Third Party Audit, Special Powers and Secrecy

Three features to name. It is confined to start-ups, or a class of them, as notified. Assignment is randomised and web based, exactly as inspections are under section 34(3)(ii). And the report goes both ways, so the audit substitutes for the officer's visit without cutting him out of the information.

Section 38: the special prohibitory powers

This is the longest section in Chapter IX. Take it by sector.

(A) Factories, section 38(1)(A)

• (a) Where it appears to the Inspector-cum-Facilitator that conditions in a factory or part of it may cause serious hazard or imminent danger by way of injury or death to the persons employed or to the general public in the vicinity, he may by order in writing to the occupier, stating the particulars, prohibit him from employing any person in the factory or that part, other than the minimum number necessary to attend to the minimum tasks, until the hazard or danger is removed.
• (b) Such an order has effect for three days, unless extended by the Chief Inspector-cum-Facilitator by a subsequent order.
• (c) A person aggrieved by an order under (a), or by the Chief Inspector-cum-Facilitator's order under (b), has a right of appeal to the High Court.
• (d) A person whose employment is affected by such an order is, without prejudice to the rights of the parties under the Industrial Disputes Act 1947, entitled to wages and other benefits, and it is the duty of the occupier to provide alternative employment wherever possible, in the prescribed manner.

Clause (d) is the point of the whole section and the answer to the obvious objection. If stopping the work cost the workers their wages, no worker would ever report the danger. So the workers are paid, and the occupier must find them alternative employment where possible. The cost of the stoppage falls on the employer whose factory caused it.

Note the balance in (a) to (c): a strong power, a short life of three days, an extension only by a senior officer, and an appeal to the High Court itself rather than to a departmental authority.

(B) Mines, section 38(1)(B)

Seventeen clauses, and the structure is what to learn rather than the detail.

Where the Code makes no express provision, and a mine, or any matter, thing or practice connected with it or with its control, supervision, management or direction, appears dangerous to human life or safety or defective so as to threaten bodily injury, the officer may give notice in writing requiring it to be remedied within a specified time: clause (a). On failure to comply, he may by order prohibit the employment of any person not reasonably necessary for securing compliance: clause (b).

He may also prohibit the extraction or reduction of pillars or blocks of minerals where that is likely to cause crushing of pillars, premature collapse, or otherwise endanger the mine or life, or where adequate provision against fire or flooding has not been made: clause (c).

Where there is urgent and immediate danger to life or safety, he may, by order in writing containing a statement of the grounds of his opinion, prohibit employment until satisfied the danger is removed: clause (d).

Every person whose employment is prohibited under (b) or (d) is entitled to full wages for the period, and the employer is liable to pay them, with a proviso permitting alternative employment at the same wages instead: clause (e).

Appeals and objections: an appeal to the Chief Inspector-cum-Facilitator within ten days against a notice or order of an Inspector-cum-Facilitator, who may confirm, modify or cancel: clause (f). Notices and orders must be reported forthwith to the Central Government: clause (g). An employer may object in writing to the Central Government within twenty days, which shall ordinarily decide within one month: clause (h). Meanwhile the notice or order shall be complied with, though the Central Government may suspend the operation of a clause (a) notice pending its decision: clause (i).

Where the Code does make express provision for a safety matter and the employer fails to comply, the Chief Inspector-cum-Facilitator may give notice requiring compliance within a specified or extended time: clause (k); and on failure may prohibit employment as under clause (b): clause (l); with the same full wages protection: clause (m); and the same reporting, objection and compliance rules: clause (n).

Finally: section 38 does not affect a magistrate's powers under section 144 of the Code of Criminal Procedure 1973: clause (j). The Chief Inspector-cum-Facilitator may reverse or modify his own order for reasons recorded in writing: clause (o). No order prejudicial to the owner, agent or manager may be made without a reasonable opportunity of making representation: clause (p). And the Central Government may reverse or modify any order of the Chief Inspector-cum-Facilitator: clause (q).

The pattern worth stating: notice first, prohibition on failure, wages protected, appeal within ten days, objection to the Central Government within twenty, compliance meanwhile, and a hearing before any prejudicial order.

(C) Dock work, section 38(1)(C)

Where a place where dock work is carried on is in such a condition that it is dangerous to life, safety or health of workers, the officer may by written order prohibit dock work there until the cause of danger is removed to his satisfaction: clause (a). He must endorse a copy to the Chief Inspector-cum-Facilitator, who may modify or cancel it without waiting for an appeal: clause (b). An appeal lies within fifteen days to the Chief Inspector-cum-Facilitator, or where the order is his, to the Central Government, to be disposed of within sixty days after a hearing, with power to entertain a late appeal for sufficient cause; and the order must be complied with pending the decision: clause (c).

Building and other construction work, section 38(2) and (3)

Where a site is dangerous to life, safety or health of building workers or the general public, the officer may by written order, served on the employer of the building workers, or on the employer of the establishment in which the site is situated, or on the person in charge of the site, prohibit the work until the cause of danger is removed to his satisfaction: sub-section (2)(a). A copy is endorsed to the Chief Inspector-cum-Facilitator: (b). The order shall be complied with forthwith: (c). An appeal lies within fifteen days to the Chief Inspector-cum-Facilitator, or where the order is his, to the appropriate Government, disposed of within sixty days after a hearing, late appeals entertainable for sufficient cause, and the order complied with subject to the decision: sub-section (3).

Note the difference in who may be served in construction: not only the employer of the workers but the employer of the establishment and the person in charge of the site, because on a construction site those are often three different people.

Section 39: secrecy

Section 39(1), confidentiality. All copies of and extracts from registers or records of an establishment, and all information relating to any manufacturing or commercial business or working process, acquired by the Chief Inspector-cum-Facilitator, an Inspector-cum-Facilitator, anyone assisting him, or an officer authorised under section 20, shall be regarded as confidential and shall not, while in service or after leaving the service, be disclosed to any person or authority, unless the officer considers disclosure necessary to ensure the health, safety or welfare of any person employed in the establishment.

Section 39(2), the exceptions. Sub-section (1) does not apply to disclosure to:

• (a) any court;
• (b) any Committee or Board constituted under the Code;
• (c) an official superior or the employer of the establishment concerned;
• (d) a Commissioner for employees' compensation appointed under the Employees' Compensation Act 1923;
• (e) the Controller, Indian Bureau of Mines; and
• (f) any officer, authority or authorised person specified by the appropriate Government.

Section 39(3), the complainant. Learn this one. Notwithstanding the Right to Information Act 2005, no Chief Inspector-cum-Facilitator or Inspector-cum-Facilitator shall disclose the source of any complaint made to him about a contravention without the consent of the complainant; and shall not, while making an inspection in pursuance of such a complaint, disclose to the employer or any of his representatives that the inspection is being made in pursuance of a complaint.

Two protections in one sub-section, and both matter. The name is protected, and so is the fact that there was a complaint at all. Without the second, an employer told that an inspection followed a complaint could work out who complained from who was present. And the non obstante clause puts it beyond the Right to Information Act.

Note the exception in section 39(1) works in the worker's favour: confidentiality yields where the officer considers disclosure necessary to ensure the health, safety or welfare of any person employed.

Section 40: facilities to be afforded

Every employer shall afford the Chief Inspector-cum-Facilitator, every Inspector-cum-Facilitator having jurisdiction, and every person authorised by the Chief Inspector-cum-Facilitator, all reasonable facilities for making any entry, inspection, survey, measurement, examination or inquiry under the Code.

A worked example

An anonymous letter tells an Inspector-cum-Facilitator that a foundry's crane is unsafe.

May he tell the occupier why he has come? No. Section 39(3) forbids him, while making an inspection in pursuance of a complaint, from disclosing to the employer or his representatives that the inspection is being made in pursuance of a complaint, and forbids disclosure of the source without the complainant's consent, notwithstanding the Right to Information Act 2005.

He finds the crane likely to drop a load on the shop floor. Conditions may cause serious hazard or imminent danger by way of injury or death, so under section 38(1)(A)(a) he may by order in writing to the occupier, stating the particulars, prohibit the employment of anybody in that part except the minimum number necessary for the minimum tasks, until the danger is removed.

How long does that last? Three days, unless extended by the Chief Inspector-cum-Facilitator: clause (b).

The occupier wants to challenge it. He may appeal to the High Court: clause (c).

Forty workers are sent home. Are they paid? Yes. Under clause (d) they are entitled to wages and other benefits, without prejudice to the parties' rights under the Industrial Disputes Act 1947, and the occupier must provide alternative employment wherever possible.

The officer learns the foundry's alloy recipe during the inspection. That is information relating to a manufacturing or commercial business or working process and is confidential, while he is in service and after he leaves it: section 39(1). He may disclose it to a court, a Committee or Board under the Code, his official superior or the employer, a Commissioner for employees' compensation, the Controller of the Indian Bureau of Mines, or an officer specified by the appropriate Government: section 39(2). And he may disclose it if he considers disclosure necessary to ensure the health, safety or welfare of any person employed.

The occupier refuses to let him take measurements. Section 40 obliges every employer to afford all reasonable facilities for entry, inspection, survey, measurement, examination or inquiry.

Now a mine. A gallery looks likely to collapse.

What does the officer do first? Where there is urgent and immediate danger to life or safety, he may under section 38(1)(B)(d) by order in writing containing a statement of the grounds of his opinion prohibit the employment of anyone not reasonably necessary for removing the danger, until satisfied it is removed.

The miners lose a week's work. They are entitled to full wages for the period, payable by the employer, unless he provides alternative employment at the same wages: clause (e).

The employer objects. He may appeal to the Chief Inspector-cum-Facilitator within ten days: clause (f); and may object in writing to the Central Government within twenty days, which shall ordinarily decide within one month: clause (h). Meanwhile the order must be complied with: clause (i).

Now a new manufacturing start-up. Instead of an inspection it may fall within a third party audit scheme under section 37, with an empanelled expert assigned randomly through a web based scheme, whose report goes to the employer and to the Inspector-cum-Facilitator.

What this does NOT mean

A prohibition order does not close the factory entirely. Section 38(1)(A)(a) permits the minimum number of persons necessary to attend to the minimum tasks.

Workers do not bear the cost of a stoppage. Section 38(1)(A)(d) and section 38(1)(B)(e) entitle them to wages and full wages respectively.

Confidentiality is not absolute. Section 39(1) yields where disclosure is necessary for health, safety or welfare, and section 39(2) lists six permitted recipients.

Section 39(3) is not defeated by a Right to Information application. It operates notwithstanding that Act.

Third party audit is not open to every establishment. Section 37(1) confines it to start-up establishments or a class of them as notified.

Limits and criticism

Three days is short for a factory prohibition, and its extension depends on the Chief Inspector-cum-Facilitator acting in time.

The mines provisions are extraordinarily complex, running to seventeen clauses with three separate review routes, which is hard for a mine manager and harder for a miner to use.

Section 37 gives no criteria for what a start-up is, leaving it entirely to the notification.

Section 39(1) permits disclosure to "the employer of the establishment concerned" under sub-section (2)(c), which sits awkwardly beside the complainant protection in sub-section (3), and the Code does not say how the two interact where the information would identify the complainant.

Quick revision

• Section 37: notified scheme to empanel experts for start-up establishments; audit and certification assigned randomly through a web based scheme; report to the employer and the Inspector-cum-Facilitator.
• Section 38(1)(A), factories: prohibition on serious hazard or imminent danger, leaving the minimum persons for minimum tasks; effect three days unless extended by the Chief Inspector-cum-Facilitator; appeal to the High Court; affected workers entitled to wages and other benefits and to alternative employment where possible.
• Section 38(1)(B), mines: notice, then prohibition; prohibition of pillar extraction; urgent danger prohibition on recorded grounds; full wages or alternative employment at the same wages; appeal to the Chief Inspector-cum-Facilitator in ten days, objection to the Central Government in twenty, decided ordinarily in one month; compliance meanwhile; section 144 CrPC unaffected; hearing before any prejudicial order.
• Section 38(1)(C), dock work: prohibition until the danger is removed; copy to the Chief Inspector-cum-Facilitator, who may modify or cancel without waiting for an appeal; appeal in fifteen days, decided in sixty; compliance meanwhile.
• Section 38(2) and (3), construction: order on the employer of the workers, the employer of the establishment, or the person in charge; complied with forthwith; appeal in fifteen days, decided in sixty.
• Section 39: confidential while in service and after, unless disclosure is necessary for health, safety or welfare; six exceptions including a court, a Committee or Board, an official superior or the employer, a Commissioner for employees' compensation, the Controller, Indian Bureau of Mines; and section 39(3), notwithstanding the Right to Information Act 2005, no disclosure of the source of a complaint without consent and no telling the employer that the inspection follows a complaint.
• Section 40: the employer shall afford all reasonable facilities for entry, inspection, survey, measurement, examination or inquiry.

Test yourself

1. What may an Inspector-cum-Facilitator do where a factory presents imminent danger, and for how long does the order last? He may by order in writing to the occupier, stating the particulars, prohibit him from employing any person in the factory or part of it other than the minimum number necessary to attend to the minimum tasks, until the hazard or danger is removed. The order has effect for three days unless extended by the Chief Inspector-cum-Facilitator: section 38(1)(A)(a) and (b).

2. Are the workers paid while the work is stopped? Yes. Under section 38(1)(A)(d) a person whose employment is affected is entitled to wages and other benefits, without prejudice to the parties' rights under the Industrial Disputes Act 1947, and it is the duty of the occupier to provide alternative employment wherever possible. In a mine, section 38(1)(B)(e) entitles him to full wages, or alternative employment at the same wages.

3. Where does an appeal lie against a factory prohibition order? To the High Court: section 38(1)(A)(c).

4. What two things does section 39(3) protect? The source of a complaint, which may not be disclosed without the complainant's consent; and the fact that the inspection is being made in pursuance of a complaint, which may not be disclosed to the employer or his representatives. Both operate notwithstanding the Right to Information Act 2005.

5. To whom may confidential information nonetheless be disclosed? To any court; any Committee or Board constituted under the Code; an official superior or the employer of the establishment concerned; a Commissioner for employees' compensation under the Employees' Compensation Act 1923; the Controller, Indian Bureau of Mines; and any officer, authority or authorised person specified by the appropriate Government: section 39(2).

6. Who may be an auditor under section 37, for whom, and how are they assigned? Experts empanelled by the appropriate Government under a notified scheme, possessing prescribed qualifications and experience, for start-up establishments or a class of them; assigned the audit and certification in a randomised manner through a web based scheme, and reporting to the employer and to the Inspector-cum-Facilitator.