DENIAL OF SUBSISTENCE ALLOWANCE TO THE SUSPENDED EMPLOYEE

[Mr. M. GOVINDARAJAN]

Suspension

Suspension of an employee means keeping an employee away from work-place temporarily for reasons of discipline. However, the suspension does not mean removal from service of employment. The suspension of an employee will be based on the grounds of misconduct, violation of rules of the company, causing damage to the property of the company etc. During the suspension period, the employee cannot perform duty till the claim is resolved. There are lot of differences between ‘suspension’ and ‘dismissal’ where the suspension is temporary and dismissal is permanent decision either by rule of the employer or by law. We will have a look at the suspension of an employee in detail.

The right to suspend an employee during the pendency of an enquiry against the employee is regulated under the provisions regulating the conditions of service. During the suspension, an employee is only prevented from discharging the duties of his office for the time being.

Subsistence allowance

During the suspension, the service of an employee is not permanently deprived. The employee still continues to be a member of the service in spite of the order of suspension. Further, during the period of his suspension, the employee is paid with allowance known as “suspension allowance” or subsistence allowance.

Section 10(A) of Industrial Employment (Standing Order) Act, 1946 (‘Act’ for short)  provides for the payment of subsistence allowance.  The said section provides that where any workmen is suspended by the employer pending investigation or inquiry into complaints or charge of misconduct against him, the employer shall pay to such workman subsistence allowance-

• @ 50% of the wages which the workman was entitled immediately preceding the date of such suspension for the first 90 days of suspension;
• @ 75% of wages for the remaining period of suspension if the delay in completion of the enquiry is not directly attributable to the conduct of such workman;

If any dispute arises regarding the subsistence allowance payable to a workman the workman or the employer concerned may refer the dispute to the Labour Court, constituted under the Industrial Disputes Act, 1947, within the local limits of whose jurisdiction the industrial establishment wherein such workman is employed is situate and the Labour Court to which the dispute is so referred shall, after giving the parties an opportunity of being heard, decide the dispute and such decision shall be final and binding on the parties.

Where provisions relating to the payment of subsistence allowance under any other law for the time being in force in any state are more beneficial than the provisions of this Sections, the provisions of such other law shall be applicable to the payment of subsistence allowance in the state.

Issue

The issue to be discussed in this article is as to whether a company can impose conditions for getting the subsistence allowance by the employer during the suspension period with decided case laws.

Case laws

In ANWARUN NISHA KHATOON VERSUS STATE OF BIHAR AND ORS. - 2002 (8) TMI 891 - SUPREME COURT, the Supreme Court held that in the absence of any applicable service Rules or Regulations there can be no external / onerous condition which can be imposed to record physical attendance everyday at the factory gate for being eligible to be paid subsistence allowance.

In M/S. HINDUSTAN LEVEL EMPLOYEES UNION VERSUS M/S. HINDUSTAN UNILEVER LIMITED - 2024 (1) TMI 664 - BOMBAY HIGH COURT, the respondent company during November 2002 set up a union called ‘Hindustan Lever Limited Daman Karmachari Sangh’.  In the next year the company set up another union called ‘Association of Chemical Workers Union’.  In the year 2003 the long term settlement in existence with the Company came to an end.  At that time the company compelled the workers to join the Association of Chemical Workers Union. 

On 01.05.2003 the Union submitted a fresh charter of demands.  On 22.05.2003 the Union approached the Commissioner of Labor for intervention in wage dispute revision. On 23.05.2003 certain incident took place in the company.  The police officer threatened one employee Natubhai Patel to leave the factory premises so that the company can force other workers to sign the settlement with the union.  On 24.05.2003 the company signed the settlement with the union. 

The company suspended Natubhai Patel on 03.04.2004 along with charge sheet.  In the suspension notice the concerned employee was directed to report at the factory gate at 11.00 am and mark his attendance in the attendance register; in case he failed to sign the register he would be treated as absent and no subsistence allowance would be payable to him for that day.

The Union raised a demand for increase in wages.  The same was referred to Labor Court.  On 21.05.2004 domestic enquiry was conducted against Natubhai Patel at a place far away from the factory.  On 15.09.2004 the Union filed an application to grant subsistence allowance to the suspended employee Natubhai Patel.  The company refused to pay the subsistence allowance.  On 24.09.2004 the Union represented to the Company that Natubhai was not in employment during the inquiry proceedings.  However the company refused to grant subsistence allowance to the employee.  The conciliation proceedings were also held but resulted in failure. 

On 28.11.2008 Natubhai was terminated.  The dispute was referred to the Court in which the nonpayment of subsistence allowance issue was raised.  The Court held that the company is having right to put condition for grant of subsistence allowance the employee should sign the register at the gate of the factory every day.  The same is in consonance with Section 10(A) of the Act.

Against the said order of Court the union filed the present writ petition before the High Court.  The petitioner submitted the following before the High Court-

• The relevant statute does not lay down any condition / pre-condition for marking of physical attendance at the gate of the factory during the period of suspension.
• The concerned employee specifically filed his pleadings that he was unemployed during the period of suspension before the Enquiry Officer, Conciliation Officer and the Labor Court.
• The concerned employee was not directed to submit an affidavit that he was unemployed during the period of suspension before the Labor Court.
• In the face of the provision of Section 10(A) of the said Act even though if a condition is laid down in the Standing Order with regard to marking of attendance, it cannot be relied upon by the Management to deny benefit of subsistence allowance to the workman.
• A statutory benefit granted to the workman under the said Act cannot be permitted to be curtailed by the Model Standing Order or the Certified Standing Order as the Standing Orders have to be in conformity with the provisions of the statute.
• Suspension is not a bounty but a right and the employee is entitled to be paid the subsistence allowance.

In view of the above the petitioner prayed the High Court to quash the award issued by the Labor Court. 

The company submitted the following before the High Court-

• In the suspension notice dated 03.04.2004 the concerned employee was directed to report at the factory gate at 11.00 am and mark his attendance in the attendance register; in case he failed to sign the register he would be treated as absent and no subsistence allowance would be payable to him for that day.
• During the conciliation, Natubhai Patel did not contest that he had chosen to not mark his attendance everyday as directed in his suspension order for being entitled to subsistence allowance.
• As per provisions of clause 4(e) of Schedule - I of the Model Standing Orders (Central), the workman has to satisfy that he was not in employment during the suspension period to claim subsistence allowance.
• The Labour Court held that non-payment of subsistence allowance in this case is not against any provision of law since it found that the condition of marking attendance at the factory gate stipulated by the Company is not unfair and against the law.
• There is no illegality in the stipulation requiring the suspended workman to mark attendance at the gate everyday to prove that he is not gainfully employed elsewhere during his suspension.
• Natubhai Patel by his own conduct is deemed to have accepted the condition stipulated in the suspension notice and therefore in the absence of challenge to the said notice is now estopped from raising any grievance with respect to the same.
• Natubhai Patel accepted the condition and marked attendance from April 2004 till April 2005 and received payment of subsistence allowance in lieu thereof; no reasons are set out by the Petitioner – Union for not marking the attendance and on the contrary,
• Natubhai Patel raised grievance in respect of non-payment only before the Enquiry Officer for the first time on the ground that the condition stipulated in the suspension notice was unlawful, however, when the matter was placed during reference before Conciliation Officer as well as the Labour Court, there was no challenge to the suspension notice in respect of the condition but only demand regarding payment of wages.
• The obligation of the employee as to the non employment during the suspension period has not been discharged by him.
• The Respondent - Company is justified in denying him the subsistence allowance during the period when he did not mark his attendance.

The company, therefore, pleaded that the writ petition is meritless and not maintainable and is liable to be dismissed.

The High Court considered the submissions of the parties to the writ petition.  The High Court considered the question as to whether the condition in the suspension order can be such that a statutory benefit granted to the employee can be permitted to be curtailed by the condition.  The High Court analyzed the provisions of Section 10A of the Act and also the suspension order issued by the Company to the employee.  The High Court observed that from reading Section 10(A) of the said Act, it appears that the provision is a beneficial enactment to take care of employees who are placed under suspension and they are required to be paid the prescribed 50% wages as contemplated for the period under suspension.  The company submitted that it is a long standing customary practice of the Respondent - Company to require marking of attendance at the factory gate because of which subsistence allowance is denied to Natubhai Patel.  The High Court was of the view that the Company cannot lay down and insist on a customary practice followed by the Company to prevail upon the existing statutory provisions of law.   Once it is found that the said customary practice is in clear conflict with the provisions of Section 10(A) of the said Act, the claim of the employee being entitled to subsistence allowance cannot be permitted to be defeated on the basis of a customary practice followed by the Respondent - Company.

In the present case, the High Court observed that the provision of clause 4(e) of Schedule - I of the Model Standing Orders (central) require the employee to satisfy that he was not in employment during the suspension period to claim the subsistence allowance. This provision cannot be stretched to the extent of the employer requiring satisfaction of a pre-condition of marking attendance at the gate of the factory everyday during the period of suspension.  The High Court was of the view that the condition imposed by the respondent company is an illegal condition and deserves to be dismissed.  It is unfair, unjust and against to the provisions of Section 10(A) of the Act.

The High Court allowed the petition and quashed and set aside.  Further the High Court declared that Natubhai Patel is entitled to the payment of subsistence allowance from the date of suspension to the date of his termination along with interest @ 10% per annum.