Article (December-2018)


The conundrum on Fixed term contract

Deepanjan Dey

Designation : -   DGM-HR

Organization : -  Dalmia Cement (Bharat) Ltd., Meghalaya Unit


10000+ View        

The insertion of Fixed Term Contract by way of amendment in Industrial Employment (Standing Orders) Central Rules, 1946 (herein after referred to as the 'amended rule') has created more confusion in the field rather than any tangible benefits to industry. Apparently though it appears that the intention of the government might have been noble but the famous quote of Lewis Caroll “The hurrier I go, the behinder I get” aptly applies in regard to this amendment. The government as it appears has been in hurry and has not applied its mind while bringing this amendment. Hence, the conundrum prevails on the ground.
Fixed Term contract under the ID Act : At the very outset it not clear as to why such amendment was required when there already exist a provision for fixed term contract under section 2(oo)(bb) of the Industrial Dispute Act 1947 (hereinafter referred to as the 'ID Act'). For better appreciation Section 2 (oo) of the ID Act is reproduced herein below :
(2oo) "retrenchment" means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action but does not include-
(a) voluntary retirement of the workman; or
(b) retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or
(bb) termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation on that behalf contained therein; or
(c) termination of the service of a workman on the ground of continued ill-health;
A plain reading of section 2(oo)(bb) entails that termination of the service of the workman for non renewal of contract will not tantamount to retrenchment under the ID Act. Reference in this regard may be made to a Supreme Court judgment in Punjab State Electricity Board Vs Darbara Singh (2006) 1 SCC 121 = AIR 2006 SC 387 = 2006 LLR 68 (SC) wherein it was held that where the engagement of workman was for specific period, his termination will fall under the ambit of section 2 (oo)(bb) and therefore no retrenchment compensation is required to be paid even when he has worked for 240 days. There are also many other cases of various High Courts where it has been held that non renewal of contract or termination of contract of a workman engaged on fixed term contract will not be deemed as retrenchment under the ID Act (ref. Sudhir R Koli V Maharashtra Pollution Control Board 2004 LLR 982 (Bom HC) & Management, Delhi Public School, Bokaro Vs Presiding Officer, Labour Court, Bokaro 2005 LLR 514 (Jhar HC).
However, this fixed term contract comes with a caveat. The fifth schedule of the ID Act which deals with unfair labour practice has the provision in clause 10 making appointment of workman on temporaries for years as unfair labour practice. The said clause reads as follows :
"To employ workman as "badlis", casuals or temporaries and to continue them as such for years, with the object of depriving them of the status and privileges of permanent workman."
Reference in this context may be made to Ferozepur Central Co-operative Bank Ltd V. Labour Court, Bhatinda, 1985(67) FJR 367 (P&H HC) wherein it has been held that repeated appointments with breaks for short duration to deprive rights of the workman the rights under section 25 F will amount to Unfair Labour Practice in terms of clause 10 of the fifth schedule of the ID Act. In The Kurukshetra Central Co-op Bank Ltd. Vs State of Haryana, 1993 LLR 67 the Punjab & Haryana High Court had set aside the termination of a workman who has been working for eighteen years with notional breaks by giving appointment year after year. The High Court was of the opinion that such breaks were given with the intention to deprive the workman the status of permanency and therefore the Court held that the workman will be entitled to reinstatement (also refer Pritam Singh Vs Cancer Hospital & Research Institute, Gwalior, 2009 LLR 275 (MP HC). Reference may be made also to Zilla Prashad, Nagpur Vs Moreshwar s/o Vithobaji Mendhekar, 2004 LLR 957 (Bom HC) wherein it was held that an initial appointment of 29 days but extending after artificial breaks for 18 times within a span of one and half years will amount to unfair labour practice and such termination of workman will be treated as illegal. The Delhi High Court in Kirloskar Electric Company Ltd Vs Government of NCT of Delhi 2010 LLR 6 (Del HC) held that extending service of the employee for depriving permanency will tantamount to unfair labour practice. The Punjab and Harayana High Court in Krishan Lal Vs General Manager, Haryana Roadways Rohtak, 2011 LLR 359 had opined that repeated breaks will amount to unfair labour practice under the ID Act. Reference may be also made to the case of Management of Tamil Nadu State Transport Corporation (Madras Division-1) Ltd. Vs Presiding Officer Labour Court, Madurai & Anr., 2016 LLR 736 (Mad HC) whereby it was held that if the contract of a workman is renewed periodically, required perennially for a long time, termination of his service would amount to unfair labour practice and it will not attract Section 2 (oo)(bb) of ID Act. Last but not the least it may be apt to refer to a Supreme Court judgment in Haryana State Electronics Dev corp. Vs Mamni, 2009 LLR 667 (SC) wherein it was held that where the appointment of 89 days were terminated on regular basis with a break of one or two days and the workman has completed 240 days in a year such breaks will tantamount to unfair labour practice. The Court was of the opinion in such event section 2 (oo)(bb) would not apply.
Prerequisites for the amended rule to be applicable : The first requisite for the amended rule to become applicable, the appropriate government for that establishment has to be the Central Government. For establishment for whom the appropriate government is a State government, this amended rule shall have no application unless and until the State also brings in such provision in their respective state rules. The next question that arises as to whether the amended rule by itself becomes applicable to establishment for whom the appropriate government is the Central Government? The answer is NO. In order to make the amended rule applicable, the concerned establishment has to amend their respective certified standing orders. In this connection reference may be made to case of Hindustan Petroleum Corporation Ltd., Mumbai Vs Presiding Officer, Central Government Labour Cum Industrial Tribunal, Chennai, 2009 LLR 75 (Mad HC) whereby it was held that if any amendment is made by the Government, the same needs to be incorporated in the certified standing orders. Now such a procedure is easier said than done. The procedure as laid down in section 10(2) of the Industrial Employment (standing orders) Act provides that any modification to the certified standing orders should be applied to the Certifying Officer with five copies supported with the agreement between the employer and the workmen or a trade union or other representative bodies of the workmen. Now the question arises as to why any union or workmen body would agree for such agreement which withers their bargaining power with the employer.
Conflict between the amended rule and the law : Now suppose hypothetically let us assume a case where in terms of the amended rule a Company has incorporated the provision of fixed term contract in their standing orders. Thereafter, the company start engaging workmen on fixed term contract for a fixed period. The said contract of the workman gets renewed from time to time. Suppose after two or three renewals the company decides not to renew the contract with the workman. The concerned workman raises an industrial dispute under section 2A of the Act challenging the termination and alleging unfair labour practice on part of the Employer. Now the question that arises, can the employer take shield behind the amended rule and their standing order? Under such circumstances, the workman might take the plea that there is a conflict between the amended rule and the ID Act and hence the Act should prevail. In this context let us now examine the judicial pronouncements for better appreciation. The Delhi High Court in the case between National Stock Exchange Member vs Union Of India (UOI) And Ors. 125 (2005) DLT 165, 2005 (85) DRJ 298, 2006 70 SCL 151 (Delhi) inter-alia observed the following :
"It may be mentioned here that according to the theory of the eminent jurist Kelsen (The Pure Theory of Law) in every legal system there is a hierarchy of laws, and the general principle is that if there is a conflict between a norm in a higher layer of the hierarchy and a norm in a lower level of the hierarchy, then the norm in the higher layer prevails, and the norm in the lower layer becomes ultra vires (see Kelsen's 'The General Theory of Law and State').
In our country this hierarchy is as follows :-
(1) The Constitution of India.
(2) Statutory Law which may be either Parliamentary Law or law made by the State Legislature.
(3) Delegated legislation which may be in the form of rules, regulations etc. made under the Act.
(4) Administrative instructions which may be in the form of GOs, Circulars etc.
The SEBI Act is in the second layer of this hierarchy and the rules and regulations are in the third layer, whereas the circular dated 16.3.1998 is in the fourth and the lowest layer in the hierarchy. Hence, if there is a conflict between the Act and the Rules & Regulations the Act will prevail, and if there is a conflict between the Act, Rules and Regulations on the one hand, and the circular on the other, the former will prevail and the latter becomes ultra vires……"
Reference may be made also to the Supreme Court judgment in the matter between M/s. Ispat Industries Ltd. And Commissioner of Customs, Mumbai (Civil Appeal Case No 3972 of 2001 source: Indian Kannon) wherein the same view was opined.
From the aforesaid cases it is crystal clear that in case of any conflict, the law will prevail over the rule. The provision pertaining to the fixed term contract as amended in the Industrial Employment (Standing Orders) Central Rules, 1946 is a rule. The provision relating to unfair labour practice under clause 10, schedule V of the ID Act is an Act. Hence, in case of any judicial scrutiny depending upon the facts and merit of the case in all probability the law pertaining to unfair labour practice will prevail over the amended rule. Under such circumstances, the ratio of the judgment/s as discussed in the foregoing paragraphs pertaining to unfair Labour practice shall continue to apply. Thus, irrespective of the amended rule and the incorporation of the same in the standing orders of the establishment, the fixed term contract with or without notional breaks, which intends to deprive the workman the status of permanency will be deemed as unfair labour practice by the courts.
Conclusion : From our above discussion we find that there already exists a provision for fixed term contract in the ID Act with a rider in clause 10, schedule V dealing with unfair labour practice. It is also apparent that the amended rule is in conflict with the ID Act. Further, in establishment wherein the amended rule is applicable, intends to implement the rule, it has to go through the tiresome process as prescribed in the Industrial Employment Standing Order Act before it can reap any benefits. In view of these issues which remain unanswered or unaddressed the amended rule appears to bring no tangible benefits to the stake holders. Thus, the proper course should have been to delete the clause 10 from the fifth schedule of the ID Act in order to provide the fixed term contract the intended leverage. Simultaneously, with deletion of the said proviso in order to safe guard the interest of the working class, the beneficial provision pertaining to the statutory benefits which has been inserted in the amended rule, could have inserted as an amendment in the ID Act itself. This kind of initiative would have made some impact on the labour market and might have also alleviated the condition of burgeoning contract labour force in the country. With such initiative in place the employers might have been encouraged for in sourcing rather than outsourcing or deploying manpower through contractor. However, there is no denying of the fact that deletion of the said proviso in the ID Act is easier said than done due to political complications and needs a huge political will. Under the present circumstances, as things stand now we may conclude by recalling the title of the article by the respected Advocate and Editor of Labour Law reporter Mr H. L. Kumar, published in May 2018 issue of the Business Manager 'Fixed Term Employment- Much ADO nothing'.