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This article has been written by Sanchi Garg pursuing LLB from Amity University, Noida and the article has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders). 

Introduction

The Industrial Employment (Standing Order) Act, 1946 (hereby referred to as ‘IESO’) precisely defines the conditions of employment under an employer to both the employer and the workmen. Before the IESO Act was passed, there was a lack of order and clarity regarding the terms of employment by an employer. The workmen at that time were hired on a contractual basis individually, and in most cases these contracts were either express or implied, thus often leading to a misunderstanding of expectations between the employer and the workmen.

In many cases, these terms and conditions of hiring were ambiguous and led to friction between the workmen and the management. The lack of rules for securing permanency of the job, fair deal and disciplinary action on petty matters was a worrying problem for industrial workmen. There was no provision against abrupt dismissal or wrongful termination. The workmen had no safeguards against any disciplinary actions that the employers took for they didn’t have any guidelines or rules protecting their interest. Even in large industries, if there was a standing order, there was no particular guidelines that it had to follow or any legislation governing the enforcement of the same.

With the concept of Trade Unionism coming into play, the State and the Tripartite Labour Conference became the voice of the workmen and helped pass the Industrial Employment (Standing Order) Act in 1946 to ensure clear and well-defined employment conditions or standing orders that helped establish smoother working relations between industrial workmen and employers.

The objective of the IESO Act is to regulate the conditions of recruitment, discharge, disciplinary action, holidays, classification of workers, mechanism of wage rates, attendance issues, etc.

Anything that requires ‘employers in industrial establishments formally to define conditions of employment under them’ falls within the scope of the IESO Act.

The Act makes it binding for employers to ‘define with sufficient precision the conditions of employment and to make those conditions known to the workmen.

The IESO Act helped introduce a uniformity or terms and conditions of employment in respect of workmen belonging to the same category and discharging the same or similar work in an industrial establishment. Overall, the IESO Act helped bring regulation and a sense of order amongst the workmen and the employers.

This Act requires the employers to define the conditions of service in their establishments and to put them in writing and then get them certified by the Certifying Officer to avoid any unnecessary industrial disputes in the future between the employers and the workmen. The standing orders of the said industrial establishment must conform to the model standing orders but not necessarily consist only of the model standing order. If the establishment wishes to add to the standing orders, then they can do so, provided the draft of the same gets approved by the Certifying Officer. 

In the case of Avery India Ltd. v. Second Industrial Tribunal, West Bengal it was held that the provisions as to the age of retirement in the standing orders of an establishment would apply to all the employees irrespective of whether or not they were part of the establishment where they work prior to or subsequent to the standing orders coming into force, even though there was no such provision for the age of retirement in the past. 

Standing Orders

The term ‘Standing Orders’ refers to the rules relating to the matters defined in the Schedule of the IESO Act. These matters should be according to the Schedule, provided in Standing Orders under this Act as follows:

  • Classifications of workmen, e.g., temporary, permanent, apprentice, probationers, etc.
  • Manner of intimating to workmen periods and hours of work, holidays, paydays and wage rates.
  • Shift working.
  • Attendance and late coming.
  • Conditions of procedure in applying for and the authority which may grant leave and holidays.
  • The requirement to enter premises by certain gates and liability to search.
  • Closing and reopening of sections of the industrial establishment, and temporary stoppages of work and the rights and liabilities of the employer and workmen arising therefrom.
  • Termination of employment and the notice thereof to be given by employer and workmen.
  • Suspension or dismissal for misconduct, and acts or omissions which constitute misconduct.
  • Means of redress for workmen against unfair treatment or wrongful executions by the employer or his agents or servants.
  • Any other matter which may be prescribed.

It shall be obligatory upon the employer to make provision in the Standing Orders in respect of any matter provided in the Schedule of the Act. Once a provision is made it can be modified only in accordance with the provision of Section 10(2) of the Act.

Nature of Standing Orders

Though the legal nature of Standing Orders is mostly considered to be statutory in nature and the same has been reinforced in several judgements by the Apex Court, there have been several arguments debating the claim. The nature of Standing Orders has been considered as contractual at times, and an ‘award’ at others. Meanwhile, the argument that the nature of Standing Order is ambiguous and inconclusive seems to stand corrected as it fails to be put in one category without solid arguments against the claim of its nature as statutory, contractual or an award.

Statutory nature of Standing Orders

The very first argument of Standing Orders as being statutory in nature comes from the case The Bagalkot Cement Co. Ltd. Vs. R.K. Pathan & Ors. wherein the Supreme Court stated that:

The object of the Act as we have already seen, was to require the employers to make the conditions of employment precise and definite and the act ultimately intended to prescribe these conditions in the from of standing orders so that what used to be governed by a contract hereto before would now be governed by the statutory standing orders”.

This decision of the Supreme Court was relied upon in various other judgements to conclude that Standing Orders, once certified, are statutory in nature. This was reinforced by the High Court of Gujarat in the case of Tata Chemicals Ltd. And Ors. vs Kailash C. Adhvaryu wherein the judge distinguished between a statutory obligation and a contractual obligation and therefore came to the conclusion that certification of standing orders under the IESO Act creates statutory rights and obligations.

Another argument pertaining to the statutory nature of standing orders is that the Certifying Officer, in certifying the draft of the standing orders made by the employer, is part of a delegated legislation. The process of hearing from both parties before certifying the standing orders may as well be seen as a consultation of sorts to those affected by the decision. This, in turn, makes the Certifying Officer, part of a rule-making process, thus making the entire process statutory in nature.

Arguments against the statutory nature of standing orders can be put forward as follows:

  • If we are to assume that the standing orders are statutory in nature, then they are in contradiction to the fundamental rights given to citizens in our constitution; the constitutional validity of these statutory rights and obligations against our fundamental rights can be argued by parties under Article 32 and Article 226 of the constitution. Another aspect to consider is the infringement of Article 14 and the Right to Equality caused by assuming certified standing orders as statutory in nature and applying it to workmen of like industries and under similar circumstances.
  •  The second argument against the statutory nature of standing orders is that Tribunals are not supposed to have the power to override provisions having statutory effect. Industrial Tribunals, under The Industrial Disputes Act, 1947, have the power to create new rights and obligations and to vary terms of an agreement or contract pertaining to the proprietary or legality of an order passed by an employee under standing orders and the application and interpretation of standing orders. If we consider certified standing rights as statutory in nature, it negates the power for the tribunals to override and create changes and modifications in the standing orders, thus hampering its power to provide industrial justice.
  • Section 10(1) of the IESO Act clearly states that even after the certification of the standing orders, they are liable to change on agreement between the employers and the workmen. This is in complete contradiction to the statutory nature of standing orders as no statute can be modified on agreement between two parties. Provisions with true statutory effects are not susceptible to amendments based on agreements between two parties.
  • Lastly, the Act imposes restrictions on the bargaining power of the employers curtailing the freedom of contract so that employers must present draft standing orders which are compatible with the statute. In no way does the Act delegate any legislative powers to any authority but rather, it imposes an obligation on an individual employer to make rules keeping in mind the model standing orders given in the schedule. Furthermore, the Certifying officer has only limited judicial power. Thus, we understand that certified standing orders are not delegated legislation and hence, are not statutory in nature.

Standing Orders as an ‘award’

Section 4 of the IESO Act states that the decision maker or the Certifying Officer, after hearing both the parties, adjudicates upon the “fairness or reasonableness” of standing orders laying down the conditions of the employment. This, in turn, makes standing orders as a kind of “award”. But this cannot be the case, as the Industrial Disputes Act, 1947 does not consider the Certifying Officers as the decision makers in matters of industrial disputes and thus the standing orders cannot be an award. Also, the Certifying Officer does not, in any way or form, settle an industrial dispute; he merely modifies or certifies the draft standing orders after hearing both the parties. Another aspect to consider would be that if we consider the standing order as an award, certain provisions pertaining to limitations on lock-outs and strikes would come into play as given under the Industrial Disputes Act, 1947. Lastly, Section 13(2) of IESO Act makes the employer liable for any contravention of the standing orders, thus contradicting the principle that an award is as binding and applicable to one party as it is to the other.

So we conclude that certified standing orders are neither completely statutory in effect nor do they fall under the category of an award.

Standing Orders as special kinds of contracts

The certified standing orders have a statutory force but they are not necessarily statutory in nature as we have already discussed. The standing order implies a contract between the employer and the workman. Therefore, the employer and workman cannot enter into contract overriding the statutory contract as embodied in the certified standing orders. While the standing orders are in force it is not permissible for the employer to seek their statutory modifications which leads to there being one set of standing orders in respect of certain employees and another set for others.

Therefore, no workman can be appointed by the employer with terms and conditions different from those defined in the standing orders unless the standing orders are modified in accordance with the provisions of matter discussed in the Schedule of the IESO Act. It is not open to an Industrial Tribunal to ignore an existing standing order in matters that refer to individual discipline. And no Industrial Tribunal can make amendments and modifications in standing orders unless they are contractual in nature. 

An argument in favor of the contractual nature of standing order comes from the case of Buckingham and Carnatic Co. Vs. Venkatayga wherein Justice Gajendragadkar stated that:

The certified Standing Orders represent the relevant terms and conditions of service in a statutory form and they are binding on the parties at least as much, if not more, as private contracts embodying similar terms and conditions of service.

Another statement in favor of the contractual nature of standing order comes from Mettur Industries Ltd Vs. A.R. Varma And Ors the High Court of Madras stated that:

Reading the Act as a whole it is clear that the standing orders form part of the contract between the management and every one of its employees.”

Lastly, in an amendment of the Industrial Disputes Act, 1964, the following was added to Section 33:

…or, where there are no such standing orders, in accordance with the terms of the contract, whether express or implied, between him and the workman.”

Thus, clearly strengthening the argument for the contractual nature of the standing orders.

Conclusion

When we consider the nature of Standing Orders individually as statutory, contractual or as an award, we can conclude positively that it doesn’t fit under any one category completely. There are solid arguments against successful categorization of Standing Orders and thus the nature of Standing Orders can be concluded as amorphous and ambiguous in nature.

References

  1. The Industrial Employment (Standing Orders) Act, 1946, No. 20, Acts of Parliament, 1946 (India).
  2. The Industrial Disputes Act, 1947, Acts of Parliament,1947 (India).
  3. Singh, Yogendra. “NATURE OF STANDING ORDERS UNDER INDUSTRIAL EMPLOYMENT (STANDING ORDERS) ACT, 1946.” Journal of the Indian Law Institute 9, no. 3 (1967): 443–52. http://www.jstor.org/stable/43949946.
  4. 1962 Latest Caselaw 17 SC.
  5. 1973 Latest Caselaw 143 SC.

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