nursing breaks allowed under section 66.

She was on the muster roll on daily wages and the employer says none of this applies to her. Following Municipal Corporation of Delhi v. Female Workers (Muster Roll), the benefit is not confined to regular employees, and the Code's own words are "every woman" in section 60(1) and days actually worked in section 60(2).

What this does NOT mean

Section 68(1) is not a bar on dismissal at any time during pregnancy. It bites where the woman is absent in accordance with the Chapter. The first proviso deals separately with a dismissal during the pregnancy, and it preserves the money, not the job.

The gross misconduct exception is not open ended. The misconduct must be of a kind prescribed by the Central Government, and the deprivation must be by written order communicated to her.

Section 69 does not freeze a woman's wages. It stops deductions made by reason only of lighter work under section 59 or nursing breaks under section 66.

Section 70 does not forfeit the whole benefit. It withholds it for the period during which she worked for remuneration.

Section 72 is not a court. It is an officer with power to direct payment and to pass just and proper orders, subject to an appeal to a prescribed authority.

Limits and criticism

"Gross misconduct as may be prescribed" is undefined until the Central Government prescribes it, so the width of the exception in the second proviso to section 68(1) is set by the executive.

Finality under sections 68(2) and 72(4) is stated without qualification. The Code provides no further appeal, so a woman or an employer dissatisfied with the outcome is left to the constitutional jurisdiction of the High Court.

Section 72 sets no time limit for the complaint itself, only thirty days for the appeal, which leaves the position of a stale claim unclear.

The whole Chapter is enforced against a single employer with no fund behind it, so a woman whose employer has closed down has a right and no money, and nothing in sections 68 to 72 addresses that.

Quick revision

• Section 68(1): unlawful to discharge or dismiss during or on account of authorised absence, to time a notice to expire during it, or to vary service conditions to her disadvantage.
• First proviso: discharge or dismissal at any time during pregnancy does not deprive her of maternity benefit or medical bonus. Second proviso: deprivation permitted for gross misconduct as prescribed, by written order communicated to her.
• Section 68(2): appeal to the competent authority within sixty days of communication; its decision is final.
• Section 69: no deduction from normal and usual daily wages by reason only of lighter work under section 59 or nursing breaks under section 66.
• Section 70: working for remuneration during permitted absence forfeits the benefit for that period.
• Section 71: an abstract of the Chapter and rules, in the local language or languages, exhibited in a conspicuous place in every part of the establishment where women are employed.
• Section 72: complaint to the Inspector-cum-Facilitator about payment improperly withheld, or discharge or dismissal; he may inquire and direct payment or pass such orders as he deems just and proper; appeal within thirty days to the prescribed authority; that decision, or his where no appeal is taken, is final.

Test yourself

1. An employer gives a woman notice of dismissal timed so that it expires while she is on maternity leave. Is that lawful? No. Section 68(1) makes it unlawful to give notice of discharge or dismissal on such a day that the notice will expire during her authorised absence.

2. A woman is dismissed during her pregnancy, before any leave, for reasons unconnected with it. Does she lose her maternity benefit? No. By the first proviso to section 68(1), a discharge or dismissal at any time during her pregnancy does not have the effect of depriving her of the maternity benefit or medical bonus to which she would otherwise have been entitled.

3. On what conditions may an employer deprive a woman of maternity benefit for misconduct? The dismissal must be for gross misconduct of a kind prescribed by the Central Government, and the deprivation must be by order in writing communicated to the woman: the second proviso to section 68(1).

4. Within what time, and to whom, does an appeal lie against such an order? To the competent authority, within sixty days from the date on which the order is communicated to her, and that authority's decision is final: section 68(2).

5. A woman on maternity leave takes paid work elsewhere for two weeks. What is the consequence? Under section 70 she is not entitled to receive maternity benefit for that period. The remainder of her entitlement is unaffected.

6. What may an Inspector-cum-Facilitator do on a complaint that a woman was dismissed for taking her leave? He may make or cause an inquiry, and if satisfied she was discharged or dismissed during or on account of her authorised absence, may pass such orders as he deems just and proper according to the circumstances: section 72(2)(b). An appeal lies within thirty days to the authority prescribed by the appropriate Government.

7. What must an employer display, and where? An abstract of the provisions of Chapter VI and the rules relating to it, in the language or languages of the locality, in a conspicuous place in every part of the establishment in which women are employed: section 71.