SBILL DJC Kirti Mam

INDEX
S.No. Name of the Chapter Page No.
1 Choice of Business Organisation 1
2 Corporate Entities – Companies 6
3 Limited Liability Partnership 25
4 Startups and its Registration 33
5 Micro, Small & Medium Enterprises 44
6 Conversion of Business Entities 49
7 Non – Corporate Entities 54
8 Financial Services Organisation 65
9 Business Collaborations 76
10 Setting up of Branch Office / Liason Office/ Wholly Owned Subsidiary by 84

Foreign Company
11 Setting up of Business Outside India and Issue Relating Thereto 92
12 Identifying Laws Applicable to Various Industries and Their Initial 97

Compliances
13 Various Initial Registrations and Licenses 105
14 Constitution and Labour Laws 117
15 Evaluation of Labour Legislation and Need of Labour Code 124
16 Law of Welfare & Working Condition 128
17 Law of Industrial Relations 147
18 Law of Wages 166
19 Social Security Legislations 180
20 Sexual Harassment of Women at Workplace 203

SBI & LL
- By CS Kirti Chaturvedi Choice of Business Organisation
1 CHOICE OF BUSINESS ORGANISATION

Chapter
INTRODUCTION
• It refers to all those steps that need to be undertaken for establishing and maintaining
relationship between men, material, and machinery to carry on the business efficiently for
earning profits.
• All necessary arrangement required to conduct a business in optimized manner.
• The main types of business entities in India are:
✓ Sole Proprietorship, Partnership, Hindu Undivided Family (HUF) Business, limited

liability partnership, LLP, Co-operative societies, branch office
✓ Company which may be any kind of company including one person company (OPC),
private limited company, public limited company, guarantee company, subsidiary
company, statutory company, insurance company or unlimited company.
✓ Further, Company formed under section 8 of the Companies Act, 2013 or under section
25 of the earlier Companies Act of 1956 is an on-profit business entity.
✓ There can also be Association of Persons (AOP) and Body of Individuals (BOI),
Corporation, Co-operative society, Trust etc.
• The right choice of the form of the business is very crucial because it determines the power,
control, risk and responsibility of the entrepreneur as well as the division of profits and
losses.
• Form of business organisation influences the success and growth of a business.
• Once a form of business organisation is chosen, it is very difficult to switch over to another
form because it needs the winding up, dissolution of the existing organisation which
ultimately results into the waste of time, effort and money.
FACTORS TO BE CONSIDERED
I. Nature of business activity

• In small trading businesses, professions, and rendering of personal services, sole-
proprietorship is predominant. E.g. small retail shops, medicine stores etc.
As an alternative, OPC can be formed if the owner wished to provide a legal entity
status to hisbusiness
• The partnership is suitable in all those cases where sole proprietorship is suitable,
provided the business is to be carried on a slightly bigger scale with help of one or
more partner (owner). E.g. Trading, consulting agencies, hotels, small manufacturing
etc.
As an alternative, LLP can be formed by the partners, where in the liability of the
partners would be limited and will also provide a legal entity status to the business
Setting Up Of Business, Industrial
& Labour Laws
1
SBI & LL
Choice of Business Organisation - By CS Kirti Chaturvedi
• In case if the owner wishes to start a business with large capital, then it is always
advisable to have a business in the form of a limited company, as it will provide a veil
between the promoters and company’s business.
II. Scale of operations
• If the scale of operations of business activities is small, sole proprietorship or a one

personcompany (OPC) is suitable;
• If the scale of operations is modest — neither too small nor too large —
partnership orlimited liability partnership (LLP) is preferable;
• In case of large scale of operations, the company form is advantageous.
• As per Ministry of Micro, Small and Medium Enterprises- w.e.f. 1st July, 2020 an enterprise
shall be classified asa micro, small or medium enterprise (MSME) on the basis of the
following criteria, namely:
ENTERPRISE INVESTMENT IN P&M TURNOVER

MICRO does not exceed Rs. 1 Crore does not exceed Rs. 5 Crore
SMALL does not exceed Rs. 10 Crore does not exceed Rs. 50 Crore
MEDIUM does not exceed Rs. 50 Crore does not exceed Rs. 250 Crore
• The scale of business operations depends upon the size of the market area served,
which, in turn,depends upon the size of demand for goods and services.
• Market area is small, local - sole-proprietorship or OPC is opted.
• If the demand originates from a large area- partnership including LLP or Company may be
adopted.
III. Capital requirement
• Enterprises requiring heavy investment (like iron and steel plants, larges cale
infrastructure projects, etc.) Should be organized as companies. Depending on the
capital required, they can be setup as public companies and in some cases, may be in
the form of listed companies by raising money from the public and being listed on the
stock exchanges.
• Enterprises requiring small investment (like retail business stores, personal service
enterprises, etc.) Can be best organized as sole proprietorship sorevenas partnerships.
A part from the initial capital required to start a business, the future capital
requirements —to meet modernisation, expansion, and diversification plans— also
affect the choice of form oforganisation.
• In sole proprietorship, the owner may raise additional capital by borrowing, by

purchasing on credit, and by investing additional amounts himself. Banks and suppliers,
however, will look closely at the proprietor’s individual financial resources before
sanctioning any loans oradvances.
• Partnerships can often raise funds with greater ease, since the resources and credit
of allpartners are combined in a single enterprise.

& Labour Laws
2
SBI & LL
• Companies are usually best able to attract capital because investors are assured that
their liability will be limited, their operations are in public domain in the transparent
manner, easily accessible and the ownership can be transferred to other investors.
IV. Managerial ability

• Sole proprietor didn’t have expertise in all functional areas of business and the size of
the business may not permit engagement of professional management.
• In other forms of organizations like partnership and company, there is division of work
among the partners which allows the partners to specialize in specific areas, leading to
better outputs and decision making. However, this may sometimes lead to conflicts
due to differences of opinion.
• Company form of organization is a better alternative if the operations are large,
complex in nature and require professional management at various levels.
V. Degree of control and management

• In Sole proprietor and OPC, the control is completely centralized with the owner/sole
member
• In Partnership/LLP, the management and control is distributed among the members
videpartnership/ LLP agreement
• In a company, the management and control lies with the directors, who are appointed
by theshareholders(owners) of the company.
VI. Degree of risk and liability

• In sole proprietorship, the sole proprietor is solely liable for all acts and liabilities
of thebusiness
• In partnership, partners are individually and jointly liable for all their acts and liabilities
• In case of OPC /LLP/Company, the liability of owners is limited
VII. Stability of business

• Companies and LLP have the most stability due to its feature of perpetual succession
andseparate legal entity. Members may come and go but the business continues.
• Sole proprietorship is the least stable for mas it depends upon an individual.
VIII. Flexibility of administration

• Means the ease with which internal organization can be formed or changed
• Sole Proprietor and Partnership firms are most flexible & have an advantage of
carrying outthe business most administratively.
• Companies have rigid structure and thus are less flexible
IX. Division of profit

• One of the most important factor considered while setting up a business
• If this the criteria for forming an organization, then the most preferred way is setting
up sole proprietorship
• In Partnership, the profits are divisible among the partners in the ratio as agreed
between them in partners hip deed and thus is the preferred way of organization
where the owners want to distribute the profit
• In case of companies, the profit is distributed among the members and depends upon
the discretion of the board as well as the profitability of the company.

& Labour Laws
3
SBI & LL
Choice of Business Organisation - By CS Kirti Chaturvedi
X. Costs, procedure and government regulations

• Sole proprietorship are the easiest and cheapest way of starting the business. there is
no government regulation and the owner need to acquire the basic approvals like GST,
license etc.for setting up the business.
• Partnerships are also simple as it requires an agreement (though even the written
agreements are not compulsory). Dissolution of partnership is also simple.
• Company is the most complicated and regulated form of doing any business.
The expenditure of incorporating a company is also quite high as compared to
other forms.Winding up is again a cumber some and costly process.
XI. Tax implication

• Plays an important role while setting up any business
• Sole proprietorship or Partnership: Tax Liability is dependent on extent of Profits.
• Company or LLP: Tax Liability higher & charged at flat rate.
XII. Geographical mobility

• For dealing in local market/ a seasonal or perishable product/ to cater a specific city or
locality, then sole proprietorship or partnership form of business may be suitable.
• If it is proposed to market the product or service all over India (which may also entail
providing customer support services), a company form of organisation may be preferred.
XIII. Transferability of ownership
• Sole Proprietorship: Single man doing the business and hence there is no scope for
transferability of ownership.
• Partnership: Ownership can be changed if the existing partner decided to quit.
• Company: Shares are freely transferable from one person/ entity to another person/entity.
XIV. Managerial needs

• If business caters to more areas, then there is definitely a need to look into various aspects
of the business, where in the Company is the best option. However, where the concerns are
small, a sole proprietorship will also serve the purpose.
XV. Secrecy
• In Sole proprietorship the secrecy is at its supreme level. However, as we move into other
forms or organization, the level started to come down.
• In case of company, the company’s details accessible on MCA website. Further, as per
various provisions of Companies Act, 2013 and SEBI, a Company needs to disclose its various
information and document to the authority (s), which would also be available on the public
domain.
XVI. Independence
• The company is subject to strict government regulations.
• Sole proprietorship or partnership : If the entrepreneur wants to have a freedom in
business with little governmental interference, he has to go for either

& Labour Laws
4
SBI & LL
COMPANY AS A CHOICE OF BUSINESS ORGANISATION FOR STARTUPS
Start ups prefer company because:

• It allows outside funding
• Limits liabilities of shareholders
• Offer Employee stock options
• Have more credibility than LLP/Partnership

& Labour Laws
5
SBI & LL
Corporation Entities-Companies - By CS Kirti Chaturvedi
2 CORPORATE ENTITIES-COMPANIES
Chapter
INTRODUCTION
Supreme Court of India has held in the case of State Trading Corporation of India vs. CTO that a
Company cannot have status of citizen under Constitution of India.
The Companies Act, 2013 provides for the companies that can be promoted and registered
under theAct. The types of companies which may be registered under the Act are:
(a) Private Companies

(b) One Person Company(to be formed as private limited)
(c) Public Companies
Section 3 of the Companies Act 2013 read with the Companies (Incorporation) Rules, 2014, states
that:
1) A company may be formed for any lawful purpose by–
(a) 7 or more persons, where the company to be formed is a public company;

(b) 2 or more persons, where the company to be formed is a private company; or
(c) 1 person, where the company to be formed is OPC that is to say, a private company,
by subscribing their names or his name to a memorandum and complying with the
requirementsof the Act in respect of registration.
2) A company formed under sub-section (1) may be either–
(a) A company limited by shares; or

(b) A company limited by guarantee; or
(c) An unlimited company.
Classification on the
basis of Liability
Limited Companies
Unlimited Companies
Limited by guarantee Limited by shares
• The liability of members of • Section 2(21) of the • Section 2(22) of
this type of company is Companies Act, 2013 the Companies Act,
unlimited. provides that a 2013
• Section 2(92) of the company thathas the provides that
Companies Act, 2013 provides liability of its members “company limited
that unlimited company limited to such amount by shares” means a
means a companynot having company having
as the members may
theliability of its
any limit on the liability of its • Undertake respectively, members limited by
members. by the Memorandum of the memorandumto
• Such companies may or may Association, t the amount, if any,
not have share capital. contribute tothe assets unpaidon the

& Labour Laws
6
SBI & LL
- By CS Kirti Chaturvedi Corporation Entities-Companies
• They may be either a public of the company in the shares respectively

company or a private event of itsbeing held by them.
company. wound-up.
Classification on the basis of

Incorporation
Statutory Companies Registered Companies
• Statutory Companies are constituted by The companies which are incorporated
aspecial Act of Parliament or State under the Companies Act, 2013or under
Legislature. any previous company law and registered
• The provisions of the Companies Act, with the RoC fall under the category of
2013 donot apply to them. Registered Companies.
• Examples of these types of companies
are RBI,LIC etc
Other Forms of Companies

Section 8 Companies Any person or an association of persons proposed to be
registered under this Act as a limited company and are able to
prove to the satisfaction of the CG that the company –
i. has in its objects the promotion of commerce, art, science,
sports,education, research, social welfare, religion, charity,
protection of environment or any such otherobject;
ii. intends to apply its profits, if any, or other income in
promoting itsobjects; and
iii. Prohibits payment of any dividend to its members,
Foreign Companies Section 2(42) :the “foreign company” means any company or
bodycorporate incorporated outside India which,-
i. has a place of business in India whether by itself or through
an agent,physically or through electronic mode; and
ii. Conducts any business activity in India in any other manner.
Producer Companies Section 378A : Producer Company means a body corporate
having objects or activities specified in section 378B and
registered as Producer Company under this Act or under the
Companies Act, 1956.
Nidhi A Nidhi is a type of company in the Indian non-banking financial
sector,recognized under section 406 of the Companies Act,
2013. Their core business isborrowing and lending money only
among their members. They are also known as Permanent
Fund, Benefit Fund, Mutual Benefit Fund and Mutual Benefit
Society. Thesecompanies are regulated under the Nidhi
(Amendment) Rules, 2022 issued by the Ministry of Corporate
affairs.
Listed Company “Listed company” means a company which has any of its
securities listed on any recognized stock exchange.
Small company means a company, other than a public company,—
1. paid-up share capital of which does not exceed Rs. 4 Crore,
or such higher amount as may be prescribed which shall
not be more than Rs. 10 Crore; and

& Labour Laws
7
SBI & LL
2. turnover of which as per P&L account for the immediately

preceding FY does not exceed Rs. 40 Crore which shall not
be more than Rs. 100 Crore
Provided that nothing in this clause shall apply to -
(a) a holding company or a subsidiary company;
(b) a company registered under section 8; or
(c) a company or body corporate governed by any special Act.
SECTION2 (68)-PRIVATE COMPANY
A private company means a company, which has a minimum paid-up capital as may be
prescribed, andby its articles:
(a) Restricts the right to transfer its shares

(b) Limits the number of its members to 200
- Excluding past and present employee
- Joint Shareholders to be counted as single member
(c) Prohibits any invitation to the public to subscribe for any securities
A private company may issue debentures to any number of persons. The only condition being
that aninvitation to the public to subscribe for debentures is prohibited.
The words 'Private Ltd.' must be added at the end of its name by a private limited
company.Deposits: A private company can only accept deposit from its members and not from
public.
NO. OF MEMBERS [SECTION3(1)]
A private company may be formed for any lawful purpose by two or more persons, by
subscribing theirnames to a memorandum and complying with the requirements in respect of
registration.
NO. OF DIRECTORS [SECTION149(1)]
A private company shall have a minimum 2 directors. The only 2 members may also be the 2
directorsof the private company.
Examples of Private Companies:

1. Flipkart India Private Limited
2. Make my trip (India) Private Limited
PUBLIC COMPANY [SECTION 2(71)]:
A public company means a company which:
(a) Is not a private company;

(b) Has a minimum paid- up capital as may be prescribed (no such capital has been
prescribed asper law).

& Labour Laws
8
SBI & LL
However, a company which is a subsidiary of a company, not being a private company, shall
be deemed to be public company even where such subsidiary company continues to be a
private company in its articles.(This means, if private company is subsidiary of public
company then it will betreated as public company)
CHARACTERISTICS OF PUBLIC LIMITED COMPANY
• Minimum 7 members and no limiton maximum members

• Minimum 3 Directors, maximum 15 directors.
• The words ‘Limited’ must be added at the end of name (i.e. ABC Limited)
• Paid-up capital: There is no minimum capital requirement
WESTERN MAHARASHTRA DEVELOPMENT CORPN. LTD. V. BAJAJ AUTO LTD. [2010]:
• It was held that the Companies Act makes a clear distinction in regard to the
transferability of sharesrelating to private and public companies.
• “Private company”: restricts the right to transfer its shares.
• “Public company”: shares or debentures and any interest therein, of a company, shall be
freelytransferable.
EXAMPLES OF PUBLIC COMPANIES:

1. Snapdeal Limited
2. Godrej Capital Limited
SECTION2(62)-ONE PERSON COMPANY
One Person Company means a company which has only one person as a member.
Relaxation s/ Exemptions:
1. The financial statement, with respect to One Person Company, may not include the cash flow
statement.
2. The Memorandum of OPC shall indicate the name of the nominee, who shall, in the event of
the subscriber’s death or his incapacity to contract become the member of the company and
the written consent of such person shall also be filed with the Registrar at the time of
incorporation of the One Person Company along with its memorandum and articles.
3. The words ‘‘One Person Company’’ shall be mentioned in brackets below the name of such
company.
4. The annual return shall be signed by the CS, or where there is no CS, by the director of the
company.
5. The resolution of general meeting is communicated by member to the company and
entered in theminutes-book.
6. If there is only 1 director on the Board of Directors, the resolution of board meeting is
entered in theminutes-book.
7. The financial statement, can be approved by only one director, for submission to the
auditor for hisreport thereon.
8. Copy of financial statements to be filed duly adopted by its member within 180 days from the
closure ofthe financial year.
9. OPC , small company and dormant company shall conduct at least one meeting of BoD in
each half ofcalendar year and gap between 2 meetings is not less than 90 days.

& Labour Laws
9
SBI & LL
(Provision not applicable if there is only 1 director.)
NIDHI COMPANY
The primary objective of Nidhi is to carry on the business of accepting deposits and lending
money tomember borrowers only against jewels, etc., and mortgage of property.
Nidhis are not permitted to engage themselves in the business of chit fund, hire -purchase,
insurance or in any other business including investments in shares or debentures.
Nidhi means a company which has been incorporated as a Nidhi with the object of cultivating the
habit of thrift and saving amongst its members, receiving deposits from, and lending to, its
members only, for their mutual benefit, and which complies with the rules made by the central
Government for regulation of such class of companies.
CHARACTERISTICS OF NIDHI
• Every Nidhi shall be incorporated as a public company and shall have the last words “Nidhi
Limited”
• Minimum paid up share capital of ten lakh rupees
• Within a period of 120 days from the date of its incorporation
i) Two hundred members;
ii) Net Owned Funds of twenty lakh rupees or more.
Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares
or sharesequivalent to one hundred rupees.
• Membership of Nidhi:
(a) Nidhi shall not admit a body corporate or trust as a member.
(b) Minor shall not be admitted as a member of Nidhi.
(c) Deposits may be accepted in the name of a minor by legal guardian
(d) Member shall not transfer more than fifty percent of his shareholding during the
subsistence ofsuch loan or deposit,
• Branches of Nidhi:
(a) Nidhi may open branches, only if it has earned net profits after tax
continuously during thepreceding 3 financial years.
(b) Nidhi may open up to 3 branches
(c) If more than 3 branches or any branch outside the district, it shall obtain the
prior permission ofthe Regional Director
(d) Shall not open branches unless financial statement and annual return (up to date) are
filed
(e) Nidhi shall not close any branch unless –
i) Proposal along with the plan as to how the existing deposits have been or
shall be paid offis approved by the board
ii) Obtained the approval of the Regional Director at least sixty days prior to such
closure.
iii) Publishes an advertisement in a newspaper at least thirty days prior to such
closure

& Labour Laws
10
SBI & LL
iv) Gives an intimation to the Registrar within thirty days of such closure
• Acceptance of deposits:
(a) Fixed deposits, minimum, 6 months, maximum, 60 months.
(b) Recurring deposits, minimum, 12 months, maximum, 60 months
(c) Maximum balance in a savings deposit account, not exceed one lakh rupees, and the
rate of interest shall not exceed 2% above the rate of interest payable on savings bank
account by nationalised banks.
• Un-encumbered term deposits by Nidhi:
Unencumbered term deposits, shall not be less than 10% of the deposits outstanding
• Loans by Nidhi:
The loans given by a Nidhi to a member shall be subject to the following limits,
Total amount of deposit from members Maximum Loan

Less than Rs. 2 crore Rs. 2 Lakh
Rs. 2 Crore - 20 Crore Rs. 7.5 Lakh
Rs. 20 Crore - 50 Crore Rs. 12 Lakh
More than Rs. 50 crore Rs. 15 Lakh
Nidhi has not made profits continuously in the three preceding financial years, it shall not
make anyfresh loans exceeding 50% of the maximum amounts of loans
Member not be eligible for any further loan if he has borrowed any earlier loan from the
Nidhi and hasdefaulted in repayment of such loan.
• Rate of interest on any loan given by a Nidhi:

Shall not exceed seven and half per cent above the highest rate of interest offered on deposits
by Nidhi
• Directors in a Nidhi:
Director shall be a member, shall hold office for a term up to 10 consecutive years
• Dividend: A Nidhi shall not declare dividend exceeding 25% in a financial year
SECTION 8 COMPANY
Person or an association of persons proposed to be registered under this Act as a limited

company—
(a) Has in its objects the promotion of commerce, art, science, sports, education, research,
social welfare,religion, charity, protection of environment or any such other object;
(b) Intends to apply its profits, if any, or other income in promoting its objects; and
(c) Intends to prohibit the payment of any dividend to its members,
• Registered as a limited company under this section without the addition to its name of the
word“Limited”, or s “Private Limited”
• Firm may be a member of the company
• Shall not alter the provisions of its memorandum or articles except with the previous
approval of theCentral Government.
& Labour Laws
11
SBI & LL
• May convert itself into company of any other kind only after complying with such conditions
• Central Government may, by order, revoke the licence.
• If the company contravenes any of the requirements of this section or the affairs are
conducted fraudulently or in violative of the objects of the company or prejudicial to public
interest direct the company to convert its status and change its name to add the word
“Limited” or the words “Private Limited”,
• Direct that the company be wound up or amalgamated with another company registered
under this section.
• If on the winding up or dissolution there remains, any asset, they may be transferred to
anothercompany registered under this section and having similar objects
• Default in complying with this section, fine not less than ten lakh rupees which may extend to
one crore rupees directors and every officer of the company who is in default fine not less
than twenty-five thousand rupees but which may extend to twenty-five lakh rupees.
• When it is proved that the affairs of the company were conducted fraudulently, every officer
in default shall be liable for action under section 447.
PRODUCER COMPANY
• Chapter XXIA (Section 378 A to 378 ZU) of Companies Act, 2013 deals with the producer
companies. A producer company is a body corporate having objects or activities specified in
Section 378B of Companies Act, 2013
OBJECTS OF PRODUCER COMPANIES
(a) Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export
of primaryproduce of the Members or import of goods or services for their benefit:
(b) Processing including preserving, drying, distilling, brewing, vinting, canning and packaging
of produceof its Members;
(c) Providing education on the mutual assistance principles to its Members and others;
(d) Rendering technical services, consultancy services, training, research and development
and all otheractivities for the promotion of the interests of its Members;
(e) Generation, transmission and distribution of power, revitalisation of land and water
resources, theiruse, conservation and communications relatable to primary produce;
(f) Insurance of producers or their primary produce;
(g) Promoting techniques of mutuality and mutual assistance;
(h) Welfare measures or facilities for the benefit of Members as may be decided by the Board;
(i) Any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to
(i) or other activities which may promote the principles of mutuality and mutual assistance
amongst the Members in any other manner;
(j) Financing of procurement, processing, marketing or other activities specified in clauses (a)
to (j) which include extending of credit facilities or any other financial services to its
Members.
FOREIGN COMPANY
As per section 2(42), “foreign company” means any company or body corporate incorporated
outside Indiawhich –

& Labour Laws
12
SBI & LL
(a) has a place of business in India whether by itself or through an agent, physically or through
electronic mode ; and
(b) Conducts any business activity in India in any other manner
Every foreign company which establishes a place of business in India must, within 30 days of
theestablishment of such place of business, file with the Registrar of Companies for registration:
(i) A certified copy of memorandum and articles,

(ii) Full address of registered office of the company;
(iii) List of the directors and secretary of the company
(iv) Names and addresses of one or more persons authorised on behalf of the company
(v) Full address of the office of the company in India
(vi) Particulars of opening and closing of a place of business in India on earlier occasion
(vii) Declaration that none of the directors in India has ever been convicted or debarred from
formationof companies in India or abroad;
(viii) Other information
• Name the country of incorporation, limited liability of members is exhibited in the
specified places or documents
• Where not less than 50% of the paid-up share capital, is held by one or more citizens of
India or bodies corporate incorporated in India, such company shall comply with such
of the provisions of this Act, as if it were a company incorporated in India.
• Foreign Company to maintain books of Account and file a copy of balance sheet and
profit and loss account in prescribed form with ROC every calendar year.
• In Tovarishestvo Manufacture Liudvig Rabenek, Re [1944] it was held that where
representatives of a company incorporated outside the country frequently stayed in a
hotel in England for looking after matter of business, it was held that the company had
a place of business in England.
MEMORANDUM OF ASSOCIATION
• The Memorandum of Association is a document which sets out the constitution of a company.
It defines the scope of the company’s activities and its relations with the outside world.
• Memorandum is one of the most essential pre-requisites for incorporating any form of
company
• Section 3 states that a company may be formed for any lawful purpose by seven or more
persons, where the company to be formed is a public company; two or more persons, where
the company to be formed is a private company; or one person, where the company to be
formed is a One Person Company by subscribing their names or his name to a memorandum
• Section 2(56) of the Act “memorandum” means the memorandum of association of a
company as originally framed and altered, from time to time, in pursuance of any previous
company law or this Act.
• It not only shows the objects of formation of the company but also determines the scope of
its operations beyond which its actions cannot go.
As per Section 4, the memorandum of a limited company must state the following:
(a) Name Clause : The name of the company with “Limited” as its last word in the case of a
public company; and “Private Limited” as its last words in the case of a private company.

& Labour Laws
13
SBI & LL
Except section 8 & Government Company.
(b) The name shall not be identical with or resemble too nearly to the name of an existing
company or use by the company- will constitute an offence or is undesirable
Identical Names
Rule 8 of the Companies (incorporation) Rules, 2014

 Green Technology Ltd. is same as Greens Technology Ltd.
 ABC Ltd. is same as A.B.C. Ltd. and A B C Ltd
 Chemtech Ltd. is same as Cemtek Ltd., Kemtech Ltd.,
Undesirable Names
Rule 8A of the Companies (incorporation) Rules, 2014
1. Prohibited under the Provisions of Section 3 of Emblems and Names (Prevention and
ImproperUse) Act, 1950.
2. The name includes a trade mark registered under the Trade Marks Act, 1999
3. Name is identical with or too nearly resembles the name of a limited liability
partnership.
4. The name includes any word or words which are offensive to a section of people.
5. The proposed name contains the words ‘British India’
6. The proposed name includes the word “State”, in case the company is not a
Governmentcompany.
7. The proposed name is containing only the name of a continent, country, State, city
such as Asia limited, Germany Limited, Haryana Limited or Mysore Limited
Word or expression which can be used only after obtaining previous approval of Central
Government.
Rule 8B of the Companies (incorporation) Rules, 2014, provides that, the following words
and combinations thereof shall not be used in the name of a company :
Board Authority Union Small Scale Industries
Khadi and Village Industries

Undertaking Commission Central
Corporation
National Rashtrapati President Municipal
Federal Panchayat Republic Prime Minister or Chief Minister
If the proposed name contains the name a foreign country/city/town etc. then applicant has
to attach any proof of significance of business relations with such foreign country like MOU
with a company of such country.
In case proposed name includes name of India and a foreign country (e.g. India Japan or
Japan India) in such cases name shall be allowed if, there is Government to government
participation or patronage and no company shall be incorporated using the name of enemy

& Labour Laws
14
SBI & LL
country
Reservation of Name
— As per section 4(4) a person may make an application, in web-based service

SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus:
INC-32) and for change of name by web service RUN (Reserve Unique
Name)form in prescribed manner and accompanied by prescribed fee to the
Registrar for the reservation of a name set out in the application as –
(a) The name of the proposed company; or
(b) The name to which the company proposes to change its name.
Reservation of Name for 20 days
— Section 4(5) (i) lays down that upon receipt of an application under sub-section (4),
the Registrar may, on the basis of information and documents furnished along with the
application, reserve the name for a period of 20 days from the date of approval.
— In case of an application for reservation of name or for change of its name by an
existing company, the Registrar may reserve the name for a period of sixty days from
the date of approval.
Common reasons for rejection of name:

• Not according to the activities described
• Not available in view of the existence of identical or resembling
• Words like International, Hindustan, India, Bharat, will not be allowed.
Section 4(5)(ii) if it is found that name was applied by furnishing wrong or incorrect
information, then:
 Reserved name shall be cancelled
 Liable to a penalty of 1lakh rupees.
 Registrar may, direct the company to change its name within period of 3 months
 Striking off the name of the company
 Petition for winding up
Situation Clause:
The name of the State in which the registered office of the company is to be situated must be
given in the memorandum. But the exact address of the registered office is not required to be
stated therein. According to section 12 of the Act within thirty (30) days of company’s
incorporation, and at all times thereafter, the company must have a registered office to which
all communications and notices may be sent.
Verification of registered office:

The Company must also furnish to the Registrar verification of its registered office within a
period of 30 days of its incorporation in such manner as may be prescribed (e-form INC-22).
However, it may be noted that e- Form INC 22 is not required to be filed with SPICe+, if a
company is registered
with the same address as the address for correspondence. In case the registered address is
different, INC-22 is required to be filed within 30 days of its incorporation, for intimating the

& Labour Laws
15
SBI & LL
registered office address.
Obligation of the company regarding the registered office:

According to Section 12(3) of the Act, every company is required to display its name and
address in legible letters in conspicuous position and in all its business letters, bill heads, and
letter papers. Accordingly, the company shall –
(a) paint or affix its name, and the address of its registered office, and keep the same
painted or affixed, on the outside of every office or place in which its business is carried
on, in a conspicuous position, in legible letters, and if the characters employed therefor
are not those of the language or of one of the languages in general use in that locality,
also in the characters of that language or of one of those languages;
(b) have its name engraved in legible characters on its seal, if any
(c) get its name, address of its registered office and the Corporate Identity Number along
with telephone number, fax number, if any, e-mail and website addresses, if any,
printed in all its business letters, billheads, letter papers and in all its notices and other
official publications;
(d) have its name printed on negotiable instruments such as hundies, promissory notes,
bills of exchange and such other document as may be prescribed;
(e) If it has a website for conducting online business or otherwise, shall disclose/publish
its name, address of its registered office, the Corporate Identity Number, Telephone
number, fax number if any, email and the name of the person who may be contacted in
case of any queries or grievances on the landing/home page of the said website.
— However, where a company has changed its name or names during the last two
years, it shall paint or affix or print, as the case may be, along with its name, the
former name or names so changed during the last two years.
— Further, in case of One Person Company, the words ‘‘One Person Company’’ shall
be mentioned inbrackets below the name of such company, wherever its name is
printed, affixed or engraved
The Ministry of Corporate Affairs (MCA) vide its notification dated August 18, 2022 has
notified “The Companies (Incorporation) Third Amendment Rules, 2022” which has
came into force on the date of its publication in the Official Gazette. According to the
amendment, rule 25B is inserted in the Companies (Incorporation) Rules, 2014, stating
physical verification of registered office of the company by the Registrar in terms of
section 12(9) of the Companies Act, 2013 in presence of two witnesses of the locality.
The Registrar shall carry the documents as filed on MCA 21 in support of address of the
registered office of the company for the purposes of physical verification and take a
photograph of the registered office. Further a report of physical verification of the
registered office of the company is also required to be in the prescribed format.
(c) Object Clause:

All companies must state in their memorandum the objects for which the company is
proposed to be incorporated and any matter considered necessary in furtherance thereof It
states extent of powers of the company and nothing should be done beyond that ambit.. The
acts beyond this ambit are ultra vires and hence void. Even the entire body of shareholders
cannot ratify such acts.
& Labour Laws
16
SBI & LL
(d) Liability Clause:
Company limited by shares, liability of its members is limited to the amount unpaid, if any, on
the shares held by them; Company limited by guarantee, amount up to which each member
undertakes to contribute in the event of its being wound-up
1. Limited by Shares: liability of the members to the extend unpaid by the members.
2. Limited by Guarantee: Member guarantees a certain amount that they will pay in case
the company moves for winding up.
3. Unlimited Liability: Every member of the company is liable to pay for an unlimited
amount if the company moves for winding up and extends to members’ personal
property as well.
(e) Capital Clause:
This clause shall state the amount of the capital with which the company is registered. The
capital is variously described as “nominal”, “authorized” or “registered”.
The usual way to state the capital in the memorandum is: “The share capital of the
company is 10,00,000 rupees divided into 1, 00,000 equity shares of 10 rupees each”.
This amount lays down the maximum limit beyond which the company cannot issue
shares without altering the memorandum as provided by Section 61 of the Companies
Act, 2013.
If there are both equity and preference shares, then the division of the capital is to be shown
under these two heads.
(f) Subscription Clause:
(i) the number of shares which the subscribers to the memorandum agree to subscribe
which shall notbe less than one share; and
— the number of shares each subscriber to the memorandum intends to take,
indicated opposite his name In the case of a One Person Company, the name of
the person who, in the event of the death of the subscriber, shall become the
member of the company.
The subscriber sheet to the Memorandum of Association is a vital document
that is required to be submitted along with the Memorandum of Association
during the company registration process. It provides the details of the first
members of the company.
The required details include:

The name of the subscribers
The details of the father or spouse of the subscribers
The complete address of the subscribers with a valid pin code.
The pan card number and occupation of the subscribers

& Labour Laws
17
SBI & LL
Signatures of the subscribers.

The subscription sheet needs to mention the total number of
shares that have been subscribed to byeach subscriber.
If a subscriber is a Company or corporate body, its director or
partner’s signature on behalf of thecompany.
The witness authenticates details of the subscriber sheet
Provision in the memorandum or articles is void
• According to section 4(7), any provision in the memorandum or articles, in the case of
a company limited by guarantee and not having a share capital, purporting to give any
person a right to participate in the divisible profits of the company otherwise than as a
member, shall be void.
• The above clauses are compulsory and are designated as “conditions” prescribed by
the Act, on thebasis of which a company is incorporated.
• It is to be noted that the Companies Act, 2013 shall override the provisions in the
memorandum articles, agreement or resolution of a company, if the latter contains
anything contrary to the provisionsin the Act (Section 6).
ARTICLES OF ASSOCIATION
• According to Section 2(5) of the Companies Act, 2013, ‘articles’ means the articles of
association of a company as originally framed or as altered from time to time or applied in
pursuance of any previous company law or of this Act. It also includes the regulations
contained in Table A in Schedule I of the Act, in so far as they apply to the company. In case of
a private company, the provisions of Table A may be altered to suit the specific
requirements of the company, provided that any such alteration should not be contrary to
the provisions of the Companies Act, 2013
• The general functions of the articles have been aptly summed up by Lord Cairns, L.C. in
Ashbury Railway Carriage and Iron Co. Ltd. v. Riche, as follows:
• The articles is subsidiary to the memorandum of association.
• Thus, the memorandum lays down the scope and powers of the company, and can be framed
and altered by the members, But within the limits marked out by the memorandum and
the CompaniesAct.
• Any clause in the Articles going beyond the memorandum will be ultra vires. articles that go
beyond the company’s sphere of action are inoperative, and is void and incapable of
ratification.
Entrenchment provisions of Articles
• The articles may contain provisions for entrenchment to the effect that specified provisions
of the articles may be altered only if conditions or procedures that are more restrictive than
those applicable in the case of a special resolution, are met or complied with. [Section 5 (3)]
• The provisions for entrenchment referred to in section 5(3) shall be made either
(a) on formation of a company, or

& Labour Laws
18
SBI & LL
(b) by an amendment in the articles agreed to by all the members of the company in the
case of a private company and by a special resolution in the case of a public company.
[Section 5 (4)]
• Where the articles contain provisions for entrenchment, whether made on formation or by
amendment, the company shall give notice to the Registrar in Spice+ form at the time of the
incorporation of the Company or E-form MGT-14 in case of existing Companies.
• The articles must be printed, divided into paragraphs, numbered consecutively, stamped
adequately, signed by each subscriber to the memorandum and duly witnessed and not
contain anything illegal or ultra vires the memorandum, nor contrary to the provisions of the
Companies Act 2013.
•
Contents of Articles
The articles set out the rules and regulations framed by the company for its own working. The
articles shouldcontain generally the following matters:
1. Share Capital
2. Allotment of shares.
3. Calls on shares.
4. Lien on shares.
5. Transfer and transmission of shares
6. Forfeiture of shares
7. Buy back.
8. General meetings
9. Share certificates
10. Voting rights and proxies
11. Directors, their appointment and power
12. Dividends and reserves.
13. Accounts and audit.
14. Winding up
Drafting of Articles of Association
Section 5 of the Act provides that the articles of association should be in any one of the Forms as
specifiedin Tables F, G, H, I or J of Schedule I to the Companies Act, 2013.
1. the form in Table F is applicable to company limited by shares

2. the form in Table G shall be applicable to company limited by guarantee and having share
capital
3. the form in Table H shall be applicable to company limited by guarantee and not having share
capital
4. the form in Table I shall be applicable to unlimited company and having share capital
5. the form in Table I shall be applicable to unlimited company and not having share capital
FORMATION AND REGISTRATION OF CORPORATE ENTITIES
• Features of SPICE+:
• Part A - for Name reservation
& Labour Laws
19
SBI & LL
• Part B -
 Incorporation
 DIN
 PAN
 TAN
 EPFO
 ESIC
 Profession Tax registration (Maharashtra, Karnataka and West Bengal)
 Opening of Bank Account
 GSTIN (if so applied for)
 Shops and Establishment Registration Number only for Delhi
User may choose Part-A for reserving a name first and thereafter submit Part B or file Part A and B
together at one go RUN service is applicable only for ‘change of name’ of existing company
Declaration by all Subscribers and first Directors in INC-9 is auto-generated in electronic except
where:
(i) Total number of subscribers / directors greater than 20
(ii) subscribers/ directors has neither DIN nor PAN.
Step – I: Apply For Name Approval
A. Login on MCA Website
B. Details required to be mentioned in online form:New fields introduced in Part A of SPICe+ are:
(i) Type of company
(ii) Class of company
(iii) Category of company
(iv) Sub-Category of company
(v) Main division of industrial activity of the company
(vi) Description of the main division.
C. Choose File:
To upload the PDF documents.
D. Submission of Form on MCA Website:
After completion of above steps user shall submit the Form with MCA website.
E. Validity of Reserved Name:
Valid for 20 days from the date of approval whereas for change of name 60 days from the
date of approval.
Step – II: Preparation of Documents for Incorporation of Company
 INC-9 – Declaration by Subscriber(s) and director(s).

 DIR-2- Declaration from directors
 MBP-1-Disclosure of interest in other entities.

& Labour Laws
20
SBI & LL
 NOC from owner of property

 Utility bills not older than two months.
 All Subscribers should have Digital Signature.
STEP – III: Fill the Information in Form
Once all the above mentioned documents/ information are available, applicant has to fill the
information intheform “Spice+ Part -B.
Features of SPICe+ (Inc-32) form:
 Maximum details of subscribers are (7). In case of more subscribers, physically signed MOA &
AOA shall
 be attached.
 Maximum details of directors (20).
 Maximum THREE (3) directors are allowed for filing DIN
 Applying for PAN / TAN compulsory
STEP – IV: Preparation of MOA & AOA (Electronic or Physical)
After proper filing of SPICE+ Pat B download the e-form INC-33 (e-MOA) and INC34 (e-AOA) form
convert to pdf and affix the DSC.
STEP – V: Fill details of PAN & TAN
STEP – VI: Fill details of GST, IEC in AGILE-PRO
STEP – VII: Submission of INC-32, 33, 34, AGILE-PRO-S on MCA
Where the Registrar finds such application defective or incomplete he shall mark the application
for
resubmission. Only 2 (Two) resubmissions are allowed resubmission has to be replied within 15
(fifteen) days.
STEP – VIII: Certificate of Incorporation
• Incorporation certificate shall be generated with CIN, PAN & TAN in Form INC-11.
Commencement of Business
— Section 10A, every company incorporated shall not commence any business unless
(a) Declaration in form INC-20A is filed by a director within a period of one
hundred and eighty day of the date of incorporation
(b) Company has filed with the Registrar a verification of its registered office in
form INC-22
PROCESS OF INCORPORATION OF A PUBLIC LIMITED COMPANY
Requirement of minimum number of directors and shareholders:

 Minimum Shareholders: 7
 Minimum Directors: 3
 Shareholders of a public company can freely transfer their shares.
& Labour Laws
21
SBI & LL
 Can invite the general public for subscribing to shares

 Shares can be listed on a recognized stock exchange
The Incorporation procedure for a public company is similar to the private company. However, the
minimum requirement of the members and directors in a public company are as per the Act. The name
shall be suffixed by the word “Limited”.
PROCESS OF INCORPORATION OF A ONE PERSON COMPANY (OPC)

Section 2(62) “One Person Company” as a company which has only one person as member. OPC is a type of
Private Company. Rule 3(1) of the Companies (Incorporation) Rules 2014 only a natural person who is an
Indian citizen and resident in India:-
(a) shall be eligible to incorporate One Person Company;
(b) Shall be a nominee
(1) “Resident in India” means a person who has stayed in India for a period of not less than one hundred
and twenty days during the immediately preceding financial year.
(2) A natural person shall not be member of more than one One Person Company and not be a nominee of
more than one one Person Company. Becomes a member in another such Company by virtue of his
being a nominee in that One Person Company, such person shall meet criteria within a period of 180
days.
 No minor shall become member or nominee or can hold beneficial interest.
 Cannot be incorporated or converted into section 8
 Cannot carry out Non-Banking Financial Investment activities.
The name of the person nominated shall be mentioned in the memorandum of and also in Form INC-32
(SPICe+)
PROCESS OF INCORPORATION OF NIDH
(1) A Nidhi shall be a public company minimum paid up equity share capital lakh rupees. Shall
not issue preference shares, debentures. No object in Memorandum other than object of
cultivating the habit of thrift and savings amongst its members, receiving deposits from, and
lending to, its members only, for their mutual benefit.
(2) Every “Nidhi” shall have the last words ‘Nidhi Limited”
Requirements for Minimum Number of Members and Net Owned Funds
• Nidhi (Amendment) Rules, 2022 deals with requirements for minimum number of members,
net- owned fund etc. It provides that:
Every Nidhi shall, within a period of 120 days from the date of its incorporation, ensure that it
has filed –
(a) E-form NDH-4

(b) Net Owned Funds of 20 lakh rupees or more;
(c) minimum of 200 persons as members;
(d) unencumbered term deposits of not less than ten per cent of the outstanding
deposits as specifiedin rule 14; and
(e) ratio of Net Owned Funds to deposits of not more than 1:20.
• “Net Owned Funds” means the aggregate of paid up equity share capital and free
& Labour Laws
22
SBI & LL
reserves as reduced by accumulated losses and intangible assets
Return of Statutory Compliances by Nidhi
Within 90 days from the close of the first financial year Nidhi shall file a return of statutory
compliances in Form NDH-1 with the Registrar duly certified by company secretary or chartered
accountant or cost accountant in practice.
General restrictions or prohibitions
Nidhi shall not –

 carry on the business of chit fund, hire purchase finance, leasing finance, insurance.
 issue preference shares, debentures
 open current account with members;
 carry on any business other than the business of borrowing or lending in its own name.
 accept deposits or lend to person, other than members;
 raise loans from banks or financial institutions for advancing loans to members
PROCESS OF INCORPORATION OF SECTION-8 COMPANY
The procedure for registration of a Section 8 Company involves two steps

(i) Obtaining of licence
(ii) Obtaining certificate of incorporation.
The following steps will be taken:

1. All the proposed directors should have valid DIN. Digital Signature
2. MOA of the Section 8 Company must be in form INC-13 (Rule 19) and AOA must be in the
form INC-31
Section 8 company shall have at least one director who has stayed in India for a total period of not
less than 182 days
Application for Incorporation
Incorporation procedure can be carried out through eForm SPICe+
It is to be noted that e-MOA (INC-33) and e-AOA (INC-34) is not applicable to Section 8 companies
and physical copies of MOA and AOA are to be attached with the form SPICe+. e-Form is found
complete, company would be registered and CIN would be allocated. Maximum three Directors are
allowed for using this integrated form for filing application of allotment of DIN
In order to encourage the concept of ‘Ease of Doing Business’, the Form SPICe+ was introduced
where both licence and the Certificate of Incorporation can be obtained through single form
attachments:
1. Memorandum
2. Article
3. Declaration by professional in Form INC 14
4. Declaration by each of the persons in the Form no. INC-15;
5. Declaration by First Directors and Subscribers;
6. Address Proof of subscribers;
7. Identity proof of subscribers;
8. Estimate of the future annual income and expenditure of the company for next three years
& Labour Laws
23
SBI & LL
9. Verification of the registered office shall be filed in Form No. INC. 22

 Consent to act as Directors in Form DIR- 2.
 Affidavit by the Directors for Not accepting Deposits
 Declaration by each Subscriber in Form INC-9.
If the Concerned Registrar of Companies is satisfied a Certificate of Incorporation is issued in form

INC-11

& Labour Laws
24
SBI & LL
- By CS Kirti Chaturvedi Limited Liability Partnership
3 LIMITED LIABILITY PARTNERSHIP

Chapter
LLP form of business organization was brought in to give the entrepreneur the advantages of both
partnership and company form of business organization.
Features of LLP
• Body corporate incorporated under the Limited Liability Partnership Act, 2008.
• Legal entity separate from its partners.
• Perpetual succession.
• Every LLP shall have atleast 2 partners where the number of partners falls below 2 and remains as
such for more than 6 months, then the single partner who is carrying on the business of the LLP
shall be personally liable for all the obligations of the LLP during the period exceeding 6 months.
• Every LLP shall have atleast 2 “designated partners”.
• Any individual or body corporate can be a partner in LLP.
• Name Shall end with the words “LLP” or “Limited Liability Partnership”.
• Every LLP shall have a registered office
• Property of the LLP is separate from the property of its partners.
• Can have its own common seal.
• LLP agreement shall prescribe the duties and rights of the LLP vis-à-vis the partners and partners
inter se.
• LLP shall maintain proper books of accounts and file a Statement of Annual Return and
Statement ofAccounts & Solvency with the Registrar.
• LLP can be brought to an end by partners or by NCLT
ADVANTAGES OF LLP
1) Easy formation: Involves lesser formalities and shorter time.

2) Liability of partners: Liability of the partners is not unlimited.
3) Lower cost of compliance: Fewer compliance requirements compared to a company
4) Audit requirements: Audit is not mandatory for LLP
5) Startup LLP & Small LLP: Enjoy various concessions
6) Entry and exit of partners: Without any rigidity, in accordance with the LLP agreement.
7) Separate legal entity
8) Easy to close down: Wind up LLP is easier and quicker compared to a company.
9) Members: No restriction to the number of partners
10) Flexibility in management: Rights and duties are as per the LLP agreement, lot of flexibility is
given to thepartners
DISADVANTAGES OF LLP
1) Registration: LLP registration is mandatory.

2) Penalties: Non-compliance involves facing penalties.

& Labour Laws
25
SBI & LL
Limited Liability Partnership - By CS Kirti Chaturvedi
3) Public Disclosure: LLP have to mandatorily file Annual Returns, Statement of Accounts and
Solvency everyyear.
4) Limitations in Formation of LLP: cannot be formed by a single person must have one person
resident in Indiato act as Designated Partner.
5) Exit Options are Not Easy for llps in default of Filings:
6) Limitation in External Commercial Borrowings (ECB): Limited Liability Partnerships are not
allowed to raise ECB. Therefore, a LLP cannot avail commercial loans from its foreign partners, fiis,
Foreign Banks, and any financial institution located outside India.
LIMITED LIABILITY PARTNERSHIP ACT, 2008
Limited Liability Partnership: means a partnership formed and registered under the Limited Liability
Partnership Act, 2008. [Section 2(n)]
“Limited Liability Partnership Agreement “means any written agreement between the partners of the
Limited Liability Partnership which determines the mutual rights and duties of the partners and their
rights and duties in relation to that Limited Liability Partnership. [Section 2(o)]
Small LLP: Small LLP means a limited liability partnership having:
(I) Contribution not exceed twenty-five lakh rupees or such higher amount, not exceeding five
crorerupees.
(II) Turnover does not exceed forty lakh rupees or such higher amount, not exceeding fifty crore
rupees,
(III) Other requirements as may be prescribed [Section 2(ta)]
Start-up LLPs: These are LLP registered with DPIIT, Ministry of Commerce and Industries as “Start-ups”
and enjoy the privileges of the Start-up India Scheme during the first 10 years of their registration.
Partners in an LLP
Every LLP shall have not less than 2 designated partners out of which atleast one shall be a resident in
India. ”Resident in India” means stay in India for a period not less than 120 days during preceding
financial year.
• Where all partners are body corporates atleast 2 of the nominees shall act as “designated
partners”.
• Partners can be made as “designated partners” in accordance with LLP agreement
• Designated partners are responsible for compliance and disclosure requirements
• Every Designated Partner shall obtain a DPIN
• Vacancy of a designated partner shall be filled within 30days
• No person can continue as a partner of LLP:-
a. Upon his death
b. Upon dissolution of LLP
c. Insolvent
d. Unsound mind
• Upon the admission or cessation of partner notice filed with Registrar within 30 days

& Labour Laws
26
SBI & LL
• Change in the name or address of any partner, a notice shall be filed with Registrar within 30 days
• Every partner is an agent of the LLP and not of other partners.
• Partner(s) acts with a fraudulent intent be made personally liable for such fraudulent
acts and his liability shall become unlimited.
FORMATION AND REGISTRATION OF LLP
1) Obtain DSC: For obtaining DIN, A Digital Signature Certificate (DSC) is required.
2) Apply for DPIN for designated partners: DIN and DPIN are synonymous each person can have only
one DIN.
3) Obtaining Name Approval: Two ways of reserving name
- File application under RUN-LLP
- Name can be proposed in eform fillip
• If name is approved, ROC will issue fresh certificate
• After name approval form LLP-5 shall be filed along with the form 3
• Section 15 of LLP Act, no LLP shall be registered by name undesirable or identical or
closely resembles to other partnership firm or LLP or body corporate or registered
trademark or a trademark subject of application
• Section 16 of LLP Act states that reservation of a name for a period of 3months from
the date of intimation by the Registrar.
• Where LLP registered with name identical or closely resembles Central Government
may give directions to change its name within a period of 3months
• Where LLP change its name, it shall within a period of 15 days of change of name give
a notice of intimation to the Registrar.
• Where LLP fails to comply direction, Central Government shall allot a new name and
Registrar shall issue a fresh certificate of incorporation
4) Filing for Incorporation: E-Form fillip (web-based) shall be filed with the Registrar Documents to be
attached with e-form fillip:
i) Consent of partners
ii) Subscribers’ sheet
iii) Details of LLPs/companies in which partner is a partner/director
iv) Identity and address proof of partner
v) Proof of address of registered office
vi) List of main objects
vii) NOC from trade mark where name is similar
If Registrar finds incomplete or defective, remove such defects and re-submit within 15 days of
suchintimation.
Registrar shall give one more opportunity of 15 days for re-submission total period for re-
submission of documents shall not exceed thirty days.
PAN &TAN shall be allotted along with certificate of incorporation

& Labour Laws
27
SBI & LL
ROCEDURE FOR CHANGE OF NAME LLP
Government can ask for a name change and failure to comply with direction punishable with fine which
shall not beless than ten thousand rupees but which may extend to five lakh rupees and the designated
partner of such limited liability partnership shall be punishable with fine which shall not be less than
ten thousand rupees but which may extend to one lakh rupees.
PROCEDURE FOR SHIFTING THE REGISTERED OFFICE OF LLP
Form 15 is to be filed within 30 days of change of registered office. The procedure for the change in
registered officeof LLP is given below:
Checklist for Shifting of Registered Office
Action to be taken Change of Registered Change of Registered Change of registered

office within the same Office within the same office from one state to
State and within State from the jurisdiction another
jurisdiction of same of one Registrar to
Registrar another Registrar
Resolution for Consent of all partners Consent of all partners Consent of all partners
Change ofAddress shall be required for shall be required for shall be required for
changing the place of changing the place of changing the place of
Registered Office of Registered Office of Registered Office of
Limited LLP to another Limited LLP to another Limited LLP to another
place. place. place.
Secured Creditors No Consent Required No Consent Required Consent Required
Form to be filed Form- 15 prescribed Form- 15 prescribed under Form- 15 prescribed
underRule 17 of the Rule 17 of the LLP Rules underRule 17 of the LLP
LLP Rules 2009 along 2009 along with the Rules 2009 along with the
with the prescribed prescribed fees. prescribed fees.
fees.
Public Notice No public notice No public notice required. Give public notice of
required change of registered

& Labour Laws
28
SBI & LL
officein an English daily

newspaper and
vernaculardaily where
the registered office is
situated.
Time limit for filing Within 30 days of Within 30 days of passing Within 30 days of passing
passing of resolution. of resolution.. of resolution
LLP AGREEMENT
LLP agreement specifies the rights, duties, powers and other terms and conditions of the LLP.
How to prepare LLP agreement
Essential Clauses of LLP agreement
1) Interpretation / Definitions: Must provide for various definitions

2) Designated Partners: clearly mention the name, age and address of each Designated Partners
3) Name of the LLP and Changes to it: shall state that business of the LLP shall be carried on in the
name andstyle of [Name of LLP].
4) Registered office of the LLP: Shall state that partnership business shall be carried on at its
registered office
5) Business: Nature of business is stated clearly.
6) Capital Contribution: Total contribution of the LLP and contribution by each partner to be
mentioned
7) Profit Sharing Ratio: must mention the ratio in which the profits and the losses will be shared
8) Rights and Duties of Designated Partners: must specify the rights and duties of the Designated
Partners Inthe absence of agreement provisions of Schedule I of the Limited Liability Act, 2008 will
apply
9) Admission of Partner, Retirement Resignation and Expulsion of Partners: must include
provisions regardingadmission, retirement, death of a partner
10) Remuneration & Interest to be paid to Partners: shall contain amount of remuneration to the
DesignatedPartner(s)

& Labour Laws
29
SBI & LL
11) Bank Account: mode of operation of the bank account

12) Books of Accounts and Accounting Year: shall contain, method of accounting
13) Meetings: state the manner in which the decisions of LLP shall be taken in the meeting of the
partners
14) Indemnity: partners should a indemnify the LLP for loss caused by any breach committed by them.
15) Dispute Resolution: must always contain a provision for resolving disputes so that lengthy and
expensivelitigation is avoided.
16) Duration & Winding Up: must specify whether perpetual agreement or is valid for a fixed period.
Alteration to the LLP Agreement
Procedure for Change in Partner /Designated Partner
ANNUAL COMPLIANCES OF LLP
Filing of Annual Return
• Annual returns are filed in Form 11 within 60 days of the closure of the Financial year. On or
before 30thMay every year by the LLP
• In case, turnover crosses Rs 5 crores or contribution exceeds more than Rs 50 Lakhs Annual

& Labour Laws
30
SBI & LL
return should beaccompanied by a Certificate from Practising Company Secretary.
Filing of Statement of the Accounts or Financial Statements
• All LLps Prepare a Statement of Solvency (Accounts) every year ending on 31st March. Form 8
should be filedon or before 30th October every year.
• LLps whose annual turnover exceeds Rs. 40 lakh or whose contribution exceeds Rs. 25 lakh are
required toget their accounts audited by a qualified Chartered Accountant mandatorily
• Penalty for non-filing Rs. 100 per day per form.
Filing of Income Tax Returns
Particulars Due Dates

LLP required to get its accounts audited September 30 of the assessment year
LLP required to furnish a report in Form No. 3CEB November 30 of the assessment year
under Section 92E
Other case July 31 of the assessment year
EVENT BASED COMPLIANCES FOR LLP
Section No. Nature of event Compliance requirement

7(3)&(4) Consent & Particulars of Partner/ Consent of Partner/ Designated
Designated Partnerin E Form- 4 within 30 days of
the appointment
9 Vacancy of Designated Partner Filing of vacancy in Designated
Partner within 30 days in E Form- 4
13(3) Change of Registered office Notice of change in registered office
In E Form - 15 within 30 days of
shifting
19 Change of Name E Form- 5 within 30 days of such
change.
23 LLP agreement & Changes in LLP In E Form-3 within 30 days of
agreement incorporation of LLP or such
alteration
25(2) Change in Designated Partners Person becomes or ceases to be a
partner notice of same to be filed
within 30 days to the Registrar in E
Form - 4
Compounding of Offences
• Regional Director or any other officer not below the rank of Regional Director may compound any
offence which is punishable with fine only, by collecting a sum which may extend to the amount
of the maximum fine provided for the offence but shall not be lower than the minimum amount
provided for the offence.
• Compounding not allowed within 3 years from which similar offence was committed and
compounded.
& Labour Laws
31
SBI & LL
Winding up of LLP
• Wound up either voluntarily or by a Tribunal winding up voluntarily must pass a resolution with
approval of at least three-fourths of the total number of Partners approval of the lenders would
also be required LLP maybe wound up by the Tribunal
- LLP decides
- There are less than two Partners for more than 6 months;
- LLP acted against interest of the nation
- Default in filing of Annual return or Statement of accounts & Solvency for any five consecutive
financial years;
- It is just and equitable to wind up the LLP
Swarnapadme Consulting LLP vs. Union of India [Karnataka High Court November, 2019
• Swarnapadme Consulting LLP was engaged in the business of fengshui consultancy used in
designing buildings. It failed to file Annual Returns and Statement of Account & Solvency for the
years 2016 and 2017
• Upon receipt of notice LLP came to understand that filing of forms with the ROC is mandatory
irrespective ofprofits or losses. While trying to file LLP came to know that the ROC has changed its
status from ‘active’ to ‘defunct’.
• It was held that it is the duty and obligation of [ROC] to consider and pass appropriate order to
change thestatus of the LLP back to active.
Sozin Flora Pharma LLP vs. State Of Himachal Pradesh & Another
• In 2005 petitioner registered as a partnership firm In 2016 firm was converted into LLP
• Department of State Revenue asked the LLP to pay stamp duty and registration charges for
transferring theassets of firm to the LLP
• It was contended that the LLP is a separate distinct entity from that of its partners and hence the
conversionamounts to change of legal rights.
• Hon’ble Court held that the transfer of property of firm in favour of a converted LLP is statutory
and is byoperation of law;
• Order of the Revenue Department was quashed and set aside. Held stamp duty and registration
chargescannot be levied upon conversion

& Labour Laws
32
SBI & LL
- By CS Kirti Chaturvedi Startups & Its Registration
4 STARTUPS AND ITS REGISTRATION

Chapter
Startup India is a flagship initiative of the Government of India, intended to build a strong ecosystem for
nurturing innovation and Startups in the country that will drive sustainable economic growth and
generate large scale employment opportunities.
Definition of Start-Up
An entity shall be considered as a Startup:
• Upto a period of ten years from the date of incorporation/ registration, if it is incorporated
as a private limited company or registered as a partnership firm or limited liability partnership
• Turnover for any financial years not exceeded Rs 100 crore.
• Entity is working towards innovation, development or improvement of products or services
• entity formed by splitting up or reconstruction of an existing business not considered ‘Startup’
Funding Support & Incentives
1. Fund of Funds
Government has created a Funds for Startups (FFS) at (SIDBI) with corpus of Rs 10,000 crore. FFS
shall contribute to corpus of Alternative Investment Funds (AIFs) for investing in equity and

& Labour Laws
33
SBI & LL
Startups & Its Registration - By CS Kirti Chaturvedi
equity linked instruments
2. Startup India Seed Fund

Worth INR 1000 crore to help startups and support ideas from aspiring entrepreneurs
3. Credit Guarantee Fund for Startups

Corpus of Rs.500 crore per year, over next four years, to provide credit guarantee cover to banks
andlending institutions providing loans to Startups.
4. Relaxed Norms in Public Procurement for Startups

Introduced procurement policy to relax norms pertaining to prior experience/ turnover for
Microand Small Enterprises.
5. Tax Incentives
I) Income Tax Exemption on profits
DPIIT recognized Startup is eligible to apply to Inter-Ministerial Board for deduction of
100% of the profits for 3 consecutive years out of 10 years
II) Tax Exemption on Investments above Fair Market Value
DPIIT Recognized Startups are exempt from tax when Startup receives consideration for
issue ofshares which exceeds Fair Market Value.
III) Introduction of Section 54EE in the Income Tax Act, 1961.
Exemption from tax on long-term capital gain if invested in fund notified by Central
Government.maximum amount invested is Rs. 50 lakh.
IV) Amendment in Section 79 of Income Tax Act.
Startups can carry forward losses on following two conditions:
a) Continuity of 51% shareholding/voting power;
b) Continuity of 100% of original shareholder.
6. Legal Support and Fast-tracking Patent Examination at Lower Costs

Fee for filing patents reduced up to 80%. Facilitators to facilitate process of patent filing and legal
guidance.
7. Self-Certification based Compliance Regime

Startups falling under the “White category” would be able to self-certify compliance in respect of
• The Water (Prevention & Control of Pollution) Act, 1974;
• The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003;
• The Water (Prevention & Control of Pollution) Act, 1981.
8. Setting up Incubators
Organisations set-up with specific goal of launching their startups. Not only do incubators offer a
high number of value added services (office space, utilities, admin & legal assistance, etc.) also
make grants/ debt/ equity investments.
9. Setting up of Startup Centres and Technology Business Incubators (TBIs)

• 14 Startup Centres and 15 Technology Business incubators are to be set up collaboratively
& Labour Laws
34
SBI & LL
byMinistry of Human Resource Development (MHRD) and the Department of Science and
Technology
• 7 Research Parks will be set up as per the Startup India Action Plan
Issue of sweat equity shares by Startup Companies
A startup company may issue sweat equity shares not exceeding 50% of its paid -up share capital
upto 10 (ten) years from date of incorporation (Earlier was upto 5 (five) years.
Recognition as Startups
Process of recognition as under:
a) Online application over mobile app or portal set up by DPIIT.

b) Application accompanied by –
• Certificate of Incorporation
• Write-up about nature of business innovation, development or improvement of products
orservices.
c) DPIIT as it may deem fit,–
• Recognise entity as Startup;
• Reject by providing reasons
Certification of Inter-Ministerial Board for availing Tax Benefit
Startup being private limited company or limited liability partnership, make an application in Form-1 to
and Board as it may deem fit,
• grant certificate or
• reject application
Inter-Ministerial Board of Certification comprise of following
• Joint Secretary, Department of Promotion of Industry and Internal Trade, Convener;

• Representative of Department of Biotechnology, Member;
• Representative of Department of Science & Technology, Member.
Eligibility Criteria for Income Tax exemption (80IAC)
• Private limited or a Limited Liability Partnership

• Incorporated after 1st April, 2016.
Eligible for getting 100% tax rebate on profit for a period of three years.
Tax Exemption under Section 56
Post getting recognition Startup may apply for Angel Tax Exemption. If it fulfils the following
• Recognised by DPIIT
• Aggregate paid up share capital and share premium after issue of share, does not exceed,
twenty five crorerupees:

& Labour Laws
35
SBI & LL
• Shares issued to any of the following not be included

• Non-resident;
• Venture capital fund;
State Startup Ranking
Initiative towards strengthening the support of States and UTs to holistically build the Indian Startup
Ecosystem.
EXEMPTIONS FOR STARTUPS
— Simple process
Launched a mobile app and a website for easy registration for startups entire process is online.
— Reduction in cost
government will bear all facilitator fees and the startup will bear only the statutory fees. enjoy
80%reduction in cost.
— Easy access to Funds

A10, 000 crore rupees fund is set-up by government to provide funds to startups as venture
capital.
— Tax holiday for 3 Years

Exempted from income tax for 3 years provided get certification from (IMB).
— Apply for tenders

Startups are exempted from “prior experience/turnover” criteria for government tenders.
— No time-consuming compliances
Startups allowed to self-certify compliance
— Easy exit
Startup can close its business within 90 days from the date of application of winding up
— Meet other entrepreneur

Government hold 2 startup fests annually both nationally and internationally to provide
networkingopportunities.
Benefits / Exemptions to Start-ups under the Companies Act, 2013
• financial statement may not include cash flow statement

• May issue sweat equity shares not exceeding 50% of its paid up capital upto ten years from date
ofincorporation
• “Deposit” does not include amount of twenty five lakh rupees or more received by start-up
by way ofconvertible note in single tranche
• Maximum limit of deposits to be accepted from members shall not apply
• annual return shall be signed by company secretary, or where no company secretary, by director.

& Labour Laws
36
SBI & LL
• at least one meeting of Directors in each half of calendar year and gap not less than ninety days.
• If start-up fails to comply with Companies Act, 2013, company, its officer in default shall be liable
to penalty not more than one half of penalty specified subject to maximum Rs. 2 lakh in case of
company and Rs. 1 lakh in case of officer in default
LIFE CYCLE OF START-UP
Stage 1: Ideation and Development

• first stage of the startup lifecycle testing feasibility of products/service offered. Testing potential
viability of business
Stage 2: Validation
• Process involves defining goals, and validating through customer feedback.
Stage 3: Early Traction

• set of target customers may test efficacy of the product/ service market for this product is
created anddeveloped at this stage.
• customer retention rate confirms early traction
Pivoting
• When company changes its industry, or other factor that impacts its bottom line. successful
companies gothrough several pivots to find product-market fit.
Stage 4: Growth / Exit

• Company attained true economic health, sufficient size and product-market to ensure
economic success,company may choose to expand through mergers or (IPO).
REGISTRATION STEPS
(a) Incorporation of Business Entity: Incorporate Private Limited Company or Partnership firm or
(LLP)
(b) Register with Start-up India: Registration process is completely online visit Startup India website
and click on the ‘Register’ button. Enter name, email id, mobile number, password and click on
“Register” OTP will be sent Startup India profile will be created. Startups can apply for
acceleration, incubator/mentorship programmes with getting access to Government Schemes,
(c) Get recognition from DPIIT: recognition helps startups to avail benefits like quality intellectual
property services relaxation in public procurement norms, self-certification access to Fund of
Funds, tax exemption for 3 years.
Click on the ‘DPIIT Recognition for Startups under ‘Schemes and Policies’ Click on ‘Get
Recognized click on‘Click here for submitting your application for recognition as a Startup’
(d) Application for Recognition: After entering all sections of ‘Startup Recognition Form’, click on
‘Submit’
(e) Documentation required for Registration:
• Incorporation Certificate
• PAN
• Proof of funding
• Authorization letter

& Labour Laws
37
SBI & LL
• Proof of concept
• website link/video
• Patent and trademark details,
(f) Getting the Recognition Number: certificate of recognition issued after examination of
documents within 2days.
Important Points for a Start-up
1. Choose the right legal structure for your startup:

Decision based on nature/ of business tax costs capital requirement funding
2. Registrations and business licenses:

Post incorporation some necessary registrations are required and mandated by law
3. Intellectual Property Protection:

Essential to obtain trademark
4. Founder Equity – Split and Vesting:

should be split amongst founders based on founder effort and capital contribution to the startup.
5. Founder Agreements:
Agreement should represent a clear understanding between the founders on all key issues
related to the startup
6. Employment contracts:
Agreements made with employees
7. Employee Stock Option Pool (ESOP):

ESOP’s are incentives given to employees/directors of a company to attract talent and retain
employees
8. Third Party Agreements:

Clauses related to breach, termination and dispute resolution should be captured in all third-
partyagreements.
9. Investment structuring
term sheet is executed followed by due diligence of the startup
10. Compliance management:

multiple laws applicable to specific entity The consequences of non- compliance can be levy of
punitive fines on the startup.

& Labour Laws
38
SBI & LL
FINANCING OPTIONS AVAILABLE FOR STARTUP COMPANIES
Finance is the life blood of any business.different financing options are as under:
Characteristics of Equity Financing Debt Financing Grants

Investment
Nature There is no component Invested Funds to be There is no
ofrepayment of the repaid within a component of
invested funds stipulated time frame repayment of the
with interest invested funds
Risk Risk factor for the Risk Factor for the There is no risk factor
investor is higher as he investor is lower as for the startup as no
has no guarantee against he generally has collateral is involved
his collateral against his
investment investment
Pressure for Less pressure for startups More pressure for No pressure for
Repayment to adhere to a repayment startups to adhere to repaymentas grants
timeline but added repaymenttimeline are a form of
pressure from investors and as a result more monetary support
to achieve growth targets pressure to generate provided for a specific
cash flows to meet purpose
interest repayments
Return to Investor Capital growth for Interest payments No Return
investors
Involvement in Equity Fund Investors Debt Fund have very No direct involvement
Decisions usually prefer to involve less involvement in indecision making
Themselves in decision decisionmaking
making process
Sources Angel Investors,Self Banks, Non-Banking Central Government,
financing, Family and Financial Institutions, State Governments,
Friends, Venture Government Loan CorporateChallenges,
Capitalists, Crowd Schemes(CGTMSE, GrantPrograms of
Funding, Incubators/ Mudra Loan, Standup Private Entities
Accelerators India)
SEED CAPITAL
• Seed capital is the initial capital This capital come from founders, families or friends.
• paperwork involved in seed funding is relatively less compared to rounds of funding.
• Financing is generally of two types i.e. (a) equity financing; or (b) debt-financing.
A. Equity Financing
(i) Venture Capitalist/Private Equity

First large investment a startup can expect to receive most commonly used VC/PE investment
includescompulsory convertible preference shares and compulsory convertible debentures.

& Labour Laws
39
SBI & LL
Funding Procedure
(a) Term Sheet Memorandum of understanding is entered into,

(b) enter into Share Subscription Debenture Subscription Agreement.
(c) contracting parties may enter into Shareholders’ Agreement
(d) Private Placement process;
(e) Filing of necessary eForms
(f) Amendment of AOA
(ii) Angel Investors

• individuals or group of industry professionals willing to fund venture in return for equity
stake.
Restrictions applicable to angel funds investing in Indian company:
• Shall invest in startups
• not promoted by industrial group whose turnover exceeds Rs.300 crore;
• Investment shall not be less than Rs.25 Lakhs and not exceed Rs.10 Crores.
• Investment locked-in for period of one year.
(iii) Bridge Round

Bridge round helps “bridge” the gap between larger funding rounds. provide an interim cash
infusion tocapitalize the rapid growth or prepare for an IPO of start-ups
(iv) Series Funding

Typical series A Series Funding Round will start like Series A to Z. round is in range of purchasing
10% to30% of the company. Usually intended to capitalize company for 6 months to 2 years
A Structure
The first time that a startup raises capital is normally called a ‘seed round’ Some even call it a pre-
Series Around.
1. Be Series A Ready
 Revenue, proof of business product/market fit, customer acquisition are taken into
consideration to figure ifyou are ready for Series A.
2. Start Early
 start the process 7-8 months prior to when you want to raise a Series A financing.
3. Leverage Your Network

 Leveraging your network and building genuine relationships before you start your
Series A fundraise willmake easier to get potential investors.
4. Practice your “Pitch”

 Meet low priority investors on your list first - they will ask you relevant question and
provide feedback
5. Create a Fundraise Momentum

 Approaching multiple venture funds at the same time is a good idea

& Labour Laws
40
SBI & LL
6. Know the “standard market practice”
7. Get the deal terms right

 Ensure deal terms for your Series A are right and consistent Series A terms play as
foundation for all futurerounds
8. Engage a Professional
9. Paperwork in place
 Ensure legal documentation and compliance is up to date
10. Raise 10-15% more than budgeted for

 As the business initiatives/operations don’t always materialise as planned.
B. Debt Financing
i. Loan from Banks & NBFCs

• Unlike a VC or angels, which have an equity stake, banks do not seek ownership in your
venture. However,They require substantial collateral and a good track record,
ii. External Commercial Borrowings

• in form of bank loans, buyers’ credit, suppliers’ credit, from non-resident lenders ECB can
be accessed undertwo routes, viz., (i) Automatic Route; and (ii) Approval Route
• borrower needs to create certain charge on immovable assets, movable assets, financial
securities
iii. CGTMSE Loans

• Credit Guarantee Trust for Micro and Small Enterprises scheme launched by Ministry of
Micro, Small & Medium Enterprises (MSME), Government of India get loans of up to 1 crore
without collateral or surety.
C. Initial Public Offering (IPO)
• IPO allows to tap wide pool of stock market investors to provide it with large volumes of capital
• Companies also issue “ADRs” or “GDRs”
D. Unconventional modes of financing options
i. Crowd Funding
• getting seed funding through small amounts collected from a large number of people
(crowd)
• can get money by showcasing his idea before a large group of people
• needs to put on portal his profile and presentation, and rewards and returns for investors.
ii. Incubators
• Help entrepreneur develop a business idea in exchange for equity stake ranging from 2-
10%. Incubators offer office space, administrative support, legal compliances, management
training, mentoring and access to industry experts These are usually government-supported
institutes like the IIMs or IITs.

& Labour Laws
41
SBI & LL
ENTREPRENEURSHIP
Four Key Elements of Entrepreneurship
• Innovation
• Risk taking
• Vision
• Organising skills.
Traits of an Entrepreneur
• Develops his own enterprise.
• moderate risk taker
• innovative.
• independent.
• Determined but patient.
• Leadership
• competitiveness.
• Convert a situation into opportunity.
Characteristics of an Entrepreneur
(i) Mental Ability:
(ii) Business Secrecy
(iii) Clear Objectives
(iv) Human Relation:
(v) Communication Ability:
Entrepreneurship is different from a Startup?

Entrepreneurship refers to all business new or old based on a new idea or on an existing idea. startup is
newlyemerged business venture solving market’s problems with unique ideas.
Unicorns Startups
• unicorn is a term used to indicate a privately held startup company with a valuation of over $1
billion.
• reasons these startup become so successful is because all of their solutions fill a specific
need in a new anddifferent way.
• These startups are not only developing innovative solutions and technologies but are
generating large-scaleemployment
• India is home to 107 unicorns with a total valuation of $ 340.79 Bn
Indian Startups turned Unicorns

Zomato, Nykaa, PolicyBazaar, Paytm
CASE STUDY ON ZOMATO – INDIA’S FIRST LISTED UNICORN
• originally incorporated as “DC Foodiebay Online Services Private Limited” as a Private Limited
Company Company’s name changed to “Zomato Media Private Limited” on May 25, 2012. name
of the Company waschanged to “Zomato Private Limited” on April 22, 2020.
• upon conversion into a public limited company fresh certificate of incorporation issued with

& Labour Laws
42
SBI & LL
name “ZomatoLimited” on April 9, 2021.

• evolved from a single -service category provider to a multi-category service provider, offering
food delivery,diningout and Zomato Pro.
• Zomato connects customers, restaurant partners and delivery partners, serving their multiple
needs
• Zomato also operates a one-stop procurement solution, which supplies high quality ingredients
and kitchenproducts to restaurant partners
• Food-delivery app Zomato Ltd. became the nation’s first unicorn to make its stock-market debut,
raising $1.3 billion with backing from Morgan Stanley, Tiger Global and Fidelity Investments IPO.
was oversubscribed by over 38.25 times.
• Strong advertising channel, efficient personnel, the good rating system and social media and
experiencedsources of funds are some of the main successive factor of Zomato.
STUDY ON DELHIVERY – E-COMMERCE-FOCUSED LOGISTICS PLATFORM
• incorporated as “SSN Logistics Private Limited”, a private limited company name changed to
“Delhivery Private Limited”, with effect from December 8, 2015. On conversion name was
changed to “Delhivery Limited” on October 12, 2021.
• Delhivery became a unicorn in 2019 when it raised $413 million in a Series F round led by
SoftBank VisionFund, Carlyle Group, and Fosun International.
• Delhivery has currently been hailed as India’s leading supply chain Services Company. It is one of
India’s largest B2B, B2C, and C2C Logistics Courier Service providers. best known for economical
shipping ratesclaims to have - No Setup Fees or Subscription Charges. 3 primary departments:
1. Warehousing
2. Transportation
3. E-Commerce
• The company grew and evolved from following a small and local business model to focusing just
on the e-commerce sector.

& Labour Laws
43
SBI & LL
Micro, Small & Medium Enterprises - By CS Kirti Chaturvedi
5 MICRO, SMALL & MEDIUM ENTERPRISES

Chapter
THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006
The Micro, Small and Medium Enterprises Development Act, 2006 came into force on 02nd
October, 2006. Thedefinitions are provided under section 2 of MSMED Act, 2006.
Important Definitions
Advisory Committee:
Section 2 (a) means the committee constituted by the Central Government under sub-section (2) of
section 7.
Appointed Day:
Section 2(b) to mean the day following immediately after the expiry of the period of fifteen days
from the day of acceptance or the day of deemed acceptance of any goods or any services by a buyer
from a supplier
Board:
Means the National Board for Micro, Small and Medium Enterprises established under section 3.
Enterprise:
Section 2(e) as an industrial undertaking or a business concern or any other engaged in the
manufacture orproduction of goods pertaining to any industry specified in the First Schedule to (IDRA)
Supplier:
Section 2(n) means a micro or small enterprise, which has filed a memorandum with 8, and includes,—
• National Small Industries Corporation,

• Small Industries Development Corporation
• Any company, co-operative society, trust or a body registered under any law
ESTABLISHMENT OF NATIONAL BOARD FOR MICRO, SMALL AND MEDIUM ENTERPRISES
The Central Government shall establish a board known as National Board for Micro, Small and Medium
Enterprises.
Constitution of Board:
• Minister in charge of the Ministry or Department of the Central Government

• Minister of State or a Deputy Minister
• 6 Ministers of the State Governments
• 3 Members of Parliament
• Administrator appointed by the Central Government
• Secretary to the Government of India in charge of the Ministry or Department of the Central
Government

& Labour Laws
44
SBI & LL
- By CS Kirti Chaturvedi Micro, Small & Medium Enterprises
• 4 Secretaries to the Government of India,

• Chairman of the National Bank
• Chairman and Managing Director of Small Industries Bank,
• Chairman, Indian Banks Association,
• 1 officer of the Reserve Bank,
• 20 persons represent the associations of micro, small and medium enterprises
• Persons from the fields of economics, industry and science and technology, not less than 1 of
whom shall be a woman,
• 2 representatives of Central Trade Union Organizations
• 1 officer not below the rank of Joint Secretary to the Government of India
Functions of the Board:
• Examine the factors affecting the promotion and development of micro, small and medium
enterprises
• Make recommendations on matters relating to promotion and development of micro, small
and mediumenterprises
• Advise the Central Government on the use of the Fund
CLASSIFICATION OF ENTERPRISES
• Micro enterprise investment in plant and machinery does not exceed one crore rupees
turnover does notexceed five crore rupees;
• A Small enterprise, investment in plant and machinery or equipment does not exceed ten crore
rupees andturnover does not exceed fifty crore rupees;
• A Medium enterprise, investment in plant and machinery or equipment does not exceed fifty
crore rupeesand turnover does not exceed two hundred and fifty crore rupee.
MSME includes all establishment engaged either in manufacturing or rendering services but it
does not include those enterprise which are engaged only in trading activities.
MEMORANDUM OF MSME
Any person who intends to establish a micro or small enterprise or a medium enterprise is required to
file the memorandum of micro, small or, medium enterprise with such authority as may be specified by
the State Government or the Central Government
REGISTRATION PROCESS
• The form for registration as provided in the Udyam Registration portal.

• No fee for filing Udyam Registration.
• Aadhaar number required for Udyam Registration.
• Aadhaar number of proprietor in the case of a proprietorship firm, partner in the case of a
partnership firm and of karta in the case of (HUF).
• In case of a Company or Limited Liability Partnership a Co-operative Society or Trust, provide its
GSTIN &PAN

& Labour Laws
45
SBI & LL
• No enterprise shall file more than one Udyam Registration:

• Misrepresents or suppress facts and figures in Udyam Registration shall be liable to such penalty
as specified
• After complete process of registration, a certificate will be issued online
• Certificate will have a dynamic QR Code from which details about enterprise can be accessed.
• No need for renewal of Registration.
BENEFITS OF TAKING UDYAM REGISTRATION
• Permanent registration for an enterprise.

• Paperless and based on self-declaration.
• No need for renewal of registration.
• Any number of activities may be added in one registration
• Help MSMES in availing the benefits of schemes of ministry of MSMES
• Becomes eligible for priority sector lending from banks.
NSIC REGISTRATION
NSIC enlists (MSEs) under Single Point Registration scheme (SPRS) for participation in Government
Purchases. E eligible to get benefits under Public Procurement Policy
Enterprises having MSME Udyog Aadhaar registration can apply online or at one of the NSIC offices.
NSIC forwards application to a zonal branch for technical inspection On receiving inspection report,
NSIC grants registration to the MSME unit.
Benefits
• Tender Sets free of cost.
• Exemption from payment of Earnest Money Deposit (EMD).
MSME SCHEMES
A. Prime minister’s employment generation programme (PMEGP)

Scheme aims to provide financial assistance to set up self-employment ventures and generate
sustainable employment opportunities in rural as well as urban areas. To rural and unemployed
youth the scheme is designed in such a way that contribution of the beneficiary is 10% of the
project cost in case of general category and 5% of the project in case of (sc/st/obc/ph/women)
B. 2nd loan for up-gradation of the existing PMEGP/mudra units

Scheme caters to the need of the entrepreneurs for bringing new technology/ automation so as
to modernize the existing unit
C. Credit guarantee scheme for micro & small enterprises (CGTMSE)

Main objective of this scheme to encourage the first generation entrepreneurs to venture into
self employment opportunities
D. Micro & small enterprises cluster development programme (MSE-CDP) scheme

Scheme is formulated to support the sustainability and growth of mses by addressing common
issues such as improvement of technology, market access, etc

& Labour Laws
46
SBI & LL
- By CS Kirti Chaturvedi Micro, Small & Medium Enterprises
E. Scheme of fund for regeneration of traditional industries (SFURTI)

Main objective of SFURTI is organize traditional industries and artisans into collectives by
increasing production and to promote traditional sectors and increase income of artisans scheme
is applicable to existing artisans from traditional industries, such as handicraft, textile, agro-
processing, etc.
F. Entrepreneurship and skill development programme (ESDP) scheme

Scheme aims at promoting new enterprises, capacity building of existing MSMES and inculcating
entrepreneurial culture in the country. Scheme widens the base of entrepreneurship by
development, achievement, motivation and entrepreneurial skill to the different sections of the
society.
G. Assistance to training institutions (ATI) scheme

Scheme aims in supporting the skill development programmes by training institutions of the
ministry of MSMES.
H. Coir vikas yojana - umbrella scheme (skill upgradation and mahila coir yojana)
Main objective of this scheme impart training in processing of coir and value addition to potential
workers, coir artisans/entrepreneurs through field training centers and training institution of coir
board.
I. Procurement and marketing support (PMS) scheme

Scheme aims to promote new market access initiatives like organizing / participation in national /
international trade fairs / exhibitions / MSME expo, etc. And to create awareness and educate the
MSMES about the importance / methods/ process of packaging in marketing, technology, import-
export policy and procedure relevant for market access developments.
J. International cooperation (IC) scheme

• Build MSME’S for entering export market (fairs or exhibition)
• Provide opportunities to meet challenges (change in demand/market/technology)
K. National SC-ST hub scheme

Main objective of this scheme provide professional support to scheduled caste and scheduled
tribe entrepreneurs to fulfill the obligations under the central government public procurement
policy
L. A scheme for promotion of innovation, rural industries and entrepreneurship (ASPIRE)

Main objective of this scheme is to set up a network of livelihood business incubation centers
predominantly in the rural and underserved areas, to promote innovation and accelerate
entrepreneurship by empowering the beneficiaries in creation of formal micro-enterprises and
imparting skill development programs for creating wage/self-employment opportunities in the
agro rural sector.
M. Credit guarantee scheme for subordinate debt (CGSSD) for stressed MSMES
Main objective of this scheme is to provide subordinate debt. Subordinate debt will provide a
substantial help in sustaining and reviving the MSMEs which become NPA or are on the brink of
becoming NPA.

& Labour Laws
47
SBI & LL
N. Self reliant india (SRI) fund

Scheme is yet to be launched. The fund structure is designed in a manner that it will leverage the
strength of the private sector in providing growth capital to viable MSMEs having a definite
growth plan.
O. MSME sambandh
Main objective is to monitor the implementation of the public procurement from MSEs by central
public sector enterprises
COMPOSITION OF MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL
• Director of Industries,
• One or more representatives of associations of micro or small industry
• One or more representatives of banks and financial institutions
• One or more persons having special knowledge in field of industry, finance, law, trade or
commerce

& Labour Laws
48
SBI & LL
- By CS Kirti Chaturvedi Conversation Of Business Entities
6 CONVERSATION OF BUSINESS ENTITIES

Chapter
CONVERSION OF A PRIVATE COMPANY INTO A PUBLIC COMPANY
Procedure for Conversion of a Private Company into a Public Company
1. Holding a Board Meeting: Main agenda for this board meeting would be:
• Pass a board resolution for conversion of private company into a public company.
• Fix date, time and place for general meeting
• Authorize the Director or Company Secretary to issue notice of general meeting
• Pass Board resolution Pass Board resolution less than 3
• Authorize Company Secretary director to sign, certify and file the required forms with
Registrar ofCompanies
2. Issue of Notice of General Meeting: Notice shall be given atleast 21 clear days before General
Meeting.
3. Holding of General Meeting:

• Pass the necessary Special Resolution, to get shareholders’ approval for
• Conversion alteration in Memorandum of Association and Articles of Association
• For removal of restrictive provisions
• Change of name of the company
4. Filing of e-form MGT-14: E-form MGT-14 within 30 days of passing special resolution
5. Filing of e-form INC-27: E-Form INC-27 needs to be filed with the Registrar of Companies within
fifteen daysof passing of Special Resolution
6. Registrar after satisfying himself issue a certificate of incorporation
CONVERSION OF A PUBLIC COMPANY INTO A PRIVATE LIMITED
Procedure for Conversion of a Public Limited Company into a Private Limited
1. Holding a Board Meeting: Main agenda for this board meeting would be:
• Pass a board resolution for approving conversion of Public Company into a Private Company
• Fix date, time and place for holding general meeting
• Authorize Director or Company Secretary to issue notice of the general meeting
• Reduction in the total number of members to maximum of 200 members.
2. Issue of Notice of General Meeting
• Notice shall be given atleast 21 clear days before
• General Meeting
3. Holding of General Meeting:
• Pass the necessary Special Resolution
• Approval for Conversion
• Alteration in Memorandum of Association and Articles of Association

& Labour Laws
49
SBI & LL
Conversation Of Business Entities - By CS Kirti Chaturvedi
• Change of name of the company

4. Filing of e-form MGT-14:
• E-form MGT-14 within 30 days of passing special resolution
5. Publication of an Advertisement: at least twenty-one days before the date of filing of the
application withRegional Director must advertise in Form INC-25A.
6. File an Application with Regional Director: within sixty days from the date of passing of Special
Resolution ine-Form RD-1
7. Approval of Application conversion by Regional Director: Where no objection received
Regional Directorshall pass an order within 30 days from date of receipt of the application.
Where an objection received shall hold a hearing/ within 30 days to record the consensus shall
pass orderapproving or rejecting within 30 days from date of hearing.
In case no consensus received, Regional Director may approve the conversion, if satisfied
Regional Director finds such application to be defective or incomplete shall within 30 days direct
company torectify defects and re-submit within 15 days in e-Form RD-GNL-5.
8. Filing of e-form INC-28: file with Registrar Form INC-28 within 15 days date of approval
9. Filing of e-form INC-27: file with Registrar in Form INC -27 within 15 days from the date of order.
10. Issuance of fresh Certificate of Incorporation
CONVERSION OF SECTION 8 COMPANY INTO OTHER KIND OF COMPANY
Section 8 Company cannot be converted to one person company. Procedure for Conversion of a
Section 8 Company into any other kind
1. Holding a Board Meeting: agenda for this board meeting
• Conversion of section 8 company into any other company
• Fix date, time and for general meeting
• Authorize Director or Company Secretary to issue notice
2. Issue of Notice of General Meeting: Notice shall be given atleast 14 clear days’ before General
Meeting.
3. Holding of General Meeting: pass the necessary Special Resolution
5. Filing of e-form INC-18 with the Regional Director: Application in Form No.INC.18 with Regional
Director for conversion
6. Publication of an Advertisement: After submit application to Regional Director e Company
should publish a notice in FORM INC-19 in the newspaper in vernacular and English newspaper
7. Order of Conversion by Regional Director:
8. Issuance of fresh Certificate of Incorporation: Company can apply for the Conversion of its
status and namewith the Registrar of Companies in Form INC-20.
Effect of conversion of Section 8 Company into Private Company
• Cannot claim privileges and exemptions as enjoyed by Section 8 Company

• The newly converted Company to pay difference between market price and purchase
price, if bought fromGovernment at lower rates

& Labour Laws
50
SBI & LL
• Unutilized income should be utilized for settlement of outstanding dues

• After settlement , if amount is left, transferred to the Investor Education & Protection Fund
within 30 days ofe Conversion.
CONVERSION OF COMPANY INTO LLP
Procedure for Conversion of Company into Limited Liability Company
1. Holding a Board Meeting:

• Pass a board resolution for conversion of Company into Limited Liability Partnership
• Fix date, time and place general meeting authorize the Director to issue notice
3. Application for Name Availability on LLP Portal: apply for name reservation, by web based
form ‘RUN-LLPand obtain Name Approval Letter
4. Filing of incorporation documents in LLP Portal: LLP must file incorporation in web based form
fillip
5. Application for Conversion of company into LLP: For converting Form 18 must be duly filled.
6. Drafting of limited liability partnership agreement: filed in e-form 3 within 30 days of
incorporation
7. Issuance of fresh Certificate of Incorporation: Registrar of LLP will issue a Certificate of
Registration in Formno. 19 as to conversion of the LLP.
Effect of Conversion from Company to LLP:
• Company gets dissolved

• Registrar will remove name from register of Companies
• Conversion doesn’t affect present liability and contracts.
• On conversion assets of the Company transferred to LLP.
• After conversion no requirement for holding minimum number of meetings
CONVERSION OF LLP INTO COMPANY
Procedure for Conversion of Limited Liability Company into Company
1) Approval of Name: Hold meeting of partners to take assent of majority of members Apply for
namereservation in form RUN in V3 portal.
2) Securing DSC and DIN: For obtaining the DIN, an application form must be filed on MCA portal.
3) Filing form no. URC – 1: After approval of name file the form no. URC-1 in addition to the
following documents:
• List of the members
• List of the first directors
• Affidavit from first directors, that not banned to be a director
• Names & addresses of partners of LLP
• Nominal share capital of firm
• Name of the firm, with addition of word Limited or private limited
• No objection certificate from creditors

& Labour Laws
51
SBI & LL
Conversation Of Business Entities - By CS Kirti Chaturvedi
4) Filing of spice, spice MOA and spice AOA: Similar to incorporation of new company,
process to be followedby filing spice + form
Points to ponder:
• There is no capital gain tax in a private limited company.
CONVERSION OF ONE PERSON COMPANY INTO A PUBLIC COMPANY OR A PRIVATE COMPANY
Procedure for Conversion of One Person Company into other Company
1. Holding of Board Meeting: The main agenda for this board meeting would be:
• pass board resolution for conversion of One Person company into other company
• fix date, time and place for holding general meeting
• authorize the Director or Company Secretary issue notice
• increase in number of Directors as per type of company
Meeting
5. Filing of e-form INC-6: (OPC) shall file n Form No. INC 6 within 30 days of passing resolution of
conversionwith following documents:
• Altered Memorandum of Association and Articles of Association
• Copy of Special Resolution
• List of proposed members directors
• List of creditors
6. Issuance of New Certificate of Incorporation: Registrar will issue fresh Certificate of
Incorporation in FormINC-25.
Conditions to fulfill for conversion:
• Alteration of Memorandum of Association and Articles of Association

• Increase minimum number to two or three
• Increase minimum number to two or seven
Points to ponder:
• Minor not become a member or nominee

• can’t hold shares with beneficial interest
• One Person Company can’t be incorporated or converted into Section 8
• can’t carry out Non-Banking Financial Investment activities
CONVERSION OF COMPANY INTO ONE PERSON COMPANY
Procedure for Conversion of One Person Company into other Company
1. Holding of Board Meeting: main agenda for this board meeting would be:

& Labour Laws
52
SBI & LL
• Conversion
• fix date, time and place for holding general meeting
• authorize Director to issue notice
Meeting.
3. Holding of General Meeting
4. Filing of e-form MGT-14: MGT-14 within 30 days of passing special resolution
5. Filing of e-form INC-6: application for Conversion C should be filed to the RoC in Form INC-6
6. Issuance of New Certificate of Incorporation: Registrar will issue a fresh Certificate of
Incorporation with theChanged name
COMPANIES AUTHORISED TO REGISTER UNDER THE COMPANIES ACT, 2013

& Labour Laws
53
SBI & LL
Non-Corporate Entities - By CS Kirti Chaturvedi
7 NON-CORPORATE ENTITIES
Chapter
PARTNERSHIP
“Partnership” is the relation between persons who have agreed to share the profits of a business
carried on by all or any one of them acting for all. persons who have agreed to join are individually
called “Partners” and collectively a ‘firm’. A partnership firm can be formed with minimum of two
partners and maximum of fifty partners.
Is Partnership Firm a Body Corporate under Companies Act, 2013?
concept of Limited Liability Partnership (LLP) which includes benefits of both partnership and body
corporate definition of ‘body corporate’ under the Limited Liability Partnership Act, 2008 (‘LLP Act’)
specifically includes LLP registered under the LLP Act.
Features of Partnership
(I) Agreement: The terms and conditions of partnership are laid down in Partnership Deed.
(II) Business: partnership can be formed only on basis of business activity.
(III) Sharing of profits and losses: partners are entitled to share in the profits and bear the losses,
(IV) Agency relationship: The partnership may be carried on by all or any of the partners acting for
all. eachpartner is a principal and At the same time, act as their agent.
(V) Unlimited Liability: liability of partners is unlimited the private property of the partners can be
taken forpayment of liabilities of firm.
(VI) Common Management: not necessary for all partners to participate day-to-day activities but
they areentitled to participate.
(VII) Restriction on transferability of share: No partner can transfer his share however, do so
with theconsent of all other partners
(VIII) Registration: not compulsory to register it
(IX) Duration: partnership comes to an end if any partner dies, retires or becomes insolvent.
Types of Partnership
I. Partnership at-will: it can be brought to an end whenever any partner gives notice
II. Particular partnership: formed for undertaking a particular venture. It comes to end with
completion ofventure
III. Partnership for a fixed duration: partnership is for a fixed period say 2 years, 5 years or any
otherduration.
Types of Partners
(I) Active Partners: Partners who take active part in day-to-day business of firm
(II) Sleeping or dormant partners: do not take active part in management of the business. only
contribute capital and share in the profits and losses of the business.

& Labour Laws
54
SBI & LL
- By CS Kirti Chaturvedi Non-Corporate Entities
(III) Others:
a. Nominal Partners: partners who do not have interest in business but lend their name to the
firm. do not make capital contribution, but are liable to third parties. Generally have share
in the profits However, in certain cases they may not have.
b. Partners by holding out: If person by his words or conduct holds out to another that he is a
partner, he will be prevented from denying that he is not a partner person becomes liable
to third parties.
c. Minor Partners: minor cannot be a partner But can be admitted to benefits if all partners
give consent.
Merits of Partnership
(I) Ease in formation: All that is required is an agreement among the partners.
(II) Pooling of financial resources: partnership commands more financial resources compared to
soleproprietorship.
(III) Pooling of managerial stalls: pooling of managerial skills leads to greater efficiency in business
operations.
(IV) Balanced business decisions: decisions are taken unanimously after considering all the major
aspects ofa problem
(V) Sharing of risks: risks of partnership business are shared by partners on a predetermined basis
(VI) Privacy: not required for partnership firm to publish its accounts.
(VII) Division of work: firm’s work is divided among partners based on knowledge and skills.
Limitations of Partnership
(I) Uncertainty of existence: retirement, death, bankruptcy or lunacy can put an end to the
partnership
(II) Unlimited Liability: each partner has unlimited liability. But liability may arise from acts of co-
partners
(III) Risks of disharmony: decisions are taken unanimously, some partners may adopt rigid attitudes
andmake it impossible to arrive at decision.
(IV) Difficulty in withdrawal or Blocking of Capital:
(V) Lack of institutional confidence: does not enjoy much confidence of banks and financial
institutions.
Because nature of its activities is not disclosed at public
(VI) Lack of Public Trust: public has less confidence since annual reports and accounts are not
published.
(VII) Difficulties of expansion: Limited membership (restricted to 50 not permit large amounts of
capital to beraised by the partners
Partnership Deed
Partnership deed, also known as a partnership agreement,key ingredients of a Partnership Deed
1- Definitions and vital information name of the business address name and address of all partners
and nature of business
& Labour Laws
55
SBI & LL
2- Partnership duration must mention establishment date and the deal period.
3- Investment: amount of capital to be invested by each partner, Profit /Loss sharing salaries to be
paid and the method of distributing the business income.
4- Accounting: accepted method of accounting for the cash flow, profit and loss, and assets and
liabilities of thebusiness
5- Duties, powers and obligations of the partners: The duties, powers and obligations of each
partner may alsobe spelt out in the Partnership Deed.
6- Profit & loss ratio
Profit/Loss ratio to be accrued to and be borne by the Partners
7- Withdrawals
8- Admission/ Retirement of a partner9- Expulsion
10- Banking and Partnership Funds
11- Borrowings: written consent of all partners for taking loans from banks, financial institutions,
12- Dissolution: methods by which partnership will be dissolved
13- Arbitration: partnership deed must provide for the means of arbitration of disputes. to avoid
expensivelitigation
Benefits of Partnership Deed
• enables business owners to file a suit in court

• avoid any misunderstanding as all the terms and conditions decided in the Deed.
• details of the profit/loss ratio reduces chances of misunderstanding
Registration Procedure
following documents and prescribed fees are enclosed with the registration application:
• in the prescribed Form -1

• Duly filled Affidavit
• Certified copy of the Partnership deed
• Proof of ownership rental/lease agreement there of name of the partnership firm should not
contain any words which may express approval or patronage of the government
Once the Registrar of Firms is satisfied he shall record an entry in the Register of Firms and issue a
Certificate ofRegistration.
Consequences of Non-Registration
• partner cannot file a suit against the firm for enforcement of right A right arising from a contract
cannotbe enforced against any third party
• firm or any of its partners cannot claim a set off in a dispute with a third party
HINDU UNDIVIDED FAMILY (HUF)
It does not have any separate and distinct legal entity The laws that govern HUFs are not codified and
are read alongwith the Hindu Succession Act and the Income tax Act.

& Labour Laws
56
SBI & LL
Characteristics
1. Governed by Hindu Law:

There are two schools of Hindu law
(I) Dayabhaga: It prevails in West Bengal & Assam and allows both male & female to be co-
parceners
(II) Mitakshara: It allows only male members to be co-parceners. Vineeta Sharma v. Rakesh
Sharma & Ors. (2020)
right in coparcenary is accorded by birth. birthdate of a daughter is immaterial Moreover father
need not be alive on commencement of the 2005 Amendment Act daughters will be given a share
even if father died before 2005.
2. Management: All the affairs are controlledare controlled by ‘Karta’Karta is the senior most male
member
3. Membership by Birth: membership of the family can be acquired only by birth.
4. Liability: Except the Karta liability of all other members is limited to their shares in the business
5. Permanent Existence: death, lunacy or insolvency of any member of family does not affect the
existence ofbusiness
6. Implied Authority of Karta: only Karta has the implied authority to contract debts and property of
the
7. Minor also a Partner: In a Joint Hindu Family firm minor is a partner.
8. Dissolution: can be dissolved only at the will of all the members
Benefits of HUF
1. Easy to Start: No legal formalities are required

2. Efficient Management & Control: Karta takes all decisions and gets them implemented
3. Secrecy: all decisions taken by the ‘Karta’ and maintains perfect secrecy in all matters.
4. Prompt Decision: Karta only person who exercises control This ensures prompt or quick decisions
5. Economy: The Karta of family spends money with great caution and economy.
6. Expanded loyalty & cooperation: natural love and affection helps to run business more efficiently
smoothly.
Limitations of HUF
1. Limited Resources: experiences a financial shortage since mostly dependent on ancestral

property.
2. Unlimited Liability of Karta: Karta carries unlimited liability. His personal belongings might be
utilized to payoff business debts.
3. Dominance of Karta: control of are vested solely in the hands of Karta, which may not be
acceptable toother members,
4. Limited Managerial Skills: Karta cannot be an expert in all areas of management failure to make
gooddecisions may even lead to financial difficulties
5. Misuse of Power: Management centered hands of Karta This may lead to Karta misusing his
position forpersonal benefits.
6. Limited Membership: membership restricted to family members exclusively

& Labour Laws
57
SBI & LL
Hindu Undivided Family (HUF) – Formation
(I) Create a HUF Deed

• written formal document on a stamp paper
• Karta of HUF.
• name of members of HUF
• name of HUF
• capital with which the HUF has been initiated.
• rubber stamp of HUF
• recommended that the Deed should be notarized After one has allotted a PAN, open a bank
account in the name of the HUF.Hindus, Buddhists, Jains and Sikhs can form HUFs.
SOLE PROPRIETORSHIP
Merits of Sole Proprietorship
(I) Easy formation: no legal formality involved in setting up

(II) Swift Decisions: all decisions are taken by one person, which makes functioning of business
simple andeasy.
(III) Sole beneficiary of profits: sole proprietor only person whom profits belong This motivates him
to workhard
(IV) Inexpensive Management: The sole proprietor does not appoint specialists for various functions.
(V) Confidentiality: sole proprietor can keep all business-related information to themselves
(VI) Lesser paperwork: The paperwork in a sole proprietorship is much less. business owners can
spend theirtime planning the business strategies
(VII) Simple tax calculations: Sole proprietorships are not considered separate legal entities. So,
businessincome or losses are reported on the owner’s income tax.
Limitations of Sole Proprietorship
(I) Limitation of management skills: sole proprietor not likely to have necessary skills regarding all
aspectsof the business.
(II) Limitation of Resources: it is difficult to finance business because banks mostly prefer to finance
established businesses
(III) Unlimited liability: For payment of business debts, his personal property can also be used if the
businessassets are insufficient.
(IV) Lack of continuity: continuity of business depends solely on the owner’s well being. In case of
death,insolvency, imprisonment, etc., it can shut down
(V) Risk in decision-making: nobody to assist in decision-making.
Procedure for Formation of Sole Proprietorship Firm
No deed or agreement is required registration may be required in the respective States of the Central
Government, such as
I. Shops and Commercial Establishments Act

II. Professional Tax
III. Micro, Small and Medium Enterprises Development Act, 2006.

& Labour Laws
58
SBI & LL
IV. Small Scale Industry

V. GST registration
VI. Intellectual Property laws.
MULTI STATE CO-OPERATIVE SOCIETY
The Multi-State Cooperative Societies (MSCS) Act, enacted in 1984, the MSCS Act, 2002 replaced the
earlier Act of1984
Benefits of Multi State Co-Operative Society
• provides loans at reasonable rates to poor. They do not have to go financiers who lend at high
interest rates.
• function pan India
• MSCS have low compliance costs.
• Multi State Co-operative Credit Society belongs to its members
• This creates a sense of belonging and ownership
Formation of Multi State Co-Operative Society
application in Form -1 should be filed with the Central Registrar of Cooperative Societies along with the
followingenclosures:
• scheme explaining prospects of becoming a viable unit

• Four copies of bye-laws
• Proposed area of operation shall initially permitted for two contagious states
• List of at least 50 members from each state
• Certified copies of the resolutions passed by the proposed society If Central Registrar satisfied
The application shall be disposed within a period of four months if application not disposed within four
months or Central Registrar fails to communicate order of refusal application shall be deemed to have
been accepted and Central Registrar shall issue registration certificate
TRUST
A relationship in which person holds valid title to certain property known as Trust property. for the
benefit of any one or more individuals who are known as the Beneficiaries governed by the terms of the
Written Trust agreement.

& Labour Laws
59
SBI & LL
The statutory basis governing Trusts, in general, under Indian law is the Indian Trusts Act, 1882. there
are two types of trusts in India: private trusts and public trusts. Private trusts are regulated by the
Indian Trusts Act, 1882, whereasPublic trusts are classified as Charitable and religious trusts.
Objectives of a Trust
trust may be created for any lawful purpose purpose of trust is lawful unless.
• Forbidden by law
• Defeat provisions of any law
• Fraudulent
• Involves injury to person or property
• Immoral or opposed to public policy
Persons who can create a TrustPersons who can be a Trustee
person capable of holding property may be a trustee; except discretion of trust, he cannot execute
unless competentto contract
Difference between Public Trust and Private Trust
PUBLIC TRUST PRIVATE TRUST

1. Beneficiaries: Large & Substantial Beneficiaries: Narrow & Specific (Known)
2. Beneficiaries: Uncertain & Fluctuating Beneficiaries: Definite & Ascertained
3. Larger & Wider Domain Limited & Narrow domain
trust for the benefit of employees of a company however numerous would not be considered as public
charitable. For example industrialist creates a trust for benefit of his 5,000 people, their spouses and
children is considered private because beneficiaries are known.
Exemptions available to Trusts
SECTION 10 OF THE SECTION 11 OF THE INCOME SECTION 12 OF THE INCOME TAX

INCOME TAX ACT,1961 TAX ACT, 1961 ACT, 1961
Total tax exemption is  If any income/ profit earned  Income made by way of
available for certain types by trust from property held voluntary contributions towards
if both conditions are by trust shall not be the corpus of trust.
satisfied: included in total income of  Charitable trust created for
 Belong to trusts for trust. benefit of any of socially and
activities related to  Established wholly for economically backward castes
sports, science, purpose of Charitable or such as SC, ST or women or
education, scientific religious nature children.
research, promotion of
khadi or village based
industries, hospitals etc
 Notified as Charitable or
religious Institutions

& Labour Laws
60
SBI & LL
Tax exemption for a Private Trust
IN CASE OF NON-DISCRETIONARY TRUSTS IN CASE OF DISCRETIONARY TRUSTS

All income is taxable in the hands of the Taxed in the hands of trust at themaximum
beneficiaries marginal rate
Note: If the beneficiaries are minors, the
income is to be Clubbed with that of the parent
with thehigher income.
FORMATION OF TRUST
Trust can be created by person over 18 years and mentally sound
1. Creation of a Trust Deed

• name(s) of the author(s)/settlor(s) of the trust;
• name(s) of the trustee(s);
• name(s) if the beneficiary/ies
• name by trust shall be known;
• place where principal offices situated;
• property that shall devolve upon the trustee(s)
• object and purpose of the trust;
• rights and duties of the beneficiary/ies;
• Mode and method of determination of the trust.
2. Obtain the signatures of Settlor, Trustees and Witnesses at the appropriate places
3. Print the Trust Deed stamp paper of appropriate value
4. Register the Original deed in Sub-Registrar office
5. At the time of registration, settlor and witnesses must be personally present
6. Thereafter Trust can apply for a permanent account number and open a bank account
PARTNERSHIP AGREEMENT & TRUST DEED
S.NO. PARTNERSHIP AGREEMENT TRUST DEED

1 Partners, as mentioned in the Deed runs Trustees are generally appointed or
the Partnership Firm elected
2 Maximum no. of partners in a partnership Three parties:
firm can be 50 partners.  Trustor / Author/ Settlor
 Trustee
 Beneficiary
3 Deed may mention a fixed term partnership Trust deed can provide for wound up
or for a specific undertaking, ordissolution within certain number of years
by notice
4 Deed states the rights and duties of the Trust Deed states the rights and duties
Partners of Trustees as well as Beneficiaries.
SOCIETY
Societies are usually registered for promotion of charitable activities like education, art, religion,
culture, music, sports, etc., In India, The Societies Registration Act, 1860 lays down the procedure for

& Labour Laws
61
SBI & LL
society registration
Advantages of Society
• formation and registration is simple

• Record-keeping requirements minimum
• Cost of compliance is low
• Least possibility of interference by the regulator
• Exemption from tax due to charitable nature
Disadvantages of Society
• Tax exemption only department accepts activities as being charitable;

• inappropriate form of a commercial venture
• not attractive for commercial investors
• Commercial investors regard investments in such entities as risky
• no unincorporated bodies are allowed to accept deposits from the public
Formation of Society
• any seven or more persons may subscribe their names to memorandum of association file with
Registrarform themselves into a society
• documents to be filed with Registrar along with the fees, and suitable name (which should not
suggestrelationship with the government
Benefits of forming a Society
• society can avail exemption from income tax , if obtains registration under Section 12A/12AA
• Donors to societies may claim a rebate for donations made to the Society
• Societies, being NGO’s receive various grants from government
• In view of the election process, there is scope for removing inefficient managementSociety can be
created by minimum of 7 or more persons. documents required for the Society Registration
• PAN Card of members
• Residence Proof of members
• Memorandum of Association which will contain work and the objectives of the society.
• Articles of Association which will contain
• Rules and regulations of the society
• covering letter mentioning objective or the purpose for which society formed
• proof of address where the registered office of the society located
• A list of all the members of governing body
• declaration to be given by the president that competent to hold said post.
• registrar will issue an Incorporation Certificate by allotting a registration number to it.
Consequences of Registration / Non-Registration of a Society
registration gives legal status and is essential for:
• obtaining registration and approvals under Income Tax Act;

& Labour Laws
62
SBI & LL
• lawful vesting of property in the societies;

• provides authenticity
• for opening bank accounts
1. If a society is not registered, it may exist in fact and theory, but not in the eyes of law
2. If benefits to be claimed the registration required.
3. unregistered society cannot claim benefits under the Income-tax act.
Accounts and Audits
Every society should get its accounts audited once a year by duly qualified auditor and have balance
sheetprepared by him.
Litigation
A registered society can file a suit anywhere in India and in any State although it may not be registered
inthat particular state.
MEGA FIRM
 Mega Firm or Multidisciplinary Firm (MDF) can be described as a Partnership firm with more than
twenty-five partners provides professional service of particular profession along with ancillary
service under one roof
 Shift from traditional approach of 10X10 offices to a global office.
 Clients have comfort in dealing with such firms. They are assured of timely and quality service
 A member in practice may form multi disciplinary firm with member of other professional bodies
Regulation 168 A - Other Professional bodies:person has to be member of
• Institute of Chartered Accountants of India

• Institute of Cost and Works Accountants of India
• Bar Council
• Indian Institute of Architects
• Institute of Actuaries
Pre-requisites
• All minds work together

• Say go to ego
• Mutual faith
• Financial discipline
• Founder partners given equal status
• Income distributed at short regular intervals;
• not put undue influence
Benefits
a) team environment

& Labour Laws
63
SBI & LL
b) Good Exposure: more than two partners having different experience n different fields
the apprentice andemployee will have an exposure to different works.
c) Cost effective: they have developed infrastructure, processes and tools which can make life less
stressful
d) Exceptional training provides opportunity to have a good training facilities whether on job
training or off jobtraining
e) Continuous Learning: multi-dimensional experience by adapting to new trends in the Profession.
f) Better Growth opportunities: MDF can experience professional growth early compared
to the other small firms may attract big multinationals
g) Global scope and reach: MDF have international scope and reach and hence become a Mega
Firm.
h) Revenue sharing: PCS who may not have subject expertise get share from assignments
i) Corporate or Industry perception:
j) Reputation: Credibility of the firm and brand gets established in long term.
Process of Constitution
• like-minded professional should take this decision have expertise in different disciplines.
Series of meetings before MOU advisable to work under MOU for one year. Mutual faith
and understanding is sine qua non.
• Partners must enter into a partnership agreement defining duties, responsibilities,
authorities, revenuesharing and exit route
Risks Involved
• Lack of understanding
• More cost on infrastructure
• Dominance of senior partners
• Exit route is difficult.
• Communication gap between partners.

& Labour Laws
64
SBI & LL
- By CS Kirti Chaturvedi Financial Service Organisation
8 FINANCIAL SERVICE ORGANISATION

Chapter
NON BANKING FINANCIAL COMPANY
Includes Does not Includes

• Business of loans & advances • Agriculture industrial activity
• Acquisition of share/stock/ debenture etc. • Purchase/sale of goods
• Leasing • Sale/purchase of immovable property
• Hire purchase
• Insurance business
• Chit business
50:50 TEST
• financial assets constitute more than 50 per cent of the total assets and
• income from financial assets constitute more than 50 per cent of the gross income
Scale Based Regulatory Framework for NBFCs
Base Layer: non-deposit taking NBFCs below the asset size of Rs.1000 crore,
Middle Layer: deposit taking NBFCs, non-deposit taking NBFCs with asset size of Rs.1000 crore and
above
Upper Layer: NBFCs which require enhanced regulatory supervision.
Top Layer: The Top Layer is empty Top Layer: The Top Layer is empty opinion that substantial increase
in risk fromNBFCs in Upper Layer. Such NBFCs move to Layer from the Upper Layer
TYPES/CATEGORIES OF NBFCS
1. Asset Finance Company (AFC)

• financial institution carrying on as its principal business the financing of assets such as
automobiles,tractors, generator sets and general purpose industrial machines.
• Principal business for this purpose is aggregate of financing real/physical assets and income
arising isnot less than 60% of its total assets and total income.
2. Investment Company (IC)

• company which is a financial institution carrying on as its principal business the acquisition
ofsecurities
3. Loan Company (LC)

• any company which is a financial institution carrying on as its principal business the
providing of finance by loans or advances or otherwise but does not include Asset Finance
Company

& Labour Laws
65
SBI & LL
Financial Service Organisation - By CS Kirti Chaturvedi
4. Infrastructure Finance Company (IFC)

non-banking finance company –
• at least 75 per cent of its total assets in infrastructure loans;
• minimum Net Owned Funds of Rs.300 crore
• minimum credit rating of ‘A
• CRAR of 15% (Capital to risk asset ratio)
5. Systemically Important Core Investment Company (CIC-ND-SI)

• It holds atleast 90% of its Total Assets in the form of investment in equity shares preference
shares,debt in group companies;
• Investments in equity shares in group companies constitutes atleast 60% of its Total Assets;
• Asset size is Rs. 100 crore or above
6. Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC)

• company registered as NBFC to facilitate flow of long term debt into infrastructure projects.
OnlyInfrastructure Finance Companies (IFC) can sponsor IDF NBFCs
• IDFs would essentially act as vehicles for refinancing existing debt of infrastructure
companies,thereby creating
• banks to lend to fresh infrastructure projects
7. Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI)

• (NBFC-MFI) means a non-deposit taking NBFC that fulfils the following conditions:
• ten crore rupees as net owned fund (NOF)
Not less than 85% of its net assets are in the nature of “qualifying assets” which satisfy the
following criteria
• Loan disbursed to borrower with annual income not exceeding Rs. 1,25,000 and Rs.
2,00,000 forrural and urban respectively;
• Loan does not exceed Rs. 75,000 in first cycle and Rs. 1,25,000 in subsequent cycles;
• Total indebtedness does not exceed Rs. 1,25,000
• Minimum tenure of 24 months for loan exceeding Rs. 30,000;
• Repayment (weekly, fortnightly or monthly) at borrower’s choice.
8. Non-Banking Financial Company – Factors (NBFC-Factors)

• NBFC-Factor is a non-deposit taking NBFC engaged in the principal business of factoring.
assets in the factoring business should constitute at least 50 percent of total assets and
income derived fromfactoring business not be less than 50 percent of its gross income
9. Mortgage Guarantee Companies (MGC)
• financial institutions for which at least 90% of the business is mortgage guarantee business
• at least 90% of gross income from mortgage guarantee business and net owned fund is Rs
100 crore.
10. NBFC- Non-Operative Financial Holding Company (NOFHC) financial institution through which
promoter permitted to set up a new bank. It’s a wholly-owned (NOFHC) which will hold bank as
well as other financialservices companies extent permissible

& Labour Laws
66
SBI & LL
11. Systemically important non-deposit taking non-banking financial company

 Means a NBFC not accepting deposits.
 Total Assets of Rs. 500 crore or more as per latest audited balancesheet
12. Systemically important NBFCs

NBFCs whose asset size is of Rs. 500 cr or more are considered as systemically important NBFCs.
BENEFITS OF INCORPORATING AN NBFC
1. Competitive Interest Rates

• Non-Banking Financial Sectors have brought down the interest rates to either equal to bank
lendingrates or at times even lower to bank rates.
2. Quick Processing
• Quick Processing loans at competitive rate of interest.
3. Less Rules and Regulations

• This helps borrowers to get loans easily.
4. Caters Customer needs

• ground level understanding of their customer’s profile gives them an edge, to customize
theirproducts according to client needs
5. Loan available for Individuals with Poor Credit Rating

• Individuals with poor credit rating generally will not get loans from banks. Unless the credit
score is above 600 -650, it is very difficult to get a loan sanctioned from banks On the other
hand, loans willbe offered to individuals with low credit score by NBFCs
DIFFERENCE BETWEEN BANKS & NBFCS
Sl. No. Particulars Banks NBFCs

1 Definition Acceptance of deposits financial Institution that is into
withdrawable by cheque or Lending or Investment or
demand collectingmonies under any
scheme or arrangement
2 Regulations BR Act, 1949 and RBI Act, Governed by Companies Act,
1934 2013 RBI Act, 1934
3 Registration and Licensing requirements are Formation of NBFC is easy.
Licensing stringent
4 Loan Sanction Process Comparatively Stringent Easier and faster
5 Overdraft Facility Available in some banks Not available
6 Maintenance of compulsory for banks to NBFC-Ds to maintain a certain
Reserve Ratios maintain reserve ratios ratio of deposits in
7 Priority sector lending Certain minimum exposure Priority sector norms are not
requirements to priority sector required applicable to NBFCs

& Labour Laws
67
SBI & LL
INCORPORATION OF NBFCS
Registration Process with Reserve Bank of India

no non-banking financial company shall commence business without–
• obtaining a certificate of registration by Bank;

• having owned fund of twenty-five lakh rupees or such other amount, not exceeding hundred crore
rupees,
Registration Procedure
Before registration company should ensure following
• minimum one director from NBFC background or senior Bankers

• Clean CIBIL records
• Understanding of NBFC business
Conditions:-
• position to pay present or future depositors

• affairs not likely conducted manner detrimental to interest of present or future depositors;
• management not be prejudicial to public interest or interests of depositors;
• adequate capital structure
• grant of certificate of registration not be prejudicial financial sector and economic growth
• any other condition
Bank may, after being satisfied grant certificate of registration
Cancellation of certificate of registration
• ceases carry business of non-banking financial institution

• fails to fulfill any of the conditions
• fails–
- to comply with any direction issued by the Bank
- maintain accounts
- offer for inspection its books of account
• before making order of cancellation company shall be given a reasonable opportunity of being
heard.
• company aggrieved by rejection of application or cancellation of registration may prefer an
Appeal withinthirty days of rejection or cancellation to Central Government
Procedure for filing application with Reserve Bank of India:

& Labour Laws
68
SBI & LL
HOUSING FINANCE COMPANIES
• type of non-banking financial institution which is primarily engaged in the business of providing
home loansand other related products
• the amount of loan advanced depends upon the value of the collateral offered.
• Housing Finance Company (HFC) is a company registered under the Companies Act, 2013
• HFC also requires registration with National Housing Bank (NHB) for commencing business of
housingfinance.
Eligibility Criteria
• Must be an NBFC:
• Net Owned Funds: at least Rs. 20 Crore
• registered under the Companies Act 2013:
• Housing Finance Activities as Object Clause:
regulatory power was transferred from National housing Bank to Reserve Bank of India On 22 October
2020, RBI issued revised regulatory framework
“Housing finance company” mean a company that fulfils the following conditions:
• NBFC whose financial assets, constitute at least 60% of its total assets
• Out of total assets not less than 50% by way of housing financing for individuals.
Housing Finance” mean
- Loans to individuals for construction/purchase of new

- old dwelling units.
- Loans to individuals for purchase of plots for construction of residential dwell
- Loans to individuals for renovation
- Loans to corporate for employee housing
- Loans for slum improvement schemes
- Lending to builders for construction of residential dwelling units
HFCs whose NOF currently stands below Rupees twenty crore, to submit statutory auditor’s certificate
to Reserve Bank within a period of one month evidencing compliance with prescribed levels HFCs failing
shall not be eligible tohold the Certificate of Registration
Benefits
Net Owned Fund
a) paid-up equity capital free reserves after deducting

• loss;
• intangible assets;
b) further reduced by
(i) investments in shares of-
• subsidiaries;

& Labour Laws
69
SBI & LL
• other housing finance institutions

(ii) book value of outstanding loans advances made to,
• subsidiaries
• Companies in same group to extent such amount exceeds ten per cent
ASSET RECONSTRUCTION COMPANY (ARC)
When customer becomes defaulter, bank can reduce loss by giving such default companies to (ARCs)
problem ofrecovery from Non Performing Assets (NPAs) was recognized by Government
ARC performs following functions:-
• Acquisition of financial assets

• Change or takeover of Management
• Rescheduling of Debt
• Enforcement of Security Interest
• Settlement of dues payable by the borrower
Asset Reconstructions companies are created to manage and recover Non Performing Assets acquired
from bankingsystem and facilitate to concentrate in banking activities.
Benefits
• relieving banks of the burden of NPAs will allow them to focus on core business
• banks use it as method to hive off bad loans from their balance sheet.
• ARCs also helps building industry expertise in loan resolution
Registration Process
• Conditions
• Company registered under Companies Act, 2013.
• There should not be any losses in preceding three financial years
• ARC must be able to pay all the periodical returns.
• Directors have sufficient experience related to financial affairs
• no criminal convictions against the directors
Documents Required for Registration
• Directors are not disqualified

• Certificate of audit by the auditor
• Copy of the audited balance sheet
• Copy of the directors and auditor’s report
• Net Owned Funds
• Detailed Information on Related Party Transactions (RPT)
• ARC shall apply for registration form specified and obtain certificate of registration
• ARC can undertake both securitisation and asset reconstruction activities
• ARC shall commence business within six months from the date of grant of Certificate of

& Labour Laws
70
SBI & LL
Registration
MICRO FINANCE INSTITUTIONS (MFI)
Micro finance provides financial services to those whose income is small and unstable. Concept of Self
Help Group (SHGs) has helped empowerment of women Characteristics
• size of the loan is small.

• repayment period short.
• No collateral for loan
• purpose of end use of loan is flexible
• Transaction cost is low
Incorporation of MFI
• company to be incorporated
• after incorporation register with Reserve Bank of India list of documents to be filed with RBI:-
a. Certificate of Incorporation.
b. copies of extract of only main object clause in the MOA
c. Board resolution
d. Copy of the certificate educational qualification of directors.
e. Copy of experience certificate in Financial Services Sector
NIDHI
Characteristics
• allowed to transact business only with its members

• no Nidhi shall issue preference shares
• allowed to open branches
• minimum paid up equity share capital Rs. 10,00,000.
• Loans provided only to its members and fully secured.
• director shall be a member and hold office for upto 10 consecutive years
• declare dividend not exceeding 25% higher amount be specifically approved by Regional Director.
General restrictions
No Nidhi shall –
• carry on business of chit fund, hire purchase leasing finance insurance issue preference shares,
open currentaccount with members;
• acquire another company by purchase of securities unless passed a special resolution and
obtained previousapproval of Regional Director
• accept deposits from person, other than members;
• pledge assets lodged by members as security:
• take deposits from or lend money to body corporate;

& Labour Laws
71
SBI & LL
Benefits
• repayment is guaranteed, as loans are secured
• offer a higher rate of interest on deposits.
• Board of Directors normally consists of senior persons This lends credibility to institution
Incorporation
• normal procedure for incorporating a public company to be complied

• Objects Clause should restrict itself to object of cultivating habit of thrift and savings amongst its
members
• name of the company should end with the words “Nidhi Limited”.
• Nidhi shall apply, in Form NDH-4, within one hundred twenty days if it fulfils following conditions,
(i) not less than 200 members;
(ii) Net Owned Funds 20 lakh rupees or more.
• Central Government, shall examine application filed in Form NDH-4 and convey its decision within
forty fivedays
• in case decision not taken within aforesaid period deemed as approved
• On being satisfied Central Government, shall notify in Official Gazette, as a Nidhi
PAYMENT BANKS
• New model of banks conceptualized by the Reserve Bank of India (RBI).

• These banks cannot grant loans or issue credit cards
• main objective of payments bank is to widen the spread of
• financial services to the remote areaslist of Payment Banks in India
• Airtel Payments Bank Ltd.
• Paytm Payments Bank Ltd
• Minimum capital requirement is Rupees 100 crore. For first five years stake of the promoter at
least 40%.
• Foreign shareholding allowed as per rules for FDI
• majority of the bank’s board of directors should consist independent directors
• deposits will be capped at Rs. 100,000 per customer.
• 25% of its branches must be in the unbanked rural area
• bank must use the term “payments bank” in its name
• banks will be licensed under Banking Regulation Act, 1949.
• registered as public limited company
MUDRA BANKS
Micro Units Development and Refinance Agency Bank (or MUDRA Bank) is a public sector financial
institution in India. It provides loans at low rates to micro-finance institutions and non-banking
financial institutions which thenprovide credit to MSMEs.
Bank classify its clients into three categories

Shishu: loans up to Rs.50,000Kishore: loans up to Rs.5 lakhTarun: loans up to Rs.10 lakh

& Labour Laws
72
SBI & LL
Those eligible to borrow from MUDRA bank are:
• Small manufacturing unit

• Shopkeepers
• Fruit and vegetable vendors
• Artisans.
basic criteria of age should be 18 years old
Procedure for loan
• select business to avail the loan (Shishu, Kishor or Tarun)

• contact nearest Public/ Private sector bank list of institutions partnering in the MUDRA initiative
available onthe MUDRA portal.
• repayment period is also extended to 5 years.
• MUDRA Bank is not a separate bank. It is a government financing scheme
• list of the activities covered under MUDRA loans:
1. Transport Vehicle
used only for commercial purposes are eligible
2. Community, Social & Personal Service Activities

Salons, beauty parlours, gymnasium repair shops, , etc.
3. Food Products Sector

papad making sweet shops, small service food stalls cold storages etc.
4. Textile Products Sector / Activity

Handloom khadi activity etc.
5. Business loans for Traders and Shopkeepers
6. Equipment Finance Scheme for Micro Units

machinery / equipments loan size of upto 10 lakh.
7. Activities allied to agricultureMUDRA Card
MUDRA Card is a debit card issued against the MUDRA loan account MUDRA Card can be
operated across thecountry for withdrawal of cash from any ATM
Types of funding support from MUDRA
1. Micro Credit Scheme: It is offered mainly through Micro Finance Institutions (MFIs), which
deliver the creditup to Rs.1 lakh
2. Refinance scheme for Banks: Different banks are eligible to avail of refinance support from
MUDRA for financing micro enterprise activities. refinance is available for term loan and working
capital loans, up to anamount of 10 lakh per unit
3. Women Enterprise programme: To encourage women entrepreneurs banks / MFIs may
consider additionalfacilities, including interest reduction on their loan.
4. Securitization of loan portfolio: MUDRA also supports Banks / NBFCs / MFIs for raising funds for

& Labour Laws
73
SBI & LL
financing micro enterprises by participating in securitization of their loan assets against micro
enterprise portfolio
CHIT FUNDS
• Section 2(B) of Chit Fund Act 1982 defines it as a rotating savings and credit association system, a
popularpractice in India
• It’s mostly popular in the areas where people have limited access to banking facilities
• In a chit fund, specific number of investors invest their money with a promise that their
investment will be multiplied within a short span of time and guaranteed return specific number
of subscribers contribute payments in installment over a defined period of time
• A chit fund comprises group of members, called subscribers. An organizer, brings group together
andadministers the activities
Features
• They have a predetermined value and duration

• work like microfinance institutions
• cater financial needs of low income households
• allow deposits to be turned into a lump sum. by three mechanisms.
• Safe Deposits: A person can deposit the money in the present and enjoy the lump sum in future
• Loans: A person can take a loan in the preset and continue to make payments in the future
• Insurance: Allows the depositor to enjoy the lump sum in case of an emergency.
• offer loan at a lower interest rate
• Chit funds companies in India are governed by various State or Central laws
• The Reserve Bank of India (RBI) is the regulator of banks and other non-banking financial
companies, but itdoes not control the chit fund business
• Although, SEBI as the regulator and controller of the securities market regulates collective
investment schemes. But specifically precludes chit funds from their definition of collective
investment schemes.
 Chit Agreement : Agreement between foreman & subscriber
 Chit Amount : Sum total of payment to be made by subscriber in a chit (without discount)
 Discount: sum of money which a prized subscriber required to forego to meet the expenses of
running the chit or fordistribution among the subscribers or for both.
 Foreman: person responsible for the conduct of the chit
Key points of the Act
• all registered chit funds should contain words “chit fund”, “chitty”, or “Kuri” as part of their name.
• not allowed to conduct business other than chit businesses.
• foreman allowed to start or run several chits simultaneously. However, prior approval of
governmentrequired
• All Chit funds needs to have its accounts audited by a qualified Chartered Accountant

& Labour Laws
74
SBI & LL
Types of Chit Funds
• Organized Chit Funds: common type of chit fund is where small paper chits with each member’s
names are gathered in a box. When all members gathering person in charge picks a chit from the
box. member so selected gets to take home the day’s collection. Afterwards, that person’s chit is
removed from the box.
• Special Purpose Funds: Some chit funds are organized for a specific purpose. For example,
Christmas giftsfund
Online Chit Funds:
• Online chit funds are conducted online contributors can make their monthly contributions and
receive prizeonline
• Registered Chit Funds: funds which are registered with the state government
• Unregistered Chit Funds: funds which are not registered with any state government.
Registration of Chit Funds
• Though chit fund companies type of a Non-Banking Financial Companies (NBFC), they are
exempted frombeing registered with the Reserve Bank of India.
• To start this business in India, should first incorporate a Private Limited Company with the
objective ofoperating a chit fund business.
• company then applies with the appropriate Chit Fund Registrar of the State
• registration will not be given to:
1. individual or entity convicted of any offence
2. individual or entity who had defaulted in payment of the fees or the filing of any statement
under thisAct or
3. Any individual or entity convicted of any offence that involves moral turpitude and
sentenced to imprisonment for offence unless a period of five years has elapsed since
his/her release.
Restrictions imposed by RBI on chit fund business
• Chit fund business can be conducted only by a registered company

• Chit companies must register with the Registrar of Chit Company in every state,
• maximum discount in a bid was restricted to 30% of the total chit amount
• Details chit must be furnished to Reserve Bank of India
• It is mandatory to keep one month’s chit amount with the Reserve Bank of India till the end of a
particularchit

& Labour Laws
75
SBI & LL
Business Collaborations - By CS Kirti Chaturvedi
9 BUSINESS COLLABORATIONS
Chapter
BUSINESS COLLABORATION
• when two or more entities work together to accomplish common goal is known as Collaboration
Types of Business Collaboration
• Horizontal Collaboration: Businesses in same set of functional area agree to collaborate to

improvecompetencies For example: conducting research toward new or improved products
• Vertical Collaboration: collaboration wherein the business collaborates with companies in its
supply chain either upward or downwards For example: Computers shipping with pre-installed
third-party software
• Intersectional Collaboration: Businesses from different functional areas agree to share special
knowledgeFor example: Manufacturing and Marketing collaborations.
• Joint Venture: Two or more businesses form a new company. new company is its own legal
entity, For example: One party provides technical support and another party provides marketing
arrangements.
• Equity: A company acquires a minor equity stake in another business in exchange for a monetary
investmentFor example: Funding to start-ups on equity basis,
FOREIGN COLLABORATION
Examples of Foreign Collaboration
• ICICI Lombard GIC (General Insurance Company) Limited is a financial foreign collaboration
between ICICIBank Ltd., India and Fairfax Financial Holdings Ltd., Canada.

& Labour Laws
76
SBI & LL
- By CS Kirti Chaturvedi Business Collaborations
Features of Foreign Collaboration
• Type of partnership: Foreign collaboration is a type of partnership between domestic and foreign
entity. Foreign entity provides support for finance, technology, etc. On the other hand, a
domestic entity provides cheap labour, high-quality raw materials
• Requires an Approval of the government: Before initiating must seek permission from
government of the domestic country
• Entities are from developed and developing country: one or more abroad entities are generally
from developed countries like U.S.A. Japan, etc. Whereas domestic entity is from developing
country India, Sri- Lanka,
• Benefits to developed country: helps developed country earn good returns on overall
investments aids developed country earn a good reputation to developing country.
• Benefits to developing country:
- Helps developing country to get finance, technology, technical expertise, etc.
- Assists developing country to achieve economic growth
• Establishes business relationships: removes economic gaps (hurdles) and brings them closer to
each other.
• Initiation of foreign collaboration: foreign collaboration is initiated at government and/or
corporate level. government of foreign country collaborates with government of domestic
country. Similarly, at corporate level foreign collaboration, a company from some foreign country
collaborates with company from a domestic country.
• Better utilization of resources: developed countries are good with finance, technology, On the
other hand, developing country has more availability of low-cost labour and plenty of quality raw
materials this leads to a better utilization of available resources.
• Scope of foreign collaboration: scope is very wide. covers core business activities such as:
Finance, Technicalconsultancy, Marketing, etc
Miscellaneous features:
• reduces unemployment in developing country.

• improves infrastructure in developing country.
• increase revenue of governments in form of taxes

& Labour Laws
77
SBI & LL
• aids to achieve economic growth
Objectives of Foreign Collaboration
• Improve financial growth

• Occupy major market share
• Reduce operating cost
• Make effective use of resources
• Generate employment
Types of Foreign Collaboration
Financial collaboration:
• The inflow of foreign investment takes place in domestic (host) country. Foreign company lends
finance by:
- Purchasing ownership shares:
- Giving long-term loans:
- Giving credit facility:
• Technical collaboration: The inflow of foreign technology takes place in the domestic (host)
country. Includes integration of foreign technology with domestic technology. Foreign company
provides technological know- how, professional services and expertise, etc.
• Marketing collaboration: The inflow of foreign goods and services take place in the domestic
(host) country. Foreign company agrees to sell goods produced by the domestic company in its
own country or internationalmarket.
• Management consultancy collaboration: The inflow of foreign management consultancy takes
place in the domestic (host) country. Foreign company provides management skills to the
domestic company. It teaches management skills for the following:
- Production management
- Marketing management.
- Personnel management
- Financial management.
Foreign Collaboration in India
• In India there are basically two forms of foreign collaboration. (Financial or technical) In case of
financial collaboration approving authority Reserve Bank of India and in the case of technical
collaboration the approving authority is DPIIT
• Government has set up a Foreign Investment Promotion board (FIPB) to:
- speed up clearance of proposals
- to review the collaborations cleared
- ear-marking and ascertaining of contacts to invest in India
JOINT VENTURE
• Joint venture is an association of two or more individuals or business entities who combine and
pool their respective expertise, financial resources, skills, experience, and knowledge in the

& Labour Laws
78
SBI & LL
furtherance of a particularproject or undertaking.

• Joint Venture commonly referred to as a “JV”, are typically formed either by individuals, business
entities, corporations or partnerships. Contributions are either in form of money services physical
asset equipment intellectual property
Advantages of Forming Joint Venture
i) Risk Sharing: Risk sharing is biggest advantages where cost of product and likelihood of failure of
product is very high.
ii) Economies of Scale: JV with a larger company can provide economies of scale necessary to
compete locally or globally and achieve critical mass
iii) Market Access: companies that lack customers forming JV can provide instant access to
established, effective distribution channels and customer bases
iv) Exploring the Global Market: Partnering with foreign company provide an ease to foreign market
Which can otherwise be difficult because of a lack of experience
v) Easy acquisition of other entity or business: When a company wants to acquire another, but
cannot due to cost, size, or geographical restrictions or legal barriers, teaming up with a JV
Partner can be an attractive option.
vi) Cost Efficiency: For a small-scale company/ entity, sometimes it is difficult to set up the
infrastructure and the machinery required product development another company lends a hand
by way of resource sharing and cost sharing it
vii) Flexible nature: The joint venture enterprises provide flexibility, each participant has the freedom
to continue with their individual businesses
Disadvantages of Joint Venture
i) Restricted flexibility: some projects require full concentration and thus the simultaneous
work maybecome impossible.
ii) Lack of equal involvement: equal involvement from all the Joint Venture partners may not be
possible
iii) Cultural Differences: People with different beliefs, tastes, and preferences can create hurdles
iv) Extensive Research and planning required: can result in a frustrating experience if it lacks
adequateplanning and research.
v) Lack of clear communication: involves different companies from different horizons there is
often asevere lack of communication between partners.
vi) Unreliable partners: partner do not devote 100% and become unreliable.
vii) Creation of competitor: possibility of the creation of a competitor or a potential competitor in
the form of one’s own joint venture partner.

& Labour Laws
79
SBI & LL
Strategies of entering into a Joint Venture
• Identification of prospective Joint Venture Partner(s): prospective partner should be strong in

terms of business, technology and resources. One partner must be able to compliment the other
partner
• Trustworthy: Joint Venture Partner should never be weak or untrustworthy partner, as it would
definitelylead to failure of the joint venture
• Development of Strong Joint Venture Relationship: Partners must strive to develop joint venture
relationships that are rewarding, and long-lasting.
• Equal Contribution: All the partners have equal contribution in terms of skills, intellectual
resources,marketing resources, capital, and so on.
• Written Agreement: Agreement be written and must clearly define all terms rights and
responsibilities ofeach partner
• Limiting the scope of Joint Venture: Limits and scope of the venture should be defined in the
beginning itself
• Well defined Business Model: . A well-defined business model provides a base for the legal and
financialframework.
• Establishment of Exit Routes: Must establish clear protocols for unwinding the relation if it fails.
Formation of Joint Ventures
(1) Equity based Joint Venture

• An arrangement whereby a separate legal entity is created with the agreement of two or
moreparties.
• Entity is generally established as a limited liability company and is distinct from either of the
parties
• Each of the parties in turn becomes the owner of the company having equity in the
company.
• Profits and losses distributed according to the ratio of the capital contributions
 an agreement to either create a new entity or to join into ownership of an existing entity
 Shared Ownership
 Shared management

& Labour Laws
80
SBI & LL
 Shared responsibilities
 Shared profits and losses
(2) Contractual Joint Venture

• Establishment of a separate legal entity is not needed The two parties do not share
ownership butexercises some elements of control in the joint venture
• contractual joint venture can be entered where project involves narrow task or a limited
activity
• relationship between parties is set forth in the contract
Key characteristics are:
• Two or more parties have a common intention – of running a business

• Each party bring some inputs
• Each party exercises certain degree of control
• Relationship has relatively longer time duration
 Every equity based joint venture gives birth to a new entity. Government of India permits certain
type of entities.
(1) Company
(2) Limited Liability Partnership (LLP) Firm
(3) Venture Capital Fund: duly registered Foreign Venture Capital Investor is allowed to contribute
up to 100% in Indian Venture
(4) Trusts: foreign company not allowed to use Trust as a form of a joint venture in India.
(5) Other Entities: Foreign companies not allowed to use any structures other than those mentioned
above
Restrictions under FDI Policy of the Government of India
any non-resident entity can set up an equity based joint venture in India. However, some restrictions are
as follows:
1- Citizen or entity land border from India can invest only after approval of Government of India
defense,space, atomic energy prohibited for foreign investment.
2- NRI residents and citizens of Nepal and Bhutan can invest on repatriation basis 3- (FII) can invest
only under the Portfolio Investment Scheme
4- Foreign Venture Capital Investor (FVCI) may contribute up to 100% under automatic route
Examples of Joint Venture (JV) Companies in India
• Tata Starbucks: 50:50 joint venture owned by Tata Consumer Products and Starbucks Corporation
• AirAsia India: joint venture between Malaysia-based AirAsia Berhad and Tata Sons.
Documents for Joint Ventures
• The Indian companies preferred to have a Memorandum of Understanding (MOU) to define the
relationshipat the initial stage
• contracts are generally of a fixed duration or are related to specific events

& Labour Laws
81
SBI & LL
Essential Features of a Shareholders’ Agreement (SHA) /Joint Venture Agreement / Partnership

Agreement (PA)
• Business of new company/LLP;

• Manner and extent which resources will be brought in;
• allotment and transfer of shares;
• Constitution of Board of Directors
• decision making
• Dividend distribution policy;
• Dispute resolution mechanism.
Essential components of a Joint Venture Agreement
(a) Description (Nature of the Agreement)

(b) Parties (full description of the parties to the Agreement)
(c) Recitals convey the intention of the parties
(d) Operative Part (defines the rules for the future; rules relating to loans by either party, activities to
beundertaken and plan of action)
(e) Legal aspects:
(i) Amendments of the JV Agreement
(ii) Duration of the JV
(iii) Termination
(iv) Dispute resolution
(v) Confidentiality and Non-Disclosure Agreement
(vi) Non-compete clause
(vii) Indemnification
SPECIAL PURPOSE VEHICLE (SPV)
• A Special Purpose Vehicle (SPV) or Special Purpose Entity (SPE) are generally formed for a special
purpose
• The operations of these entities are limited to the acquisition and financing of specific assets.
SPVs are generally a subsidiary company whose obligations are secured even if the parent
company goes bankrupt
• No SPV can be formed for an unlawful purpose,
• SPVs/SPEs may be formed through limited partnerships, trusts, corporations, limited liability
corporations orother entities
Benefits of Special Purpose Vehicle (SPV)
• Minimum Statutory Requirement –

• Tax benefits-
• Legal protection-
• Accounting Reasons – Debts raised through SPV are not reflected in the balance sheet of the
sponsor. Itreflects a pleasant picture and enhances the debt raising ability of the sponsor
• key advantage is that it helps in separating the risk and freeing up the capital. SPV and the
sponsoringcompany are protected against risks like insolvency,

& Labour Laws
82
SBI & LL
Purpose of Special Purpose Vehicle
• main purpose is to allow the parent company to make highly leveraged or speculative
investments withoutendangering the entire company If SPV goes bankrupt it will not affect parent
company
• SPVs are also formed by banks and financial institution for Securitisation. total assets of banks
mainly comprise of loans By securitization through SPV the risk involved in this activity is
separated from thegeneral business of the bank
• Indirect acquisition of assets - SPVs can be used for acquiring assets indirectly for the purpose of
tax savingthe sponsor takes the assets on lease from its SPV. Expenses incurred as rent, is allowed
as a deduction to sponsor for income tax purpose. On the other hand, the SPV acquires the asset
through raising debt, the interest on which is a deductible expense for tax purpose. This way the
same asset can be used to claim deduction by both,
Difference between a Special Purpose Vehicle (SPV) and a Company
• Technically, an SPV is a company Like a company, the SPV is an artificial person. The SPV has an
existence of its own in the eyes of law. It can sue and be sued in its name An SPV can also be a
partnership firm
• The company, as distinguished from an SPV, may be called a general purpose vehicle. company
may do many things mentioned in memorandum or permitted by the Companies Actor permitted
by the Companies Act SPV may also do the same but scope of operation limited The MoA is quite
narrow in the case of an SPV.
How is an SPV established?
• a sponsoring corporation hives off assets from rest of the company assets or activities are
distanced from the parent company, hence performance of the new entity will not be affected by
the ups and downs of theoriginating entity.
LLP FIRM AS A SPECIAL PURPOSE VEHICLE
• Foreign companies are not permitted to invest in partnership firms.

• Till November 2015, foreign companies were not allowed to invest in any form except a company.
ForeignInvestment in some LLP firms has been allowed now.
• Key advantages of using an LLP firm as an SPV as compared to a company are as follows:
- Low cost of incorporation of an LLP;
- Flexibility of rules of management
- Partners can be companies while management is by Designated Partners who are
individuals
- Low annual maintenance cost;
- not be any necessity of getting the accounts audited
- An LLP firm does not have to pay Dividend Distribution Tax (DDT)
- Voluntary winding of an LLP firm which has no creditors is very easy
- Investment in LLP Firms is permitted only in sectors in which 100% FDI is permitted through
automaticroute

& Labour Laws
83
SBI & LL
Setting Up Of Branch Office/Lianson Office/Wholly
- By CS Kirti Chaturvedi
Owned Subsidiary By Foreign Company
SETTING UP OF BRANCH OFFICE/LIASON

10 OFFICE/WHOLLY ONED SUBSIDIARY BY
Chapter
FOREIGN COMPANY
INTRODUCTION
There are mainly two types of entry strategy for foreign businesses in India,
• Incorporation of a private limited company: easiest and fastest Foreign direct investment of upto
100% into a private limited company or limited company is under the automatic route, wherein
no Central Governmentpermission is required.
• Registration of Branch Office, Liaison Office or Project Office: It requires RBI and/or Government
approval cost and time taken for registration e higher than the cost and time associated with
incorporation of a private limited company.
• Branch Office, Liaison Office or Project Office are unincorporated place of business of foreign
company and are regulated by the Companies Act as well under FEMA
IMPORTANT TERMS
Section 2(42) “Foreign Company” means any company or body corporate incorporated outside India
which–
— Has a place of business in India whether by itself or through an agent, physically or through
electronic mode;and
— Conducts any business activity in India in any other manner.
Section 2(87) Subsidiary Company in relation to any other company (that is to say the holding
company), means a company in which the holding company –
— Controls the composition of the Board of Directors; or

— Controls more than one-half of [total voting power] either at its own or together with one or
more of itssubsidiary companies:

& Labour Laws
84
SBI & LL Setting Up Of Branch Office/Lianson Office/ Wholly
Provided that hall not have layers of subsidiaries beyond such numbers as may be prescribed. For the
purposes of this clause, –
— A company shall be deemed to be a subsidiary company of the holding company even if the
control is ofanother subsidiary company of the holding company;
— Composition of a company’s Board of Directors shall be deemed to be controlled by another
company ifcompany can appoint or remove all or a majority of the directors;
— Company” includes any body corporate;
— “layer” in means its subsidiary or subsidiaries.
KEY PROVISIONS
• ‘Branch Office’ in relation to a company, means any establishment described as such by the
company.
• ‘Liaison Office’ means a place of business to act as a channel of communication between the
principal place of business or Head Office in India but which does not undertake any commercial
/trading/ industrial activity, directly or indirectly,
• ‘Project Office’ Place of business in India to represent interest of Foreign Company (excludes
Liaison office)
• Section 379: where not less than 50% of the paid-up share capital is held by one or more citizens
of India or by one or more bodies corporate incorporated in India, whether singly or in the
aggregate, such company asif it were a company incorporated in India.
• Section 380: every foreign company which establishes a place of business in India must within 30
days filewith the Registrar of Companies for registration:
(a) Memorandum and articles
(b) Full address of registered or principal office
(c) List of the directors
(d) Name and address of persons resident in India authorized to accept notices or other
documents
(e) Full address of the office of the company in India
(f) Particulars of opening and closing of a place of business in India on earlier occasion or
occasions;
(g) Declaration that none of the directors of the company declaration that none of the
directors of thecompany in India or abroad are disqualified.
(h) Other information
Every foreign company to ensure that name of the company country of incorporation, fact of limited
liability isexhibited in the specified places or documents as required
Section 381 of Foreign Company to maintain books of Account and file balance sheet and profit and
loss accountprescribed form with ROC every calendar year.
In Tovarishestvo Manufacture Liudvig Rabenek, it was held that where representatives of a company
incorporated outside the country frequently stayed in a hotel in England for looking after matter of
business, it was held that the company had a place of business in England.
In a certain case, it was held that mere holding of property cannot amount to having a place of business.

& Labour Laws
85
SBI & LL
PROVISIONS PERTAINING TO NAME
• If foreign company is incorporating subsidiary company in India, then it may be allowed with
addition ofword India or Indian State or city
• No company shall be incorporated using the name of an enemy country
ESTABLISHMENT OF BRANCH OFFICE (BO)/ LIAISON OFFICE (LO)/ PROJECT OFFICE (PO) IN INDIA
BRANCH OFFICE
• Branch office serves as an extension of the head office and carries on same business as that of its
parentcompany.
• The profits from these are easily remittable from india, subject to the taxes applicable.
ELIGIBILITY FOR SETTING UP A BRANCH OFFICE
• Body corporate incorporated outside India;

• Name of the Indian branch office same as the parent company
• Net worth of branch office not less than US $100,000;
• Parent company should have profit making record in preceding five financial years
PERMITTED ACTIVITIES
• Branch office cannot directly carry out manufacturing activities unless such manufacturing
activity is done ina special economic zone (SEZ) with the purpose of exporting
• Following activities are permitted for a branch office in India
i) Export/import of goods.
ii) Rendering professional services
iii) Carrying research work
iv) Promoting financial collaborations
v) Representing the parent company
vi) Rendering services in Information Technology
vii) Rendering technical support
REGISTRATION OF A BRANCH OFFICE IN INDIA
• Foreign company must apply for approval from Reserve Bank of India (RBI) under (FEMA), 1999
• Foreign entities whose principal business falls under 100 per cent (FDI) is permissible under
automatic route
• Application must be forwarded by foreign entity through AD Category – I bank
• If foreign entity wishes to establish branch office in more than one location must seek approval
from RBI foreach location

& Labour Laws
86
FUNDING OF THE BO BY THE FOREIGN COMPANY
1. Equity Share Capital
2. Preferred Share Capital: convertible preference shares, compulsorily convertible into equity
shares are regarded as Foreign Direct Investment (FDI).
3. Debentures and Borrowings: These also, when convertible into equity shares, are treated as
FDI
LIAISON OFFICE
• Liaison Office means a place of business to act as a channel of communication between the
principal place of business and entities in India but which does not undertake any commercial
/trading/ industrial activity, and maintains itself out of inward remittances received from abroad
through normal banking channel.
ELIGIBILITY FOR SETTING UP A LIAISON OFFICE
• Body corporate incorporated outside India;

• Name of Indian branch office same as parent company
• Net worth of liaison office not less than US $ 50,000;
• Parent company should have profit making record in preceding three financial years
PERMITTED ACTIVITIES
(i) Representing the parent company

(ii) Promoting export / import from / to India
(iii) Promoting technical/ financial collaborations in India.
(iv) Acting as a communication channel
Bar Council of India vs. A. K. Balaji & Ors., RBI not to grant any permission to any foreign law firm, for
opening of LO in India.
Hon’ble Supreme Court held that advocates alone are entitled to practice law in India and foreign law
firms cannot practice profession of law in India. As such, foreign law firms not permitted to establish
any branch office, or other place of business in India AD Category – I banks directed not to grant
approval to any branch office liaison office in India under FEMA for practicing legal profession in India.
EXTENSION OF THE VALIDITY PERIOD FOR LIAISON OFFICE
• Person resident outside India may establish liaison office for three years
• Non-resident entity may apply to Authorised Dealer Category-I bank for extension and
Authorised DealerCategory-I bank may extend the validity period of
• Entities engaged in construction sectors are permitted to open a Liaison Office for two years only.
No further extension for liaison offices of Non-Banking Finance Companies and construction
sectors

& Labour Laws
87
SBI & LL
PROJECT OFFICE
• Project office means a place of business in India to represent the interests of the foreign company
executinga project in India but excludes a Liaison Office.
PARAMETERS OF PROJECT OFFICE
• Foreign company may open project office/s in India provided

• Project is funded directly by inward remittance from abroad;
• Project is funded by a bilateral or multilateral International Financing Agency;
• Project cleared appropriate authority;
• Company awarding the contract has been granted term loan by a Public Financial Institution
CASES IN WHICH RBI APPROVAL IS REQUIRED FOR SETTING UP BO, PO AND LO IN INDIA
• Applicant is citizen or registered/incorporated in Pakistan;

• Applicant is citizen or registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran China,
Hong Kongor Macau
• Principal business of Defence, Telecom, Private Security and Information and Broadcasting;
• Applicant is (NGO), Non-Profit Organisation, of a foreign government.
MASTER DIRECTION - ESTABLISHMENT OF BRANCH OFFICE (BO) / LIAISON OFFICE (LO) / PROJECT
OFFICE (PO) IN INDIA BY FOREIGN ENTITIES
 Applications to be made in form FNC under two routes
- Reserve Bank Route: If principal business of falls under sectors where 100% FDI is permissible
- The Government Route: If principal business of does not fall under sectors where 100% FDI is
permissibleRBI will also consider the following criteria while sanctioning the Liaison office/ Branch
office
 Track Record: in the immediately preceding five financial years
 Net Worth: net worth has to be equal to or more than USD 100,000.
 Application foreign company to be made through designated AD Category-I bank Some documents
to be attachedwith the application.
1) English version of the Certificate of Incorporation/ or Memorandum & Articles of Association

attested byIndian Embassy
2) Latest Audited Balance Sheet of the applicant entity.”
 The BO hence, once approved by the RBI, will be allotted a Unique Identification Number (UIN). BO
must also obtain a Permanent Account Number (PAN) This should be reported in the Annual
Activity Certificate (AAC) that BO required to present at end of each ear show that the activities are
undertaking in the permitted categories only.
 Company has to ‘conspicuously’ exhibit outside office, the company’s name The name must be in
English and locallanguage

& Labour Laws
88
PROCEDURE FOR ESTABLISHMENT OF BO/LO/PO
1. Submission of Form FNC: Application may be submitted in Form FNC to a designated AD Category
- I bankFollowing are the prescribed documents:
- Certificate of Incorporation Memorandum of Association and Articles of Association
- Audited Balance sheet
- Power of Attorney in favor of signatory of Form FNC
2. Allotment of Unique Identification Number (UIN): before issuing approval letter AD Category-I
bank shall forward copy of the Form FNC for allotment of Unique Identification Number (UIN) to
each BO/ LO.
3. Issue of Approval letter: After receipt of UIN from Reserve Bank AD I bank shall issue approval
letter
4. Intimation to Designated AD Category I bank: applicant shall inform designated AD Category I
bank date onwhich the BO/LO/ PO has been set up
5. Extension for setting up office: in case BO/LO/ PO not opened within six months from the date of
the approval letter the approval shall lapse. AD Category-I bank may consider extension for six
months. Anyfurther extension of shall require prior approval of Reserve Bank of India.
6. BO/LO by foreign banks and insurance companies: applications for establishing a BO/LO in India
by foreign banks and insurance companies will examined by Department of Banking Regulation
(DBR), Reserve Bank of India and Insurance Regulatory and Development Authority (IRDA),
respectively.
OPENING OF BANK ACCOUNT BY BO/LO/PO

& Labour Laws
89
SBI & LL
Extension of validity period of the approval of LO and PO
I) Designated AD Category - I bank may extend validity period of LO/s for a period of 3 years if
applicantcomplied with following conditions
(a) LO should have submitted Annual Activity Certificates
(b) Account of LO maintained with designated AD Category-I bank is being operated in
accordance withterms and conditions
II) Entities engaged in construction and Non- Banking Finance Companies are permitted to open a
liaison office for two years only. No further extension
APPLICATION FOR ADDITIONAL OFFICES AND ACTIVITIES
(a) If number of offices exceeds it shall require prior approval of RBI.

(b) Applicant may identify one of its offices as Nodal Office, which will coordinate activities of all of
its offices inIndia.
(c) Whenever existing BO/LO is shifting to another city in India, prior approval from the AD Category-
I bank isrequired.

& Labour Laws
90
REMITTANCES OF PROFITS/ SURPLUS
CLOSURE OF BO/PO/LO
1. Submission of request for closure: application for winding up may be submitted along with
followingdocuments:
- Copy of Reserve Bank’s/AD Category-I bank’s approval
- Auditor’s certificate
- no legal proceedings in any Court in India pending against BO / LO/ PO
- report from Registrar of Companies regarding compliance
- other document/s, specified by Reserve Bank of India / AD Category- I bank
2. Remittance of winding up proceeds: AD Category-I bank may allow remittance of winding up
proceeds in respect of offices of banks and insurance companies, after obtaining copies of
permission of closure

& Labour Laws
91
SBI & LL
Setting Up Of Business Outside India &
Issues Relating Thereto
11 SETTING UP OF BUSINESS OUTSIDE

Chapter
INDIA AND ISSUES RELATING THERETO
INTRODUCTION
• The year 1991 was the golden year for Indian economy foreign investment policies opened gates
for foreign investments to enter the Indian Territory.
• Till 1991, India’s economic integration with the rest of the world was very limited.
• The policy on Indian investments overseas was first liberalised in 1992. Under this policy, an
Automatic Route for overseas investments was introduced with restrictions on the total value
• The introduction of Foreign Exchange Management Act in the year 1999 changed the entire
perspective on foreign exchange particularly those relating to investment abroad
• “Overseas Direct Investment” or “ODI” means investment by way of acquisition of unlisted equity
capital of aforeign entity, or subscription as a part of the memorandum of association of a foreign
entity, or investment in ten per cent, or more of the paid-up equity capital of a listed foreign
entity or investment with control where investment is less than ten per cent of the paid-up equity
capital of a listed foreign entity.
LAWS /AUTHORITY GOVERNING SETTING UP OF BUSINESS OUTSIDE INDIA
• Reserve Bank of India

• Overseas Investments are prohibited unless made in accordance with the FEMA Act,
FOREIGN EXCHANGE MANAGEMENT ACT, 1999
• RBI has also issued the compiled FEMA (Overseas Investment) Directions, 2022 grouping the
requirements under three categories General provisions, Specific provisions and Other
operational instructions to the ADBanks.
• The changes brought about through the new rules and regulations are summarised below:
• clarity with respect to various definitions;
• introduction of “strategic sector”;
• introduction of “Late Submission Fee (LSF)” for reporting delays.
• “Strategic sector” energy and natural resources sectors such as Oil, Gas, Coal, Mineral Ores,
submarine cablestart-ups and any other sector as deemed fit by the Central Government.
OI RULES V/S OI REGULATIONS
• OI Rules provides the regulatory framework for making of overseas investment While the OI Rules
have beenframed by CG, however will be administered by the RBI
• OI Regulations: covers operational part, Financial commitment, modes of payment,
consequences of delay etc.

& Labour Laws
92
SBI & LL Setting Up Of Business Outside India &
OVERSEAS INVESTMENT
• Under the erstwhile ODI regulations, effective till August 21, 2022, there was a concept of direct
investmentoutside India in JV and WOS that excluded portfolio investment and FC.
• OI Rules define Financial Commitment and term Overseas Portfolio Investment (‘OPI’).
• “Financial commitment” means aggregate amount of investment by way of ODI, other than
Overseas Portfolio Investment (OPI) An Indian entity may lendin debt instruments issued by a
foreign entity includingoverseas Step down Subsidiaries subject to the following conditions:
(a) Indian entity eligible to make ODI;
(b) Indian entity made ODI in the foreign entity;
(c) Indian entity acquired control in foreign entity
• “Overseas Investment” means financial commitment and Overseas Portfolio Investment
• Overseas Investment can be made under two routes (i) Automatic Route and (ii) Approval Route
• ELIGIBILITY (ENTITIES ARE REFERRED TO AS “INDIAN ENTITY”)
- Company under the Companies Act, 2013 or
- Body Corporate incorporated by any law or
- Limited Liability Partnership under the Limited Liability Partnership Act, 2008
- Partnership Firm registered under the Indian Partnership Act, 1932
NON-APPLICABILITY
• Investments made by a financial institution in an IFSC (International Financial Service Centre)

• Acquisition or transfer of investment outside India made out of Resident Foreign Currency
Account;
• Acquisition or transfer of any investment outside India made out of foreign currency resources
held outsideIndia by person employed in India
PROHIBITIONS
1. No person resident in India shall make ODI in foreign entity engaged in –

o real estate activity;
o gambling
o dealing with financial products linked to the Indian rupee without specific approval of the
Reserve Bank.
2. Any ODI in start-ups shall be made by an Indian entity only from internal accruals and in case of
residentindividuals, from own funds
3. No person resident in India shall make financial commitment in a foreign entity that invested or
invests intoIndia resulting in a structure with more than two layers of subsidiaries

& Labour Laws
93
SBI & LL
AUTOMATIC ROUTE
• subject to prescribed limits and conditions, any overseas investment by person resident in India
shall be made in foreign entity engaged in bona-fide business activity, directly or through step-
down subsidiary special-purpose vehicle
• Step-down subsidiary, in respect of a foreign entity, has been defined as an entity in which the
foreign entityhas control
• ‘Bona-fide business activity’ defined as business activity permissible under any law in India and
the hostcountry
• Financial Commitment not exceeding USD 1 Billion and within 400% of the net worth as per the
last audited balance sheet.
APPROVAL ROUTE
• overseas investment under the automatic route, shall not be made into a company incorporated
in Pakistan
• prior approval of RBI for any FC exceeding USD 1 billion or its equivalent in a financial year even
when the total FC of the Indian Party was within the eligible limit under automatic route (i.e.
within 400% of the net worth as per the last audited balance sheet)
No Objection Certificate
• if any person resident in India who –

- Has non-performing asset (NPA);
- classified as willful defaulter
- is under investigation by investigative agencies shall obtain a No Objection Certificate (NOC)

& Labour Laws
94
SBI & LL Setting Up Of Business Outside India &
from the concerned bank, regulator or investigative agency, for making financial
commitment
• if the bank, fails to furnish the NOC within 60 days an NOC may be presumed to ‘deemed consent’
METHOD OF FUNDING
• A person resident in India making Overseas Investment may make payment –

(i) by remittance made through banking channels;
(ii) funds held account maintained accordance with the provisions of the Act;
(iii) swap of securities;
(iv) using the proceeds of American Depository Receipts or Global Depositary Receipts or
externalcommercial borrowings
• It is further provided in the OI Directions that:
1. Overseas investment by way of cash is not permitted.
2. Indian entity can make remittances office/branch outside India only for normal business
operations
3. person resident in India shall not make any payment on behalf of foreign entity other than by
way offinancial commitment
4. investment/financial commitment in Nepal and Bhutan shall be done in a manner as provided
in ForeignExchange Management (Manner of Receipt and Payment) Regulations, 2016
FOREIGN DIRECT INVESTMENT POLICY
• The (DPIIT) is the nodal Department for formulation of the policy of Foreign Direct Investment
(FDI).
• DPIIT plays an active role in the liberalization and rationalization of the FDI policy
Reporting requirements
• Person resident in India who has made ODI or financial commitment in foreign entity shall report
following,
- financial commitment
- disinvestment within thirty days of receipt of disinvestment proceeds;
- restructuring within thirty days from the date of such restructuring
• Person resident in India other than resident individual making Overseas Portfolio Investment
(OPI) or shall report such investment or transfer of investment within sixty days from end of the
half-year OPI by way ofacquisition of shares , the reporting shall be done by the office in India
• Annual Performance Report (APR): Person resident in India acquiring equity capital in a foreign
entity shall submit an APR to foreign entity every year by 31st December and where accounting
year ends on 31st December, APR shall be submitted by 31st Dec of next year. No APR shall be
required where-
a) A person resident in India holding less than 10% of equity capital without control in foreign
entity and there is no other financial commitment other than by way of equity capital.
b) A foreign entity is under liquidation

& Labour Laws
95
SBI & LL
An Indian entity which made ODI shall submit an Annual Return on Foreign Liabilities & Assets to
Department of Statistics & Information Memorandum, RBI.
ISSUES IN CHOOSING LOCATION OUTSIDE INDIA
Geographical Location of the business
• Infrastructure (ports, airports

• Access (transportation of goods, materials and personnel)
• Availability of talent pool for productions
Economic Aspects
• Ease of doing business: entering, establishing and closing the business

• Cost of doing business: return on investment
• Laws relating to labour and Quality of labour force
• Laws relating to taxation: repatriation of profits double-taxation avoidance agreements
• Incentives: Local, regional state economic development incentives available to help the company
lowerproject costs
Political Aspects
• Friendly country, MFN status

• relations with nearing countries and neighbours
Social Aspects
• Trade bodies
Technological Aspects
• Intellectual property protection: create, maintain and extract IP

• Power, communication, telecom – availability, quality and cost issues like infrastructure,
geography, political considerations/conditions.

& Labour Laws
96
SBI & LL Identifying Laws Applicable to Various Industries
& Their Initial Compliances
IDENTIFYING LAWS APPLICABLE TO

12
Chapter
VARIOUS INDUSTRIES AND THEIR INITIAL
COMPLIANCES

& Labour Laws
97
SBI & LL
Identifying Laws Applicable to Various Industries

& Labour Laws
98
SECTION 8 COMPANY
Exemptions Granted to section 8 companies
• General Meetings at shorter notice period 14 days

• Recording of Minutes of the Meeting not required
• Audited Financial Statements sent before14 days to the members
• No maximum limit of 15 directors
• No Appointment of Independent Director
• One Board Meeting within six months
• No appointment of Company Secretary
PARAMETERS FOR DECIDING BUSINESS STRUCTURE
The parameters for deciding the business structure are listed below:-
• Control & Management
• Capital Investments
• Liability Threshold & Personal Risk
• Tax Obligation
• Licenses, Permits, & Regulations
• Attracting Investors
FORMATION OF A COMPANY
(i) Apply for Director Identification Number (DIN)

(ii) Apply for Digital Signature Certificate (DSC)
(iii) Filing for New User Registration
It is important to get registered on the MCA portal.
(iv) Application for Company Name
(v) Filing for Charter Documents applicants are required to create charter documents like (MOA) and
(AOA).

& Labour Laws
99
SBI & LL
(vi) Stamping of Company Documents

(vii) Certificate of Incorporation
Documents required for Company Registration
Documents of the Directors and Shareholders of the company/ Partners of the LLP
Proof of identification
- Pan card
- Aadhar card
- Driving license
- PassportProof of addres
- Latest telephone bill (not older than 2 months)

- Latest electricity bill
- Bank account statement Documents of the Company/LLPProof of registered office
APPLYING FOR BUSINESS LICENSES
1. Employee’s State Insurance Registration
• Self-financing social security and health insurance scheme for Indian workers.it offers an
economic & medicalassurance to workers and its dependents.
• ESI Registration is mandatory for employers having 10 or more employees. For all
employees earningRs.25,000 or less per month as wages
2. EPF Registration: S ocial security legislation for the future benefit of employees & their
dependents, Every establishment which is a factory engaged in any industry in which 20 or more
person is employed.
3. GST Registration: GST Registration is mandatory for every business
4. Udyam Registration: there are several advantages to registering, including government credit
programmes,subsidies, etc

& Labour Laws
100
5. FSSAI Registration
• This is the national authority for ensuring the safety and standardization of food items in
India.
• License or registration is divided into three categories namely:
a) FSSAI Central License
b) FSSAI State License
c) FSSAI State Registration
6. Import Export Code: Export and import businesses require a special license known as the
Import Export Code, which the Directorate General of Foreign Trade (DGFT) issues
7. Trade License
A sole proprietorship can obtain a trading license in the same manner as a traditional shop
under the Shopand Establishments Act
8. Licenses needed for an Indian Factory: Under the Factories Act of 1948, registration is required
to operate a factoryin India
Understanding Taxation and Accounting Laws
There are a broad variety of taxes, such as, GST state tax and even local taxes that may be
applicable forcertain businesses.
ADHERING TO LABOUR LAWS
Objective of the Labour Laws
 Productive Work & Adequate Earning

 Proper Working Hours
 Security to the Employees
 Work-Life Balance
 Secure Working Environment
 Sickness and Accident benefits to the employees
 Social Security
 Labour Welfare
 Fair Treatment in the Workplace
 Prevention of Children at Work
 Forced Labour
Some major labour laws applicable are:
 The Industrial Disputes Act, 1947

 The Contract Labour (Regulation and Abolition) Act, 1970
 The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
 The Employees’ State Insurance Act, 1948
 The Factories Act, 1948.

& Labour Laws
101
SBI & LL
Adherence to Laws relating to Intellectual Property
 The twenty-first century witnessed the emergence of “Intellectual Capital” as a key wealth driver
of international trade between countries, thanks to rapid globalization and liberalization of
economies the world over.
 The TRIPS agreement has made way for the harmonization of Indian laws connected with
IntellectualProperty Rights
Ensuring Effective Contract Management
 Contracts lie at the crux of running any business. As per the Indian Contract Act, 1872, all
agreements are contracts if they are made by the free consent of parties competent to contract,
for a lawful consideration with a lawful object, and are not expressly declared to be void.
 Employee contracts one of the most crucial aspects while starting a venture.
 Contract management involves overseeing agreements made with suppliers, customers, partners
and employees.
LAWS RELATING TO INDUSTRIES SPECIFIC LAWS
Trading & Retail Industry
List of laws that are specifically applicable to trading and retail industries:-
 The Trade Marks Act, 1999;
 The Patents Act, 1970;
 The Indian Copyright Act, 1957;
 Shops and Establishment Act & Rule (State wise);
 The Food Safety & Standard Act, 2006;
 The Consumer Protection Act, 2019
Start-ups
List of laws that are specifically applicable to Startups:-

 Shop and Establishment Act, (State-wise);
 Environment and Protection Act, 1986;
 Competition Act, 2002;
 The Consumer Protection Act, 2019
 The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act,
2013.
Non-Banking Financial Company (NBFC)

List of laws that are specifically applicable to NBFCs:-
1- Reserve Bank of India Act, 1934

2- Prevention of Money Laundering Act, 2002;3- The Competition Act, 2002;

& Labour Laws
102
Pharma Industry
List of laws that are specifically applicable to Pharma Industries:-

 The Food Safety and Standards Act, 2006;
 The Narcotic Drugs and Psychotropic Substances Act, 1985;
 The Drugs and Cosmetics Act, 1940
 The Water (Prevention and Control of Pollution) Act, 1974;
 The Environment (Protection) Act,1986 and allied rules;
 The Rights of Persons with Disabilities Act, 2016;
 Trademarks Act, 1999;
 The Patents Act, 1970;
Banking Industry
List of laws that are specifically applicable to Banking industries:-

 Banking Companies (Acquisition and Transfer of Undertakings)
 Banking Regulation Act, 1949
 Transfer of Property Act, 1882;
 Negotiable Instruments Act, 1881;
 Sale of Goods Act, 1930;
 The Shops and Establishments Act, 1953;
 Indian Contract Act, 1872;
Insurance Industry
List of laws that are specifically applicable to Insurance industries:-

 Insurance Act, 1938
 Insurance Regulatory and Development Authority (IRDAI) Act, 1999;
 State Shop and Establishment Act;
 Prevention of Money Laundering Act, 2002;
Real Estate Companies
 Real Estates (Regulations & Development) Act, 1916

 Environment (Protection) Act, 1986;
 The Air (Prevention and Control of Pollution) Act, 1981;
 The Water (Prevention and Control of Pollution) Act, 1974;
 The Electricity Act, 2003;
Telecom Industry
List of laws that are specifically applicable to Telecom industries:-
 Telecom Regulatory Authority of India Act, 1997

 Information Technology Act, 2000;

& Labour Laws
103
SBI & LL
Information & Technology Industry
List of laws that are specifically applicable to Information & Technology industries:-
Media and Communication Industry
 The Right to Information Act, 2005;

 The Information Technology Act, 2000;
 The Telecom Regulatory Authority of India Act, 1997;
 Copyright Act, 1957;
Infra Industry
List of laws that are specifically applicable to Infra industries:-
 Building and other Construction Workers’ Welfare Cess Act, 1996;

 Contract Labour (Regulation and Abolition) Act, 1970 and the Rules thereunder;
Environment Laws
 Water (Prevention and Control of Pollution) Act, 1974

 Air (Prevention and Control of Pollution) Act, 1981;
 Environment (Protection) Act, 1986;
 The Public Liability Insurance Act, 1991;
 The National Green Tribunal Act, 2010;

& Labour Laws
104
SBI & LL
- By CS Kirti Chaturvedi Various Initial Registrations & Licenses
13 VARIOUS INITIAL REGISTRATIONS AND

Chapter
LICENSES
INTRODUCTION
A business entity is required to secure various registration and licenses in order to set up its businesses
in India.
Business Entity Registration
MANDATORY REGISTRATION
PAN
PAN is a Permanent Account Number and is a vital document for any taxpayer. 10-character
alphanumeric numberUtility of PAN:
 Helps identify the income tax payer.
 Serves as an identity proof
For whom it is mandatory to obtain PAN:
 Every person
 Charitable trust
 Person carrying business or profession whose turnover, exceed five lakh rupees in any year
 All non-individual resident persons if the financial transaction during financial year exceeds Rs.
2,50,000
Significance of PAN for Setting up of Business
 It was made mandatory by the Government of India under the Income Tax Act, 1961.
 In the absence of the PAN Government will charge withholding tax at rate more than 30% of total
invoicedpayment
 It serves as a reference number for Income Tax Department to track financial transactions
 Even if not required to pay income tax it is mandatory for him to hold a PAN if earning money

& Labour Laws
105
SBI & LL
Various Initial Registrations & Licenses - By CS Kirti Chaturvedi
Application and Registration of PAN
 Application for PAN can be made both online and offline Indian citizens to submit Form 49A
Foreign citizenssubmit Form 49AA
 Online application made either through NSDL or UTITSL
 Charges for applying for Pan is Rs. 93 for Indian communication Rs. 864 for foreign
TAN
Tax Deduction Account Number or Tax Collection Account Number is a 10 -digit alpha-numeric number
Persons liable to apply for TAN
Every person liable to deduct tax at source or collect tax at source
Procedure to Apply for TAN
There are two modes for applying for TAN:
 OFFLINE - in Form 49B and submitted to TIN-Facilitation Centre (TIN-FC) of NSDL

 ONLINE from the website of NSDL TIN website.
Form 49B is freely downloadable from the website of Income-tax Department

Applicants may track the status of TAN application using 14-digit unique Acknowledgment Number Fee
for filing the TAN application + GST as applicable may change from time to time.
GST REGISTRATION
Mandates the Registration of every supplier of goods whose turnover exceeds INR 40 Lakhs in a financial
year.
For special category states such as north eastern states, Jammu and Kashmir, Himachal Pradesh and
Uttarakhand, the threshold limit is INR 10 lakhs threshold limit for service providers is INR 20 Lakhs
across India and in case of special category states is INR 10 lakhs
Persons not liable to register
 Persons not liable to tax;

 Persons engaged in business of supplying goods or services or wholly exempt from tax;
 Agriculturist, to the extent of supply of produce from land cultivation;
Compulsory registration
 persons making any inter-State taxable supply;

 casual taxable persons;
 persons taxable under reverse charge;
 non-resident taxable persons;
 Suppliers who supply goods through electronic commerce operators;
 every electronic commerce operator

& Labour Laws
106
SBI & LL
GSTIN
GST is based on Permanent Account Number and State specific.
Procedure for Registration
1. Login to (www.gst.gov.in)
2. Applicant to submit form GST REG-01 on GSTN Portal
3. On completing OTP verification, a Temporary Reference Number (TRN) will be generated
4. Form GST REG-03 will be issued, if additional information required Applicant shall respond in
Form GST REG-04Within 7 working days
5. Registration certificate in Form GST REG-06 will be issued or else rejected in Form GST REG-05
 Where person fails to undergo authentication Aadhaar number registration shall be granted
only after physicalverification of principle place of business
 In case of deficiency concerned officer may issue a notice within a period of three working
days
 Where proper officer is satisfied with the clarification, may approve within seven working
days
If proper officer fails to take any action, -
(a) within a period of three working days from date of application; or

(b) within a period of seven working days from date of clarification, the registration shall be deemed
to havebeen approved.

& Labour Laws
107
SBI & LL
Composition Scheme under GST
The composition levy is an alternative method of levy of tax designed for small taxpayers whose
turnover is up to Rs. 1.5 Crores under this scheme can pay tax at a prescribed percentage of his
turnover every quarter, instead of paying tax at normal rate
Persons not eligible for Composition Scheme
 supply of goods not liable to taxed

 inter-State outward supplies
 supplies through electronic commerce operators
 person registered as TDS Deductor/Tax Collector.
The floor rate of tax for CGST and SGST are as
Registration under the Act in special cases:
 Non-resident taxable persons
a. Person who occasionally undertakes supply of goods or services but who has no fixed place
of business or residence in India. someone who has a business outside India, but comes to a
different state for a business purpose temporarily.
b. For example, a person from Paris, comes to participate in an exhibition at Mumbai he will
be granted registration for a maximum period of 90 days.
c. Non-resident taxable person shall submit application, at least five days prior to the
commencement of business
 Suo moto registration
Pursuant to any enquiry, inspection, proper officer finds a person liable to registration has failed
to apply forregistration, may register on a temporary basis
 Casual Taxable Person
a. Person who occasionally undertakes supply of goods or services in a State or a Union

territory where he has no fixed place of business. Thus, a casual taxable person is someone
who has a business in a different state, but comes to a different state for a business
purpose temporarily.
b. For example, a footwear dealer registered in Agra comes for an exhibition at Mumbai he
will be granted registrationfor a maximum period of 90 days.

& Labour Laws
108
SBI & LL
Important points:
Furnishing of Bank Account Details- After certificate of registration has been made available Goods and
Services Tax has been assigned, furnish information with respect to details of bank account. on the
common portal
Display of registration certificate and GSTIN on the name board:
Every registered person shall display certificate of registration at his principal place of business Every
registered person shall display Goods and Services Tax Identification Number on name board
REGISTRATION UNDER SHOPS & ESTABLISHMENTS ACT
Key Definitions:
“Shop” any premises where
(i) goods are sold, either by retail, wholesale

(ii) services rendered
“Commercial Establishment”: means
Premise where trade, business, is undertaken, may include society trust, contractors educational
institutes, banking, restaurants and eating houses, residential hotels, clubs, theatres and other places of
public amusement
However, factories are not covered by the shops & establishments Act and are regulated by the
Factories Act, 1948.
Registration of Shops & Establishments
1- Submit application in the prescribed form within 30 days of starting any work in the
shop/establishment.
2- Upon receiving application and the fees, the Inspector shall verify the accuracy and correctness
Registration certificate to be prominently displayed at the establishment.
ESI REGISTRATION
1. Employee State Insurance (ESI) is a social security scheme offered by the Government of India as per
the Employees’State Insurance Act, 1948.
2. It is a self-financing scheme i.e contribution from both Employees and Employers for protection of
Employees against sickness, maternity, disablement and death due to employment injury .
3. The ESI Scheme applies to factories and other establishment’s wherein 10 or more persons are
employed.
Applicability
 All non-seasonal factories employing 10 or more persons

& Labour Laws
109
SBI & LL
 Shops, Hotel, Restaurants, Cinema Private Medical Institutions, Educational Institutions

employing 10 or morepersons where State Government is appropriate government.
 20 or more Persons where the Central Government is appropriate government.
Wage Limit for Registration
Employees drawing wages upto Rs.21,000/- per month, cover under the ESI Act. For Disabled persons,
Rs.25,000/- per month. Employee contribution: 0.75% of total salaries. Employer Contribution: 3.25% of
total wages.
ESI Registration Procedure for both Employer & Employee
ESI Registration Procedure for both Employer & Employers
Central Government has launched Unified Shram Suvidha Portal to facilitate reporting of Inspections,
and submission of Returns. A common form for both ESIC and EPFO has been introduced Registration of
employers is fully online,
Registration of Employee
Employee has to register in ESIC Portal.
Once registered, registration can be transferred if the employee switches the organization and takes up
employmentelsewhere
EMPLOYEE PROVIDENT FUND MEANING AND REGISTRATION PROCEDURE
To provide financial stability and security in the form of post-retirement benefits and insurance to the
employeeswhen they are temporarily or no longer fit to work,
Compulsory Registration-
 Registration mandatory for an establishment

 Factory having 20 or more persons
Voluntary Registration
 Establishment with less than 20 employees

 Employer must obtain the registration within 1 month of touching mandatory registration
threshold
 Government of India launched “Shram Suvidha Portal ” to facilitate Establishments to submit
application forRegistration/License
 Every employee is issued Universal Account number by EPFO towards the contribution to EPF.
UAN is a 12-digitnumber for lifetime irrespective of the change in the organisation.
POLLUTION CONTROL
Entrepreneurs are required to obtain Statutory clearances relating to Pollution Control and
Environment for setting up an industrial project, from the Ministry of Environment, Forest and
& Labour Laws
110
SBI & LL
Climate Change, industries like petrochemical complexes, petroleum refineries, cement, thermal
power plants, bulk drugs, fertilizers, dyes, paper etc.
State Pollution Control Board is the concerned authority to obtain a pollution license permission is
obtained in twostages:
(i) Consent to establish (CTE)

To be obtained of construction
(ii) Consent to operate (CTO)

To be obtained before starting production activity
The Central Pollution Control Board has specified list of industries as requiring a pollution license
Industries which fall under white category are exempted from environment clearance
Procedure for obtaining NOC from Pollution Control Board:
 Application for (CTE) and (CTO) be made online onto concerned State’s pollution control board’s
websiteboard need to reply within 4 months
 If an individual fails to obtain a CTE/CTO or Pollution license, they will be subject to 6 months to 1
year ofimprisonment,
OTHER REGISTRATION AS PER REQUIREMENT OF SECTOR/ ACTIVITIES
IMPORT EXPORT CODE
 (IE Code) is mandatory for exporting or importing goods. It is a 10-digit code issued by Directorate
General ofForeign Trade (DGFT
 IE code has lifetime validity. Importers are not allowed to proceed without this code and
exporters can’t takebenefit of exports
 IE Code must be quoted by importers while clearing customs. For exporters, IE Code must be
quoted whilesending shipments. And banks while receiving money from abroad.
Application for IE Registration
 Apply on DGFT portal (https://dgft.gov.in)User should have (PAN)

 Scanned Documents for Upload in the System
 Proof of Address
 Proof of Firm’s Bank Account
 Active DSC or Aadhaar

& Labour Laws
111
SBI & LL
DRUG LICENSE
A Drug License is permission to start a pharmacy business. The Central Drugs Standard Control
Organization and State Drugs Standard Control Organization control the issue of drug license Drug
license is usually under purview of State Drugs Standard Control Organization. two types of licenses
 Retail Drug License (RDL)
 Wholesale Drug License (WDL)
Retail drug only issued to persons who possess degree or diploma in pharmacy But this condition is
relaxed in case of Wholesale Drug license (WDL).
Prerequisites for obtaining Drug License
1. Area: The minimum area of 10 square meter In case, combines retail and wholesale, a minimum of
15 square meteris required
2. Storage Facility: must have refrigerator & air conditioner drugs like vaccines, insulin injections
required to be storedin the refrigerator
3. Technical Staff:
(a) Wholesale – sale shall be made in presence of registered pharmacist or competent person
graduate with 1 yearexperience in dealing in drugs
(b) Retail – sale made in the presence of registered pharmacist throughout the working hours.
FSSAI (Food Safety and Standards Authority of India)
 FSSAI is an acronym for Food Safety and Standards Authority of India autonomous body created
regulate food-related issues in India.
 The manufacturers, traders, restaurants who involved in food business must obtain a 14-digit
registration or a license number

& Labour Laws
112
SBI & LL
FSSAI Registration
Registration is required for all petty food business operators. Petty food business operator who:
(a) Sells food himself or a petty retailer, hawker, itinerant vendor or temporary stall holder; or
(b) Distributes foods in religious or social gathering except a caterer; or
(c) Other food businesses with annual turnover not exceeding Rs. 12 lakhs and whose:
 Production capacity (other than milk and meat products) does not exceed 100 kg/ltr per day
 Procurement or handling of milk is up to 500 litres of milk per day
 Slaughtering capacity is 2 large animals or 10 small animals or 50 poultry birds per day or
less.
Petty food business operators are required to obtain a FSSAI registration
FSSAI License
(i) State FSSAI License-needed for small to medium sized Food Companies which has an annual
turnover of Rs. 12 Lakhs – Rs 20 Crores.
(ii) FSSAI Central License: mandated for all Food giants with annual turnover of more than Rs. 20
Crores
FSSAI license application made by applying online on FoSCoS portal.
FSSAI license is granted for 1 to 5 years as request by food business operator license can be renewed no
later than30 days prior to the expiry date of the FSSAI license.
NON-BANK FINANCE COMPANY REGISTRATION
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act,2013
engaged in the business of loans and advances, receiving deposits acquisition of stocks or shares,
leasing, hire-purchase, insurance business, chit business. NBFCs are doing functions similar to Banks but
they differ from Banks which are as follows:
Differences between banks and NBFCs:
a) NBFC cannot accept demand deposits,

b) NBFCs cannot issue cheques drawn on itself, and
c) NBFC depositors are not covered by the Deposit Insurance and Credit Guarantee Corporation.
BANKING
Licensing of Banking Companies is governed by Banking Regulation Act, 1949. entity must be a
company registeredunder the Companies Act, 2013 or previous company or a foreign company
Minimum paid-up voting equity capital for a bank shall be 500 Crore Rupees for universal banks
and 200 CroreRupees for small finance banks.
& Labour Laws
113
SBI & LL
No banking company is allowed to carry on its business unless it satisfies the following conditions:
1. Subscribed capital not less than one-half of its authorized capital;
2. Paid-up capital not less than one-half of the subscribed capital;
3. Capital of the company consists of ordinary shares, equity shares and preference shares:
4. No person shall have voting rights of above 10%
5. Every company before commencing banking business shall apply in writing to the Reserve Bank
for a License
6. Before granting any license Reserve Bank may require to be satisfied that following conditions are
fulfilled,
(a) company position to pay its present or future depositors in full

(b) affairs of the company not being conducted in manner detrimental interests of its present
or future depositors;
(c) proposed management will not be prejudicial to the public interest of its present or future
depositors;
(d) company has adequate capital structure
(e) any other condition,
IRDA (INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY)
(1) The classes of business of insurance
(i) Life insurance business;

(ii) General insurance business;
(iii) Health insurance business exclusively;
(iv) Reinsurance business.
(2) Applicant means a public company or a statutory body established by Act of Parliament
(3) Applicant shall make a requisition for Life or General or Health or Reinsurance Business.
(4) Capital Requirement
(a) Minimum equity capital to set up General or Health Insurance Company INR 100 crore.
(b) In case of Reinsurance company, minimum of INR 200 crore.
Who cannot apply
a. Where application has been rejected by Authority
b. Where foreign investors have exit during preceding 2 financial years.
c. Application has been rejected during preceding 2 financial years.
d. Where Certificate of Registration cancelled by the Authority.
e. Name of the applicant does not contain the words ‘insurance’ or ‘assurance’.

& Labour Laws
114
SBI & LL
Procedure for Registration of Insurance Company
Grant of certificate of registration
 Authority grant the applicant certificate in Form IRDAI/R3.

 Commencement of Insurance Business: applicant granted the Certificate of
Registration shall commenceinsurance business within 12 months of grant of
Certificate of Registration.
 No extension of time shall be granted by the Authority beyond 24 months from the date
of grant of Certificate ofRegistration.
INDUSTRY LICENSING POLICY
No person or authority shall establish any new industrial undertaking, except with a license issued
Section 11A of the Act makes it mandatory to obtain license for producing or manufacturing new
articles.
Since the liberalization most industries have been exempted from obtaining industrial license to start
manufacturingin India.
Industrial license is made compulsory only for the following:
 Alcoholics drinks
 Cigarettes and tobacco products
 Electronic aerospace and defense equipment
 Explosives
 Hazardous chemicals

& Labour Laws
115
SBI & LL
Locational restrictions
Industrial undertakings to be located within 25 kms urban area limit of 23 cities having a population of 1
million.
To create a business and Investor friendly environment, DPIIT developed G2B Portal to file Industrial
EntrepreneursMemorandum (IEM) as well as Industrial License
IEM (Industrial Entrepreneur Memorandum)
a. All industrial undertakings exempted from the requirements of industrial licensing, and
b. Investment in plant and machinery of Rs 50 Crore, and
c. Turnover of Rs. 250 crore and above,
d. Including Existing Units, New undertaking (NU)
may file an IEM online.
On-line applications filed through the portal scrutinized for verification verified and found correct;
Departmentelectronically issues IEM Ack. to the applicant.
Acknowledgement is prima facie evidence of not attracting provisions of licensing.
TELECOM LICENSE
Business entities which provide internet services or engaged in commercial communications i.e., call
center, BPO, Tele-education, Tele-banking, tele networking, e-commerce and other IT enabled services
who are catogerised as ‘Other Service Providers’(OSP) must obtain a telecom license from Department
of Telecommunication (DoT) under Government of India, Ministry of Communications and Information
Technology,
OSP categorized into two types:
1. Domestic OSP providing services to clients within India
2. International OSP providing services to clients outside India
PROCESS
Company registered under Companies Act, 2013 or previous law or LLP or Partnership Firm eligible to
obtain OSPlicense. OSP license is valid for a period of 20 years and can be extended for further period of
ten years.
STATE LEVEL APPROVAL FROM THE RESPECTIVE STATE INDUSTRIAL DEPARTMENT
Apart from the registration and licences listed above, one has to seek state level approval (s) from the
respectiveState Industries Department.

& Labour Laws
116
SBI & LL
14 CONSTITUTION AND LABOUR LAWS

Chapter
INTRODUCTION
The Constitution of a country is the fundamental law of the land. It is under this fundamental law that all
other laws are made and executed. Every organ of the state, be it the executive or the legislative or the
judiciary, derives its authority from the Constitution and there is no authority, no department or branch
of the State, which is above the Constitution or has been vested with unfettered and unrestricted
powers by the Constitution.
The trinity of Indian Constitution, the Preamble, the Fundamental Rights and Directive Principles of the
State Policy embody the fundamental principles which provide guide to all legislations including the
labour legislations
CONSTITUTIONAL BEARING ON INDUSTRIAL LAWS AND INDUSTRIAL RELATIONS
Further, goals and values to be secured by labour legislation and workmen have been made clear in Part
IV, Directive Principles of the State Policy of the Constitution.
Constitution and Labour

& Labour Laws
117
SBI & LL
Constitution and Labour Laws - By CS Kirti Chaturvedi
SOCIAL JUSTICE AND INDUSTRIAL LAWS
The Preamble of the Constitution highlights the concept of socio-economic justice, Article 38 of the
Constitution provides the concept of social justice to promote the welfare of the people
Social justice does not mean that all wealth should be shared equally provision of basic minimum to all
in response to life. “The State has constitutional responsibilities and the citizens have moral
responsibility to create an ideal society to live in”.
Industrial laws are socio-economic justice oriented
The laws particularly the industrial laws of the country revolve on this basic philosophy of the
Constitution.
The concept of social justice aims at assisting the removal of social economic disparities and finding a
just, fair and equitable solution to their human relation problem, peace, harmony prevails among them
which may further the growth of nations.
Constitutional Limitations
The fundamental rights are envisaged with the overall object of protecting individual liberty and
democratic principles based on equality of all members of society. Therefore, the State cannot make
laws inconsistent with the fundamental rights. Any law that contravenes fundamental rights will be void
to the extent of inconsistency.
CONSTITUTIONAL REMEDIES
Article 32 and 226 of the Constitution confers writ jurisdiction on Supreme Court and High Courts
respectively for enforcement and protection of fundamental rights of an individual.
The Supreme Court is with discretionary jurisdiction to entertain appeal under Article 136 from decree,
sentence, or order passed by any court or tribunal in India. Person aggrieved by an award of the High
Court can appeal to the Supreme Court under Article 132.
Can a Trade Union move the High Court under Article 226 to redress the fundamental rights of its
members?
Jaipur Division Irrigation Employees Union v. State of Rajasthan large number of the employees were
declared surplus. Union challenged it in this writ petition. Single Bench held that petition not
maintainable holding that the fundamental rights of the individual are not the rights of the union.
S.P. Gupta and Ors. v. President of India and Ors. the question of locus standi was discussed and legal
injury is caused to a person or class of persons by right and such person is by reason of poverty,
helplessness or socially or economically disadvantageous position, unable to approach the Court for
relief, any member any member of the public can maintain an application for an appropriate direction,
order or writ in the High Court or in the Supreme Court seeking judicial redress for the legal wrong.

& Labour Laws
118
SBI & LL
- By CS Kirti Chaturvedi Constitution and Labour Laws
FUNDAMENTAL RIGHTS AND INDUSTRIAL RELATIONS
Articles 12 to 35 of the Constitution pertain to Fundamental Rights of the people. The Indian
Constitution guarantees essential human rights in the form of Fundamental Rights under Part III and also
Directive Principles of State Policy in Part IV. The need for protecting and safeguarding the interest of
labour as human beings has been enshrined in Article 14, 16, 19, 21, 23 and 24.
Article 14: Equality before law
“The State shall not deny to any person equality before the law or the equal protection of the laws
within the territory of India.”
Article 14 bars discrimination and prohibits discriminatory laws. Also ‘equal protection of the laws’.
Air India v. Nargesh Meerza Indian Airlines regulations was in question that an air Hostess will retire
from service upon age of 35 years or marriage within 4 years Service or on first pregnancy, but
managing director had the discretion extend age of retirement. It was held that retirement on ground
of pregnancy was unreasonable and it was in violation of Article 14.
Article 16: Equality of opportunity in matters of public employment
1. equality of opportunity relating to employment to any office under the State
2. No citizen on grounds only of religion, race, caste, sex, descent, place of birth, residence
discriminated against any employment or office under State.
3. Nothing in this article shall prevent Parliament from making law prescribing, appointment to
an office any requirement as to residence within that State prior to such appointment.
4. Nothing shall prevent State from making provision for reservation of appointments favor of
backward class adequately represented in the services.
5. Nothing shall affect law which provides incumbent of an office in religious institution hall be a
person professing a particular religion.
Mewa Ram Kanojia vs. All India Institute of Medical Sciences and Ors. “The doctrine of ‘Equal Pay for
Equal Work’ is not an abstract one, it is open to the State to prescribe different scales of pay for
different posts ‘Equal Pay for Equal Work’ is applicable when employees holding same rank perform
similar functions are treated differently.
Article 19(1)(c) of the Constitution: Right to form Association & Union
State may by law impose reasonable restrictions on this right in the interest of public order or morality
and integrity of India. It thus includes Right to form companies, societies, partnership, trade union and
political parties. The freedom to form implies freedom to join or not to join, an association
All India Bank Employees vs. National Industrial Tribunal the court held: Lack of bargaining power in
workmen as compared with employers is the reason for the existence of labour organizations and there
is consequently a fundamental right to form unions. Government is empowered in event of industrial
dispute which lead to a strike or lock-out to refer the dispute to an impartial Tribunal for adjudication
& Labour Laws
119
SBI & LL
with a provision banning illegal strikes. The provision of an alternative to a strike in the shape of
industrial adjudication is a restriction on the fundamental right to strike would be reasonable and valid if
it were an effective substitute.”
Damyanti Naranga v. The Union of India right to form association implies right to voluntarily admit in
the association. right can be effective only if include right to continue association with its composition
voluntarily agreed by persons forming association.
Article 21 of the Constitution: Right to Life

“No person shall be deprived of his life or personal liberty except according to a procedure established
by law.”
The term ‘personal liberty’ given covering variety of rights Its deprivation shall only be as per in law.
Right to life includes aspects which make man’s life meaningful and worth living.
Regarded as the heart of Fundamental Rights —
1. Directive Principles become enforceable.

a) Right to livelihood
b) Right to live with human dignity
c) Right to medical care
d) Health of labour
e) Sexual harassment
f) Right to health
 Olga Tellis & Ors v. Bombay Municipal Corporation the main argument is that if they are
evicted from slum dwellings, their eviction is deprivation of their life and is unconstitutional.
Question is whether the right to life includes the right to livelihood. It does not mean merely
imposition of the death sentence, but equally important facet is night to livelihood because, no
person can live without the means of living.
 Right to work is the most precious liberty enables a man to live and the right to life is a precious
freedom.
 D.K. Yadav v. J.M.A. Industries Ltd the court held: “Article 21 clubs life with liberty, dignity of
person with means of livelihood without which dignity of person would be reduced to animal
existence. Therefore, before putting an end to the tenure of employee that a reasonable
opportunity to put forth his case is given complying with principles of natural justice.
 Paschim Banga Khet Mazdoor Samity v. State of West Bengal mazdoor fell from a running
train and seriously injured. sent from one government hospital to another finally admitted in a
private hospital where incur expenditure of Rs. 17,000/- Court ruled that: “the Constitution
envisages establishment of a welfare state, and primary duty of government to provide
medical facilities. Art. 21 imposes an obligation on State to safeguard right to life of every
person.
 Vishakha & Ors. v. State of Rajasthan (1997) hereby a woman was assaulted harassed at her
workplace, Supreme Court observed: incident results in violation of ‘Right of Life and Liberty’.
(Chapter 20)
& Labour Laws
120
SBI & LL
Article 23 and Article 24: Right Against Explotion
 Traffic in human beings, begar, and other similar forms of forced labour are prohibited and
contravention of this provision shall be offence punishable in law.
 Term ‘begar’ means compulsory work without payment.
 Withholding pay of government employee as punishment held to invalid
 Expression ‘traffic in human beings, implies buying and selling of human beings and such practice is
abolished.
 The words ‘other similar forms of forced labour’ are to be interpreted ejusdem generis.
Sanjit Roy v. State of Rajasthan, it was held that when person provides labour to another for
remuneration which is less than prescribed the labour so provided falls within ambit of the words
‘forced labour’ such a person entitled to approach under writ jurisdiction for enforcement of
fundamental rights which include payment of minimum wages.
Article 24 “no child below the age of fourteen years shall be employed in actory or mine or hazardous
employment”. This emphasizes the need to protect the health of workers, and protect children against
exploitation.
M.C. Mehta v. State of T.N.: employers of children below 14 years must comply with the provisions
of the Child Labour (Prohibition and Regulation) Act providing compensation, employment of their
parents / guardians
LABOUR LAWS AND REFERENCE TO DIRECTIVE PRINCIPLES OF STATE POLICY
These principles obligate state to take positive action in certain directions to promote the welfare of the
people and achieve economic democracy. These principles give directions to legislatures and executive
as regards manner in which they should exercise their power.
Courts however do not enforce directive principle in Part IV unlike rights enshrined in Part III.
Constitution declares that the Directive Principles, not enforceable by any Court, are ‘fundamental’ the
‘state’ under obligation to apply them in making laws. Articles 38, 39, 41, 42 and 43 have a special
relevance in the field of industrial legislation they are the substratum or rather ‘magna carta’ of
industrial jurisprudence.
Social Order Based on Socio-Economic Justice
Article 38(1) directs state “to promote the welfare of the people by securing and protecting as a social
order in which justice, social, economic and political, shall inform all the institutions of the national life.”
Article 38(2) directs state “to minimise the inequalities in income, Supreme Court has concluded in
Consumer Education & Research Centre v. Union of India that “right to health, medical aid to protect
the health and vigour of a worker while in service is a Fundamental Right
Equal Pay For Equal Work
a) all citizens, irrespective of sex, equally have the right to an adequate means of livelihood

& Labour Laws
121
SBI & LL
b) ownership and control of the material resources subserve the common good;
c) economic system does not result concentration of wealth
d) equal work for both men and women;
e) health and strength of workers, not abused
f) children given opportunities and facilities to develop in a healthy manner.
 Randhir Singh v. Union of lndia Supreme Court held that doctrine of equal pay for equal work is
equally applicable to persons employed on a daily wage basis. However, cannot be put in a strait
jacket. Accordingly, it has been held that different scales of pay in the same cadre of persons can
be fixed if there is difference in the nature of work done and as regards reliability and
responsibility.
 Dhirendra Chamoli and Anr. v. State of U.P. Court stated: employees accepted employment with
full knowledge that they will be paid only same salary as other Class IV employees, employees
who are in the service must same salary as Class IV employees. It makes no difference whether
appointed in sanctioned posts or not. So long as they are performing the same duties, they must
receive the same salary
 Bandhua Mukti Morcha and Ors. vs. Union of India “Court has considered the abolition of the
child labour and the child below 14 years of age in industries. to evolve such steps scheme laid
down in M.C. Mehta’s case, to provide
(1) compulsory education to all children by the State Government to the children employed in the
factories, mine other industry,
(2) apart from education, periodical health check-up;
(3) nutrient food
(4) entrust the responsibilities for implementation of the principles.
SOCIAL SECURITY PROVISIONS
Article 41 requires the state, within the limits of its economic capacity and development, to make
effective provision for securing the right age, sickness and disablement.
Employees’ State Insurance Act, 1948 Employees’ Provident Funds and Miscellaneous Provisions Act,
1952 Maternity Benefit Act, 1961 are also social security measures .
WORKING CONDITIONS
Article 42 requires the state for securing just and humane conditions of work and for maternity relief.
LIVING WAGE
Article 43 requires the state to endeavor to secure, by suitable to all workers, agricultural, industrial or
otherwise, a living wage, conditions of work ensuring a decent standard of life and social and cultural
opportunities.
‘Living wage’ enables male earner to provide for himself and his family not merely the bare essentials of

& Labour Laws
122
SBI & LL
food, clothing and shelter, but includes education for children, protection against ill-health, social needs,
insurance. minimum wage’, is just sufficient to cover the bare physical needs worker and his family.
WORKERS PARTICIPATION IN MANAGEMENT
Article 43-A introduced by the 42nd Amendment in 1976, direct bearing on labour laws, in State
shall secure the participation of workers in the management of industrial establishments.
CASE LAWS
Janapareddy Surya Narayana and Ors. vs. The Muncipal Administration and Urban Development and
Ors.
"When part time workers are regularized, they are entitled get minimum time scale of pay for post for
Limited office hours, whereas, petitioners discharging duties for eight hours they are entitled to get
equal pay otherwise, it amounts to discrimination, which is prohibited under Article 14 . Therefore,
court issue a direction to the respondents to extend minimum time scale of pay.

& Labour Laws
123
SBI & LL
15 EVALUATION OF LABOUR LEGISLATION

Chapter AND NEED OF LABOUR CODE
INTRODUCTION
The law relating to labour and employment is primarily known “Industrial Law”. Reforms in labour laws
are an ongoing process to update legislative system with emerging economic and industrial scenario.
The Government has taken steps for implifying, amalgamating and rationalizing the relevant provisions
of the existing Central Labour Laws.
HISTORY OF LABOUR LAWS
International Labour Organisation (ILO) is one of the first organisations to deal with labour issues. India
is the founder member of ILO) and actively contributing to evolution of global policy on labour welfare.
Even after 75 years of Independence, approximately 90% of workers work in the unorganized sector that
do not have access to all the social securities. The Central Government has taken historical step of
codifying 29 laws into 4 Codes, so that workers can get security along with respect, health and other
welfare measures with ease.
NEED TO BRING IN NEW LEGISLATIONS
Labour is covered under the Concurrent List of the Constitution. Therefore, rules governing labour can
be passed by both the Parliament and state legislatures.
The Second National Commission of Labour had submitted its report in 2002 that there was multiplicity
of Labour Laws therefore, multiple Labour Laws should be codified in 4 or 5 Labour Codes namely
(a) Industrial relations;

(b) Wages;
(c) Social security;
(d) Safety; and
(e) Welfare and working conditions.
During 2015 to 2019, the Ministry organized 9 tripartite discussions in which all the Central Trade
Unions, Employers’ Associations and representatives of State Governments were invited to give
opinions on Labour reforms.
In order to codify 29 central legislations, Ministry of Labour and Employment submitted four labour
code bills in 2019. They broadly categorized labour codes into 4 different category-
1. Code on Wages
2. Industrial Relations Code
3. Social Security Code
4. Occupational Safety, Health and Working Conditions Code

& Labour Laws
124
SBI & LL
Evaluation of Labour Legislation and Need of
Labour Code
PURPOSE OF LABOUR LEGISLATION
Labour legislation modern world fulfils three crucial roles:

 Establishes legal system that facilitates productive economy;
 providing a framework within which employers, workers can interact work-related issues,
 provides and guarantee fundamental principles and rights at work
CLASSIFICATION OF LABOUR LAWS IN INDIA

I. Laws related to Industrial Relations such as:
1. Trade Unions Act, 1926
2. Industrial Disputes Act, 1947
II. Laws related to Wages such as:

3. Payment of Wages Act, 1936
4. Minimum Wages Act, 1948
5. Payment of Bonus Act, 1965
III. Laws related to Working Hours, Conditions of Service and Employment such as:
6. Factories Act, 1948
7. Contract Labour (Regulation & Abolition) Act, 1970
8. Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981
9. Plantation Labour Act, 1951
IV. Laws related to Equality and Empowerment of Women such as:

10. Maternity Benefit Act, 1961
11. Equal Remuneration Act, 1976
V. Laws related to Deprived and Disadvantaged Sections of the Society such as:
12. Bonded Labour System (Abolition) Act, 1976
13. Child and Adolescent Labour (Prohibition & Regulation) Act, 1986
VI. Laws related to Social Security such as:

14. Employees’ Compensation Act, 1923
15. Employees’ State Insurance Act, 1948
16. Employees’ Provident Fund & Miscellaneous Provisions Act, 1952.
17. Payment of Gratuity Act, 1972
OBJECTIVE OF NEW LABOUR CODES
The four Codes on wages, industrial relations, social security, and occupational safety were introduced
in Parliament as a result of NCL’s recommendations. Facilitating employment development while
preserving employees’ rights is the main problem of labour reforms.

& Labour Laws
125
SBI & LL
Evaluation of Labour Legislation and Need of - By CS Kirti Chaturvedi
Labour Code
FEATURES OF NEW LABOUR CODES
1. Most labour rules are applicable could ease the burden of compliance for businesses.
2. One Registration one License, single return for all the Codes.
3. Government approval is required for establishments that employ 100 or more employees to
close, lay off, or retrench.
4. The Codes delegate rule-making authority over a number of significant issues,
5. The law forbids discrimination based on gender when it comes to hiring new employees for
similar or identical jobs and determining pay.
6. The advisory boards will be made up of the federal and state governments. Employers, employees
independent individuals, and government representatives and Women will make up one-third of
both the central and state boards’ overall membership.
7. The Code outlines punishments for offences by employer maximum punishment is three months
in prison and a fine of one lakh rupees.
REFORMS PROPOSED BY NEW LABOUR CODES
Code on Social Security, 2020
 Benefit of pension scheme (EPFO)

 Through a small contribution, benefit of free treatment available under hospitals f ESIC.
 Even if a single worker is engaged in hazardous work, he would be given ESIC benefit.
 Institutions working in hazardous area to be compulsorily registered with ESIC.
 Provisions for maternity benefits crèche facility etc.
 Requirement employees.
Occupational Safety, Health and Working Conditions Code, 2020
The salient features of the Occupational Safety, Health and Working Conditions Code, 2020 are as
under:—
 To impart flexibility in adapting technological changes in matters relating to health, safety, welfare
and working conditions of workers.
 To apply the provisions of the Code for all establishments having ten or more workers.
 Mandatory, free annual health check-up of the workers to be provided by the employers.
 Under the “One Nation - One Ration Card” Inter-State Migrant Worker would get ration facility
the State he is working and remaining members of his family would be able to avail of the ration
facility in the State where they reside.
 Emphasis on women empowerment through the Labour Codes.
 Women have been given the right to work at night with their consent and employer.
 To make provision of “common license” for factory, contract labour and beedi and cigar
establishments and to introduce contract labour.
& Labour Laws
126
SBI & LL
Evaluation of Labour Legislation and Need of
Labour Code
Code on Wages, 2019
The salient features of the Code on Wages, 2019 are as follows:—
 To provide elements relating to wages, equal remuneration, its payment and bonus.
 Review of minimum wages in every 5 years.
 Guarantee of timely payment of wages to all workers.

 Equal remuneration to male and female workers.
 It provides that the wages to employees may also be paid by cheque or through digital or
electronic mode or by crediting it in the bank account of the employee.
 It enables the appropriate Government to establish appellate authority speedy, cheaper redressal
of grievances and settlement of claims.
 It provides for compounding of those offences which are not punishable with imprisonment.
 The period of limitation for filing of claims by a worker has been enhanced to three years.
Industrial Relations Code, 2020
The salient features of the Industrial Relations Code, 2020 are as follows:–
 In case of job loss, a worker will get benefit under the Atal Bimit Vyakti Kalyan Yojna.
 Faster justice to the workers through the Tribunal.

 Workers disputes to be resolved within a year in the Tribunal.
 To set up Industrial Tribunals in the place of existing multiple adjudicating bodies
 To prohibit strikes and lock-outs in all industrial establishments without giving notice of fourteen
days.
 To empower the appropriate Government to exempt any industrial establishment from any of the
provisions of the Code in the public interest for the specified period.

& Labour Laws
127
SBI & LL
Law of welfare & Working Condition - By CS Kirti Chaturvedi
16 LAW OF WELFARE & WORKING CONDITION

Chapter UNIT 1 – Factories Act, 1948
REGULATORY FRAMEWORK
 Factories Act, 1948

Factories Act, 1948 is an Act to consolidate and amend the law regulating labour in factories.
Main objective to ensure adequate safety measures but also to promote health and welfare of
the workers employed in factories. This Act lay guidelines on working conditions including leaves,
working hours, holidays, etc.
History of the Legislation
The industrial unrest and economic discontent led to a number of strikes and labour troubles. In Pre-
Independence era, the workers were generally illiterate, poor and unconscious of their rights. In the
post-independence period, the national government paid attention to the improvement in conditions of
labour health in industry.
Factory Act is a central legislation which came into existence in 1881. It was extensively amended in the
year 1948.
The Factories Act, 1948 has been amended from time to time, especially after the Bhopal gas disaster;
the amendment demanded a shift away from dealing with disaster to prevention of its occurrence.
Object of the Act
Enacted with the objective to provide adequate compensation to the affected persons. The Act extends
to the whole of India and persons employed in factories, mines, plantation, construction, and in some
hazardous occupations. The main object is to ensure adequate safety measures and to promote the
health and welfare of the workers employed in factories.
Ravi Shankar Sharma v. State of Rajasthan, Court held that Factories Act is a social legislation. In short,
Act provides protection to workers from being exploited and also provides improvement of working
conditions.
Bhikusa Yamasa Kshatriya (P.) Ltd. v. UOI, court observed Act enacted primarily with object of
protecting workers. For that it impose upon owner certain obligations to protect the workers
J.K. Industries Limited, etc. v. The Chief Inspector of Factories, “The provisions of the 1934 Act
regarding safety, health and welfare were found inadequate. In view of growing industrial activity an
overhauling of factories law became necessary.”

& Labour Laws
128
SBI & LL
- By CS Kirti Chaturvedi Law of welfare & Working Condition
Applicability of the Act
 Extends to the whole of India w.e.f. the 1st day of April, 1949.
 applies to factories using power and employing 10 or more workers, and if not using power,
employing 20 or more workers on any day of the preceding 12 months does not include mine,
hotels, armed forces, railway.
Scheme of the Act
Definitions
Term Section Definition

“Adult” Section 2(a) person completed eighteenth year of age;
“Adolescent” Section 2(b) person completed fifteenth year of age but not
completed eighteenth year;
“Calendar Year” Section 2(bb) period of twelve months beginning with the first day of
January
“Child” Section 2(c) person not completed fifteenth year of age;
“Competent Person” Section 2(ca) person or an institution recognized by Chief Inspector for
purposes of carrying out examinations to be done in a factory
“Hazardous Process” Section 2(cb) process in relation to industry specified in First Schedule
special care is taken, raw materials used or wastes, or
effluents thereof would-
(i) cause impairment to health of persons engaged
(ii) result in pollution of environment.
“Young Person” Section 2(d) person either a child or an adolescent;
“Day” Section 2(e) a period of twenty-four hours beginning at midnight;
“Week” Section 2(f) period of seven days beginning at midnight on Saturday night
“Power” Section 2(g) electrical energy, or other form of energy mechanically
transmitted
and not generated by human
“Prime mover” Section 2(h) engine, motor which generates or provides power;
“Transmission Section 2(i) any wheel drum, pulley, clutch, driving belt by which motion
Machinery” of a prime mover is transmitted to or received by machinery
“Machinery” Section 2(j) includes prime movers, and all other appliances whereby
power is generated, transmitted

& Labour Laws
129
SBI & LL
“Manufacturing Process” {Section 2(k)} means any process for —

(i) making, altering, repairing, packing, washing, cleaning, any article to use, sale, transport
(ii) pumping oil, water, sewage or any other substance; or
(iii) generating, transforming or transmitting power; or
(iv) types for printing, by letter , lithography or other similar process
(v) constructing, reconstructing, repairing, ships or vessels; or
(vi) preserving article in cold storage;
An important necessity for any premises to be regarded as a ‘factory’ is, that a “manufacturing process”
should be conducted within the premises.
“Worker” {Section 2(I)}
person employed, directly or through agency whether for remuneration or not], in manufacturing
process, or premises used for a manufacturing process, but does not include any member of the armed
forces of the Union;
“Factory” {Section 2(m)} means any premises including the precincts thereof-
(i) ten or more workers working, on any day of preceding twelve months, in which
manufacturing process carried with the aid of power
(ii) twenty or more workers working, on any day of the preceding twelve months in which a
manufacturing process carried without the aid of power, definition excludes mine or mobile
unit to armed forces of the Union, a railway running shed or hotel, restaurant or eating
place.
Explanation I: For computing number of workers all workers in a day shall be taken into account;
Explanation II: Electronic Data Processing Unit is installed shall not be construed to make it a
factory if no manufacturing process carried on
“Occupier” {Section 2(n)} means the person who has ultimate control over the affairs of the factory;
Provided that —
(i) in case of a firm individual partners shall be deemed to occupier;
(ii) case of a company, any one of directors deemed to be occupier;
(iii) in case of a factory owned by Central or State Government, or local authority, persons appointed
to manage affairs shall be deemed to occupier.
In case of a ship —
1. owner of the dock deemed to be occupier.
2. owner of the ship agent or master or other office-in-charge of the ship shall be deemed to be the
occupier.
Exemption of occupier or manager from liability in certain cases
Section 101
(a) used due diligence
& Labour Laws
130
SBI & LL
(b) offence in question was committed without his knowledge

In such a case occupier or manager of the factory is discharged from liability.
Group/Relay/Shift {Section 2(r)}
work of the same kind carried out by two or more sets of workers during different periods of day, each
sets is called “group” “relay” and each of such periods is called a “shift”.
Statutory Agencies and their powers for enforcement of the Act
(I) Reference to time of day (Section 3): empowers State Government to specify area, define the
local mean time and permit time to be observed in all or any of the factories situated in the area.
(II) Power to declare different departments to be separate factories or two or more factories to be
a single factory (Section 4): State Government may on its own or on an application direct, by
order in writing that different departments of factory shall be treated as separate factories or two
or more factories shall be treated as single factory.
(III) Power to exempt during public emergency (Section 5): case of public emergency State
Government by notification in Official Gazette, exempt factory from all provisions of this Act
except section 67 for such period as it may think
(IV) Sec 67 : Child below 14 year of age not allowed to work.
“public emergency” means whereby security of India is threatened by war or external

or internal disturbance.
(V) Power of the State Government to make rules with reference to approval, licensing and
registration of factories:
State Government to make rules-

(a) requiring submission of plans to Chief Inspector or the State Government;
(b) requiring previous permission of State Government or Chief Inspector for construction or
extension of factory.
(c) for submission of plans and specifications;
(d) prescribing nature of such plans and specifications and by whom they shall be certified;
Deemed Approval: If on application for permission no order communicated within three months
permission applied for shall be deemed to granted.
Appeal to the Central Government : Where State Government or Chief Inspector refuses to grant
permission to construction or registration and licensing of a factory, applicant within thirty days refusal
appeal to the Central Government.

& Labour Laws
131
SBI & LL
(I) Inspectors
Appointment: Section 8 empowers State Government to appoint Inspectors, Additional Inspectors

and Chief Inspectors, To assist him, government may appoint Additional, Joint or Deputy Chief
Inspectors.
A Chief Inspector is appointed for the whole State. He shall exercise the powers of an inspector
throughout the State.
Powers of Inspectors (Section 9)

(a) enter, any place which is used, as a factory;
(b) make examination of premises, plant, machinery,
(c) inquire accident or dangerous occurrence, resulting in bodily injury, disability or not,
(d) require production register or any other document
(e) seize, or take copies of register, record or other document
(f) direct occupier that any premises shall be left undisturbed for so long as is necessary
(g) take measurements and photographs necessary for examination
(h) in case of any article or substance found in any premises direct it to be dismantled and take
possession of such article and detain it for so long as is necessary
(i) exercise such other powers as may be prescribed
(II) Certifying surgeons (section 10), State Government may appoint qualified medical practitioners
to be certifying surgeons . No person shall be appointed to be certifying surgeon, occupier of a
factory or is directly or indirectly interested
The certifying surgeon shall carry out
(a) examination of young persons

(b) examination of persons engaged in dangerous occupations
(c) exercising medical supervision where —
(i) cases of illness have occurred
(ii) by reason of any change in the manufacturing process there is a likelihood of injury to
the health of workers
(iii) young persons employed which is likely to cause injury to their health.
(III) Welfare Officer (Section 49) statutory obligation upon occupier of factory of the appointment of
Welfare Officer/s wherein 500 or more workers are ordinarily employed.

& Labour Laws
132
SBI & LL
(IV) Safety Officer (Section 40-B) State Government directing occupier to employ Safety Officers
where more than 1,000 workers are employed or where manufacturing process involves risk
Duties of Occupier / Manufacturer
(I) Notice by occupier (Section 7) written notice sent by occupier at least fifteen days before begins
to occupy factory, to the Chief Inspector. notice shall contain
(a) name and situation of factory;
(b) name and address of occupier;
(c) address to which communications may be sent;
(d) nature of the manufacturing process-
(e) name of the manager
(f) number of workers
Notice of appointment of new manager: to Chief inspector within seven days.
Manager, Deemed Occupier: any period for which no person designated manager occupier
himself, shall be deemed to be manager.
(II) General duties of the occupier (Section 7A)

(a) maintenance of plant and systems in the factory
(b) arrangements in the factory for ensuring safety
(c) provision of training and supervision to ensure health and safety of all workers
(d) maintenance of all places of work that is safe and without risks to health
(III) General duties of manufacturers, etc., as regards articles and substances for use in factories
(Section 7B) obligation on every person who designs, manufactures, any article for use in any
factory that he shall –
(a) article safe and without risks to the health of the workers
(b) carrying out tests and examination
where article manufactured outside India, obligatory on that article conforms same
standards manufactured in India,
Measures to be taken by factories for health, safety and welfare of workers
HEALTH MEASURES
(Chapter III of the Act deals with the following aspects)
Spittoons (Section 20)
Sufficient number of spittoons in convenient places shall be maintained in a clean and hygienic
condition. provision prominently displayed at suitable places that no person shall spit within the
premises of a factory except in Spittoons

& Labour Laws
133
SBI & LL
SAFETY MEASURES
Chapter IV of the Act contains provisions relating to safety.

& Labour Laws
134
SBI & LL

& Labour Laws
135
SBI & LL
Provisions relating to Hazardous Processes

The Factories (Amendment) Act, 1987, has inserted this new chapter in the Act after Chapter IV.
Constitution of Site Appraisal Committees (Section 41A)
State Government for factory involving a hazardous process appoint a Site Appraisal Committee.
Committee shall examine application for the establishment of a factory involving hazardous process
Compulsory disclosure of Information by the Occupier (Section 41B)
Every occupier of a factory shall inform the Chief Inspector of the nature and details of the process in
such form and in such manner as may be prescribed if
(a) factory is engaged in a hazardous process within thirty days

(b) factory purposes to engage in a hazardous process within thirty days before commencement of
such process.
Specific responsibility of the occupier in relation to hazardous processes (Section 41C)
Every occupier shall maintain up-to-date health records of the workers exposed to any chemical or
other harmful substances. occupier shall appoint persons who possess experience in handling
hazardous substances
Power of Central Government to appoint Inquiry Committee (Section 41D)
Central Government in the event of extraordinary situation appoint an Inquiry Committee to inquire
standards of health and safety to finding out causes of any failure in adoption of measures for health
and safety of the workers
Emergency Standards (Section 41E)
Central Government is satisfied that no standards of safety have been prescribed it may direct Director-
General of Factory Advice Service and Labour Institutes to lay down emergency standards in respect of
such hazardous processes.
Permissible limits of exposure of chemical and toxic substances (Section 41F)
maximum permissible threshold limits of exposure of chemical shall be indicated in the Second Schedule.

& Labour Laws
136
SBI & LL
Workers’ participation in safety management (Section 41G)
constitution of Safety Committee consisting of equal number of representatives of workers and

management. The functions of the Safety Committee are to promote co-operation between the workers
and the management in maintaining proper safety and health at work
Right of workers to warn about imminent danger (Section 41H)
Where workers employed have likelihood of imminent danger to their lives due to any accident, they
may, bring same notice of occupier, representatives in Safety Committee. It shall be the duty of such
occupier, to take immediate remedial action if satisfied about existence of imminent danger.
If occupier not satisfied about the existence of any imminent danger he shall, refer matter to nearest
Inspector whose decision shall be final.
WELFARE MEASURES
 Washing Facilities (Section 42)

suitable facilities for washing shall be provided for use of the workers
 Facilities for storing and drying clothing (Section 43)

suitable place for keeping clothing not worn during working hours and for the drying of wet
clothing.
 Facilities for sitting (Section 44)

suitable arrangements for sitting in every factory obliged to work in a standing position.
 First-aid appliances (Section 45)

readily accessible during all working hours’ first-aid boxes . At least one such box for every one
hundred and fifty workers an ambulance room in every factory wherein more than five hundred
workers employed.
 Canteens (Section 46)

provide and maintain a canteen wherein more than two hundred and fifty workers employed.
Shelters, rest-rooms and lunch-rooms (Section 47)
maintain adequate and suitable shelters or rest-rooms and a suitable lunch-room, with provision for
drinking water, where workers can eat meals brought by them in every factory wherein more one
hundred and fifty workers employed.
Creches (Section 48)
Compulsory to provide maintain a suitable room or rooms for the use of children under the age of six
years of women wherein more than thirty women workers employed. Shall be maintained under the
charge of women trained in the care of children and infants.

& Labour Laws
137
SBI & LL
LAW OF WELFARE & WORKING CONDITION

16 UNIT 2 – The Contract Labour
Chapter
(Regulation and Abolition) Act, 1970
History of the Legislation
Contract Labourers were considered as exploited section of the working class mainly due to lack of
organisation on their part.
The Government constituted various committees to study the socio-economic conditions of contract
labours. In the Second Five Year Plan, the Planning Commission stressed the need of improvement in the
working conditions of contract labour.
“The Contract Labour (Regulation and Abolition) Act, 1970” came into force from 10th February, 1971.
Object and Scope of the Act
 The preamble of the Act states that to regulate the employment of contract labour in certain
establishments and to provide for its abolition in certain circumstances and for matters connected
therewith.
 Gammon India Ltd. vs. Union of India, Supreme Court observed that Act passed to prevent
exploitation of contract labour and introduce better conditions of work.
 To abolish contract labour, whenever possible and where cannot be abolished.
 Working conditions of the contract labour should be so regulated to ensure payment of wages and
provisions of essential amenities.
 Act extends to the whole of India. It applies —
(a) establishment in which twenty or more workmen, employed on any day of preceding twelve
months.
(b) every contractor who employs on any day of preceding twelve months twenty or more
workmen.
 Appropriate Government may, after giving not less than two months’ notice apply provisions Act
to establishment employing workmen less than twenty.
 Where dispute relates to service conditions, the dispute can be referred to industrial Tribunal for
adjudication [Indian Explosives Ltd. v. State of U.P.,]
 Act is not applicable to establishments in which work of intermittent or casual nature is performed.
 Explanation.- Work performed shall not be deemed to intermittent nature –

& Labour Laws
138
SBI & LL
(i) if performed for more than one hundred and twenty days in the preceding twelve months,
(ii) if it is of a seasonal character and is performed for more than sixty days in a year.
Definitions
1. ‘Appropriate Government’
(i) in relation to establishment in respect of Industrial Disputes Act, 1947, is the Central
Government;
(ii) in relation to any other establishment, Government of the State.
2. “Contract Labour”
A workman shall be deemed to be “contract labour” when he is hired by contractor, with or
without the knowledge of the principal employer.
3. “Contractor” - means- a person

 who undertakes supply of goods or articles of manufacture through contract labour; or
 who supplies contract labour and includes a sub-contractor.
4. “Controlled Industry”
means industry the control of which by the Union has been declared by any Central Act in the
public interest.
5. “Establishment”
Means –
(i) office or department of Government or a local authority, or -
(ii) place where industries, trade, business, manufacture is carried on.
A ship or vessel in which repair work is carried on is a place and an “establishment”
Any object covering the surface and where industry, trade, business, manufacture is carried on
would be a place and an “establishment”.
6. “Principal Employer”
means –
(i) in relation office or department of Government or local authority, head of that office or
department
(ii) in a factory, owner or occupier of the factory and person named as manager
(iii) in a mine, owner or agent of the mine
(iv) in any other establishment, person responsible for supervision and control.
7. “Occupier”
means the person who has ultimate control over the affairs of the factory.

& Labour Laws
139
SBI & LL
8. “Wages”
Shall have the meaning assigned to it in clause (vi) of Section 2 of the Payment of Wages Act, 1936.
9. “Workman”
means any person employed to do any skilled, semi-skilled or un-skilled manual, supervisory,
technical or clerical work for hire or reward, but does not include
(A) employed mainly in a managerial capacity; or

(B) employed in a supervisory capacity draws wages exceeding five hundred rupees per mensem
(C) who is an out worker, that is a person to whom any articles and materials are given out by
or on behalf of’ the principal employer to be cleaned, washed, altered, finished, repaired,
for sale or trade or for business purpose.
The Advisory Boards
(1) Central Advisory Board.
 Constitution of Central Board: Central Government shall, constitute a board to be called the
Central Advisory Contract Labour Board.
 Function of the Central Board: Board shall perform function of advising the Central
Government on administration of this Act.
 Composition of the Central Board:
(a) Chairman appointed by Central Government;

(b) Chief Labour Commissioner
(c) number of members, not exceeding seventeen but not less than eleven, as Central
Government may nominate to represent Government.
(2) State Advisory Board
 Constitution of the State Board: State Government to constitute a board to be called the
State Advisory Contract- Labour Board.
 Function of State Board: To advise State Government on administration of this Act.
 Composition of the State Board:
(a) Chairman appointed by State Government ;

(b) Labour Commissioner
(c) numbers, not exceeding eleven but not less than nine, as the State Government
may nominate to represent Government
(3) Power to constitute committees

& Labour Laws
140
SBI & LL
Section 5, Central Board or State Board, may constitute committees as it may think fit. Committee
shall meet at such time and places in regard to transaction of business at its meetings as may be
prescribed. Members shall be paid fees for attending meetings.
No fees payable to member who is an officer of Government.
Registration of Establishments Employing Contract Labour
(1) Appointment of Registering Officers: Appropriate Government may
(a) appoint persons, being Gazetted Officers to be registering officers

(b) define the limits, within which registering officer shall exercise the powers
(2) Registration of certain establishment: Section 7 makes mandatory for every principal employer to
make application to registering office for registration of the establishment. Appropriate
Government may, fix time period for making such application.
(3) Revocation of registration in certain cases: Section 8 provides if registering officer is satisfied,
that registration has been obtained by mis-representation or suppression of any material fact, the
registering officer may revoke the registration. He can do so only after giving an opportunity to
the principal employer to be heard.
Circumstances in which application may be rejected. —
(1) Application not complete in all respects.

(2) On being required to amend application omits or fails to do so,
(4) Effect of non-registration: According to section 9, no principal employer shall employ contract
labour after expiry of the period under section 7.
Principal employer shall not employ contract labour after revocation of registration.
(5) Prohibition of employment of contract labour: According to section 10, appropriate Government
may, prohibit, employment of contract labour in any establishment.
Apart from registration of establishments Act contains provisions for licensing of contractors.
(i) Appointment of licensing officers: According to section 11, appropriate Government may
appoint Gazetted Officers as licensing officers.
(ii) Licensing of contractors: According to section 12, no contractor to whom this Act applies,
shall undertake work through contract labour except accordance with a licence issued in
that behalf by the licensing officer.
Welfare and Health of Contract Labour
(i) Canteens.- According to section 16, one or more canteens shall be provided by contractor in every
establishment-

& Labour Laws
141
SBI & LL
(a) to which this Act applies,

(b) wherein work likely to continue for period prescribed
(c) wherein contract labour numbering one hundred or more employed
(ii) Rest-rooms. According to section 17, mandatory for the contractor to provide rest-rooms in every
place wherein contract labour is required to halt at night in connection with work.
Rest-rooms shall be sufficiently lighted and ventilated in a clean and comfortable condition.
(iii) Other facilities.- According to section 18, every contractor, to provide and maintain-
(a) sufficient supply of wholesome drinking water;

(b) sufficient number of latrines and urinals
(c) washing facilities.
(iv) First-aid facilities.-According to section 19, there shall be provided readily accessible during all
working hours a first aid box.
(v) Liability of principal employer in certain cases.- According to section 20, If any amenity required
to provided is not provided by contractor, such amenity shall be provided by principal employer.
All expenses incurred by principal employer in providing the amenity may be recovered from the
contractor.
(vi) Responsibility for payment of wages.- Section 21 makes a contractor statutorily responsible for
payment of wages to each worker employed as contract labour.
Penalties and Procedures
(i) Obstructions.- According to section 22, Whoever obstructs inspector in discharge of duties shall
be punishable with imprisonment which may extend to three months, or fine which may extend to
five hundred rupees, or both.
(ii) Contravention of provisions regarding employment contract labour.- Section 23 provides person
shall be punishable imprisonment which may extend to three months, or fine which extend to Rs.
1000, or with both.
In the case of a continuing contravention additional fine may extend to one hundred rupees for
every day.
(iii) Other offences.- According to section 24,If any person contravenes provisions for which no
penalty provided, he shall be punishable with imprisonment which may extend to three months,
or fine may extend to one thousand rupees, or with both.
(iv) Offences by companies.- Section 25 provides if person committing offence is a company,

company as well as every person in charge shall be deemed to be guilty of offence and punished
accordingly.

& Labour Laws
142
SBI & LL
However, where it is proved that offence committed with consent or connivance of director,
manager, or any other officer, such director, manager, or other officer shall deemed to be guilty of
that offence.
(v) Cognizance or offences.- According to section 26, no court shall take cognizance of any offence
except on a complaint made by, inspector and no court inferior to Presidency Magistrate or
magistrate of first class shall try any offence punishable under this Act.
(vi) Limitation or prosecution.- According to section 27, no court shall take cognizance of an offence
unless complaint made within three months.
Inspecting Staff
According to section 28, appropriate Government may, appoint persons to be inspectors. An inspector
may -
(a) enter, at all reasonable hours, any premises where contract labour is employed, for purpose of
examining register or record;
(b) examine person whom he finds in premises who, he believe, is a workman employed;
(c) require person, to give information, is in his power;
(d) seize to take copies of such register, record of wages
(e) other powers as may be prescribed.
Registers and Other Records to be Maintained
According to section 29, every principal employer and every contractor shall maintain registers and
records giving particulars of contract labour employed, the nature of work performed rates of wages
paid and other particulars as may be prescribed.

& Labour Laws
143
SBI & LL
LAW OF WELFARE & WORKING CONDITION

16 UNIT 3 – The Child and Adolescent Labour
Chapter
(Prohibition and Regulation) Act, 1986
 Child and Adolescent Labour (Prohibition and Regulation) Act, 1986
Introduction
The Child and Adolescent Labour (Prohibition & Regulation) Act, 1986 enacted to prohibit the
engagement of children in all occupations and to prohibit the engagement of adolescents in hazardous
occupations. It extends to whole of India.
Definition
1. Appropriate Government in relation establishment under control of Central Government, the

Central Government, and in all other cases, State Government.
2. Adolescent means person who completed fourteenth year of age but not completed his
eighteenth year. Child means a person not completed fourteenth year of age.
3. Day means period of twenty-four hours beginning at midnight.
4. Establishment includes a shop, commercial establishment, workshop, residential hotel,

restaurant, eating-house, theatre or other place of public amusement.
5. Occupier means person who has ultimate control over affairs of the establishment or workshop.
6. Workshop means any premises wherein any industrial process is carried on, but does not include
premises to which Factories Act, 1948 apply.
Prohibition of Employment of Children in any Occupations and Processes
Section 3 no child shall be employed in any occupations or process except:-
(a) helps his family or family enterprise, other than any hazardous occupations
(b) works as an artist in audio-visual entertainment industry, including advertisement, films, television
serials except circus.
However no such work shall effect the school education of the child.
“family” means mother, father, brother, sister and father’s sister and brother and mother’s sister and
brother;
Prohibition of Employment of adolescents in hazardous Occupations and Processes
Section 3A provides no adolescent shall be employed to work in hazardous occupations. Hazardous

& Labour Laws
144
SBI & LL
occupations are as under:
(1) Mines.
(2) Inflammable substances or explosives.
(3) Hazardous process.
Hours and Period of Work
Section 7 provides to work
No adolescent shall work for more than three hours before interval for at least one hour. This section
also stipulates that:
— No adolescent shall be permitted to work between 7 p.m. and 8 a.m.
— No adolescent required or permitted to work overtime.
— No adolescent shall be required or permitted to work any establishment on any day which he has
already been working in another establishment.
Weekly Holidays
Section 8 every adolescent employed is entitled in each week, a holiday of one whole day.
Notice to inspector
Section 9 every occupier who employs, adolescent shall, within a period of thirty days, send to
Inspector written notice containing:
— Name and situation of the establishment;
— Name of person in actual management;
— Address to which communications be sent;
— Nature of the occupation carried on.
Maintenance of Register
Every occupier maintained a register showing –

— name and date of birth every adolescent employed;
— hours and periods of work;
— nature of work of adolescent;
— other particulars
Display of Notice Containing Abstract of Sections 3A and 14
Every railway administration, port authority and occupier shall cause to be displayed at every station or
port or place of work, a notice in local and English language.

& Labour Laws
145
SBI & LL
Penalties
 Whoever employs child or permits any child to work in contravention of section 3 shall be
punishable with imprisonment which shall not be less than six months but may extend to two
years, or fine which shall not be less than twenty thousand rupees but may extend to fifty
thousand rupees, or with both.
 Whoever employs any adolescent in contravention of provisions shall be punishable with

imprisonment which shall not be less than six months but may extend to two years or fine which
shall not be less than twenty thousand rupees but may extend to fifty thousand rupees, or with
both.
 Parents or guardians of any child or adolescent shall not be liable for punishment, in case of the
first offence.
 Parents or guardians commits a like offence afterward shall be punishable with fine which may
extend to ten thousand rupees.
District Magistrate to Implement the Provisions
Section 17A provides that appropriate Government may confer powers and impose duties on a District
Magistrate to ensure provisions of Act are properly carried out.

& Labour Laws
146
SBI & LL
- By CS Kirti Chaturvedi Law of Industrial Relations
17 LAW OF INDUSTRIAL RELATIONS

Chapter UNIT 1 – Industrial Dispute Act, 1947
 Industrial Disputes Act, 1947
HISTORY OF THE LEGISLATION
The first enactment dealing with settlement of industrial disputes was the Employers’ and Workmen’s
Disputes Act, 1860. The main purpose of the Act, however, was to provide a conciliation machinery to
bring about peaceful settlement of industrial disputes.
Development of industrial law was caused by Second World War. Rule 81-A of the Defence of India
Rules intended to provide speedy remedies by prohibiting strikes or lock-outs during pendency of
conciliation proceedings and for two months thereafter. This rule also put a blanket ban on strikes
which did not arise out of genuine trade disputes.
The termination of the Second World War, Rule 81-A was about to lapse but kept alive by Ordinance.
Then followed the Industrial Disputes Act, 1947.
OBJECT AND SIGNIFICANCE OF THE ACT
The Industrial Disputes Act, 1947 makes provision for the investigation and settlement of industrial
disputes.
Workmen of Dimakuchi Tea Estate v. Dimakuchi Tea Estate, the Supreme Court laid down following
objectives of the Act:
(i) Promotion of measures of securing good relations between employer and workmen.
(ii) Investigation and settlement of industrial disputes between employers and employers,
employers and workmen, or workmen and workmen.
(iii) Prevention of illegal strikes and lock-outs.
(iv) Relief to workmen in lay-off and retrenchment.
(v) Promotion collective bargaining.
 This Act extends to whole of India.
 The Act applies to an existing and not to a dead industry ensure fair wage to prevent disputes. It
applies to all industries irrespective of religion or caste of parties. It applies to the industries
owned by Central and State Governments too [Hospital Employees Union v.Christian Medical
College, (1987) 4 SCC 691].

& Labour Laws
147
SBI & LL
Law of Industrial Relations - By CS Kirti Chaturvedi
IMPORTANT DEFINITIONS
Industry
Means any business, trade, undertaking, manufacture and includes employment, handicraft. [Section
2(j)]
 Tests for determination of’ “industry”

To determine whether an activity is covered by “industry” or not. It is also referred to as the triple
test.
I. Where there is
(a) systematic activity,
(ii) by co-operation between employer and employee,
(iii) for production of goods and services to satisfy human wants (not spiritual
or religious e.g., making, prasad or food).
(b) Absence of profit motive is irrelevant.
Supreme Court observed that professions, clubs, educational institutions. co-operatives,

research institutes, charitable projects if they fulfil triple tests cannot be exempted from
Section 2(j).
 Criteria for determining dominant nature of undertaking
Supreme Court, in Bangalore Water Supply case laid guidelines for deciding dominant nature.
(a) Where a complex of activities, involves employees. Some of whom are not “workmen”. The
whole undertaking will be “industry” although who are not “workmen” may not be benefit
by the status.
(b) Sovereign functions alone qualify for exemption and not welfare activities undertaken by
Government statutory bodies.
(c) Even in departments discharging sovereign function, if units are industries and are
substantially severable can be considered within Section 2(j).
(d) Constitutional and legislative provisions may remove undertaking from scope of the Act.
Charitable or missionary institutions, hospital, educational other research institutions,

municipal corporations, firms of chartered accountants, solicitors’, etc., which were not
held to be “industry” earlier will now covered by definition of “industry”.
 Section 2(j) shall stand amended by Amendment Act of 1982.
Section 2(j) under Amendment Act, 1982:
“Industry” means systematic activity carried on by co-operation between an employer and his
workmen to satisfy human wants (not being wants merely spiritual or religious in nature),

& Labour Laws
148
SBI & LL
whether or not:
(i) any capital invested for the purpose of carrying on such activity; or
(ii) activity is carried on with a motive to make profit, But Does Not Include:
(1) agricultural operation;

(2) hospitals or dispensaries;
(3) educational, scientific, research to training institutions;
(4) charitable, social or philanthropic service;
(5) khadi or village industries;
(6) activity of the Government relatable to the sovereign functions defence research
atomic energy and space; or
(7) domestic service; or
(8) profession practised by individual, if number of persons employed is less than ten;
(9) a co-operative society or a club, if number of persons employed is less than ten.
Industrial Dispute
[Section 2(k)]
(i) Dispute or difference;
(ii) between:
(a) employer and employer;
(b) employer and workmen; or
(c) workmen and workmen.
(iii) Connected with

(a) the employment
(b) terms of employment,
(c) the conditions of labour
Workman
Means any person employed in any industry to do manual, unskilled, skilled, clerical or supervisory work
for hire or reward, includes:
(a) person dismissed, discharged as a consequence of that dispute;
(b) person whose dismissal, discharge has led to that dispute, but does not include person:
(i) subject to Army Act, 1950;
(ii) employed in the police service;
(iii) employed mainly in managerial capacity;

& Labour Laws
149
SBI & LL
(iv) employed in a supervisory capacity drawing more than Rs. 1,600 per month;
Strike
Means a cessation of work by a body of persons in any industry acting in concerted refusal, who are
employed to continue to work or to accept employment. [Section 2(q)]
Strike is a weapon of collective bargaining of workers.
(i) Strike can take place only when cessation of work or refusal to work by workmen
(ii) A concerted refusal going on mass casual leave amounts to a strike. However, refusal should be of
normal lawful work. But refusal to do work which employer has no right to ask for, such refusal
does not constitute a strike (Northbrooke Jute Co. Ltd. v. Their Workmen, AIR 1960 SC 879). If on
sudden death of fellow-worker, workmen acting in concert refuse to resume work, it amounts to
a strike [National Textile Workers’ Union v. Shree Meenakshi Mills, (1951) II L.L.J. 516].
(iii) Even when workmen cease to work, relationship of employer and employee deemed to continue.
However, for illegal strike, employer can dismiss the striking workmen.
TYPES OF STRIKE AND THEIR LEGALITY
(a) Stay-in, sit-down, pen-down or tool-down strike

Workmen after taking their seats, refuse to do work. When asked to leave the premises, they
refuse to do so. All such acts on the part of the workmen acting in combination, amount to a
strike. Since such strikes are directed against the employer, they are also called primary strikes. In
the case of Punjab National Bank Ltd. All lndia Punjab National Bank Employees’ Federation,
AIR 1960 SC 160, the Supreme Court observed that on a plain and grammatical construction of
this definition it would be difficult to exclude a strike where workmen enter the premises of their
employment and refuse to take their tools in hand and start their usual work. Refusal under
common understanding not to work is a strike. If in pursuance of such common understanding
the employees enter the premises of the Bank and refuse to take their pens in their hands that
would no doubt be a strike under Section 2(q).
(b) Go-slow
Go-slow does not amount to strike, but it is a serious case of misconduct.
Bharat Sugar Mills Ltd. v. Jai Singh, the Supreme Court explained: “Go-slow is deliberate
delaying of production by workmen while delaying production and reducing output, workmen
claim to have remained employed and entitled to full wages. During a go-slow machinery is
kept going on which is extremely damaging to machinery parts.
(c) Sympathetic strike
Cessation of work in support of demands of workmen belonging to other employer Ramalingam

v. Indian Metallurgical Corporation, Madras, it was held that cessation of work not amount to
strike since no intention to use strike against the management.

& Labour Laws
150
SBI & LL
(d) Hunger strike
Workers resort to fast on or near place of work or residence of employer. If it is peaceful, it will
not constitute a strike. But if due to such act, those present for work, could not be given work, it
will amount to strike [Pepariach Sugar Mills Ltd. v. Their Workmen).
(e) Work-to-rule
There is no cessation of work, it does not constitute a strike.
LEGALITY OF STRIKE
Section 10(3), 10A(4A), 22 and 23 of the Act deals with strike.
The justification of strike as held in Matchwell Electricals of India v. Chief Commissioner, is entirely
unrelated to its legality or illegality.
Gujarat Steel Tubes Ltd. v. Gujarat Steel Tubes Majdoor Sabha, justifiability of a strike is purely a
question of fact. If strike by workers in peaceful manner, then strike will be justified. Where by using
violence, then strike will unjustified.
Charakulam Tea Estate v. Their Workmen, in case of strike legal and justified, workmen will entitled to
full wages.
Statesman Ltd. v. Their Workman, if strike is illegal, strikers will not entitled to the wages.
India Marine Service Pvt. Ltd. v. Their Workman, the Court evolved the doctrine of “apportionment of
blame” to solve the problem. When workmen and management equally to be blamed, Court normally
awards half of the wages.
Lock-out
Means the temporary closing of a place of employment, or suspension of work, or refusal by employer
to continue to employ any number of persons employed by him.
Just as “strike” is a weapon available to the employees for enforcing their demands, a “lock out”
is a weapon available to the employer to accept his demands
Lay-off
 Means the failure, refusal or inability of an employer to give employment due to following
reasons:
(a) shortage of coal, power or raw materials, or
(b) break-down of machinery, or
(c) natural calamity, or
(d) other connected reason.

& Labour Laws
151
SBI & LL
 Every workman who presents himself for work at the time appointed and is not given
employment within two hours shall be deemed been laid-off.
 If instead of being given employment at commencement of shift asked to present during

second half and given employment, he shall be deemed to been laid-off only for one-half of that
day.
 If not given employment, he shall not be entitled to full basic wages and dearness allowance.
 The lay-off should not be mala fide. Tribunal can adjudicate upon it and find out whether the
employer deliberately and maliciously brought situation where lay-off becomes necessary.
 There cannot be lay-off in an industrial undertaking which has been closed down. Lay-off and
closure cannot stand together.
 Difference between lay-off and lock-out

1) In lay-off, employer refuses to give employment, but in lock-out, deliberate closure of
business.
2) In lay-off, business continues, but in lock-out, business is closed down for time being.
3) In a lock-out, no question of wages or compensation unless lock-out is held to be unjustified.
4) Lay-off is the result of trade reason but lock-out is weapon of collective bargaining.
5) Lock-out is subject to restrictions and penalties but not so in case of lay-off.
Retrenchment
“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;
(b) retirement of workman or reaching the age of superannuation;
(c) termination of the service as a result of non-renewal of contract of employment.
(d) termination of the service on ground of continued ill-health.
Award
Means an interim or a final determination of industrial dispute by Labour Court, Industrial Tribunal
or National Industrial Tribunal and includes an arbitration award under Section 10-A.
Appropriate Government
Means:
(i) in relation to any industrial disputes concerning any industry under authority of the Central
Government or railway or Dock Labour Board established under Section 5-A of the Dock Workers
or Industrial Finance Corporation 1956, or Employees’ State Insurance Corporation or Employees’
Provident Funds and Miscellaneous Provisions Act, 1952.

& Labour Laws
152
SBI & LL
The Central Government, and
(ii) in relation to any other Industrial Dispute, the State Government.
Average Pay
Means the average of the wages payable to a workman:
(i) monthly paid workman, in the three complete calendar months;
(ii) weekly paid workman, in the four complete weeks;
(iii) daily paid workman, in the twelve full working days
Closure
Means permanent closing down of a place of employment
Controlled Industry
Means any industry control of which by Union has been declared by any Central Act in the public
interest.
Employer
Means:
(i) in relation to department of Central Government, the head of the department;
(ii) in relation to local authority, chief executive officer of that authority.
“Employer includes an agent of an employer, general manager, director, occupier of factory etc.
Public Utility Service

Means:
(i) railway service;
(ii) postal, telegraph or telephone service;
(iv) industry which supplies power, light or water to the public;
Public utility services may be carried out by private companies or business corporations
Settlement
Means settlement arrived in course of conciliation proceeding and includes written agreement between
employer and workmen otherwise than in conciliation proceeding.
Trade Union
Means a trade union registered under the Trade Unions Act, 1926.
Unfair Labour Practice

Means any of the practices specified in the Fifth Schedule.

& Labour Laws
153
SBI & LL
Wages
Means all remuneration capable of being expressed in terms of money, and includes:
(i) allowance (including dearness allowance);
(ii) value of any house accommodation;
(iii) travelling concession, but does not include:
(a) bonus;
(b) contribution paid by employer to pension fund;
(c) gratuity payable on termination of his service;
(d) commission payable
AUTHORITIES UNDER THE ACT AND THEIR DUTIES

The Act provides for following Authorities for Investigation and settlement of industrial disputes:
(i) Works Committee
Section 3 of the Act provides appropriate Government may require employer to constitute Works
Committee, where 100 or more workmen employed on any working day in preceding 12
months will be comprised of the representatives of employers and workmen.
(ii) Conciliation Officers
 With the duty of promoting settlement of industrial disputes, appropriate Government may,
appoint such number of Conciliation Officers as it thinks fit. Main objective of appointing
Conciliation Officers is to create atmosphere where workers and employers can reconcile on
their disputes through mediation of the Conciliation Officers.
(iii) Boards of Conciliation
 For promoting settlement of industrial dispute, appropriate Government may, constitute

Board of Conciliation. Board shall consist of a Chairman and two or four other members as
the appropriate Government thinks fit.
 Duty of Board to endeavour to bring settlement of the dispute, without delay, investigate
into the dispute and all matters affecting the merits and the right settlement. The Board will
also enlist reasons on account of which in its opinion settlement could not be arrived at and
its recommendations for determining the disputes.
(iv) Courts of inquiry
 Section 6, appropriate Government may constitute a Court of Inquiry. A Court may consist
of one independent person and where a Court consists of two or more members, one of
them shall be appointed as the Chairman. The period within which the report is to be
submitted is not mandatory and report may be submitted even beyond the period of six
months without affecting the legality of the inquiry.
(v) Labour Courts
 Section 7, appropriate Government empowered to constitute one or more Labour Courts for

& Labour Laws
154
SBI & LL
adjudication of industrial disputes.
 A Labour Court shall consist of one person only to be appointed by the appropriate
Government.
 When industrial dispute referred to a Labour Court, it is the duty of the Labour Court to
(i) hold its proceedings expeditiously,
(ii) submit its award to appropriate Government.
(vi) Industrial Tribunals
(1) Appropriate Government may constitute one or more Industrial Tribunals for the
adjudication of industrial disputes.
(2) Tribunal shall consist of one person only.
(3) Person shall not be qualified for appointment as the presiding officer unless:
(a) he is, or has been, a Judge of High Court;
(b) he has, a period of not less than three years, been a District Judges.
(4) Appropriate Government, if it so thinks fit, appoint two persons as assessors to advise the
Tribunal.
(vii) National Tribunals
(1) Central Government alone has been empowered to constitute National Tribunals for the
adjudication of industrial disputes which (a) involve questions of national importance (b) are
of nature that industrial establishments situated in more than one State are;
(2) A National Tribunal shall consist of one person only to be appointed by the Central
Government;
(3) Person shall not be qualified for appointment Presiding Officer unless: he is, or has been, a
Judge of a High Court;
(4) Central Government, if it so thinks fit, appoint two persons to advise the National Tribunal.
REFERENCE OF DISPUTES
(A) Reference of disputes to various Authorities
(a) may refer dispute to a Conciliation Board for promoting the settlement of the dispute.
(b) may refer any matter to a Court of Inquiry. Purpose of making such a reference is not
conciliatory or adjudicatory but only investigatory.
(c) may refer the dispute, to a Labour Court for adjudication.
(d) may refer dispute to an Industrial Tribunal for adjudication.
 Where dispute relates to a public utility service and a notice of strike or lock-out has

& Labour Laws
155
SBI & LL
been given, it is mandatory for appropriate Government to make reference even when
some proceedings under the Act are pending in respect of the dispute.
 Where parties apply whether jointly or separately, for reference of the dispute to a
Board, Court (Labour Court, Tribunal or National Tribunal), Government, if satisfied
shall make the reference accordingly.
 Industrial Disputes Act provides for no appeal or revision as against the awards so
made though no doubt the Supreme Court in its discretion may under Article 136 of
the Constitution grant special leave to a party aggrieved by award to appeal to
Supreme Court against an award so made.
 Section 10(1) powers of appropriate Government to make a reference summarised

below:
i. Order making a reference is administrative act and it is not a judicial or quasi-

judicial act.
ii. The powers to make a reference is discretionary.
iii. Government cannot be compelled to make a reference. If Court satisfied that

Government can be compelled to reconsider its decision by a writ of Mandamus
(State of Bombay v. K.P. Krishnan)
iv. Western India Match Co. Ltd. v. Workmen, it is not mandatory for
appropriate Government to wait for the outcome of the conciliation
proceedings before making an order of reference.
v. Refusal of Government to refer the dispute for adjudication does not debar
it from making subsequent reference.
vi. The appropriate Government has no power either expressly or impliedly to

cancel, withdraw or supersede any matter referred for adjudication.
vii. If reference to dispute is made in general terms and disputes are not
particularised, the reference will not become bad provided the dispute in
question can be gathered by Tribunal from reference and surrounding facts.
(B) Reference of dispute to National Tribunal involving question of importance, etc.
 Where Central Government is of opinion that industrial dispute exists and dispute involves
question of national importance or dispute should be adjudicated by a National Tribunal,
then, Central Government may, by order in writing, refer the dispute to a National Tribunal.
(C) Reference on application of parties
 Where parties to industrial disputes apply in prescribed manner, whether for reference of
the dispute to a Board, Court, Labour Court, Tribunal or National Tribunal, appropriate
Government, if satisfied shall make reference to submit award, such time limit may be
extended if required.

& Labour Laws
156
SBI & LL
(D) Time limit for submission of awards
 An order referring industrial dispute to Labour Court, Tribunal or National Tribunal shall
specify period within which award shall be submitted to appropriate Government.
 Provided that where dispute connected with individual workman, no such period shall
exceed three months:
 Provided further that where parties apply for extension of such period Labour Court,
Tribunal or National Tribunal considers it necessary, he may for reasons extend such period
by such further period as he may think fit:
(E) Prohibition of strike or lock-out
 Where industrial dispute referred to a Board, Labour Court, Tribunal or National

Tribunal, the appropriate Government may by order prohibit continuance of any strike or
lock-out.
 It is necessary that Government makes order prohibiting strike or lock out. If no order is
made, continuance of strike or lock-out is not illegal.
(F) Powers of the Government to add parties
 Where a dispute referred to a Labour Court, Tribunal or National Tribunal and appropriate
Government is of opinion, that dispute is of nature that other establishment of similar
nature is likely to be intereste, or affected by, such dispute, the appropriate Government
may, at time of making reference but before submission of the award, include in that
reference such establishment.
VOLUNTARY REFERENCE OF DISPUTES TO ARBITRATION
Section 10-A:
i. Where any industrial dispute exists and not yet been referred to Labour Court, Tribunal or
National Tribunal, the employer and the workmen may refer the dispute, by written agreement,
to arbitration.
ii. Arbitration agreement shall be in form and manner as prescribed.
iii. Copy of the arbitration agreement shall be forwarded to appropriate Government and Conciliation
Officer and appropriate Government shall within one month from date of the receipt copy,
publish the same in the Official Gazette.
iv. Arbitrator shall investigate dispute and submit to appropriate Government the arbitration award.
v. Where industrial dispute referred to arbitration and notification has been issued, appropriate
Government may, by order, prohibit the continuance of any strike or lock-out.
STRIKES AND LOCK-OUTS
Two weapons in the hands of workers and employers respectively, which they can use to press
their viewpoints in collective bargaining.

& Labour Laws
157
SBI & LL
(i) General prohibition of strikes and lock-outs
No workman employed shall go on strike and no employer:

(a) during pendency of conciliation proceedings and seven days the conclusion;
(b) during pendency of proceedings before Labour Court, Tribunal;
(c) during pendency of arbitration proceedings and two months after the conclusion of
proceedings;
(d) during period in which settlement or award in operation.
(ii) Prohibition of strikes and lock-outs in public utility service
(1) No person employed in a public utility service shall go on strike.
(a) without giving employer notice of strike, within six weeks before striking;
(b) within 14 days of giving of such notice;
(c) before expiry of date of strike in such notice as aforesaid;
(d) during pendency of any conciliation proceedings and seven days after such
proceedings.
(2) No employer carrying public utility service shall lock-out:
(a) without giving notice of lock-out provided within six weeks before locking-out; or
(b) within 14 days of giving such notice;
(c) before expiry of date of lock-out specified in notice;
(d) during pendency of any conciliation proceedings and 7 days after proceedings.
(3) If employer receives such notices, he shall within five days report to the appropriate
Government the number of such notices received.
(iii) Illegal strikes and lock-outs
(1) A strike or lock-out shall be illegal if:
(i) commenced in contravention Section 22 or Section 23;
(ii) continued in contravention of Section 10(3) or Section 10A(4A).
(2) Where strike or lock-out has already commenced, the continuance strike or lock-out shall
not be deemed to be illegal, provided that strike or lock-out was not in contravention of
provisions of this Act or was not prohibited.
(3) A lock-out declared in consequence of illegal strike shall not be deemed to be illegal.

& Labour Laws
158
SBI & LL
UNFAIR LABOUR PRACTICES
Section 25T lays that no employer or workman or a Trade Union shall commit any unfair labour practice.
Any person who commits shall be punishable with imprisonment which may extend to six months or
fine which may extend to one thousand rupees or with both.
PENALTIES
1. Penalty for illegal strikes
Any workman who commence strike which is illegal shall be punishable with imprisonment which
may extend to one month, or fine which may extend to fifty rupees or with both.
2. Penalty for illegal lock-outs
Imprisonment which may extend to one month or fine which may extend to one thousand rupees,
or with both.
3. Penalty for instigation etc.

Person who instigates others to take part in, strike or lock-out which is illegal shall be punishable
with imprisonment which may extend to six months, or fine may extend to one thousand rupees,
or with both.
4. Penalty for giving financial aid to illegal strikes and lock-outs

shall be punishable with imprisonment which may extend to six months, or with fine which
may extend to one thousand rupees, or with both.
5. Penalty for breach of settlement or award

punishable with imprisonment which may extend to six months, or with fine or with both, where
breach is continuing further fine two hundred rupees for everyday.
6. Penalty for disclosing confidential information
Person who wilfully discloses information in contravention of provisions of that section shall, on
complaints made by or on behalf of the trade union or individual business affected, be punishable
with imprisonment for a term which may extend to six months or with fine which may extend to
one thousand rupees, or with both. (Section 30)
7. Penalty for closure without notice
Employer who closes down undertaking without complying with provisions punishable with
imprisonment which may extend to six months or fine may extend five thousand rupees, or with
both.
8. Penalty for other offences
Employer shall be punishable with imprisonment which may extend to six months, or with fine
which may extend to one thousand rupees, or with both.

& Labour Laws
159
SBI & LL
whoever contravenes provisions, if no penalty is elsewhere provided, be punishable with fine

which may extend to one hundred rupees.

& Labour Laws
160
SBI & LL
LAW OF INDUSTRIAL RELATIONS

17 UNIT 2 – The Industrial Employment
Chapter
(Standing Order) Act, 1946
 Industrial Employment (Standing Orders) Act, 1946
OBJECT AND SCOPE OF THE ACT
To enforce uniformity in conditions of services in different industrial establishments with the express or
written conditions of employment, it is open for the prospective worker to accept them and join the
industrial establishment.
 Act extends to the whole of India and applies to every industrial establishment wherein 100 or
more workmen employed on any day during preceding twelve months. Appropriate Government
after giving 2 months notice extend provisions to industrial establishment employing persons less
than 100.
 Act does not apply to (1) industry to which provisions of Chapter VII of the Bombay Industrial
Relations Act, 1946, apply; (2) provisions of Madhya Pradesh Industrial Employment (Standing
Orders) Act, 1961 apply.
 Section 13-B specifically exempt certain industrial establishments industrial establishment in

workmen employed are persons to whom Fundamental and Supplementary Rules, Civil Services
(Classification, Control and Appeal) Rules, Civil Service Regulations, Indian Railway Establishment
Code apply.
Section 14 appropriate Government may by notification exempt any industrial establishment from all or
any provisions Act.
Appellate Authority
Authority appointed by the appropriate Government, to exercise functions of an appellate authority

under this Act.
Appropriate Government
Industrial establishments under control of Central Government or Railway administration or port, mine
or oilfield, and in all other cases the State Government:
Certifying Officer
Labour Commissioner or a Regional Labour Commissioner, and includes officer appointed by

appropriate Government, to perform functions of a Certifying Officer.

& Labour Laws
161
SBI & LL
Employer
means the owner of an industrial establishment to which this Act applies and includes:
(i) manager
(ii) head of the department.
(iii) person responsible to the owner for the supervision and control.
Industrial Establishment
It means
(i) industrial establishment Payment of Wages Act, 1936, or
(ii) a factory Factories Act, 1948, or
(iii) a railway Indian Railways Act, 1890, or
(iv) establishment for purpose of fulfilling contract with owner of industrial establishment.
Standing Orders
means rules relating to matters set out in Schedule to the Act.
Wages and Workmen
“Wages” and “Workmen” meanings respectively assigned to them in Industrial Disputes Act, 1947.
CERTIFICATION OF DRAFT STANDING ORDERS
Submission of draft Standing Orders by employers to the certifying officer
 Section 3 within six months from date which Act becomes applicable employer shall submit to
Certifying Officer five copies draft Standing Orders proposed for adoption.
 Draft Standing Orders shall be in conformity with the Model Standing Orders.
 Draft Standing Orders accompanied by statement containing particulars of workmen employed.
 If industrial establishment of similar nature may submit joint draft of Standing Orders.
Submission of draft Standing Orders by employers to the certifying officer

Section 4, Standing Orders shall be certifiable if
(a) Provision made for every matter stated in the Schedule which is applicable to industrial
establishment; and
(b) Standing Orders in conformity with provisions of Act.
Fairness or reasonableness of Standing Orders

Section 4.
Duty on Certifying Officer, to consider reasonableness and fairness of Standing Orders before certifying.
& Labour Laws
162
SBI & LL
The Certifying Officer is under a legal duty to consider that the Standing Orders are in conformity with
the Act. If Certifying Officer finds some provision not included in the Schedule, or finds some provisions
unreasonable he must refuse to certify. Where matter not included in Schedule and appropriate
Government not added item to Schedule, neither employer has right to frame Standing Order nor
Certifying Officer to certify the same. Consent of employees to such standing orders would not make
any difference (Air Gases Mazdoor Sangh, Varanasi v. Indian Air Gases Ltd.,).
Certification of Standing Orders
 Procedure to be followed by the Certifying Officer : Section 5. On receipt of draft Standing Order
employer, forward copy to trade union or where no trade union, to workmen in manner as
prescribed, together with notice requiring objections. Objections to be submitted within 15 days.
On receipt of objections provide opportunity of being heard and will make amendments, if any,
required.
 Effect of certification: Act is special law matters enumerated in the Schedule.
 Register of Standing Orders: Section 8 empowers Certifying Officer to file a copy of all Standing
Orders in a register maintained. He shall furnish a copy of the same to any person applying
therefor on payment of the prescribed fee.
APPEALS
Section 6, order of Certifying Officer can be challenged by employer, workman, trade union who can file
an appeal before appellate authority within 30 days from which copies sent to employer workers
representatives. Appellate authority decision shall be final.
DATE OF OPERATION OF STANDING ORDERS
Standing Orders come into operation on expiry of 30 days from date on which copies sent to employer
or where appeal preferred on the expiry of 7 days from date which copies sent to employer and workers
representatives. (Section 7)
POSTING OF STANDING ORDERS
Text of Standing Orders prominently posted by employer in English and language understood by
majority workmen on special boards at or near entrance and in all departments where workmen
employed. (Section 9)
DURATION AND MODIFICATION OF STANDING ORDERS
Section 10 prohibits employer to modify Standing Orders once they are certified except on agreement
between employer and workmen or a trade union modification not affected until expiry of 6 months
from date last modified empowers an employer or workmen or trade union to apply to Certifying Officer

& Labour Laws
163
SBI & LL
to have Standing Orders modified application should be accompanied by 5 copies.
Section 10(2) does not contain any time limit for making modification application. It can be made at any
time. [Indian Express Employees Union v. Indian Express (Madurai) Ltd. (1998) 1 Cur LR 1161 (Ker)]
PAYMENT OF SUBSISTENCE ALLOWANCE
Section 10A:
Where any workman suspended by employer pending investigation or inquiry of misconduct against
him, employer shall pay workman subsistence allowance
(a) at rate of fifty per cent of wages entitled immediately preceding suspension, for first ninety days
of suspension and
(b) at rate of seventy five per cent wages for remaining period of suspension.
Any dispute may be referred by workman or employer, to Labour Court.
If provisions relating to payment of subsistence allowance under other law are more beneficial,
then provisions other law applicable.
INTERPRETATION OF STANDING ORDERS
Section 13-A provides that question relating to application of Standing Order certified under this Act, can
be referred to Labour Court constituted under Industrial Disputes Act, 1947. The Labour Court to which
question referred, shall decide after giving opportunity of being heard. Decision shall be final and
binding on the parties.
TEMPORARY APPLICATION OF MODEL STANDING ORDERS
Section 12-A period commencing on date which Act becomes applicable to industrial
establishment and ending with date on which Standing Orders certified, the prescribed model
Standing Orders shall be deemed to be adopted in that establishment Sections 9, 13(2) and 13-A
shall apply.
Matters to be provided in Standing Orders under this Act
1. Classification of workmen, e.g., permanent, temporary.
2. Periods and hours of work, holidays, pay-days and wage rates.
3. Shift working.
4. Attendance and late coming.
5. Leave and holidays.
6. Requirement to enter premises by certain gates.

& Labour Laws
164
SBI & LL
7. Closing and reopening of sections of industrial establishment, temporary stoppage of

work and rights and liabilities of employer and workmen arising therefrom.
8. Termination of employment.
9. Suspension or dismissal for misconduct.
10. Means of redress against unfair treatment.
11. Other matter.

& Labour Laws
165
SBI & LL
Law of Wages - By CS Kirti Chaturvedi
18 LAW OF WAGES
Chapter UNIT 1 – Payment of Wages Act, 1936
 Payment of Wages Act, 1936
OBJECT AND SCOPE
The main object of the Act to eliminate all malpractices by laying down time and mode of
payment as well as securing workers are paid at regular intervals, without any unauthorised
deductions.
Definitions
“Employed person” includes legal representative of deceased employed person. “Employer” includes
legal representative of deceased employer.
Responsibility for payment of wages
Section 3 provides every employer responsible for payment to persons employed. However, in the case
of factories person named as manager; in case of industrial or other establishments person responsible
for supervision and control in case of contractor, person designated by contractor shall be responsible
for such payment.
Fixation of wage period
Section 4 of every person responsible for payment of wages shall fix wage-periods. No wage-period
shall exceed one month.
Time payment of wages
 Section 5 specifies the time payment of wages. The wages of every person employed upon or in
any railway factory or industrial or other establishment upon or in which less than one thousand
persons are employed, shall be paid before the expiry of the seventh day.
 The wages of person employed in other establishment shall be paid before the expiry of the tenth
day.
 Where employment terminated by or on behalf of the employer wages earned by him shall be
paid before expiry of the second working day from terminated.
Wages to be paid in current coin or currency notes or by cheque or crediting in bank account
Section 6, all wages shall be paid in current coin or currency notes or by cheque or by crediting in the
bank account.
Deductions from the wages of an employee
Section 7 allows deductions from the wages on account of the following:-

& Labour Laws
166
SBI & LL
- By CS Kirti Chaturvedi Law of Wages
(i) fines;
(ii) absence;
(iii) damage to goods expressly entrusted to employee;
(iv) housing accommodation;
(v) recovery of advances;
(vi) recovery of loans advances from provident fund;
(viii) income-tax;
(Ix) deductions made with written authorisation of employee for payment of premium on his life
insurance policy.
Fines
Section 8 deals with fines. It provides that :
(1) No fine imposed on save in respect of such acts and omissions State Government may have
specified by notice.
(2) A notice specifying such acts and omissions exhibited on premises.
(3) No fine imposed until given opportunity of showing cause against the fine.
(4) Total amount of fine not exceed three per cent of wages payable.
(5) No fine imposed on person under age of fifteen years.
(6) AII fines and all realisations shall be recorded in a register to be kept by the person responsible.
Maintenance of registers and records
Section 13A every employer shall maintain registers and records giving particulars of persons
employed, work performed, wages paid, deductions made.
Claims arising out of deductions from wages or delay in payment of wages and penalty for malicious
or vexatious claims.
 Section 15 appropriate Government may appoint-
(a) Commissioner for Workmen’s Compensation; or

(b) officer of Central Government as,-
(i) Regional Labour Commissioner;
(ii) Assistant Labour Commissioner;
(c) any officer of State Government with at least two years’ experience;
 Where contrary to the provisions of the Act any deduction been made or payment of wages
delayed such person himself or legal practitioner or registered trade union may apply authority for
a direction.
 Every such application shall be presented within twelve months from deduction or from date on
which wages was due. application may be admitted after twelve months when applicant satisfies

& Labour Laws
167
SBI & LL
that he had sufficient cause.
 Authority shall hear the applicant and the employer and, after enquiry, direct refund to employed
person of the amount deducted, or delayed wages, together with compensation not exceeding
ten times amount deducted in former case and not exceeding three thousand rupees but not less
than one thousand five hundred rupees in the latter.
 A claim shall be disposed within period of three months period of three months may be extended
if both parties agree.
 No direction for payment of compensation if authority is satisfied that the delay was due to-
(a) bona fide error
(b) occurrence of an emergency
(c) failure of employed person to apply for or accept payment.
 If authority is satisfied that application was either malicious or vexatious may direct penalty not
exceeding three hundred seventy five Rupees be paid to employer.

& Labour Laws
168
SBI & LL
18 LAW OF WAGES
Chapter UNIT 2 – Minimum Wages Act, 1948
 Minimum Wages Act, 1948
OBJECT AND SCOPE OF THE LEGISLATION
Minimum Wages Act purports to prevent exploitation of labour and for empowers the appropriate
Government to prescribe minimum rates of wages in the scheduled industries.
The Act extends to whole of India.
Scheduled employment
 Means an employment specified in the Schedule forming part of such employment.
 Note: The schedule is divided into two parts namely, Part I and Part II.
FIXATION OF MINIMUM RATES OF WAGES
 Section 3 ‘appropriate Government’ shall fix the minimum rates of wages, payable to
employees. The rates to be fixed need not be uniform. Different rates can be fixed for different
zones or localities:
 “Appropriate Government” may not fix minimum rates of wages in employment in which less than
1000 employees in whole State are engaged.
REVISION OF MINIMUM WAGES
‘Appropriate Government’ may review at such intervals not exceeding five years, and revise minimum
rate of wages.
MANNER OF FIXATION/REVISION OF MINIMUM WAGES
Section 3(2), ‘Appropriate Government’ may fix minimum rate of wages for:
(a) time work, Minimum Time Rate;
(b) piece work, Minimum Piece Rate;
(c) a “Guaranteed Time Rate”
(d) “Over Time Rate”
Section 3(3) different minimum rates of wages may be fixed for —

(i) different scheduled employments;
(ii) different classes of work;
& Labour Laws
169
SBI & LL
(iii) adults, adolescents, children and apprentices;

(iv) different localities
Further, minimum rates of wages may be fixed:

(i) by the hour,
(ii) by the day,
(iii) by the month
PROCEDURE FOR FIXING AND REVISING MINIMUM WAGES (SECTION 5)
Appropriate Government can follow either of the two methods described below.
First Method
 This method is known as the ‘Committee Method’. Appropriate Government may appoint
committees to advise in respect of fixation or revision. After consider advise Government shall, by
notification in Official Gazette fix or revise minimum rates of wages.
 Committee shall consist of persons representing employers and employee who shall be equal in
number and independent person not exceeding 1/3rd of its total number of member. One of such
independent persons shall be appointed as Chairman of the Committee.
Second Method
 The method is known as the ‘Notification Method’. Appropriate Government shall by

notification, in the Official Gazette publish proposals for persons likely to be affected.
 The representations received will be considered and thereafter fix or revise the minimum rates of
wages.
CENTRAL ADVISORY BOARD
Section 8 provides that Central Government shall appoint a Central Advisory Board for advising Central
Government and State Governments in the matters of fixation and revision of minimum rates of wages
shall consist of persons representing employers and employees who shall be equal in number and
independent person not exceeding 1/3’d of its total number of members.
MINIMUM WAGE — WHETHER TO BE PAID IN CASH OR KIND
Minimum wages payable shall be paid in cash. But where it has been custom to pay wages wholly or
partly in kind, appropriate Government, may authorize such payments.
PAYMENT OF MINIMUM WAGES IS OBLIGATORY ON EMPLOYER (SECTION 12)
Paymenjt of less than the minimum rates of wages is an offence. Employer shall pay every employee
wages at a rate not less than the minimum rate of wages.

& Labour Laws
170
SBI & LL
FIXING HOURS FOR A NORMAL WORKING DAY (SECTION 13)
Appropriate Government may —
(a) fix number of work which shall constitute a normal working day;
(b) provide for a day of rest in every period of seven days
(c) provide for payment on a day of rest at rate not less than overtime rate.
PAYMENT OF OVERTIME (SECTION 14)
When employee, works on any day in excess of number of hours constituting normal working day,
employer shall pay in excess at the overtime rate fixed under Act.
WAGES OF A WORKER WHO WORKS LESS THAN NORMAL WORKING DAY (SECTION 15)
Employee works on any day on which he employed for a period less than the requisite number of hours
he shall be entitled to receive wages if he had worked for a full working day.
Provided shall not receive wages for full normal working day —
(i) if his failure to is caused by his unwillingness to work and not by omission of employer.
(ii) other cases as may be prescribed.
MAINTENANCE OF REGISTERS AND RECORDS (SECTION 18)
Apart from payment of the minimum wages, employer is required to maintain registers and records.
Every employee is required to exhibit notices in the place of work.
AUTHORITY AND CLAIMS (SECTION 20-21)
 Appropriate Government, may appoint authority to hear and decide any claims arising out of
payment of less than minimum rate of wages.
 Authority so appointed shall have jurisdiction to hear and decide claim or remuneration for days
of rest or payment of overtime.
OFFENCES AND PENALTIES
Employer who pays employee less than the minimum rates or contravenes any rule shall be
punishable with imprisonment which may extend to six months or fine which may extend to five
hundred rupees or with both.

& Labour Laws
171
SBI & LL
18 LAW OF WAGES
Chapter UNIT 3 – Payment of Bonus Act, 1965
 Payment of Bonus Act, 1965
The object of the Act is to provide payment of bonus to persons employed in certain establishments
Jalan Trading Co. (Pvt.) Ltd. v. Mill Mazdor Sabha, “object of the Act to maintain peace and harmony
between labour and capital by allowing employees to share prosperity of establishment and prescribing
maximum and minimum rates of bonus.
Mumbai Kamgar Sabha v. Abdulbhai Faizullabhai, that “bonus” is a word of many houses. There is
profit based bonus which is one specific kind of claim. There is customary or traditional bonus.
Conceptually, statutory bonus and customary bonus operate in two fields and do not clash with each
other.
APPLICATION OF THE ACT
Act extends to the whole of India, and Act shall apply to
(a) every factory;
(b) every other establishment in which twenty or more person employed
Appropriate Government may, after giving two months notice apply provisions of this Act to any
establishment including factory employing persons less than twenty however, shall in no case be less
than ten.
ACT NOT TO APPLY TO CERTAIN CLASSES OF EMPLOYEES
Act shall not apply to:

(i) employees employed by any insurer carrying general insurance business and Life Insurance
Corporation of India;
(ii) seamen of Merchant Shipping Act, 1958;
(iii) employees under the Dock Workers
(iv) employees of department of Central or a State Government or local authority;
(v) employees employed by the Reserve Bank of India;
(vi) employees employed by
(a) Industrial Finance Corporation of India;
(b) Deposit Insurance Corporation;
(c) National Bank for Agriculture Rural Development;
(d) Unit Trust of India;

& Labour Laws
172
SBI & LL
(e) Industrial Development Bank of India;
(f) Small Industries Development Bank of India (eb) National Housing Bank;
Apart from above, appropriate Government necessary powers to exempt establishment from provisions
of the Act.
Accounting Year
“Accounting Year” means
(i) in relation to corporation, year ending on day which books are to be closed;
(ii) in relation to company, period of which profit and loss account laid before annual general meeting
is made up, whether year or not;
(iii) in any other case
(a) year commence on 1st day of April
Allocable Surplus
It means —
(a) in relation to an employer, being a company (other than a banking company) sixty-seven per
cent of available surplus in accounting year;
(b) in any other case sixty per cent of available surplus.
Award
Means interim or a final determination of industrial dispute by Labour Court, Industrial Tribunal or
National Tribunal and includes an arbitration award.
Corporation
Means body corporate established under Central, Provincial or State Act not include company or a
co-operative society.
Employee
Means any person employed on a salary not exceeding Rs. 21,000/- per mensem.
Employer
“Employer” includes:
(i) in relation to factory, owner or occupier of the factory,

& Labour Laws
173
SBI & LL
(ii) in relation other establishment, person who, has ultimate control over affairs of establishment
Establishment in Private Sector
Means any establishment other than establishment in public sector.
Establishment in Public Sector
Means an establishment owned, controlled managed by:

(a) Government company;
(b) Corporation in which not less than forty percent of capital is held by:
(i) Government; or
(ii) Reserve Bank of India;
Salary or Wage
Means all remuneration capable of being expressed in terms of money be payable to employee in
respect of work done and includes dearness allowance but does not include:
(i) other allowance;
(ii) value of house accommodation;
(iii) travelling concession;
(iv) bonus;
(v) contribution paid to any pension fund or provident fund;
(vi) commission payable
Establishment – Meaning Of
Word establishment shall include all departments, undertakings branches situated in same place or
different places for purpose of computation of bonus:
Where a separate balance-sheet and profit and loss account prepared in respect of any department or
branch then such department, or branches shall be treated as a separate establishment for the purpose
of computation of bonus.
CALCULATION OF AMOUNT PAYABLE AS BONUS
1. First of Gross Profit is calculated.
2. From this Gross Profit, sums deductible.
3. To this figure, add sum equal to difference between direct tax calculated on gross profit for
previous year and direct tax calculated on gross profit after deducting bonus paid or payable.
4. Figure so arrived will be available surplus.
5. Of this surplus, 67% in case of company and 60% in other cases, shall be “allocable surplus”.

& Labour Laws
174
SBI & LL
ELIGIBILITY FOR BONUS AND ITS PAYMENT
(i) Eligibility for bonus
Every employee entitled to be paid in accounting year, bonus, provided he has worked for not less
than thirty working days in that year.
(ii) Disqualification for bonus
If he is dismissed from service for:

(a) fraud;
(b) violent behaviour on the premises;
(c) theft, misappropriation of property of establishment.
(iii) Payment of minimum bonus
Every employer bound to pay a minimum bonus which shall be 8.33 per cent of salary or one
hundred rupees whichever is higher, whether or not employer has allocable surplus in accounting year:
Where employee not completed fifteen years of age words one hundred rupees the words sixty
rupees were substituted.
Even if the employer suffers losses during accounting year, bound to pay minimum bonus as prescribed
by Section 10 [State v. Sardar Singh Majithia].
(iv) Maximum bonus
(1) Where allocable surplus exceeds minimum bonus payable employer shall be bound to pay bonus
which shall be maximum of twenty per cent of such salary or wage.
(v) Proportionate reduction in bonus in certain cases
Where employee not worked for all working days minimum bonus of one hundred rupees or, sixty
rupees, if such bonus is higher than 8.33 per cent of salary shall be proportionately reduced.
(vi) Computation of number of working days
Employee shall be deemed to worked also on the days on which:
(a) he has been laid off
(b) been on leave with salary or wage;
(c) been absent due to temporary disablement caused by accident arising out of employment;
(d) employee on maternity leave.

& Labour Laws
175
SBI & LL
(vii) Set on and set off of allocable surplus
(1) Where allocable surplus exceeds amount of maximum bonus payable then, the excess shall,
subject to twenty per cent of the total salary be carried forward for being set on in succeeding
accounting year
(2) Where no available surplus or the allocable surplus amount of minimum bonus payable to the
employees and there is no amount or sufficient amount carried forward for purpose of payment
of minimum bonus, shall be carried forward in succeeding accounting year.
(viii) Adjustment of customary or interim bonus
Where (a) employer paid any puja bonus or customary bonus (b) paid part of the bonus payable
before bonus becomes payable; then, employer shall entitled to deduct bonus so paid from bonus
payable.
(ix) Time limit for payment of bonus
Where employee is found guilty of misconduct causing financial loss it shall be lawful to deduct amount
of loss from bonus payable and employee shall be entitled to receive balance, if any.
(b) Where there is dispute regarding payment of bonus pending before authority shall be paid in cash
within month from date from which award becomes enforceable.
(c) Bonus should be paid within a period of eight months from the close of the accounting year.
(x) Recovery Set on and set off of allocable surplus
Where money is due to employee by way of bonus from his employer under award or agreement, the
employee or heirs may, make application to appropriate Government for recovery and Government
shall issue a certificate for that amount to Collector who shall proceed to recover.
Such application shall be made within one year from date on which money become due.
BONUS LINKED WITH PRODUCTION OR PRODUCTIVITY
Section 31A enables the employees and employers to operate a scheme of bonus payment linked to
production or productivity in lieu of bonus based on profits.
POWER OF EXEMPTION
Appropriate Government is of opinion that it will not be in public interest to apply provisions of
Act, it may, by notification exempt establishments from all or any of the provisions of this Act.
PENALTIES
If person contravenes provisions shall be punishable with imprisonment which may extend to six
months, or fine which may extend to one thousand rupees, or with both.

& Labour Laws
176
SBI & LL
OFFENCES BY COMPANIES
If person committing offence is company, every person who was responsible for conduct of
business as well as company, deemed to be guilty of offence and shall be liable and punished
accordingly.
‘Company’ means body corporate and includes firm and ‘director’, in relation to a firm, means a partner
in the firm.

& Labour Laws
177
SBI & LL
18 LAW OF WAGES
Chapter UNIT 4 – Equal Remuneration Act, 1976
The Equal Remuneration Act, 1976 provides payment of equal remuneration to men and women for
same work or work of similar nature without any discrimination and prevents discrimination against
women employees while making recruitment, or in any condition of service subsequent to recruitment.
The Act extends to whole of India.
Definitions
 “Man” and “Woman” mean male and female human beings, respectively, of any age.
 “Remuneration” basic wage or salary, and additional emoluments payable, in cash or in kind, to
person employed, if the of contract of employment, were fulfilled.
 “Same work or Work of a similar nature” means work in respect of which the skill, effort and
responsibility required are the same, when performed under similar working conditions, by a man
or a woman.
Act to have overriding effect
Section 3 provisions of the Act shall have effect notwithstanding anything inconsistent contained in any
other law or contract of service, whether made before or after the commencement of the Act.
Duty of employer to pay equal remuneration to men and women workers for same work or work
of a similar nature
Section 4 no employer shall pay to any worker, remuneration, in cash or in kind, at rates less favourable
than those at which remuneration is paid by him to the workers of the opposite sex performing same
work or work of a similar nature.
Discrimination not to be made while recruiting men and women
Section 5 employer while making recruitment for same work or work of a similar nature,
shall not make discrimination against women except where employment of women is prohibited or
restricted under any law.
Above mentioned section shall not affect priority or reservation for Scheduled Castes or Scheduled
Tribes.
Authorities for hearing and deciding claims and complaints
Section 7 appropriate Government appoint such officers, not below the rank of a Labour Officer, for
hearing and deciding complaints with regard to contravention of provision of the Act; claims arising out
of non-payment of wage.

& Labour Laws
178
SBI & LL
Maintenance of Registers
Section 8 duty of every employer, to maintain registers in relation to workers employed.
Penalty
If employer:-
(i) makes recruitment in contravention;
(ii) makes any payment of remuneration at unequal rates;
(iii) makes discrimination between men and women;
(iv) omits or fails to carry direction by appropriate Government, then he/ she shall be punishable with
fine or with imprisonment or with both.

& Labour Laws
179
SBI & LL
Social Security Legislations - By CS Kirti Chaturvedi
19 SOCIAL SECURITY LEGISLATIONS

Chapter UNIT 1 – Employees’ State Insurance Act, 1948
 Employees’ State Insurance Act, 1948
INTRODUCTION
 The Employees’ State Insurance Act, 1948 provides for certain benefits to employees in case of
sickness, maternity and employment injury.
 The Act extends to the whole of India.
(i) Confinement
Means labour resulting in issue of a living child or labour after 26 weeks of pregnancy resulting in
issue of child whether alive or dead.
(ii) Contribution
Means the sum of money payable to Corporation by principal employer.
(iii) Dependent
Means any of the following relatives of a deceased insured person namely:
(i) a widow, a legitimate or adopted son not attained age of twenty-five year an unmarried
legitimate or adopted daughter,
(ii) a widowed mother,
(iii) if wholly dependent a legitimate or adopted son or daughter attained age of 25 years;
(iv) if wholly or in part dependent on the earnings of insured person at the time his death:
(a) parent other than widowed mother,
(b) minor illegitimate son, unmarried illegitimate daughter,
(c) minor brother or unmarried sister or widowed sister,
(d) widowed daughter-in-law,
(e) minor child of a pre-deceased son,
(f) minor child pre-deceased daughter,
(g) paternal grand parent if no parent of insured person is alive.
(iv) Employment Injury
E.S.I. Corpn. Indore v. Babulal, the M.P. High Court held that injury arose out of employment where
workman attending duty in spite of threats for strike and was assaulted while returning after duty. A
worker was injured while knocking the belt of the moving pulley, though injury caused was to his
negligence, yet such an injury amounts to an employment injury (Jayanthilal Dhanji Co. v. E.S.I.C.).
& Labour Laws
180
SBI & LL
- By CS Kirti Chaturvedi Social Security Legislations
The word injury does not mean only visible injury in the form of some wound. Such a narrow
interpretation would be inconsistent with the purposes of the Act which provides certain benefits in
case of sickness, maternity and employment injury (Shyam Devi v. E.S.I.C., AIR 1964 AII. 42).
(v) Exempted Employee

Means an employee who is not liable under this Act to pay the employees contribution.
(vi) Family
(i) spouse;
(ii) minor legitimate or adopted child;
(iii) child wholly dependent on earnings of insured person:
(iv) child infirm by physical or mental abnormality and is wholly dependent;
(v) dependent parents;
(vi) In case insured person unmarried and parents are not alive, a minor brother or sister wholly
dependant.
(vii) Factory
“Factory” means any prjemises including the precincts thereof whereon ten or more persons are
employed on any day of preceding twelve months, but does not including a mine or railway running
shed.
(viii) Insurable Employment

Means an employment in factory to which the Act applies.
(ix) Insured person

Means a person who is or was employee and who is by reason entitled to any of the benefits.
(x) Permanent Partial Disablement

Means such disablement, as reduced the earning capacity of an employee in every employment:
(xi) Permanent Total Disablement

Means such disablement of a permanent nature as incapacitates employee for all work:
(xii) Seasonal Factory

Means a factory exclusively engaged in one or more following manufacturing processes namely, cotton
ginning, cotton or jute pressing, decortication of groundnuts, manufacture of coffee, indigo, lac, rubber,
sugar, tea and includes a factory engaged for period not exceeding seven months in a year:
(xiii) Sickness
Means a condition which requires medical treatment.

& Labour Laws
181
SBI & LL
(xiv) Temporary Disablement

Means a condition resulting from employment injury renders employee temporarily incapable of doing
work.
(xv) Wages
Means all remuneration paid or payable in cash to an employee and includes payment in respect
of period of authorised leave, lock-out, strike which is not illegal but does not include:
(a) contribution paid to pension fund or provident fund;
(b) travelling allowance;
(c) gratuity payable.
REGISTRATION OF FACTORIES AND ESTABLISHMENTS UNDER THIS ACT
Every factory or establishment to which this Act applies shall registered in manner as may be specified.
EMPLOYEES’ STATE INSURANCE

Section 38 makes compulsory all the employees in factories shall be insured. Such insured persons
shall pay contributions towards Insurance Fund.
ADMINISTRATION OF EMPLOYEES’ STATE INSURANCE SCHEME

For administration of scheme Employees’ State Insurance Corporation Standing Committee have been
constituted. ESI Fund has been created which is administered by ESI Corporation.
EMPLOYEES’ STATE INSURANCE CORPORATION
Section provides for establishment of Employees’ State Insurance Corporation for administration of
Scheme.
Constitution
Central Government appoints chairman, vice-chairman and other members. Three members of
Parliament are its ex- officio members.
Powers and duties of the Corporation

Section 19 to promote measures for the improvement of the health and welfare of insured persons.
Appointment of Regional Boards, etc.

Corporation may appoint Regional Boards, Local Committees and delegate powers and functions,
as may be provided.
WINGS OF THE CORPORATION
TWO WINGS
Standing Committee

& Labour Laws
182
SBI & LL
The Act provides for constitution of a Standing Committee.
Power of the Standing Committee
To administer affairs of Corporation and perform functions of the Corporation.
Medical Benefit Council

Section 10 Central Government to constitute a Medical Benefit Council. The Council shall:
(a) advise Corporation and Standing Committee on matters relating to medical benefit;
(b) have powers and duties of investigation against medical practitioners;
(c) perform such other.
EMPLOYEES’ STATE INSURANCE FUND

Creation of Fund
Section 26 Act provides all contributions paid and moneys received shall be paid into Fund called the
Employees’ State Insurance Fund. Corporation may accept grants, gifts, donations from Central or State
Governments. A Bank account in name of Employees’ State Insurance Fund shall be opened with
Reserve Bank of India.
Purposes for which the Fund may be expended
Fund shall be expended only for the following purposes:

(i) payment of benefits to insured persons and to their families;
(ii) payment of fees to members of Corporation, Standing Committee and Medical Benefit Council;
(iii) payment of salaries, leave, travelling and compensatory allowances to servants of the Corporation;
(iv) establishment and maintenance of hospital;
(v) payment of contribution to State Government, local authority towards cost of medical treatment;
(vi) payment of sums under any decree, order or award, against the Corporation or servants.
CONTRIBUTIONS
Contributions to be paid at rates prescribed by Central Government.
Principal employer to pay contributions in the first instance

Section 40 it is incumbent upon principal employer to pay both the employers contributions and
the employees contribution. However, he can recover from employee the employees contribution by
deduction from wages.
If contribution payable not paid, he shall be liable to pay interest at the rate 12 per cent per annum or
higher rate as may be specified.
Recovery of contribution from immediate employer

Section 41, principal employer who has paid contribution is entitled to recover amount of
contribution from immediate employer either by deduction from any amount payable to him by

& Labour Laws
183
SBI & LL
principal employer.
Method of payment of contribution
Section 43 provides for payment and collection of contribution payable:
BENEFITS
Section 46 insured persons, their dependants are entitled to the following benefits on prescribed scale:
(a) periodical payments in case sickness;
(b) periodical payments insured workman in case of confinement miscarriage or sickness out of
pregnancy,;
(c) periodical payment to an insured person suffering from disablement;
(d) payment to dependants of insured person;
(e) medical treatment;
(f) payment of funeral expenses.
General provisions relating to Benefits

Right to receive benefits not transferable or assignable. When receives benefits under this Act not
entitled to receive benefits under other enactment.
EMPLOYEES’ INSURANCE COURT (E.I. COURT)
Constitution
Section 74 Act provides State Government shall constitute Employees’ Insurance Court. Person who is or
has been judicial officer of 5 years standing shall be qualified to be judge.
Matters to be decided by E.I. Court
(i) Adjudication of disputes

Employees’ Insurance Court has jurisdiction to adjudicate disputes.
(ii) Adjudication of claims

El Court has jurisdiction to decide claims for recovery of contribution from principal employer
action for failure or negligence to pay contribution.
No Civil Court has power to decide matters within the purview of E.I. Court.
EXEMPTIONS
Appropriate Government may exempt any factory/establishment from the purview of this Act.
Such exemption initially given for one year and extended from time to time.

& Labour Laws
184
SBI & LL

Chapter UNIT 2 – Employees’ Provident Funds and
Miscellaneous Provisions Act, 1952
 Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
INTRODUCTION
Provident Fund schemes for the benefit of the employees.
The following three schemes been framed under Act by the Central Government:
(a) Employees’ Provident Fund Schemes, 1952;
(b) Employees’ Pension Scheme, 1995; and
(c) Employees’ Deposit-Linked Insurance Scheme; 1976.

The Act applies:
(a) to factory in which twenty or more persons employed; and
(b) to other establishment employing twenty or more persons:
Provided that Central Government may, after giving two months notice apply provisions to establishment
employing number of persons less than twenty.
Non-applicability of the Act to certain establishments

Act shall not apply to (a) establishments registered under Co-operative Societies Act, 1912; (b) other
establishment under control of Central or State Government whose employees entitled to provident fund
or old age pension; (c) other establishment set up under Central, Provincial or State Act whose
employees entitled to provident fund or old age pension.
(i) Basic Wages

Means all emoluments earned by employee:
(i) cash value;

(ii) dearness allowance;
(iii) presents made by the employer.

& Labour Laws
185
SBI & LL
(ii) Contribution
Means a contribution payable in respect of a member under a Scheme.
(iii) Controlled Industry

Any industry control of which by the Union has been declared by the Central Act.
(iv) Employee
Means any person employed for wages in connection with work and gets wages includes any person
(i) employed by contractor;
(ii) engaged as apprentice.
Sons being paid wages are employees (Goverdhanlal v. REPC).
“Employee”, includes part-time employee, sweeper working twice or thrice night watchman gardener
working for ten days in month, etc. (Railway Employees Co-operative Banking Society Ltd. v. The Union
of lndia).
(v) Exemption Establishment
Means an establishment of which exemption granted from operation of all or any provisions of Scheme.
(vi) Factory
Any premises including precincts thereof, in any part of which a manufacturing process carried on
whether with the aid of power or without the aid of power.
(vii) Fund
Means Provident Fund.
(viii) Industry
Means any industry specified in Schedule I.
(ix) Insurance Fund
Means the Deposit-Linked Insurance Fund.
(x) Insurance Scheme
Means the Employees Deposit-Linked Insurance Scheme.
(xi) Manufacture or Manufacturing Process
Means any process for making, altering, finishing, packing, washing, cleaning with a view to its use, sale,
transport, delivery or disposal.

& Labour Laws
186
SBI & LL
(xii) Member
“Member” means a member of the Fund.
(xiii) Occupier of a Factory
Means the person, who has ultimate control over the affairs of the factory.
(xiv) Pension Fund
Means the Employees Pension Fund.
(xv) Pension Scheme
Means the Employees Pension Scheme.
(xvi) Scheme
Employees’ Provident Fund Scheme.
(xvii) Superannuation
In relation to an employee, who is member of the Pension Scheme, means attainment of the age of fifty-
eight years.
SCHEMES UNDER THE ACT
(A) Employees Provident Fund Scheme
 Administration of the Fund
(a) Central Government may constitute Board of Trustees.
(b) Scheme also lays down manner in which the Board shall administer the funds.
 Class of employees entitled and required to join Provident Fund
Every employee in factory or other establishment to which scheme applies entitled and required
to become member of the fund.
‘Excluded employee’ means:
(i) employee having been member withdraw full amount his accumulations in Fund;
(ii) employee whose pay exceeds fifteen thousand rupees per month.
(iii) An apprentice.
 Contributions
Contribution paid by employer to Fund shall be 10%, of basic wages, dearness allowance and
retaining allowance. Each contribution calculated to nearest rupee, fifty paise or more to be
counted as next higher rupee.

& Labour Laws
187
SBI & LL
Dearness allowance include cash value food concession. Retaining allowance payable to employee
for retaining his services, when establishment is not working.
 Investment: Members of the Provident Fund get interest on money standing to their credit in their
Provident Fund Accounts.
 Advances/Withdrawals: Advances from the Provident Fund can be taken for following purposes:
(1) Payment towards Life Insurance;
(2) Purchasing a dwelling house or flat or for construction of a dwelling house;
(3) Non-refundable advance to members due to temporary closure of factory;
(4) (i) Non-refundable in case of:

(a) hospitalisation lasting one month or more,
(b) surgical operation,
(c) suffering from T.B., Leprosy, Paralysis, Cancer;
(ii) Non-refundable advance for the treatment of a member of his family, requires
hospitalisation, for one month or more:
(a) for surgical operation;

(b) for treatment of T.B., Leprosy, Paralysis, Cancer;
(5) Advance for daughter/sons marriage, self-marriage, marriage of sister/brother;
(6) advance to members affected by cut in the supply of electricity;
(7) advance in case property is damaged by a calamity;
(8) Withdrawals for repayment of loans in special cases;
(9) Advance to physically handicapped members for purchasing equipment.
 Final withdrawal: Full accumulations with interest are refunded in event of death,
permanent disability, superannuation, retrenchment or migration from India.
(B) Employees’ Pension Scheme
 Government has introduced a new pension scheme styled Employees’ Pension Scheme, 1995 in
place of Family Pension Scheme, 1971.
 Compulsory for persons who become members of the Provident Fund.
 Minimum 10 years contributory service is required for entitlement to pension. Normal

superannuation pension payable on attaining age of 58 years. Pension on discounted rate payable
on attaining age of 50 years.
 Scheme provides for payment of monthly pension in following contingencies (a) Superannuation
age of 58 years; (b) Retirement; (c) Permanent total disablement; (d) Death during service; (e)
Death after retirement; (f) Children Pension; (g) Orphan pension.

& Labour Laws
188
SBI & LL
(C) Employees’ Deposit-Linked Insurance Scheme
Employees’ Deposit-Linked Insurance Scheme for the purpose of providing life insurance benefit
to the employees of any establishment.
1. Application of the Scheme: Applicable to all factories/establishments to which Provident Funds

applies.
2. Contributions to the Insurance Fund: Employees not required to contribute to Insurance Fund.
Employers required to pay contributions at the rate of 1% total emoluments.
3. Administrative expenses: Employers of all covered establishments required to pay charge Insurance
Fund.
4. Payment of assurance benefit: In case of death of a member, amount equal average balance in
account of deceased during preceding 12 months period of membership, whichever is less shall be
paid to persons eligible.
5. Exemption from the Scheme: Factories/establishments, which Insurance Scheme conferring more
benefits than those provided under statutory Scheme.
DETERMINATION OF MONEYS DUE FROM EMPLOYERS
(i) Determination of Moneys Due

Section 7A vests the powers of determining the amount due from any employer and deciding
dispute in the Central Provident Fund Commissioner.
Central Government already constituted Employees Provident Fund Appellate Tribunal. Any
person aggrieved by order may prefer an appeal.
(ii) Mode of recovery of moneys due from employee
Section 8 mode of recovery of moneys due from employers as may be authorised in the
same manner as an arrear of land revenue.
(iii) Recovery of moneys by employers and contractors
Section 8A lays down employer’s contribution as well as employee’s contribution from

contractor either by deduction from amount payable to contractor or debt payable by
contractor.
(iv) Measures for recovery of amount due from employer
Authorised officer shall issue a certificate for recovery of amount due from employer. Recovery
Officer got powers to attach/sell property of employer for effecting recovery. Authorised officer
can grant time to make payment of dues.

& Labour Laws
189
SBI & LL
(v) Priority of payment of contributions over other debts
Section 11 provides that contribution towards Provident Fund shall rank prior to other
payments in the event of employer being adjudicated insolvent.
EMPLOYER NOT TO REDUCE WAGES
Section 12 prohibits employer not to reduce wages of employee by reason of his liability for the
payment of contribution to Fund.
TRANSFER OF ACCOUNTS
Section 17A(1) of Act provides where employee to which this Act applies leaves employment and obtain
re- employment in another establishment to which Act does not apply, the amount of accumulations
shall be transferred to the credit of his account in the Provident Fund of establishment in which he is re-
employed.
PROTECTION AGAINST ATTACHMENT
Statutory protection provided to amount of contribution to Provident Fund from attachment to any
Court decree. Amount standing to credit of any member in the Fund shall not be liable to attachment
under any decree or order in respect of any liability incurred by member.
Amount standing to the credit at the time of his death and payable to his nominee.
POWER TO EXEMPT
Section 17 appropriate Government to grant exemptions to certain establishments from all or any of the
provisions of the Scheme.

& Labour Laws
190
SBI & LL

Chapter UNIT 3 – Maternity Benefit Act, 1961
 Maternity Benefit Act, 1961
INTRODUCTION
Maternity Benefits are aimed to protect dignity of motherhood by providing full and healthy
maintenance of women and her child when she is not working.
1. “Commissioning Mother” means a biological mother who uses egg to create an embryo
implanted in any other woman.
2. “Establishment” means —
(i) a factory;
(ii) a mine;
(iii) plantation;
3. “Wages” means all remuneration paid or to a woman if the terms of the contract of employment
were fulfilled and includes -
(1) cash allowances
(2) incentive bonus
(3) money value of concessional supply of food grains but does not include —
(i) bonus;
(ii) over-time earnings;
(iii) contribution paid to pension fund or provident fund;
(iv) gratuity payable;
Employment of or work by women prohibited during certain periods
Section 4 provides that no employer shall knowingly employ a woman also no women shall work
during the six weeks immediately following delivery, miscarriage of pregnancy.
If pregnant women makes request to her employer, she shall not be given during one month
immediately preceding expected delivery work which involves long hours of standing.
Right to payment of maternity benefits
A woman shall be entitled to maternity benefit if worked for not less than eighty days in the

& Labour Laws
191
SBI & LL
twelve months preceding date of her expected delivery.

Maximum period for which entitled to maternity benefit shall be twenty-six weeks maximum
period by woman having two or more than two surviving children shall be twelve weeks.
A woman who legally adopts child below three months entitled to maternity benefit for period of twelve
weeks.
Notice of claim for maternity benefit
Section 6 any woman entitled to maternity benefit may give notice to her employer, stating that
maternity benefit and any other amount may be paid to her and that she will not work during period for
which receives maternity benefit.
Nursing breaks
Every woman who returns to duty after delivery shall, in addition interval for rest be allowed for nursing
child until child attains age of fifteen months.
Creche Facility
Every establishment having fifty or more employees shall have facility of creche. Employer shall allow
four visits to the creche which shall include interval for rest.
Abstract of Act and Rules there under to be exhibited
Abstract of the provisions of this Act shall be exhibited in a conspicuous place of the establishment.
Regsiters
Every employer shall prepare and maintain such registers, records and muster-rolls and in prescribed
manner under section 20 of the Act.
Penalty for contravention of Act by employer
Section 21 provides if employer fails to pay maternity benefit to woman, he shall be punishable with
imprisonment not less than three months but may extend to one year and fine not less than two
thousand rupees but may extend to five thousand rupees.

& Labour Laws
192
SBI & LL

Chapter UNIT 4 – Payment of Gratuity Act, 1972
INTRODUCTION
Gratuity is a lump sum payment made by employer as a mark of recognition of the service rendered by
employee when he retires or leaves service.
The Act applies to:
(a) factory, mine, oilfield, plantation, port and railway company;
(b) shop or establishment in which ten or more person employed on any day of preceding twelve
months;
(c) other establishments in which ten or more employees are employed on any day preceding twelve
months. A shop or establishment to which Act applicable once, continues even if number of
persons.
WHO IS AN EMPLOYEE?
Definition of “employee” amended by Payment of Gratuity (Amendment) Act, 2009 to cover teachers in
educational institution retrospectively with effect from 3rd April, 1997.
OTHER IMPORTANT DEFINITIONS

Continuous Service
For the purposes of this Act:
(1) An employee shall be said to be in ‘continuous service’ if he has, been in uninterrupted service,
including service interrupted on account of sickness, accident, layoff, strike or work not due to
fault of employee;
(2) Where employee not in continuous service for period of one year or six months, he shall be
deemed to be in continuous service under the employer:
(a) for the said period of one year, if employee worked for not less than:
(i) one hundred and ninety days in case employed below ground in mine which works for
less than six days in a week;
(ii) two hundred and forty, days in other case;

& Labour Laws
193
SBI & LL
(b) for the said period of six months, if employee during period of six calendar months worked
under employer for not less than:
(i) ninety five days, in case employee employed below ground in a mine which works for
less than six days in a week; and
(ii) one hundred and twenty days any other case;
(3) Where employee, employed in a seasonal establishment not in continues service, he shall be
deemed to be in continuous service if he worked for not less than seventy-five per cent of number
of days establishment was in operation.
Family
In relation to an employee, shall be deemed to consist of:
(i) in case of a male employee, himself, his wife, his children dependent parents and dependent
parents of his wife and widow of predeceased son,
(ii) in the case of a female employee, herself, husband, children, dependent parents and dependent
parents of her husband and widow of her predeceased son.
Retirement
Means termination of the service of an employee otherwise than on superannuation.
Superannuation
Relation to an employee, means attainment by employee of age as is fixed in the contract.
Wages
Means all emoluments earned by an employee while on duty or on leave paid or are payable to him
in cash and includes dearness allowance but does not include bonus, commission, house rent
allowance, overtime wages.
WHEN IS GRATUITY PAYABLE?

Gratuity shall be payable to employee on termination of his employment after he has rendered
continuous service for not less than five years:
Note: Completion of continuous service of five years not necessary where termination of employee is
due to death or disablement.

& Labour Laws
194
SBI & LL
TO WHOM IS GRATUITY PAYABLE?

Payable normally to employee himself. In case of death of the employee shall be paid to his nominee.
Amount of Gratuity Payable

Calculated on the basis of continuous for every completed year of service or part in excess of six
months, at the rate of fifteen days wages last drawn. Maximum amount of gratuity allowed is Rs. 20
lakh.
Forfeiture of Gratuity
Act deals with this issue in two parts gratuity of employee have been terminated for willful omission or
negligence gratuity shall be forfeited to the extent of damage or loss caused. In absence of proof
forfeiture is not available.
EXEMPTIONS
Appropriate Government may exempt factory if gratuity or pensionary benefits for employees
are not less favourable than conferred under the Act.
The Controlling Authority and the Appellate Authority
Controlling authority and the Appellate Authority two important functionaries.
RIGHTS AND OBLIGATIONS OF EMPLOYEES
Application for Payment of Gratuity
Section 7(1) person who is eligible for payment of gratuity shall send a written application to the
employer where date of superannuation or retirement is known, employee may apply to employer
before 30 days of the date of superannuation.
Although the forms have been laid down, an application on plain paper is also accepted.
RIGHTS AND OBLIGATIONS OF THE EMPLOYER
Employers Duty to Determine and Pay Gratuity
 As soon as gratuity becomes payable employer shall, whether application been made or not,
determine amount of gratuity and give notice to person to whom gratuity is payable.
 Employer shall arrange to pay amount of gratuity within thirty days from becoming payable.
 If amount of gratuity not paid within period specified employer shall pay simple interest at the
rate of 10 per cent per annum.

& Labour Laws
195
SBI & LL
Dispute as the Amount of Gratuity or Admissibility of the Claim
If claim for gratuity not found admissible, employer shall issue notice to employee, specifying reasons
why claim for gratuity not considered admissible.
Recovery of Gratuity
Section 8 provides that if gratuity payable not paid by employer Controlling Authority shall on
application made by aggrieved person, issue certificate to Collector, who shall recover same together
with compound interest.
Before issuing certificate give the employer reasonable opportunity of showing. Interest payable shall, in
no case, exceed amount of gratuity payable.

& Labour Laws
196
SBI & LL

Chapter UNIT 5 – Apprentices Act, 1961
INTRODUCTION
The Apprentices Act, 1961 enacted with objective of regulating programme of training of apprentices in
industry for imparting on-the-job training.
Definitions
1. Apprentice means person who is undergoing apprenticeship.

2. Apprenticeship training means course of training in any industry establishment in pursuance
of a contract of apprenticeship.
3. Employer means person who employs one or more other persons to do work.
4. Establishment includes place where any industry is carried on.
5. Graduate or technician apprentice means apprentice who holds degree or diploma in
engineering or non- engineering or technology or equivalent qualification.
6. Industry means any industry which any trade occupation.
7. Portal-site means a website of the Central Government for exchange of information.
8. Technician (vocational) apprentice means apprentice who holds certificate in vocational course
involving two years of study after completion of the secondary stage of school education.
9. Trade Apprentice means an apprentice undergoes apprenticeship training in any designated trade.
Qualifications for being engaged as an apprentice
(a) is not less than fourteen years of age, and designated trades related to hazardous industries,
not less than eighteen years of age;
(b) satisfies such standards of education and physical fitness as prescribed:
Contract of apprenticeship
Section 4 states that -

(1) No person shall be engaged as apprentice unless entered into contract of apprenticeship with
employer.
(2) Apprenticeship training deemed to commenced on date which contract of apprenticeship entered
into.
(3) In the case of objection in the contract of apprenticeship, Apprenticeship Adviser shall convey
objection to employer within fifteen days.
Novation of contracts of apprenticeship
Section 5 Act provides that where an employer unable to fulfil his obligations under the contract,

& Labour Laws
197
SBI & LL
the contract of apprenticeship with shall terminate and no obligation under the contract shall be
enforceable.
Engagement of apprentices from other States
Employer may engage apprentices from other States for purpose of providing apprenticeship training.
Period of apprenticeship training
Section 6 of period of apprenticeship training shall be as follows —

(a) In the case of trade apprentice;
(b) case of other trade apprentices period of apprenticeship;
(c) the case of graduate or technician apprentice, period of apprenticeship training shall be such
as may be prescribed.
Number of apprentices for a designated trade and optional trade
Section 8 empowers the Central Government to prescribe number of apprentices to be engaged by

employer.
Practical and basic training of apprentices
Section 9 deals practical and basic training of apprentices.

– Every employer shall make suitable arrangements for imparting practical training to every
apprentice.
– Central Apprenticeship Adviser shall be given reasonable facilities to ensure that practical training
in accordance with approved programme:
– Trade apprentices who have not undergone institutional training shall, before admission for
practical training, undergo course of basic training and shall be given to trade apprentices.
Obligations of employers
Every employer shall have the following obligations: –

– provide apprentice;
– if employer is not himself qualified to ensure that a person prescribed is placed in charge of the
training of the apprentice;
– provide adequate instructional staff;
– carry out his obligations under the contract of apprenticeship.
Obligations of apprentice
Every trade apprentice shall have following obligations, namely :-

& Labour Laws
198
SBI & LL
– learn his trade diligently;

– attend practical and instructional classes regularly;
– carry out all lawful orders of employer;
– carry out obligations under contract.
Hours of work, overtime, leave and holidays
Section:
(1) Weekly and daily hours shall be as determined by the employer.
(2) No apprentice required or allowed to work overtime except with approval of Apprenticeship
Adviser.
(3) Apprentice shall be entitled to leave and holidays which he is undergoing training.
Apprentices are trainees and not workers
Every apprentice shall be a trainee and not a worker.
Records and returns
Section 19 of provides that every employer shall maintain records in such form as may be prescribed.
Settlement of disputes
As per section any disagreement or dispute between employer shall be referred to the Apprenticeship
Adviser. Person aggrieved may within thirty days prefer an appeal against decision to Apprenticeship
Council.
Holding of test and grant of certificate and conclusion of training
Every trade apprentice who has completed period of training may appear for test to be conducted
by National Council to determine his proficiency in the designated trade.
Every trade apprentice who passes test shall be granted certificate of proficiency.
Offer and acceptance of employment
Every employer shall formulate own policy for recruiting apprentice. Apprentice shall completion of the
apprenticeship training, serve employer.
Authorities under the Act
In addition to the Government namely : –
(a) National Council,

& Labour Laws
199
SBI & LL
(b) Central Apprenticeship Council,
(c) State Council,
(d) State Apprenticeship Council,
(e) All India Council,
Offence and penalties
Section 30 provides that-

(1) If employer contravenes provisions, he shall be given month’s notice for explaining reasons for
contravention. (1A) In case employer fails to reply after giving opportunity of being heard, he
shall be punishable fine of five hundred rupees for first three months and thereafter one
thousand rupees per month.
(2) If any employer or any other person –
(a) required to furnish information - refuses or neglects to furnish, refuses to answer, false
answer to any question.
(b) requires apprentice to work overtime
(c) employs apprentice on work not connected with training
(d) makes payment to apprentice on basis of piece-work,
(c) shall be punishable with fine one thousand rupees.

& Labour Laws
200
SBI & LL
SOCIAL SECURITY LEGISLATIONS

19 UNIT 6 – Labour Laws (Simplification of Procedure
Chapter for Furnishing Return and Maintaining Registers by
Certain Establishments) Act, 1988
INTRODUCTION
The Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by certain
Establishments) Amendment Act provides for simplification of procedure for furnishing returns and
maintaining registers in relation to establishments employing a small number of persons.
Employer
Means the person who is required to furnish returns or maintain registers.
Establishment
Establishment has the meaning assigned to it in a Scheduled Act, and includes — (i) “industrial or other
establishment”; (ii) a “factory”; (iii) a factory, workshop or place to which minimum wages Act, 1948 ,
applies. (iv) “plantation” (v) “newspaper establishment”.
Form
Means a Form specified in the Second Schedule. They are as under:
– Form I -Annual Return
– Form II -Register of persons employed-cum-employment card
– Form III- Muster roll-cum-wage register
Scheduled Act
Means an Act specified in the first Schedule. Following are Acts specified in the first schedule.
1. Payment of Wages Act, 1936

2. Minimum Wages Act, 1948
3. Factories Act, 1948
4. Plantations Labour Act, 1951
5. Motor Transport Workers Act, 1961
6. Payment of Bonus Act, 1965
7. Contract Labour (Regulation and Abolition) Act, 1970

& Labour Laws
201
SBI & LL
8. Equal Remuneration Act, 1976

9. Child Labour (Prohibition and Regulation) Act, 1986
Small establishment
Means an establishment in which not less than ten and not more than forty persons employed on
any day of preceding twelve months.
Very small establishment
Means an establishment in which not more than nine persons employed on any day of preceding twelve
months.
Exemption from furnishing or maintaining of returns and registers required under certain labour laws
Section 4(1) provides that notwithstanding anything contained in a Scheduled Act, it shall not be
necessary for employer in relation to small establishment, to furnish the returns or to maintain registers
required under Scheduled Act.
Furnishing or maintaining of returns and registers in electronic form
The annual return in Form I and the registers in Forms II and III and wage slips may be maintained by
employer in physical form or computer, other electronic media.
Penalty
Section 6 employer who fails to comply with provisions punishable, in case of the first conviction, with
fine extend to rupees five thousand; and in second conviction, with imprisonment not less than one
month but may extend to six months or fine not be less than rupees ten thousand but may extend to
rupees twenty-five thousand, or with both.

& Labour Laws
202
SBI & LL
Sexual Harassment Of Women At Workplace
(Prevention, Prohibition & Redressal) Act, 2013
SEXUAL HARASSMENT OF WOMEN AT

20
Chapter
WORKPLACE (PREVENTION,
PROHIBITION & REDRESSAL) ACT, 2013
HISTORY OF THE LEGISLATION
 Sexual harassment of a woman in workplace is of serious concern. The victims of sexual

harassment face psychological and health effects like stress, depression, anxiety, and so on.
 Sexual harassment results in violation of rights to equality under Articles 14, 15 and right to life
and to live with dignity under Article 21 of the Constitution and right to practice profession, trade
or business which includes a right to a safe environment free from sexual harassment.
 Principle of gender equality enshrined Constitution, in its Preamble, fundamental rights,

fundamental duties and Directive Principles in landmark judgment of Vishaka v. State of
Rajasthan, Supreme Court framed directions to the Union of India for combating workplace sexual
harassment. Absence of a specific law in India, Supreme Court, laid down certain guidelines
making it mandatory for employer to provide a mechanism to redress grievances pertaining to
workplace sexual harassment.
 In 1992, Bhanwari Devi, dalit woman employed with rural development programme of
Government of Rajasthan, was brutally gang raped on account of efforts to curb practice of child
marriage. Women’s rights activists filed a public interest litigation under the banner of Vishaka.
Supreme Court, for the first time, acknowledged workplace sexual harassment as a human rights
violation.
 As per Vishaka judgment,
 ‘Sexual Harassment’ includes unwelcome sexually determined behavior as:

a. Physical contact and advances;
b. A demand or request for sexual favours;
c. Sexually coloured remarks;
d. Showing pornography;
e. other unwelcome physical, verbal or nonverbal conduct of sexual nature.
 First case after Vishaka was case of Apparel Export Promotion Council v. A.K Chopra, (1999).
Supreme Court upheld dismissal of superior officer of Delhi based Apparel Export Promotion
Council who was found guilty of sexually harassing subordinate female at the workplace. In this
judgment, the Supreme Court enlarged definition of sexual harassment by ruling physical contact
not essential for act of sexual harassment.

& Labour Laws
203
Sexual Harassment Of Women At Workplace SBI & LL
 In 2007 Protection of Women against Sexual Harassment at Workplace Bill, 2007, was introduced.
However, Bill never saw the light of the day. On December 7, 2010, was introduced in Lok Sabha.
 Subsequent changes were made to the Original Bill, including title of the Bill, changed to Sexual
Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Bill, 2013
Medha Kotwal Lele vs. Union of India, stated that Vishaka Guidelines had to be implemented in form,
substance and spirit by ensuring women can work with dignity, and due respect.
Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
(“POSH Act”) was enacted after 16 years of case of Vishaka.
OBJECT OF THE ACT
The Preamble reads as under:
“An Act to provide protection against sexual harassment of women at workplace and redressal of
complaints of sexual harassment.
WHEREAS sexual harassment results in violation of fundamental rights of a woman.
AND WHEREAS protection against sexual harassment and the right to work with dignity are universally
recognised human rights.
AND WHEREAS expedient to make provisions for protection of women against sexual harassment at
workplace.”
What is Workplace Sexual Harassment?
It is the impact and not intent that matters. Workplace sexual harassment apart from interfering with
performance at work, it also affects social and economic growth and puts them through physical and
emotional suffering.
FORMS OF WORKPLACE SEXUAL HARASSMENT
 Quid Pro Quo (literally ‘this for that’) - promise of preferential/detrimental treatment threat about
her present or future employment status.
 Hostile Work Environment - Creating offensive work environment likely to affect her health or
safety.
APPLICABILITY
The Act applies to organized and unorganized sectors government bodies, private and public sector
organizations, entertainment, financial activities, hospitals educational institutes, sports and also applies
to a dwelling place or a house.
DEFINITIONS (SECTION 2)
1. “Aggrieved woman” means—

& Labour Laws
204
SBI & LL
i. woman, of any age who alleges to been subjected to act of sexual harassment;
ii. in relation to dwelling place or house, woman of any age employed in dwelling place.
2. “Domestic worker” means
 woman employed to do the household work for remuneration cash or kind, directly
or through agency temporary, permanent, part time basis;
 but does not include member of family of the employer.
3. “Respondent” person against whom the aggrieved woman has made a complaint
4. “Sexual harassment” includes
i. physical contact and advances;

ii. a demand or request for sexual favours; or
iii. making sexually coloured remarks; or
iv. showing pornography; or
Definition is very wide, as it provides for direct or implied sexual conduct. Hence, a mere
statement in a case where the plaintiff requested defendant No. 1 to instruct to switch off the A.
C. Machine, but in reply defendant No. 1 said “... come close to me, you will start feeling hot”, can
also be construed to be sexual harassment [Albert Davit Limited vs. Anuradha Chowdhury and
Ors.
5. “workplace” includes –
a. department, establishment, enterprise, office, branch owned, controlled by appropriate

Government or local authority or Government company;
b. any private sector organisation;
c. hospitals or nursing homes;
d. any sports institute,
e. any place visited by employee during course of employment including transportation

provided by employer;
f. a dwelling place or a house;
Saurabh Kumar Mallick v. Comptroller & Auditor General of lndia, respondent was facing departmental
inquiry for allegedly indulging in sexual harassment of his senior woman officer contended that he could
not be accused as alleged misconduct took place not at workplace but at official mess where woman
officer was residing. It was also argued that complainant was senior to respondent and therefore no
‘favour’ could be extracted. Delhi Court held as ‘clearly misconceived’. In defining term ‘workplace’ It is
imperative to take into consideration recent trend emerged with advancement of information
technology. A person can do business by way of videoconferencing. It has also become a trend office is
being by CEOs from their residence. In a case like this, officer indulges in act of sexual harassment. It
would not be open for him to say that not committed at ‘workplace’ but at his ‘residence’
Delhi High Court held that official mess definitely falls under ‘workplace’.

& Labour Laws
205
“Unorganised sector” means an enterprise owned by individuals number of such workers is less than ten.
COMPLAINTS COMMITTEE
Act provides for two kinds of complaints mechanisms:
(i) Internal Complaints Committee (ICC);

(ii) Local Complaints Committee (LCC).
Constitution Internal Complaints Committee
Section 4 requires employer to set up (“ICC”) at organization employing 10 or more employees, to hear
and redress grievances pertaining to sexual harassment.
1. Composition of the ICC:
a. Presiding Officer: who shall be a woman at senior level at workplace, in case senior level
woman not available shall be nominated from other offices;
b. Members: not less than two Members from amongst employees;
c. External member: one member from amongst non-governmental organisations; At least
one-half of the total Members shall be women.
2. Tenure of office:
Presiding Officer and every Member shall hold office for period, not exceeding three years.
Constitution of Local Complaints Committee
At the district level, Government required to set up a ‘Local Complaints Committee’ (“LCC”) to
investigate and redress complaints from establishments where ICC not constituted on account of having
less than 10 employees.
(i) Composition, tenure and other terms and conditions of Local Committee
Section 7, Local Committee shall consist of the following members :- —
a. Chairperson amongst eminent women in the field of social work;
b. one Member nominated from amongst the women working in taluka or tehsil;
c. two Members, of whom at least one shall be a woman, nominated from amongst
non-governmental organisations:
At least one of the nominees shall be woman belonging to the Scheduled Castes or the Scheduled Tribes
or the Other Backward Classes;
Chairperson and every Member shall hold office, not exceeding three years.

& Labour Laws
206
SBI & LL
COMPLAINT
Complaint of Sexual harassment
1. Any aggrieved woman may make, in writing, complaint of sexual harassment at work place to
Internal Committee if so constituted, or Local Committee, in case not constituted, within three
months from date of incident:
Internal Committee or, Local Committee may extend the time limit not exceeding three
months, if satisfied circumstances prevented woman from filing complaint
2. Where aggrieved woman unable to make complaint on account of physical or mental incapacity or
death, her legal heir or other person may make complaint.
In Manjeet Singh vs. lndraprastha Gas Limited Delhi High Court observed that anonymous complaints
are bound to be rejected.
CONCILIATION
Section 10, Internal Committee or, Local Committee, at the request of aggrieved woman, take steps to
settle matter through conciliation. No monetary settlement shall be made as a basis of conciliation.
Where settlement arrived, Internal Committee or Local Committee, shall record settlement and
forward same to District Officer to take action.
Inquiry into Complaint
Section 11 states procedure for conducting inquiry Internal Committee or Local Committee shall
proceed to make inquiry into complaint and if prima facie case exist, forward complaint to police,
within seven days
Where aggrieved woman informs Internal Committee or Local Committee, that any term or condition of
settlement arrived not complied by respondent shall proceed to make inquiry into complaint or forward
complaint to the police.
POSH Act stipulates that ICC and LCC shall, while inquiring have same powers as vested in a civil court in
respect of:-
a. summoning attendance of person and examining him on oath;

b. rediscovery and production of documents;
c. other matter.
Inquiry shall be completed within ninety days.
Action during pendency of inquiry.
Section 12 provides for relief that can be given by IC to aggrieved woman during pendency of
inquiry. During the pendency may recommend to the employer to —
a. transfer aggrieved woman or to other workplace;

& Labour Laws
207
b. grant leave up to period of three months;
c. grant other relief as may be prescribed.
Inquiry Report
 Section 13 provides for action report to be submitted by IC or LC after conducting inquiry. On

completion of inquiry shall provide report of its findings to employer, or District Officer within ten
days from completion of inquiry.
 Where arrives at conclusion that allegation against respondent has not been proved, it shall
recommend that no action required.
 Where arrives at conclusion that allegation against respondent has been proved, shall recommend
employer District Officer –
i. to take action as misconduct in accordance with service rules;

ii. to deduct from salary or wages of the respondent to be paid to the aggrieved woman.
 In case employer unable to make deduction from salary due to being absent from duty it may
direct respondent to pay such sum to the aggrieved woman. In case respondent fails to pay,
Internal Committee or, Local Committee may forward order for recovery of sum as an arrear of
land revenue
Punishment for false or malicious complaint and false evidence
 Strict provisions under section 14 for false or malicious complaint and false evidence. Where the
Internal Committee or Local Committee, arrives at conclusion that allegation is malicious. it may
recommend to employer or District Officer, to take action against woman or person who made
complaint in accordance with provisions of service rules or where no service rules exist, in manner
prescribed.
 Malicious intent on part of complainant shall be established after inquiry.
 Where witness given false evidence recommend to employer of witness to take action in
accordance with service rules.
Determining of Compensation
Section 15 for determining sums to be paid to aggrieved woman Committee shall have regard to (a ) the
mental trauma, caused to aggrieved woman; (b) loss in career opportunity; (c) medical expenses for
physical or psychiatric treatment; (d) income and financial status.
Prohibition of publication or making known contents of complaint and inquiry proceedings

Section 16, Notwithstanding anything contained in the Right to Information Act, 2005, contents of
complaint and action taken by employer shall not be published, communicated or made known to the
public, in any manner.

& Labour Laws
208
SBI & LL
Information may disseminated regarding the justice secured to any victim of sexual harassment without
disclosing the name, address, identity.
Penalty for publication or making known contents of complaint and inquiry proceedings
Section 17, where person entrusted to handle complaint, contravenes provisions section 16, shall
be liable for penalty in manner prescribed.
APPEAL
Section 18 appeal by aggrieved person. Any person aggrieved from recommendations made may prefer
appeal to court or tribunal as may be prescribed. Appeal shall be preferred within ninety days of
recommendations.
DUTIES OF EMPLOYER
Every employer shall —
a. provide safe working environment;

b. display at conspicuous place penal consequences of sexual harassments;
c. organise workshops and awareness programmes;
d. provide facilities to Internal Committee or the Local Committee, for dealing with complaint;
e. assist in securing attendance of witnesses;
f. make available information to Committee as it may require;
g. provide assistance to woman if she so chooses to file a complaint;
h. treat sexual harassment as a misconduct under service rules;
i. monitor timely submission of reports by Internal Committee.
Duties and Powers of Districts Officer

Section 20 following mandatory duties on the District Officer who shall, —
a. monitor timely submission of reports by Local Committee;

b. take measures for engaging non-governmental organisations for awareness on sexual harassment.
MISCELLANEOUS
Committee to submit annual report

Section 21, Internal Committee or the Local Committee shall prepare an annual report submit the same
to employer and the District Officer.
Employer to include information in annual report

Section 22, employer shall include in its report number of cases filed, if any, and their disposal in annual
report.

& Labour Laws
209
Appropriate Government to take measures to publicise the Act

Section 24, appropriate Government may, (a) develop relevant information, education, communication
and training materials to advance understanding of the public of provisions of this Act (b) formulate
orientation training programmes for the members of the Local Committee.
Power to call for information and inspection of records
Section 25 —
a. call upon District Officer to furnish information relating to sexual harassment;
b. authorise any officer to make inspection of the records.
Penalty for non-compliance with provisions of Act
Section 26 provides for a penalty with a fine up to rupees fifty thousand where employer fails to
a. constitute Internal Committee;
b. take action under sections 13, 14 and 22; and
c. contravenes provisions of this Act.
In addition to above shall be liable for cancellation, of his licence or withdrawal, or non-renewal,
or approval, cancellation of the registration.
Cognizance of offence by courts
Section 27, every offence are non-cognizable which means one cannot be arrested without a warrant.
No court inferior to Metropolitan Magistrate or a Judicial Magistrate of the first class shall try offence
punishable under this Act.
Act not in derogation of any other law
Section 28 purpose of the Act to provide additional safeguard to women at work. In addition to any
other law time being in force.
Power of appropriate Government to make rules
Section 29 Central Government may make rules carrying out provisions of this Act. Such rules may
provide for following matters, namely:-
a. fees or allowances paid to the Members;
b. nomination of members;
c. fees or allowances to be paid to the Chairperson;
d. person who may make complaint;
e. manner of inquiry;
f. manner of action to be taken;

& Labour Laws
210
SBI & LL
CASE LAWS
Binoy Jacob vs. State of Kerala and Ors.
Provisions of Act shall be in addition to and not in derogation of any other law. Two fold actions are
permissible for the sexual harassment. Hence, both actions are independent and permissible under
law.
Rayala Satyanarayana vs. SBI Funds Management Pvt. Ltd. and Ors.
Andhra Pradesh High Court decided termination of services is, a major punishment, which
cannot be imposed without conducting enquiry or opportunity of hearing.
Conclusions arrived by Committee shall not be treated as disciplinary action, but shall be treated as a
finding in an enquiry.

& Labour Laws
online-pdf-no-copy.com 211

SBILL DJC Kirti Mam

Uploaded by

Copyright:

Available Formats

SBILL DJC Kirti Mam

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

SBILL DJC Kirti Mam

Uploaded by

Copyright:

Available Formats

INDEX

S.No. Name of the Chapter Page No.

1 Choice of Business Organisation 1

2 Corporate Entities – Companies 6

3 Limited Liability Partnership 25

4 Startups and its Registration 33

5 Micro, Small & Medium Enterprises 44

6 Conversion of Business Entities 49

7 Non – Corporate Entities 54

8 Financial Services Organisation 65

10 Setting up of Branch Office / Liason Office/ Wholly Owned Subsidiary by 84

12 Identifying Laws Applicable to Various Industries and Their Initial 97

14 Constitution and Labour Laws 117

15 Evaluation of Labour Legislation and Need of Labour Code 124

16 Law of Welfare & Working Condition 128

17 Law of Industrial Relations 147

18 Law of Wages 166

19 Social Security Legislations 180

20 Sexual Harassment of Women at Workplace 203

1 CHOICE OF BUSINESS ORGANISATION

✓ Sole Proprietorship, Partnership, Hindu Undivided Family (HUF) Business, limited

• Form of business organisation influences the success and growth of a business.

I. Nature of business activity

II. Scale of operations

• If the scale of operations of business activities is small, sole proprietorship or a one

ENTERPRISE INVESTMENT IN P&M TURNOVER

• Market area is small, local - sole-proprietorship or OPC is opted.

III. Capital requirement

• In sole proprietorship, the owner may raise additional capital by borrowing, by

Setting Up Of Business, Industrial

IV. Managerial ability

V. Degree of control and management

VI. Degree of risk and liability

VII. Stability of business

VIII. Flexibility of administration

IX. Division of profit

Setting Up Of Business, Industrial

X. Costs, procedure and government regulations

XI. Tax implication

XII. Geographical mobility

XIII. Transferability of ownership

XIV. Managerial needs

Setting Up Of Business, Industrial

COMPANY AS A CHOICE OF BUSINESS ORGANISATION FOR STARTUPS

Start ups prefer company because:

Setting Up Of Business, Industrial

(a) Private Companies

1) A company may be formed for any lawful purpose by–

(a) 7 or more persons, where the company to be formed is a public company;

2) A company formed under sub-section (1) may be either–

(a) A company limited by shares; or

Setting Up Of Business, Industrial

• They may be either a public of the company in the shares respectively

Classification on the basis of

Other Forms of Companies

Setting Up Of Business, Industrial

2. turnover of which as per P&L account for the immediately

SECTION2 (68)-PRIVATE COMPANY

(a) Restricts the right to transfer its shares