The Hindu Business Line : A case of dead policy and a car crash

PILLAI purchased a car by taking a loan from Kerala Cooperative Bank Ltd. He gave post-dated cheques to the bank not only in respect of repayment of loan instalments but also of premium of insurance policy for two succeeding years. On the expiry of the policy, the bank failed to get the policy renewed. In the meantime, Pillai's car met with an accident. Will Pillai succeed in getting a claim against the bank?

Pillai will not succeed. The obligation to renew the policy is on the owner of the car alone. Merely forwarding cheques to the bank towards premium of insurance policy for two succeeding years would not absolve him of his liability to renew the policy. The problem is based on the Supreme Court decision in Pradeep Kumar Jain vs Citibank.

ii) Sohan sent all relevant documents in an envelope regarding consignment of goods to a buyer in the US through Fast Service Couriers. The documents did not reach the buyer as a consequence of which the buyer could not take delivery of the goods. By the time the duplicate copies of the documents had been received by the buyer, the season of the goods was over. He claimed that he had suffered a loss of US $5,000 as a result of the negligence of the courier.

The State Commission ordered the payment to be made by Fast Service Couriers, but the National Commission in appeal reversed the order and ordered payment of $100 only as per the receipt issued by Fast Service to the consignor at the time of the despatch of the letter. Advise Sohan.

Sohan will not succeed. The liability of Fast Service Couriers will be limited to the payment of $100 as per the receipt issued by the courier service to the consignor. The problem is based on Supreme Court decision in Bharathi Knitting Co. vs DHL Worldwide Express Courier Division of Airfreight Ltd, wherein it upheld decision of the National Commission that liability was limited in accordance with the terms and conditions of contract between the parties.

iii) Mahesh purchased a machine from Astute Ltd to operate it himself for earning his livelihood. He took the assistance of a person for operating the machine. The machine developed fault during the warranty period. He filed a claim in the consumer forum against the company for deficiency in service.

Astute Ltd alleged that Mahesh did not operate the machine himself but had appointed a person exclusively to operate the machine. Will Mahesh succeed?

Mahesh will succeed. The Supreme Court, in Laxmi Engineering Works vs P.S.G. Industrial Institute, held that if a person purchased a machine to operate himself for earning his livelihood, he would be a `consumer' under Section 2(1)(d) of the Act. If such person took the assistance of one or two persons to assist him in operating the machine, he would still be a consumer. However, if a person purchases the machine and appoints or engages another person exclusively to operate the machine, then such person would not be a `consumer'. Mahesh had taken ` assistance' and not appointed him `exclusively' to operate the machine.

Short notes

POWERS of the Central Government for the protection of security of India under the Patents Act, 1970: Section 157 A of the Patents (Amendment) Act, 2002 contains provisions relating to protection of security of India.

`Certification trade mark' under the Trade Marks Act, 1999: Section 2(1)(e) of the Trade Marks Act, 1999 defines the term certification trademark.

SEZ: Special economic zone is a specifically delineated duty-free enclave deemed to be foreign territory for the purpose of trade operations and duties and tariffs.

Notified order: Sections 18 B to 18 E of the Industries (Development and Regulation) Act, 1951 deal with the effects of a notified order issued by the Central Government.

Copyright infringed: Section 51 of the Copyright Act, 1957 envisages situations in which a copyright shall be deemed to be infringed (refer to study material). Section 55 provides for the civil remedies for infringement of copyright and entitles the ownership of copyright to all such remedies by way of injunction, damages, accounts and otherwise as may be conferred by law for the infringement of copyright.

Standing orders

SECTIONS 3 to 6 of the Act deal with certification of standing orders (refer study material). Section 12 provides that no oral evidence having the effect of adding to or otherwise varying or contradicting standing orders certified under the Act shall be admitted in any court.

The Supreme Court, in Sudhir Chandra Sarkar vs TISCO, held that certified standing orders which statutorily prescribe the conditions of service shall be deemed to be incorporated in the contract of employment of each employee with his employee.

Gas leak

A MAJOR leakage of a poisonous gas in an industrial plant caused death of five workmen besides injuring 15 others. The `occupier' of the industrial plant pleaded that he had exercised all due diligence to prevent the escape of the gas and that the leak was attributable to an act of God. Will he succeed? Refer to decide case law in support of your answer.

The occupier will not succeed. The Supreme Court, in a landmark judgment in M. C. Mehta and another vs Union of India, held that an enterprise which is engaged in hazardous or inherently dangerous activity and any industry which poses a potential threat to the health and safety of the persons working in the factory and these residing in the surrounding areas owed an absolute and non-delegatable duty to ensure that no harm results to anyone on account of any hazardous or inherently dangerous nature of the activity which it has undertaken.

It further held that the rule of strict liability laid down in Rylands vs Fletcher would apply in India without any exceptions whatever recognised England. The court further ruled the compensation must be correlated to the magnitude and capacity of the enterprise so as to have a deterrent effect.

Worker involvement

WORKERS participation in management is the method through which workers are able to collectively express their views on the functioning of an enterprise. It implies practices that increases the scope for employees' share of influence in decision-making at different tiers of organisational hierarchy with concomitant assumption of responsibility.

It presupposes willing cooperation and acceptance of responsibility by the workers. The basic objective is to make them a partner in the management of an industrial enterprise. The degree of worker participation in management is closely tied to the underlying values of the designers, goals and objectives the participation is to serve and particular organisational and societal context in which the participating system exists.

Advantages of workers' participation in management include a spur to managerial efficiency, minimisation of industrial strife, effective decision-making, improvement in morale and teamwork and easy acceptability of change.

The law base

AN EMPLOYER orders ex parte dismissal of a workman for unauthorised absence without leave for more than eight days. Is the order valid?

The order is valid if proper inquiry has been held before dismissal even if the dismissal order is ex parte.

ii) A laboratory assistant consumes a chemical during his night shift and dies. The chemical was not used in the laboratory. Will his wife succeed in claiming compensation?

The employer is not liable to pay compensation to the laboratory assistant under the Workmen's Compensation Act, 1923. Had the accident accrued on account of a risk which is an incident of employment, the claim for compensation would have succeeded. The employee's act of committing suicide amounts to exposing himself to an added peril by his own imprudence. (Supreme Court decision in Mackinnon Mackenzie & Co Ltd vs. I. M. Issak.)

iii) The increment of an employee was due in April. He would have received an additional Rs 100 in the wages to be paid in May. The employer withheld the increment. Does it amount to deduction from wages under the Payment of Wages Act, 1936?

It shall not be deemed to be a deduction from wages. (see Section 7 of Payment of Wages Act, 1936).

iv) Sun-cured tobacco leaves are subjected to processes of moistening, stripping, breaking up, adaptation, packing, and so on, with a view to transporting them to the company's main factory for their use in manufacturing cigarettes. Does it amount to a `manufacturing process' under the Factories Act, 1948?

It amounts to a manufacturing process defined in Section 2 (k) of the Factories Act, 1948 (refer to the Supreme Court decision in V. P. Gopala Rao vs Public Prosecutor).

v) Mohan meets with an accident on a public road on his way to the place of employment. Does it amount to `employment injury' entitling him to benefits under the Employees' State Insurance Act, 1948?

Mohan is not entitled to benefits under the Act. The Supreme Court, in Regional Director ESI vs Francis de Costa, held that was road accident on a public road while the employee was on his way to the place of employment. It cannot be said to have its origin in his employment in the factory. It cannot be said to be caused by an accident out of and in the course of employment.

vi) Sambha is the president of a registered trade union in a factory. He is a very influential leader and has the support of a majority of the works in espousing trade disputes. He is in the habit of reporting late for duty and picking up quarrels with the supervisor. The management punishes him for breach of discipline. He files a suit claiming immunity under the Trade Unions Act, 1926. Will he succeed?

Sambha will not succeed. Section 18(1) of the Act provides immunity from civil suits in respect of any act done in contemplation or furtherance of a trade dispute. However, a union leader is not entitled to claim immunity from punishment for breach of discipline (refer to the Supreme Court decision in Buren & Co vs Workman).

vii) The services of a bus conductor were terminated on the grounds of weak eyesight. Does it amount to a valid ground for retrenchment under the Industrial Disputes Act, 1947?

It does not amount to retrenchment under Section 2(oo) of Industrial Disputes Act, 1947. The Supreme Court, in Anand Bihari vs RSRTC, held that where the services of a driver were terminated on the ground that he has developed eyesight which was not of standard required to drive the buses, such termination would be covered by continued ill-health.

viii) Raju, a contract labour, engaged for keeping industrial premises clean, has been engaged for 270 days in a year. He approaches the employer to absorb him in the establishment. Is the employer under an obligation to absorb the contract labour under the Contract Labour (Regulation and Abolition) Act, 1970?

The employer is not under any obligation to absorb the contract labour. The Supreme Court, in SAIL vs National Unions of Water Front Workers & Others, held that neither Section 10 or any other provision of the Act, whether expressly or by implication, provides for automatic absorption of contract labour.

(Concluded)

(Suggested answers to the June 2003 ICSI (Intermediate) paper on economic, labour and industrial laws.)

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