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Delhi Shops and Establishment Act

Delhi Shops and Establishment Act

October 29, 2022

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This article has been written by Ayush Tiwari, a student of Symbiosis Law School, NOIDA. This article aims to discuss the critical aspects of the Act, the major provisions and how to register under the Act.

It has been published by Rachit Garg.

Table of Contents

Introduction

The modern world economy is powered by trade and business. They are necessary not just for a society’s progress and prosperity, but also for its survival. These broad terms encompass anything from the neighbourhood kirana shop to a paan shop to governments negotiating free trade agreements. Businesses and merchants in Delhi confront a number of challenges that limit their economic freedom, make conducting business more difficult, and prevent them from growing their capacity. The government prioritises reforming India’s business climate to make it easier and more appealing for enterprises to operate here. It is critical that the country’s labour legislation be overhauled in order to achieve this. The Delhi Shops and Establishments Act, 1954 (hence referred to as “the Act”) was enacted in order to regulate the working conditions of people employed in such shops and establishments. Due to a lack of government oversight, the working conditions of many small businesses and commercial enterprises are prone to a variety of harmful practices such as child exploitation, inappropriate working hours, unreasonably low wages and salaries, a lack of healthy working conditions, and so on. The Act aims to create an authority to oversee these enterprises, improve working conditions for employees, and sanction companies that fail to comply with the Act.

What is the Shops and Establishments Act

The Shop and Establishment Act has been adopted by various state governments to regulate the working conditions of employees in shops, commercial undertakings, eateries, and so on. The Weekly Holiday Act of 1942, adopted by the Central Government, oversees the provision of holidays to all commercial establishments. However, there is no single central government Act that oversees working hours, salary payments, and health and safety in commercial organisations. State governments have established shop and establishment Acts to assist in controlling the behaviour of business enterprises within their jurisdictions in order to bridge this gap.

Shops and Establishments Act of Delhi

The Delhi Shops and Establishments Act, 1954 applies to all shops, establishments, and commercial establishments in Delhi.

Important terms

Shops

The Delhi Shops and Establishments Act, 1954 defines a shop as “any premises where products are sold either wholesale or retail or where services are provided to clients, and includes any offices, a storehouse, godown facility, warehouse, workhouse or place of work, either within the same property or elsewhere, used in or in association with such business or trade, but doesn’t include a factory or a commercial establishment.”

Commercial establishment

Any location where any trade, business, or profession is carried on, as well as any work incidental or ancillary thereto, is referred to as a “commercial establishment.” This definition also includes societies registered under the Societies Registration Act, 1860, as well as charitable or other trusts, whether registered or not, that carry on such businesses, trades, or professions, as well as work incidental or ancillary thereto, as well as journalistic and printing establishments, contractors and auditors’ establishments, quarries and mines not subject to the Mines Act of 1952, educational or other institutions operated for private gain, and locations where the business of banking, insurance, stocks and shares, brokerage, or product exchange is carried on; however, these entities do not include shops or factories registered under the Factory Act, 1948, theatres, movie theatres, restaurants, eateries, hotels, clubs, or other places of public amusement.

When defining the term “commercial establishments” in the case of Chief Commissioner, Delhi v. Federation of Indian Chambers of Commerce and Industry, 1974, the Supreme Court of India laid out the following requirements for a place in order to qualify as a “commercial establishment”:

It must be “premises”;
It must be actively engaged in a trade, business, or activity; and
Any job related to, incidental to, or ancillary thereto is conducted.

Employee

“Employee” refers to a person who is entirely or primarily employed, directly or indirectly, in connection with the operation of a business, whether for wages (payable on a permanent, periodical, contract, piece-rate, or commission basis) or other consideration. This definition includes an apprentice and any worker in a factory who is not covered by the Factories Act of 1948. It also includes a person who has been dismissed or discharged.

Employer

“Employer” refers to the owner of any business-related establishment where individuals are employed, or, if the owner does not personally manage the establishment’s business, to the manager, agent, or representative of that owner in that business;

Registration of the establishment

Every business owner is required to provide a statement to the Chief Inspector in the format specified, together with the required fees. The following information must be included in this declaration:

Name of the company, including any managers.
Name of the establishment, if one has been assigned.
Establishment’s postal address.
The type of business, such as a store, commercial building, hotel, theatre, or other entertainment, as well as a restaurant or other dining institution.
Number of individuals employed by the business.
Other further information may be required.

Within 90 days of this Act coming into effect, this statement and the pertinent information must be sent. If a new business is founded, the owner must send the statement starting on the first day the business is open for business.
Any decision made by the state government in addition to that shall be decisive for the purposes of this Act in the event that there is a disagreement between the Chief Inspector and the Proprietor about the category to which the establishment belongs.
After receiving the statement and confirming that its contents are accurate, the Chief Inspector must register the establishment with the Registrar of Establishments and give the establishment’s owner a registration certificate in the appropriate format.
The owner of the institution has a responsibility to inform the Chief Inspector of any modifications that may be made to the data provided to the Chief Inspector in the statement at the time of registration.
Within 15 days of closing, the owner has a responsibility to inform the Chief Inspector that his enterprise is closing. As a result, the Registrar would revoke the registration certificate and strike the name of the establishment from the list of establishments.

Important rules regarding work hours

Section 8 of the Act deals with the important rules regarding work hours. They are as follows:

There is no such thing as forcing an adult to work more than nine hours per day or 48 hours per week. Adults, however, may be required to work longer than the allotted hours when making accounts or for any other regulated task, as long as the total number of hours worked each week does not exceed 54. In addition, anyone required to work overtime is entitled to be compensated twice what he would receive for working during regular business hours.
No employee may be required to labour for more than five hours in a continuity without a break for at least 30 minutes of rest or a meal. The total amount of time worked per day, including rest and lunch breaks, shall not exceed 10 hours.
Regardless of whether a child is a part of the family that owns the business, employers are not allowed to hire children, or individuals under the age of 14.
No woman or young person under the age of 18 is permitted or required to work, either as an employee or in any other capacity, in any establishment between the hours of 9 p.m. and 7 a.m. during the summer and 8 p.m. and 8 a.m. during the winter.
By general or specific order, no store or business establishment shall open or close on any day before or after the hour established by the government in such regard.

Important holiday and leave provisions

According to Section 16 of the Act, on a closing day, all stores and other business establishments must be closed. The day of the week that the store or other commercial institution is closed is known as the “closed day.” There are various sorts of stores and establishments for which closed days might be specified.
Every store and business must be closed on three national holidays each year, in addition to the closed day.
According to Section 17 of the Act, every employee is entitled to at least twenty-four hours of uninterrupted rest (weekly holiday) each week.
According to Section 18, employees’ pay cannot be withheld for holidays taken on non-business days or on federal holidays. If an employee is paid a daily wage, he must still be paid that amount for the holiday; if he is paid on piece rates, he must be paid the average of his weekly wages.
After 12 months of continuous employment, each employee is entitled to privileged leave, which must last a minimum of 15 days.
Such an employee may inform his employer in writing of the time period from which he would like to take leave if he wishes to make use of privileged leave. Unless he has a good reason, the employer is required to abide by this request. An employer is required to respond to such a request within seven days of the request’s date.
A worker is also allowed to take up to 12 days of annual sick leave. Employers are not allowed to deny employees leave when they are unwell, their spouses or children are ill, they have been physically hurt in an accident, or a family member has passed away.
An employer cannot reject sick leave to any employee. However, if an employer has any doubts about an employee’s claim to be ill, he can either request that the employee provide a medical certificate from a licenced physician or arrange for the employee, his wife, or child, as the case may be, to be examined by a physician at the employer’s expense to confirm the details of the sick leave application.
If an employee has worked consistently for more than three months, the employer cannot fire them without providing at least one month’s written notice or pay in lieu of the notice period.
If an employee engages in deliberate misconduct, the employer has the right to terminate his or her job. However, before being fired, such an employee must be given a chance to explain his side.

Important provisions on wages

Wages are the most important part of the Act, and this part tells us how the employees receive wages and how the employer can make deductions from their salaries.

Employees must receive their pay on time and salaries cannot be withheld for more than one month.
Wages must be paid to employees without any deductions. However, an employer has the following options for withholding wages: –

Fines
deduction for missed days at work.
Deduction for losses resulting from harm to items that were specifically entrusted to the employee’s care or for the theft of money for which the employee was accountable.
deductions made by employees for the purpose of paying their income taxes.
deductions that were imposed in this manner by a court order or another appropriate authority.
deductions for participation in the provident fund.
deductions for contributions paid to a registered cooperative organisation or deductions for an insurance plan that has received government approval.
deduction for any housing expenses the employer has covered.
deduction for any amenity or service that the employer provides that the government has authorised through a general or particular order to be charged.
deductions for any advances provided or changes made to wages that were paid in excess of the standard wage.

If an employer fines an employee, he or she must be informed of the fine’s amount as well as the reason why it was imposed. The worker must be given the chance to explain themselves in front of another person.

Compliance with regard to employee health

The Delhi Shops and Establishments Act compliance with regard to employee health is as follows.

During business hours, the occupier is responsible for making sure the space is appropriately lit and ventilated. If the chief officer believes that certain regulations are not being followed, he may issue an order outlining the steps that might be taken to ensure compliance.
The shop or business establishment must have a sufficient arrangement for the employees’ access to drinking water.
The property’s occupant is required to take reasonable precautions against fire.
The provisions of the Workmen’s Compensation Act of 1923 shall, as and when applicable, apply to this act.

Compliance with record-keeping and register-keeping requirements

The requirements for maintaining registers and records are:

The occupant is required to keep the record and register in the manner outlined below.
Register the employee’s employment and pay according to Form G.
When the starting and ending times of employment are set, the occupier might keep a register with the pertinent information in case the employer is called in advance or held after hours in accordance with Form H.
Wages and leave records according to Form I.
Closed days, working days, work hours, and intervals in Form K.

The documents must be kept safe until the end of the next year.

Every employee must get a letter of appointment from the employer, which must include the following details.

the employer’s name,
the establishment’s name, if any, and postal address,
the employee’s name, father’s name, and age,
the working hours,
The appointment’s date

Such documents must be produced by the occupier for the chief inspector’s inspection.

Penalties under the Delhi Shops and Establishment Act of 1954 for non-compliance

Penalties under this Act include:

A penalty of Rs. 25 that might go up to Rs. 250 would be imposed on any occupant who violates any Act provisions.
The violation of the record-keeping provision will result in a penalty of Rs. 5 per day if it continues.
A minimum penalty of Rs. 50 but not more than Rs. 250 will be imposed on anyone who tries to obstruct the inspector in the exercise of his authority or hides any employee from coming before the inspector.

Letter of appointment to employee

Every employer is required to issue a letter of appointment when a new employee is hired in the business. These details must be included in the document:

The pay or the hourly wage rate.
identification of the worker and the type of work performed, such as manual labour, clerical work, supervisory work, or any other.
If any concessions or benefits are granted to an employee that is unique to his position.

Establishments exempted from the Act

Numerous establishments are either entirely or partially exempt from the application of this Act. The list of exempted establishments and the scope of their exemption are provided by the definition clause and Schedule I taken together.

The following is a list of some examples of establishments that the Act exempts:

an establishment authorised by the Factories Act of 1948 ;
locations for public entertainment or amusement, such as theatres, movie theatres, restaurants, eating establishments, residential hotels, and clubs;
mines and quarries covered by The Mines Act of 1952 ;
establishments that employ medical professionals;
establishments of legal professionals; and
Foreign News Organisations.

However, the Act partially exempts some establishments from its requirements. For instance, only Sections 15 (relating to establishment opening and closing hours) and 16 (relating to closing day) of the Act will provide an exception if the institution is that of an accountant or auditor.

Any occupier would be able to tell whether or not they fall under the Act’s scope after using these principles and the provisions of the Act.

Every owner of a shop or other establishment now has the responsibility of making sure that, within 90 days of the establishment’s formation, it is properly registered in the Chief Inspector’s Record of Registers.

The Registration process

If your business isn’t already registered, one can do so by taking these few simple steps:

Step 1

On the website of the Department of Labour, Government of Delhi, forms (Form A) are available for online registration of a store or establishment. The Delhi Shops and Establishments Rules, 1954 (hereinafter referred to as “the Rules”) displayed on the Internet should also be consulted when submitting the form. The following information must be included on the registration form:

The name of the establishment, if any.
The establishment’s postal address.
Full name of the employee or employer, including the name of his father.
The Manager’s full name, if any and including the name of his father.
The establishment’s type, such as whether it is a shop, a business, a hotel, a restaurant, a bar, a theatre, or another facility for public enjoyment.
The type of business.
The names of the employer’s family members who are employed by the business (state separately the names of young persons, if any).
The names of other people holding management positions or working in confidential roles.
The overall number of staff (men and women separately).
The day the establishment started operating.

Step 2

The occupier of the establishment must provide a statement on Form “A” and the required fee, which must be paid in cash, to the Chief Inspector within 90 days of:

The Act’s (or notification’s) effective date (for establishments that already existed at the time the Act was passed.) and
For new establishments, the day they start operations.

Step 3

The number of employees at the establishment will determine the registration and renewal fees (or renewal of registration fees).

Step 4

After receiving the statement and the required fees, the Chief Inspector, after confirming that the statement is true, will register the establishment in the appropriate section of the Register of Establishments on Form “B” and will provide the establishment’s occupier with a registration certificate on Form “C.”

Step 5

The Registration Certificate must be renewed every year by paying the required cost.

Step 6

Within fifteen days of the alteration taking place, the occupier must notify the Chief Inspector of any changes to any information in his statement required by Rule 3. The Chief Inspector must receive the notice on Form “D” along with the fee listed in Schedule II.

Why is shop and establishment registration necessary in the State of Delhi

One should register their shop or firm in Delhi right away because the unorganised sector’s businesses have become stagnant over time. The primary cause of this is that most businesses lack legal status, which limits their access to opportunities that encourage growth.

Within 30 days of opening for business, every store and establishment in India must register under the Shops and Establishments Act. This registration certificate also acts as evidence of a business establishment when applying for any other licences or registrations. Below is a detailed explanation of the advantages of registering:

Opening a current account becomes simple

A Shops and Establishments Act licence is sufficient documentation for business entities choosing to register under this Act, which makes it simple to open a current account in a bank. Due to the ability to set up a separate financial account for the business, corporations can prevent individual accounts from interfering with business transactions.

Ensures the employee’s and employer’s peace of mind

It involves corporate operations that protect the rights and well-being of employees as well as their physical and financial security. It deters unethical behaviour and fosters a supportive workplace culture for the workers.

Strengthens the management of pay and holidays

In order to be more open to its employees and auditing authorities, it pays special attention to significant regulations governing wages and holidays.

Steer clear of unscrupulous business conduct

The entities registered under this Act are not permitted to employ a minor to carry out their duties, and it contains strict prohibitions against child labour.

Encourage growth

By giving the entity legal recognition and enabling businesses to gradually get better exposure to a previously untapped market, it strengthens the business’s foundations.

Strengthens the position of the organisation in the market

It changes entities into legal ones, which strengthens its status as a trustworthy competitor, which in turn helps it gain the trust of its target customers and maintain its market share.

Conclusion

All commercial enterprises that sell goods or services are obliged to get a licence from their municipality under the Shops and Establishments Act. The Delhi Shops and Establishment Act of 1954 should be enforced for a number of reasons, including improved working conditions for employees, peace and harmony between employers and employees, and improved operation of the shops and other commercial establishments. Therefore, complying with regulations must be seen as both a responsibility and a chance for a corporation to flourish unrestrictedly. For the vast majority of firms, this Act won’t pose any major obstacles. One will have to handle things a little differently if they operate an exempted business, though, either because there aren’t any retail stores or for some other reason. This is a general overview of the laws and rules that apply in Delhi. Consult with your local tax advisor as soon as possible if you own an exempt business and are unsure how to handle these situations.

Frequently asked questions (FAQs)

Which businesses are covered by the Shop Act’s jurisdiction?

The Act covers shops, restaurants, residential hotels, commercial establishments, clubs, eating establishments, theatres, and other similar locations for public entertainment or amusement.

Are there any establishments run by the Indian Central Government and State Governments to which the Act applies?

No. The Shops and Commercial Establishments Act does not apply to any properties managed by the government of India or state governments.

What is the registration fee for businesses and shops?

Depending on the state’s legal system, different shops and establishments have different registration fees. At a national level, the registration rate is not set. The cost is based on the number of employees in the company or organisation.

Who is a Chief Inspector under the Act?

The Act also covers the responsibilities and authority of the Chief Inspector. In order to carry out the Act’s provisions, the Chief Inspector’s position is important. He is in charge of seeing that the Act’s guidelines are properly followed. The owner, employer, or manager of the shop or establishment, depending on the situation, shall be punished with a fine that shall not be less than twenty-five rupees and which may extend to two hundred and fifty rupees, or as may be prescribed under the Act, upon conviction for any violation of any provision of this Act, or any rule or order made thereunder.

What is a Commercial establishment under the Act?

A commercial establishment means any premises wherein any trade, business or profession or any work in connection with, or incidental or ancillary thereto, is carried on.

References

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