Working of the Social Security Organisations

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.