International Labor & Employment Law Committee Newsletter

Issue: May 2013

Editor: Tim Darby | Africa and Middle East Editor: Karen Seigel | Asia and Oceania Editor: Ute Krudewagen | Canada Editor: Gilles Touchette | European Editor: Paul Callaghan | Latin America Editor: Juan Carlos Varela | Law Student Editor: Irene Lehne, Earle Mack School of Law at Drexel University | USA: Trent Sutton


Dismissal on Grounds of Misconduct Is Improper Without Documentary Proof to Show Departmental Enquiry Was Lawfully Conducted

Sajai Singh and Soumya Patnaik, J Sagar Associates, Bangalore

In case of dismissal of an employee on grounds of misconduct, documentary proof is necessary to show that a departmental enquiry was conducted lawfully, the High Court of Madhya Pradesh has held.1

In the case of Ram Sewak Tiwari v. M.P. Road Transport Corporation and Others, a departmental enquiry was initiated against the petitioner after he was deliberately absent from duty for more than a period of ten days. A show cause notice had been served on him, following which a charge sheet was also drawn against him. However, there was no further documentary evidence regarding the conduct of a disciplinary enquiry.

The court held that except for sending the charge sheet and the show cause notice to the petitioner, nothing had been placed on record by the respondent to show that the enquiry was duly conducted in a lawful manner. In the absence of such proof, the dismissal order was quashed.

1Ram Sewak Tiwari v. M.P. Road Transport Corporation and Others, (2013) ILLJ 217 MP.

Law on Prevention of Sexual Harassment at the Workplace Enacted

Veena Gopalakrishnan and Vikram Shroff, Nishith Desai Associates, Mumbai/Bangalore/Delhi

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("Sexual Harassment Act") received the President's assent on April 22, 2013 and has been published in the Gazette of India as Act No. 14 of 2013. The Sexual Harassment Act is effective from April 23, 2013.1 The statute was enacted almost 16 years after the Supreme Court of India, in its landmark judgment in Vishaka and others v. State of Rajasthan,2 laid down guidelines making it mandatory for every employer to provide a mechanism to redress grievances pertaining to workplace sexual harassment and enforce the right to gender equality of working women. Codification of the requirements is a much-awaited development and is a significant step towards ensuring women a safe and healthy work environment. Prior articles on this topic appeared in earlier editions of the newsletter.3


2JT 1997(7)SC384

3; and

Management Need Not Initiate Enquiry for the Termination of a Probationer

Sajai Singh and Soumya Patnaik, J Sagar Associates, Bangalore

Where the management is dissatisfied with a probationer, it need not initiate an enquiry to establish the reasons for the said dissatisfaction, the Delhi High Court has held.1 The Court elaborated, stating that it goes without saying that if the management decides not to confirm a probationer and decides instead to discontinue his services during the probation period, the management would have some cause for dissatisfaction regarding the service and conduct of the probationer. The burden of proof would lie on the probationer to establish bad faith on the part of the employer.

In the instant case, the employee was on probation for a period of one year, which was extended for a further period of 6 months. During this period the employee was terminated on the basis of a charge sheet alleging that he had wrongfully parked the bus which he was driving, during the course of his employment, and had also misbehaved with the supervisor on duty. The employee claimed that since no further enquiry was conducted before terminating his services, the said termination was illegal and in violation of the Industrial Disputes Act, 1947. However, the Court held that since the employee was on probation, he could be terminated by the employer, without any enquiry, unless bad faith was established.

1DTC v. Prem Nath & Ors., decided on January 9, 2013.

Departmental Enquiry Will be Erroneous if Charges Alleged Against the Employee Are Vague and Uncertain

Sajai Singh and Soumya Patnaik, J Sagar Associates, Bangalore

The charges alleged against an employee, if vague and uncertain, vitiates the departmental enquiry, the Supreme Court held.1 The Court held that an employee who the employer claims is delinquent should not be served a charge sheet without providing to that individual a clear, specific, and definite description of the charge against him. When a statement of allegations is not served with the charge sheet, the enquiry is null and void, as having been conducted in violation of the principles of natural justice.

In the present case, the employee was the headmaster of a private school. The management initiated disciplinary proceedings against him on grounds of misappropriation and embezzlement of funds of the school. However, the charges levied against him related to expenditures made by him during the course of the day-to-day running of the school, and did not specifically state how they amounted to misappropriation or embezzlement. The Court held the departmental enquiry to be erroneous and vitiated, due to vague and uncertain charges being alleged against the employee.

1Shri Anant R. Kulkarni v. Y.P. Education Society & Ors. [Civil Appeal No. 3935 of 2013], decided on April 26, 2013.

Disciplinary Enquiry May Be Renewed Against an Employee After His Retirement, Only Where Specifically Authorized Under the Terms and Conditions of Service

Sajai Singh and Soumya Patnaik, J Sagar Associates, Bangalore

Renewed disciplinary enquiry against an employee may be initiated post-retirement (due to superannuation), only when the relevant rules governing his service conditions authorise or permit such an enquiry or the allegations against the employee prima facie hold substance, the Supreme Court has held.1 The Court, citing various judgments, held that no fresh disciplinary enquiry can be initiated against an employee post-retirement, since the employer-employee relationship has terminated. However, the Court also clarified that in the event an enquiry was initiated while the employee was in service, the same would continue even after his retirement, with only a change in the nature of punishment, since the punishment of dismissal/removal from services can no longer be imposed.

In the present case, the employee, a private school headmaster, was charged with allegations of misappropriation and embezzlement of the funds of the school. The service rules required the enquiry committee to consist of at least three members. However, the committee formed consisted only of two members, and hence, the enquiry was quashed on technical grounds. A claim for fresh enquiry was refused by the Supreme Court on the ground that the employee had by then, retired, and there was nothing in the service rules to permit a fresh enquiry to be initiated against an employee post-retirement. The Court further held that prima facie there was no substance in the allegations made against the employee, and therefore, the employer cannot be permitted to hold a fresh enquiry.

1Shri Anant R. Kulkarni v. Y.P. Education Society & Ors. [Civil Appeal No. 3935 of 2013], decided on April 26, 2013.

ESOP Regulations: Deadline Extended for Adhering to Recent Restrictions on Schemes Involving Securities of the Company

Veena Gopalakrishnan and Vikram Shroff, Nishith Desai Associates, Mumbai/Bangalore/Delhi

The Indian securities market regulator has, by way of clarificatory circular dated May 13, 20131 ("Clarification") extended the deadline for compliance with the new guidelines on employee stock option schemes (ESOPs) from June 30, 2013 to 31 December, 2013.

As reported previously,2 the Securities and Exchange Board of India ("SEBI") had issued a circular on January 17, 2013 to amend the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (ESOP Guidelines) along with the Equity Listing Agreement ("Circular"). The Circular requires all employee benefit schemes involving the securities of the employer company to be in compliance with, inter alia, the ESOP Guidelines. The Circular also mandates that all employee benefit schemes already framed and implemented by the company, involving securities of the company, before the January 17, 2013, are aligned with and made to conform to the ESOP Guidelines by June 30, 2013.

In light of the representations received by SEBI seeking clarification on the applicability of the Circular as well as on the ability to continue holding securities that had already been acquired by employee benefit trusts prior to the date of the Circular, SEBI has provided the following clarifications:

Applicability of the Circular

  • As per the Clarification, the Circular is applicable to all employee benefit schemes involving the securities of the company provided that the schemes are set up, managed or financed by the company directly or indirectly. Therefore, the Circular is applicable if any of the following conditions are satisfied:
    • if the company has set up the scheme or the trust/agency managing the scheme; or
    • if the company has direct or indirect control over the affairs of the scheme or the trust/agency managing the scheme; or
    • if the company has extended any direct or indirect financial assistance to the employee benefit schemes or the trust/agency managing such schemes.

Grant of Options

  • It has been clarified that any further grant of stock options from the date of the Circular is to be strictly in accordance with the ESOP Guidelines.

Holding of Securities by Trusts beyond December 31, 2013

  • Employee benefit trusts which had already acquired securities of the company from the secondary market, before the date of the Circular have now been allowed to continue to hold such securities beyond the December 31, 2013 provided that, (i) the scheme has been aligned with the ESOP Guidelines, and (ii) such securities are used only in accordance with such aligned scheme.

Continued holding of securities by non-ESOP employee benefit schemes

  • The Circular further states that existing employee benefit schemes involving securities of the company, which do not involve granting of options to/purchase of securities by employees, shall be permitted to either:
    • hold beyond December 31, 2013, the securities of the company already acquired by them, provided the schemes have been aligned with ESOP Guidelines; or
    • dispose before December 31, 2013 of the securities of the company held by them.

 Additional disclosures

  • The Circular has also prescribed certain additional disclosures with respect to employee benefit schemes involving securities of the company.




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