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Indian Partnership Act 1932

Question 1. Introduction
Answer:

• The law relating to partnership in India was first contained in the Indian Contract Act, of 1872.
• Later, on 1st October 1932 Indian Partnership Act, of 1932 came into force.
• This Act deals partly with the rights and duties of partners between themselves and partly with the legal relations between partners and third persons.
• It can be regarded as a branch of law relating to principal and agent.

Question 2.Partnership
Answer:

As per Sec. 4, “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”

Question 3. Essentials of Partnership
Answer:

• It must be a result of an agreement between two or more persons.
• It is voluntary.
• The agreement must be to share the profits of the business.
• Business must be carried on by all or any of them acting for all.
• All the above essentials must co-exist before any partnership comes into existence.
• The relation of partnership arises from contract and not from status.
• Agreement may be express or implied.
• As per Sec. 2 (b),
• “Business includes every trade, occupation, and profession.”
• Profit means the excess of return over advances.
• Sharing of profits includes the sharing of losses.

Read and Learn More CMA Laws and Ethics Paper

Question 4. True Test of Partnership
Answer:

• Mutual agency is the basic and most essential thing for partnership.
• The sharing of profit also involves the sharing of loss.
• Sharing of profits is not a conclusive test of the existence of a partnership.
• Every partner is a principal and agent for himself and others.
• An agency relationship is the most important test of partnership.

Question 5. Partnership deed
Answer:

• It constitutes the mutual rights and obligations of partners in a written form.
• It is also known as a partnership agreement, constitution of partnership articles of partnership, etc.
• It must be drafted and stamped as per the provisions of the Indian Stamp Act

Question 6. Types of Partners
Answer:

1. Active Or Actual Ostensible Or Working Or Managing Partner:
   • He is not only contributing capital but also taking an active part in the conduct of the firm’s business.
   • He shares its profits and losses.
   • As per Sec. 12 (a),
   • Subject to the contract to the contrary, every partner is entitled to take part in the conduct of the business of the firm.”
   • He has to give public notice of his retirement if he has to free himself from all liabilities.
2. Sleeping Or Dormant Partner:
   • He only contributes capital and shares profit or loss without taking an active part in the firm’s business.
   • He has unlimited liability.
   • He can retire from the firm without giving any public notice.
   • He is entitled to access books and accounts of the firm, even though he performs no duty.
3. Sub Partner:
   • Me is the third person with whom a partner shares his profit.
   • He has no rights or duties towards the firm.
4. Nominal or Quasi Partner:
   • He only lends his name and reputation for the firm’s benefit without sharing any profit or loss.
   • He is known to outsiders as a partner but actually, he is not.
   • He is liable to a third party for all his acts.
   • He is required to give public notice of retirement.
5. From a duration point of view partnership may be:
   • Particular Partnership – i.e. for a particular purpose or a particular undertaking or single venture.
   • Partnership at will – No fixed duration or period of partnership. It is dissolved by the partner by giving notice in writing.
6. Partner in profits only:
   • He gets a share in profits but does not share any losses of the firm. He has to bear all the liabilities to a third party.
7. Partner by estoppel:
   • He is not a partner of the firm but conducts himself in such a way that leads third parties to believe that he is a partner.
   • He is liable for all the debts to such third party.
8. Partner by holding out:
   • He is declared by others as a partner of the firm but does not contradict it immediately and remains silent.
   • He is liable to a third party who is entering into contracts with the firm on the belief that he is the partner.
   • Holding out means ‘to represent’
   • It is based on the doctrine of the Estoppel of Indian Evidence Act.

Question 7. Minor’s Position in Partnership
Answer:

• Minor is a person who has not completed 18 years of age, and thus cannot become a partner as he is not competent to contract.
• As per Sec. 30, He can, however, be admitted to the benefits of partnership with the mutual consent of all partners.’
• No partnership firm can be formed only with minors.
• A minor’s agreement is altogether void.
• If a minor has to be. admitted into the benefits of partnership, there must be at least 2 major partners.

Question 8. Rights of Minor
Answer:

• Sec. 30(2): Share profits of the firm.
• Sec. 30(2): Inspect and copy the book of accounts of the firm.
• Sec. 30(4): Can file a suit for accounts and his share in the firm but only when severing his connection with the firm.
• Sec. 30(5): On attaining majority, he may within 6 months either.

Question 9. Rights of Partners
Answer:

• To take part in management.
• To Express Opinion.
• To Inspect and take out copies of Books of Accounts.
• To Share Profits.
• To have an Interest in capital.
• To have an Interest in Advances.
• Right to be indemnified.
• To have a joint share in the partnership property.
• To enforce the proper use of property.
• Right of Retirement.
• To prevent the introduction of a new partner.
• Implied Authority.
• Right to Dissolve.
• Profits after retirement or death.

Question 10.Duties and Liabilities of Partner
Answer:

• To carry on the business of the firm to the Greatest Common Advantage.
• Being diligent and honest.
• Being just and faithful.
• To render accounts and information.
• To indemnify the firm.
• Not to make any secret profits.
• Not to hold and use the property of the firm.
• Not to start a business in competition with the firm.
• Not to receive any remuneration.
• Not to transfer his interest.
• To act within the scope of his authority.
• To share losses.

Question 11. Goodwill
Answer:

Goodwill is defined as the value of the reputation of a business house concerning profits expected in the future over and above normal profits.

• It is a partnership property.
• In case of dissolution of the firm, every partner has a right according to the deed in the absence of any agreement, to have a share in the goodwill on it being sold.
• It can be sold separately, or along with other properties of the firm.

Question 12. Effects of non-registration
Answer: The Indian Partnership Act does not make registration of partnerships compulsory nor does it impose any penalty.

1. However, non-registration gives rise to certain disabilities U/S 69:

• The firm or any person on its behalf cannot bring action against a third party for breach of contract unless the firm is registered and persons suing are shown in the register of firms.
• Neither the firm nor any partner can claim set off if any suit is brought by the third party against the firm.
• Partner of an unregistered firm cannot bring any action against the firm or any partner of such firm.
• An unregistered firm however can bring a suit for enforcing the right arising otherwise than out of contract.

2. Suits allowed by Act:

• Dissolution of a firm.
• Rendering accounts of a dissolved firm.
• Realization of property of a dissolved firm.
• Set off of values not exceeding $ 100.
• Proceeding arising incidentally of value not exceeding $ 100.
• The firm does not have a business place in territories to which the Indian Partnership extends.
• Realization of property of insolvent partner.
• Firms having business places in areas exempted from the Partnership Act.

Relevant Case Laws:

• Prithvi Singh Vs. Hasan Ali
• Kashav Lai Vs. Chunni Lai

Question 13. Dissolution of Partnership Firm (Sec. 39)
Answer:

It takes place when the relationship between all the partners of the firm is so broken to close the business of the firm.

As a result, the firm’s assets are sold and its liabilities are paid off.

Question 14. Modes of Dissolution of Partnership
Answer:

• Sec. 42 (a): By the expiry of the fixed term for which the partnership was formed.
• Sec. 42 (b): By the completion of the venture.
• Sec. 42 (c): By the death of a partner.
• Sec. 42 (d): By insolvency of a partner.
• Sec. 42 (e): By retirement of a partner.

Question 15. Modes of Dissolution of Firm
Answer:

• Sec. 40: Result of an agreement between all partners.
• Sec. 41 (a): By adjudication of all partners, or declaration of all partners as insolvent except one.
• Sec. 41 (b): By firm’s business becoming unlawful.
• Subject to agreement between parties, on the happening of certain contingent events.
• Sec. 43: In case of partnership at will, by a partner giving notice of the intention to dissolve the firm.
• The firm dissolves from the date mentioned in the notice. If no date is mentioned, then from the date of communication of the notice.
• See. 44: By Court Intervention in the case of:

1. 1. A partner becoming unsound mind.
   2. Permanent incapacity of partners to perform their duties.
   3. Misconduct of partners affecting the business.
   4. Willful or persistent breaches of agreement by a partner.
   5. Transfer or sale of the whole interest of a partner.
   6. The improbability of business being carried on except at a loss.
   7. Court being satisfied on other just and equitable grounds.

Question 16. Consequences of Dissolution
Answer:

• Continuing liability until public notice: Partners continue to be liable for any act done by them, done on behalf of the firm until public notice of dissolution is given.
• Sec. 46: Rights to enforce winding up:
  1. Partner or his representative have a right against others, on dissolution.
  2. Apply the firm’s property in payment of the firm’s debt. Distribute surplus amongst all partners.

Sec. 47: Continuing authority of partners:

The authority of partners continue

1. 1. So far as necessary to wind up the firm,
   2. To complete the pending transactions till the dissolution date.

Indian Partnership Act 1932 Distinguish Between Question And Answers

Question 1. Briefly explain the difference between Partnership and Co-ownership.
Answer:

Difference between Partnership and Co-ownership:

Indian Partnership Act 1932 Descriptive Question And Answers

Question 1. Who is a Partner by “Holding Out” or “Estoppels”?
Answer:

• If any person behaves and or poses or presents in such a way that others consider him to be a partner, he will be held liable to those persons who have been misled, suffered, or lent finance to the firm on the assumption that he is a partner.
• Such a person is known as a “Partner by Holding out or Estoppels.”
• He is not a true partner and he is not entitled to any share in the profit of the firm.

Question 2. What tests would apply to determining the existence of a partnership? Discuss.
Answer:

• As must be clear from the discussion of various elements of partnership, there is no single test of partnership.
• For example, in one case there may be a sharing of profits but may not be any business, in the other case there may be business but there may not be a sharing of profits,
• In yet another case there may be both business and sharing of profits but the relationship between persons sharing the proms may not be that of principal and agent.
• And in either case, therefore, there is no partnership.
• Thus, all the essential elements of a partnership must coexist to constitute a partnership.
• To emphasize this fact, Section 6 expressly provides that “in determining whether a group of persons is or is not a firm or whether a person is or is not a partner in a firm, regard shall be given to the real largeon between the parties, as shown by all relevant facts taken together.
• Thus, the existence of a partnership has to be determined by the real intention of the parties, which must be gathered from all the facts of the case and the surrounding circumstances.

Question 3. State your views on the following: A partner is not an agent of other partners in a partnership firm.
Answer:

Incorrect: The basis of the partnership is mutual agency, hence a partner is an agent of all other partners.

Question 4. What are the rights of outgoing partners?
Answer:

Rights of Outgoing Partners Section 36 provides that an outgoing partner may carry on a business competing with that of the firm. He may advertise such business, but, subject to contract to the contrary, he may not:

• use the firm name
• represent himself as carrying on the business of the firm; or
• solicit the custom of persons who were dealing with the firm before he ceased to be a partner.

Section 37 provides that in a case where a partner has died or ceased to be a partner, the surviving and continuing partners may carry on the business of the firm with the property of the firm without any final settlement of accounts between them and the outgoing partner or the estate of the deceased partner.

In the absence of a contract to the contrary, the outgoing partner of the representative of the deceased partner is entitled to the option:

• To such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm; or
• To interest at 6% per annum on the amount of his share in the property of the firm.
• Where an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner and the same is duly exercised, the estate of the deceased partner or the outgoing partner is not entitled to any further or other share of profits.
• But if any partner, assuming to act in the exercise of the option, does not, in all material respects comply with the terms, he is liable to account under the provisions of this section.

Indian Partnership Act 1932 Practical Question And Answers

Question 1. A, B, and C were partners in a firm of drapers. The partnership deed authorized the expulsion of a partner when he was found guilty of a flagrant breach of duty. A was convicted of traveling without a ticket. On this ground, he was expelled by the other partners B and C. Is the expulsion justified?
Answer:

Yes, the expulsion is justified. In this case, the partnership deed authorized expulsion on the ground of flagrant breach of duty. Doing an act that brings a partner within the penalties of criminal law is a flagrant breach of duty. Also, the expulsion decision was taken by a majority of partners (Carmichel Vs. Evans (1904) 90 LT573).

Question 2. A, B, C are partners in a firm. As per terms of the partnership deed, A is entitled to 20% of the partnership property and profits. Retires from the firm and dies after 15 days. B and C continue the business of the firm without settling accounts. What are the rights of A’s legal representatives against the firm under the Indian Partnership Act, of 1932?
Answer:

Section 37 of the Indian Partnership Act, 1932 provides that where a partner dies or otherwise ceases to be a partner and there is no final settlement of account between the legal representatives of the deceased partner or the firms with the property of the firm, then in the absence of a contract to the contrary, the legal representatives of the deceased partner or the retired partner entitled to claim either.

1. such shares of the profits earned after the death or retirement of the partner which is attributed to the use of his share in the property of the firm; or
2. Interest at the rate of 6 percent per annum on the amount of his share in the property.

Based on the aforesaid provisions of Section 37 of the Indian Partnership Act, 1932 in the given problem, A’s representative, at his option, can claim:

1. The 20% shares of profits (as per the partnership deed); or
2. Interest at the rate of 6 percent per annum on the amount of A’s share in the property.

Question 3. Rohit and Anurag are partners in a firm. Did they borrow a sum of $ 10,000 from Parul? Later on, Rohit becomes insolvent but his assets are sufficient to pay back the loan. Parul compels Anurag for the payment of an entire loan. Referring to the provisions of the Indian Partnership Act, 1932, examine the validity of Parul’s claim and decide as to who may be held liable for the above loan.
Answer:

The present problem is concerned with the contractual liability of the Partners. As stated in Section 25 of the Indian Partnership Act, 1932, in partnership the liability of the partners is unlimited.

• The share of each partner in the partnership property along with his private property is liable for the discharge of partnership liabilities.
• The liability of the partners is not only unlimited but is also stated that a partner is both jointly and severally liable to third parties.
• However, every partner is liable jointly with other partners and also severally for the acts of the firm done while he is a partner.
• Based on the above provisions, Parul can compel Anurag for the payment of an entire loan. Anurag must pay the said loan and then he can recover the share of Rohit’s loan from his property.

Question 4. Arun, Varun, and Tarun started a Kirana business in Chennai on 1st January 2012 for five years. The business resulted in a loss of $ 20,000 in the first year, $ 25,000 in the second year, and $ 35,000 in the third year, Varun and Tarun wish to dissolve the firm while Arun wants to continue the business. Advise Varun and Tarun.
Answer:

• As per provisions of Sec. 44(f) of the Indian Partnership Act, 1932, Varun and Tarun are advised to make a petition to the Court for the dissolution of the firm on the ground that the firm cannot be carried on except at a loss.
• Since the firm was constituted for a fixed term of five years it cannot be dissolved without the consent of all the partners and as such Varun and Tarun cannot compel Arun to dissolve the firm.

Question 5. Akash, Ashish, and Anil were partners in a firm. By his willful neglect and misconduct, Anil caused serious loss to the business of the firm. After several warnings to Anil, Akash and Ashish passed a resolution expelling Anil from the firm. By another resolution, they admitted Abhishek as a partner in place of Anil. Anil objects to his expulsion as also to the admission of Abhishek. Is he justified in his objections?
Answer:

• A partner may be expelled from a firm by the majority of the partners only if,
• The power to expel has been conferred by contract between the partners, and
• Such a power has been exercised in good faith for the benefit of the firm.
• The partner who is being expelled must be given reasonable notice and opportunity to explain his position and to remove the cause of his expulsion.
• Yes, Anil is justified in his objections.
• In the absence of an express agreement authorizing expulsion, the expulsion of a partner is not proper and is without any legal effect.

[Section 33(1)] Anil’s objection to the admission of Abhishek is also justified as a new partner can be admitted only with the consent of all the partners.[Section 31 (1)]

Question 6. Mayur and Nupur purchased a taxi to ply it in partnership. They had done business for about a year when Mayur, without the consent of Nupur, disposed of the taxi. Nupur brought an action to recover his share in the sale proceeds. Mayur’s only defense was that the firm was not registered. Will Nupur succeed in her suit?
Answer:

• As per Section 69(3) of the Indian Partnership Act, the term set-off may be defined as the adjustment of debts by one party due to him from the other party who files a suit against him.
• It is another disability of the partners and of an unregistered firm that it cannot claim a set-off when a suit is filed against it.
• Yes, Nupur will succeed in her suit. As the business had been closed on the sale of the taxi, the suit in question is for claiming a share of the assets of ’ a dissolved firm.
• Section 69(3) especially protects the right of a partner of an unregistered firm to sue for the realization of the property of a dissolved firm.

Question 7. ABC & Co., a firm consisting of three partners A, Band C having one-third share each in the firm. According to A and B, the activities of C are not in the interest of the partnership, and thus want to expel C from the firm. Advise A and B whether they can do so quoting the relevant provisions of the Indian Partnership Act.
Answer:

Expulsion of a partner (Sec. 33):

• The expulsion of a partner is another event necessitating the reconstitution of a firm.
• A partner may be expelled from a firm if the following conditions are satisfied:

1. 1. expulsion should be as per the express provisions in the agreement;
   2. power of expulsion should be exercised by a majority of partners;
   3. expulsion should be in good faith.

• Only when all the above three conditions are satisfied a partner can be expelled from a firm.
• As stated above expulsion should be in good faith. The test of good faith may be:

1. expulsion is in the interest of the firm
2. expelled partner has been given notice

Question 8. X and Y were partners carrying on a banking business. X had committed adultery on several women in the city and his wife had left on this ground. Y applied to the court for dissolution of the firm on this ground. Will he succeed? )
Answer:

• As per Section 44(c) of the Indian Partnership Act, 1932 sometimes, a partner is guilty of misconduct. When the Court is satisfied that the misconduct adversely affects the partnership business the Court may allow the dissolution of the firm.
• Y will not succeed. In this case, though X is guilty of misconduct his misconduct does not have any adverse effect on their business as bankers [Snow Milform. (1868) 18 LT142].
• In the above case, the Court observed that how can it be said that a man’s money is less safe because one of the partners commits adultery?
• It was further observed that in those cases where the moral conduct of a partner would affect the firm business, it can be a ground for dissolution of the firm, an example where a medical man had entered into a partnership with another and it was found that his conduct was very immoral towards some of his patients, the firm can be dissolved on the ground of misconduct by the partner.

Limited Liability Partnership Act 2008

Question 1. Meaning of LLP
Answer:

Any two or more persons associated with carrying on a lawful business to earn profit may form a limited liability partnership by subscribing their names to an incorporation document and registration with the registrar of companies.

Question 2.Mutual Rights and duties of partners
Answer: Mutual rights and duties of partners of a Limited Liability Partnership inter- se and those of the Limited Liability Partnership and its partners shall be governed by an agreement between the partners.

Question 3. No. of Partner
Answer: Every Limited Liability Partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident of India.

Question 4. LLP Agreement
Answer:

The mutual rights and duties of the partners of a limited liability partnership and the mutual rights and duties of a limited liability partnership and its partners shall be governed by the limited liability partnership agreement between the partners or between the limited liability partnership and its partners.

Question 5. Solvency
Answer:

• Every felted Dabinty partnership shall file the Statement of Account and Seventy in Form S with the Registrar, within thirty days from the end c:
• six months of the financial year to which the Statement of Account is Solvency relates.
• A limited liability partnership’s Statement of Account and Solvency shall be signed on behalf of the limited liability partnership by fits designated partners.

Read and Learn More CMA Laws and Ethics Paper

Question 6. Accounts Audited
Answer:

A felted liability partnership whose turnover exceeds forty lakh rupees, in any financial year or whose contribution exceeds twenty-five lakh rupees (should be required to cst its accounts audited.

Question 7. Annual Return
Answer: Every feted BabTetypartnership shall file an annual return with the Registrar in Form 11.

Question 8. Foreign LLP
Answer:

As per rule 34(1) of the LLP Rules, a foreign limited liability partnership srs. l when thirty days of establishing a place of business in India, file with the Registrar in Form 27

1. A copy of the certificate of incorporation;
2. The full address of the registered or principal office of the limited liability. I partner with the country of its incorporation;
3. The full address of the office of the limited liability partnership in India which is to be deemed as its principal place of business in India;
4. Cst of partners and designated partners, if any, and the names and addresses of two or more persons resident in India, authorized to accept on behalf of the limited liability partnership, service of process, and any notices.

Limited Liability Partnership Act 2008 Short Note Question And Answers

Question 1. Write a short note about unlimited Liability Partnership
Answer:

Limited Liability Partnership is formed under the Limited Liability Partnership Act,

Its essential features are:

1. A limited liability partnership is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners and the liability of partners is limited.
2. A limited liability partnership shall have perpetual succession.
3. Any change in the partners of a limited liability partnership shall not affect the existence, rights, or liabilities of the limited liability partnership.
4. The provisions of the Indian Partnership Act, of 1932 shall not apply to a
   limited liability partnership. ,
5. Any individual or body corporate may be a partner of LLP.
6. Every limited liability partnership shall have at least two partners.
7. Every limited liability partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India.
8. Every limited liability partnership shall have a registered office to which all communications and notices may be addressed and where they shall be received.
9. Every limited liability partnership shall have either the words “limited liability partnership” or the acronym “LLP” as the last words of its name.

Question 2. Write a short note on the Annual Return (limited liability partnership)
Answer:

• Annual return: (Section 35): As per Section 35 of the LLP Act, every LLP shall file an annual return within sixty days of its financial year in such form and manner as may be prescribed.
• Such return should be accompanied by prescribed fees
• If the LLP fails to comply with the provisions of Section 35 regarding filing of annual return, the LLP will be punishable with a fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every designated partner of such LLP shall be punishable v/ith fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

Limited Liability Partnership Act 2008 Descriptive Question And Answers

Question 1. Comment on the following based on legal provisions Provisions of Indian Partnership Act 1932 apply to LLPs and the Body corporate may be a partner of LLP.
Answer:

The rules and regulations relating to Limited Liability Partnership have been described in the Limited Liability Partnership Act 2008, hence provisions of the Indian Partnership Act 1932 are not at all applicable to LLP’s. As regards the second portion of the question, the body corporate may be a partner in the LLP as per the LLP Act 2008.

Question 2. If the following statements are not correct, give the correct

1. Authorized capital for the formation of a limited liability partnership (LLP) is one crore.
2. Maximum number of partners in a LLP shall not exceed 50.
3. Foreign nationals can also be partners in a LLP.
4. The audit is not required in LLP in any circumstances.

Answer:

1. Since the authorized capital is not specified in the Act.
2. No maximum limit and no specific number are specified in the Act.
3. Yes, foreign Nationals can also be partners.
4. The audit is required if the contribution is above INR 25 Lakhs or if the annual turnover is above INR 40 Lakhs.

Question 3. What are the circumstances in which a Limited Liability Partnership may be wound up by the Tribunal?
Answer:

The circumstances in which a limited liability partnership may be dissolved by the Tribunal are provided in Section 64 of the Limited Liability Partnership Act, 2008 A limited liability partnership may be wound up by the Tribunal in the following ways:

1. The limited liability partnership decides that the limited liability partnership be wound up by the Tribunal;
2. if, for more than six months, the number of partners of the limited liability partnership is reduced below two;
3. if the limited liability partnership has acted against the interests of the sovereignty and integrity of India, the security of the state, or public order;
4. if the limited liability partnership has made a default in filling with the Registrar the statement of account and solvency or annual return for any five consecutive financial years; or
5. if the Tribunal thinks that it is just and equitable that the limited liability partnership be wound up.
6. If the limited liability partnership is unable to pay its debts.

Question 4. Explain the concept of ‘whistle-blowing’ concerning the Limited Liability Partnership Act, 2008.
Answer:

A whistleblowing policy is a policy in which a mechanism is established to listen and take action against any wrong practice anywhere in the company. The concept has been discussed in Section 31 of the Limited Liability Partnership Act, 2008. As per the Section:

1. The Court or Tribunal may reduce or waive any penalty leviable against any partner or employee of a limited liability partnership if it is satisfied that:
   • such partner or employee of a limited liability partnership has provided useful information during an investigation of such limited liability partnership; or
   • when any information given by any partner or employee (whether or, not during the investigation) leads to a limited liability partnership or any partner or employee of such a limited liability partnership being convicted under this Act or any other Act.
2. No partner or employee of any limited liability partnership may be discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against the terms and conditions of his limited liability partnership or employment merely because of his providing information or causing information to be provided under sub-Section(l).

Question 5. A Limited Liability Partnership is not bound by any act of its member. Justify.
Answer:

• If the member has no authority to act on behalf of the LLP, the LLP is not bound by his act.
• A limited liability partnership is not bound by any act of a member in dealing with persons if:
• The member has no authority to act for the limited liability partnership by doing that thing.
• The person knows that the member has no authority or does not know or believe him to be a member of the limited partnership.

Question 6. A limited liability partnership wants to shift its registered lice from Udaipur in the State of Rajasthan to Gurgaon in the State of Haryana. What procedure the corporation has to follow
Answer:

• Sec . 13 of the LLP Act states that a limited liability partnership may change the place of its registered office and file the notice of such change with the register from 15 within 30 days
• The registered office can be changed from one place to another place in the manner provided in the partnership Agreement if the agreement is silent then the consent of all partners shall be required to change the place of the registered office of the limited liability partnership to another place.
• where the Change in place of register the limited liability partnership consent of such secured on Where the change in place another state, a general notice with Registrar, is ret published in English and in the registered office of the circulating in that district.
• However, there is just the jurisdiction of another Reg the notice in Form 15 with partnership proposes to send the information to the Reg office is proposed to be sf Failure to comply with the partnership and its every p shall not be less than two twenty-five thousand rupees.

Question 7. Explain the extent c Section 26 of LLP Ac
Answer:

• The extent of liability of a limited partnership is contained in Section 27 which is as under:
• A limited liability partnership is not bound by anything done by a partner in dealing with a person if:
• The partner in fat has no authority to act for the limited liability partnership in doing a particular act: and
• The person knows that he has no authority or does not know or believe him to be a partner of the limited liability partnership.
• An obligation of the limited liability partnership whether arising in contract or otherwise, shall be solely the obligation of the limited liability partnership.
• The liabilities of the limited liability partnership shall be met out of the property of the limited liability partnership.

Question 8. For any contravention of provisions of the LLP Act or LLP agreement, all the partners of the LLP are liable for all penalties. Offer your views based on the Limited Liability Partnership Act, of 2008.
Answer:

• False, it is the designated partner who is responsible for doing all acts matters, and things as are required to be done by LLP as per the Act or as specified in the LLP agreement.
• Unless expressly provided otherwise in this Act, a designated partner shall be responsible for doing all acts, matters, and things as are required to be done
• The limited liability partnership in respect of compliance with the provisions of this Act including the filing of any document, return, statement, and the like report under the provisions of this Act and as may be specified in the limited liability partnership agreement and liable to all penalties imposed on the limited liability partnership for any contravention of those provisions.

Question 9. Limited Liability Partnerships are body corporate. Do you agree? Justify.
Answer:

• Limited liability partnership to be body corporate:
• A limited liability partnership is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners.
• A limited liability partnership shall have perpetual succession.
• Any change in the partners of a limited liability partnership shall not affect the existence, rights, or liabilities of the limited liability partnership.

Question 10. List the circumstances under which a LLP formed under the LimitedLiability Partnership Act, 2008 may be wound up by a tribunal.
Answer:

1. A limited liability partnership may be wound up by the Tribunal, if:
2. The limited liability partnership decides that the limited liability partnership be wound up by the Tribunal;
3. If, for more than six months, the number of partners of the. limited liability partnership is reduced below two;
4. If the limited liability partnership is unable to pay its debts;
5. If the limited liability partnership has acted against the interests of the sovereignty and integrity of India, the security of the State or public order;
6. If the limited liability partnership has made a default in filing with the Registrar the Statement of Account and Solvency or annual return for any five consecutive financial years; or
7. If the Tribunal thinks that it is just and equitable that the limited liability partnership be wound up.

Question 11. A limited liability partnership wants to shift its registered office from Mumbai in the State of Maharashtra to Kolkata in the State of West Bengal. What procedure does the corporation have to follow under the Limited Liability Partnership Act, of 2008?
Answer:

According to Sec. 13 of the LLP Act Provides that a limited liability partnership may change the place of its registered office and file the notice of such change with the Registrar in form 15 within 30 days.

• The registered office can be changed from one place to another place in the manner provided in the Partnership Agreement, if the agreement is silent then the consent of all partners shall be needed to change the place of the registered office of the limited liability partnership to another place, where the change in place of the registered office is from one State to another State, the limited liability partnership having secured creditors shall also obtain the consent of such secured creditors.
• Where the change in place of the registered office is from one State to another State, a general notice, not less than 21 days before filing any notice with the Registrar, is needed- to be published in a daily newspaper published in English and in the principal language of the district in which the registered office of the limited liability partnership is situated and circulating in that district giving notice of change of registered office.
• Although, there is just a change in the jurisdiction of one Registrar to the jurisdiction of another Registrar; the limited liability Partnership shall file the notice in Form 15 with the Registrar from where the Limited liability partnership proposes to shift its registered office with a copy thereof for the information to the Registrar under whose Jurisdiction the registered office is proposed to be shifted.
• Failure to comply with the provision of this section the limited liability partnership and its every partner is liable to be punishable with a fine which shall not be less than two thousand rupees but which may extend to twenty-five thousand rupees.

Alternate Answer:

Change of LLP Office from one State to another (in the given problem, it is from Mumbai, Maharashtra to Kolkata, West Bengal)

1. Resolution for Change of Address: It should be done as per LLP Agreement. If where the Limited LLP doesn’t provide for any such procedure, consent of all partners shall be required for changing the place of the Registered Office of Limited LLP to another place.
2. Secured Creditors: Consent of Secured Creditors is required for such a change of address.
3. Form to be filed: Form-15 is to be filed with the Registrar from where (here it is Mumbai) the LLP proposes to shift its registered office with a copy thereof for the information to the Registrar under whose jurisdiction (Kolkata) the registered office is proposed to be shifted within 30 days of such change.
4. Public Notice: Publish a general notice, not less than 21 days before filing any notice with the Registrar, in a daily newspaper published in English and another regional language where the registered office of the LLP is situated (Mumbai, Maharashtra) and circulated in that district giving notice of change of registered office.
5. From when to be filed: Within 30 days of publishing of notice.
6. Penalty: Failure to comply with these provisions, the LLP and its every partner is liable to be punishable with a fine which shall not be less than two thousand rupees but which may extend to twenty-five thousand rupees

Question 12. Discuss the procedure of conversion from a private limited company into a limited liability partnership.
Answer:

The procedure of conversion from a private limited company into a Limited Liability Partnership is examined below:

Para 1 (b) of the third schedule defines the term ’convert’ about a private company converting into an LLP, as a transfer of the property, assets, interests rights privileges, liabilities, obligations, and the undertaking of the private company to the LLP by the third schedule.

A company may apply to convert itself into a LLP if and only if

• There is no security interest in its assets subsisting or in force at the time of application; and
• The partners of the LLP to which it converts comprise all the shareholders of the company and no one else.

Upon the conversion of a private company into an LLP, the company and its shareholders, the LLP, and the partners of the LLP shall be bound by the provisions of this schedule that apply to them.

The company has to apply with the Registrar by filing the different documents:

1. A statement by all its shareholders in Form No. 18 and fees containing the following particulars
   • The name and registration number of the company;
   • The date on which the company was incorporated; and
2. Incorporation document and statement; On the receipt of the above said documents, the Registrar shall register the documents subject to the provisions of the Act and the rules made there under. The Registrar may require the documents to be verified as he considers fit. The Registrar shall issue a certificate of registration in Form No. 19 as the Registrar may determine stating that the LLP is, on and from the date specified in the certificate.

• The LLP shall inform the concerned Registrar of Companies (ROC) within 15 days of the date of registration about the conversion and of the particulars of the LLP in the Form along with the fees.
• If the Registrar is not satisfied with the particulars or other information furnished the Registrar may refuse to register. Against this order, an appeal may be made before the Tribunal.

Factories Act 1948

Question 1. Objective and Scope of Factories Act, 1948
Answer:

• An Act to consolidate and amend the laws regulating labor and factories.
• Applies to the whole of India including Jammu and Kashmir.
• The objective of the Act is to ensure safety measures and promote the health and welfare of factory workers.

Question 2. What is Factory as per the Act [Factory includes any premises including the precincts thereof, whereon 10 or more workers are working for any of the days in the preceding 12 months to carry any manufacturing process with the aid of power OR 20 or more in case the manufacturing process is carried without power.
Answer:

• The factory includes all the length of the railway line, company is engaged in the construction of the railway line.
• Open land engaged in the conversion of seawater into crystals of salt will be regarded as a Factory.
• Seasonal factories like sugarcane etc. will continue to remain as factories during the off-season.
• Factory includes any premises including the precincts thereof, whereon 10 or more workers are working for any of the day in the preceding 12 months to carry any manufacturing process with the aid of power OR 20 or more in case the manufacturing process is carried without power.
• Excludes mines, units of armed forces, railway running sheds, hotels, restaurants, or eating places.
• Premises including precincts enlarge the scope.
• The factory includes all the length of the railway line, company is engaged in the construction of the railway line.
• Open land engaged in the conversion of seawater into crystals of salt will be regarded as a Factory.
• Seasonal factories like sugarcane etc. will continue to remain as factories during the off-season.

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Question 3. What is the manufacturing process as per Factories Act, 1948
Answer:

• The term manufacturing process means any process for
  • Making, altering, repairing, oiling, ornamenting, fishing, packing, washing, clearing, breaking, demolishing, or otherwise treating any article to use, for sale, disposal, or delivery;
  • Generating, transforming, and transmitting power
  • Pumping oil, water, or sewage
  • Printing, composing types for printing or bookbinding
  • Repairing, constructing, fishing, etc of vessels or ships
  • Preserving or storing in cold storage.
• of Factories Act, 1948 Factories Act, 1948 Includes the following:
  • Laundry
  • Carpet beating
  • The process involved in pumping water
  • Stitching bags
  • Conversion of latex into rubber
  • Conversion of seawater into salt
  • Tracing and adapting on raw film Packing and packaging into smaller units
  • Processes like moistening, stripping, breaking up, adaption, and packing of tobacco for use in the manufacture of cigarettes
• Factories Act, 1948 Excludes the following :
  • Transforming and transmitting electricity
  • Training Institute
  • Exhibition of film

Question 4. What is a worker as per the Factories Act, 1948
Answer:

As per Sec. 2(1) of the Factories Act, of 1948, the definition of a worker has the following ingredients:

• A person should be employed of the Factories Act, of 1948:
  • There should exist an employer-employee relationship Employer not just to control what work is to be done but also how the same shall be done.
  • The relationship between master and servant is not necessary.
  • Piece-rated workers who work regularly shall be treated as ‘workers’.
  • Partners or independent contractors cannot be regarded as workers.
• Employment to be direct or through some agency of the Factories Act, of 1948:
  • Employment should be directly by the management or the employment agency.
  • There should exist a privity of contract.

1. Employment should be in some manufacturing process of the Factories Act, of 1948:

• Includes in its purview people directly involved in the manufacturing process but also incidental to the manufacturing process.
• Includes:
  • People working in the canteen
  • Munim in a factory.

2. ployment may be for remuneration or not

• Includes
  • Apprentice
  • Honorary worker
  • A person employed an on-price work base persons employed for no wages.

Question 5.Enforcement of Factories Act, 1948
Answer:

• The State Government is responsible for the enforcement of the Act.
• State Government carries administration of the Act through:
  • Inspecting Staff
  • Certifying Surgeons
  • Welfare Officers
• Safety OfficeA welfare office er to be appointed wherein 500 or more workers are employed
• Safety officer to be appointed wherein 1000 or more workers are employed

Question 6. Occupier And his Role under the Factories Act, 1948
Answer:

• Occupier as per section 2(n) means a person who the ultimate control over the affairs of the factor occupiers of the factory needs to give a notice the to Chief Inspector:
  • 30 days before the date of resumption of seasonal factories
  • 15 days before the date of use of premises by the occupier
• When re new manager is appointed, the occupies er to intimate within:
  • 7 days of appointment
• Contents of Notice:
  • Name and address of factory
  • Name and address of occupier
  • Naandamd address of the owner
  • Name of manager
  • Address of communication
  • Number of Workers
  • Nature of manufacturing work
  • Total power installed
• Occupiers should ensure worker’s:
  • Health
  • Safety and
  • Welfare
  • He should make a written statement of the policy adopted concerning the aforesaid points (health, etc.) and even make the workers walk out the same.
• He shall provide:
  • Proper maintenance of the plant to ensure that they are| safe.
  • Safety arrangement of wire gardens to use, handling, and transportation of substances.
  • Training and supervision.
  • Safe access to all places of work in the factory.
  • Adequate facilities and arrangements for the welfare of the workers in the factory.

Question 7. Working hours as per Factories Act, 1948
Answer:

• Aduworkersker to work for 48 hours a week.
• Cannot be made to work for more than 9 hours a day.
• In case of work exceeding 9 hours, overtime at twice the normal rate needs to be given.
• Needs to be given at least half an hour’s break after continuous 5 hours of work.
• There shall be one holiday every week.
• No adult worker shall work for consecutively 10 days child who has not completed 14 years of age shall not be employed in the factory.
• Where a worker has worked for 240 days, adult workers shall be entitled to leave for 20 days.

Factories Act 1948 Short Note Question And Answers

Question  1. Write a short note on the following term Cleanliness of the factory in Factories Act, 1948
Answer:

• Section 11 of the Act provides every factory shall be kept clean and free from effluvia arising from any drain, pr, ivy, or other nuisance, and in particular
• removal of accumulated dirt and refuse on floors, benches of workroom, stair
  cases and passages and effective disposal of the same;
• cleaning of the floor of every workroom – every week by washing with disinfectant or by some other effective method;
• providing effective drainage for removing water to the extent possible;
• to ensure that interior walls and roofs etc. are kept clean the following is to be complied with-
  • whitewash color wash should be carried out at least once in every period of 14 months;
  • Whether the surface has been painted or varnished repaired or re-varnished should be carried out every five years, if washable then once every period of six months.
  • all doors, windows, and other frameworks that of wooden or metallic shall be kept painted or varnished at least once in every period of five years;
  • The dates on which such processes are carried out shall be entered in the prescribed register.

Question 2. Write a short note on the following term Manufacturing process under the Factories Act, of 1948.
Answer:

Manufacturing process under the Factories Act, 1948 “Manufacturing Process” means Process for:

• Making, altering, repairing, oiling, washing, cleaning, ornamenting, finishing, packing, breaking up, or otherwise treating or adapting any article or substance with a view to its use, sale transport, delivery or disposal, or
• Pumping oil, water, sew, age or any other substance or,
• Generating, transforming, or transmitting, power, or
• Composing types for printing the letterpress, lithography, photographing, or other similar process or book binding, or
• Constructing, reconstructing, repairing, refitting, or breaking up of ships or vessels; or
• Preserving or Storing any articles in cold storage

In this regard it becomes necessary to discuss some special circumstances that came up in some court cases:

1. Preparation of food with the aid of various electrical appliances in the kitchen of a hotel is a manufacturing process: As decided in the case of “Poona Industrial Hotel vs. I.C. Sarin, 1980, Lab I.C. 100.
2. Selliof petrol or diesel by a petrol dealer or repairing of the motor vehicle will not come within the term “manufacturing process”, as noted in the case of: “National Service Centre and Petrol Pump Vs. E.S.I Corporation, 1983 lab I.C. 412 (P. And H.).
3. The work of mere packing cannot be called a manufacturing process (ref. A.I.R. 1955 NUC 2710).
4. The business of sale of diesel oil, motor spirit, lubricant, servicing of cars and lorries, repairing vehicles,les and charging batteries with the aid of power, by employing more than workers/laborer sea the to manufacturing process, as noted in the case of “Baranagar Service Station Vs. E.S.I Corporation (1987) 1 L.L.N 912 (Cal.) (Divisional Bench). and Lab I.C. 302. ,
5. Decorticating groundnuts in electricity is a manufacturing process (A.I.R. 1959 Madras 30).
6. Breaking up of boulders is a manufacturing process – as decided the in case of “Larsen and Toubro V The state of Orissa, 1992 Lab I.C. 1513 (Orissa Divisional Bench).
7. Transportation of goods a on contract basis from one place to another by road with the assistance of transport carriers is not a manufacturing process decided in the case of Regional Director, E.S.I.C Vs. Jaihind Roadways, Bangalore (2001 ),1 L.L.J 1187 (Karnataka).
8. Reading the definition of ‘Manufacturing Process’ in the light of Supreme Court in “Workmen”, Delhi Electricity Supply Undertaking Vs. management”, (1974) 3 S.C.C. 108, the word ‘or’ in Section 2(k) (iii) must be read as ‘and’.

Question 3. Write short notes on the following terms Annual Leave under the Factories Act, 1948
Answer:

Annual leave of the Factories Act, of 1948:

Section 79 of The Factories Act, 1948 Provides that every worker who has worked for 240 days or more in a factory during a calendar year shall be allowed leave with wages for a number calculated at the rate of-

• if an adult, one day for every 20 days of work performed by him during the previous calendar year
• if a child, one day for every 15 days of work performed by him during the previous calendar year
• The following should be deemed to be days on which the worker has worked ‘c’ the purpose of computation of the period of 240 days or more any cases of layoff, by agreement or contract or as permissible under the standing orders in the case of a female worker, maternity leave for any number of days not exceeding 12 weeks and the leave earned before that in which the leave is enjoyed.
• But the above shall not be entitled for a worker to earn leave. The lead missible shall be exclusive of all holidays whether occurring during or at either end of the period of leave.
• In calculating the leave fraction of leave of half a day or more shall be treated as one full day’s leave the and fraction of less than half a day shall be omitted.

Question 4. Write short notes on Hazardous Process
Answer:

Hazardous Process of the Factories Act, of 1948

Section 2(CB) of the Factories Act, 1948 defines the expression ‘hazardous process’ as any process or active about to an industry specified in the First Schedule where, unless special care is taken, raw materials used therefor the intermediate or finished products, bye products, wastes, or effluents thereof would

• Cause material impairment to the health of the persons engaged in or connected therewith, or
• Result in the pollution of the general environment.
• The State Government may, by notification in the Official Gazette, amend the First Schedule by way of addition, omission, ion, or variation of any industry, specified in the said Schedule.

Factories Act 1948 Descriptive Question And Answers

Question 1. Comment on the following based on legal provisions Any child can be employed in a factory.
Answer:

As per The Factories Acof t, 1948, Children below 14 years are not allowed to work in the factory. Child means a child who has not completed the age of 15 years. After attaining the age of 14, he or she can work in the factory provided he or she has a certificate of fitness given by a competent authority.

Question 2. “Young person” means a person who has completed 18 years of age (Factories Act, 1948). Do you agree? (2 marks)
Answer:

• The statement is not correct. A young person is a person who is either a child or an adolescent. [Sec 2(d), The Factories Act, 1948]
• A child means a person who has not completed his 15th year of age. [Sec 2(c), The Factories Act, 1948]
• An adolescent is a person who has completed his 15th year of age but has not completed his 18th year. [Sec 2(b), The Factories Act, 1948]

Question 3. Are there any provisions in the Factories Act for the protection of the eyes of Workmen?

1. Who is ‘Occupier’ (Factories Act)
2. State the Duty of the Occupier when a new manager is appointed in the factory.

Answer:

Yes, the State Govt, by rules requires that effective screens or suitable goggles shall be provided for the protection of the eyes of persons employed in or near the manufacturing process which involves:

1. Risk of injury to the eyes from particles, or fragments thrown off in the course of the process or
2. Risk to the eyes because of exposure to excessive light.

• Occupier has been defined in the Factories Act in Section 2(n) as the person who has ultimate control over the affairs of the factory. It is also stated further that in the case of a firm or other association of individuals, any one of the partners or members thereof shall be deemed to be the ‘occupier’.
  • Section 2 of the Factories Act, of 1948 further states that in the case of a company, any of the directors shall be deemed to be the ‘occupier’. The Supreme Court resolved in Industries vs Chief Inspector of Factories in 1997 that only a member othe f the Board of Directors of the company can ban an ‘occupier’ of the factory of the company.
  • The ultimate control of the factory vests with the BOD of the company and not on anyone else.
  • Any company which owns a factory cannot nominate its employee or its officer except the director of the company as the occupier of its factory.
• When the new manager is appointed, the occupier must inform the inspector and chief inspector in writing regarding the appointment within seven days of the appointment.

Question 4. Comment on the following based on legal provisions: (e) Factories Act, 19 applies to all the factories wherein 50 or more workers are working.
Answer:

Factories Act, 19 appliesble to the factory which is defined as Factry: means any premises including its precincts (means zone, sector, ground, division, area. Precinct means any area enclosed by a wall.) where

• Ten or more workers are working or were working on any day of the preceding twelve months, in a manufacturing process which is carried on with the help of power Or
• Twenty or more workers are working or were working on any day of the preceding twelve months, in a manufacturing process that is carried on without the help of power.

Question 5. As per the r Factories Act, adequate shelters, restrooms, MS, and lunch rooms are mandatory in all the factories. Do you agree? Give the e correct answer. 
Answer:

The occupier is required to provide suitable shelters or rest rooms and suitable lunch rooms with the provision of drinking water, in his factory if more than one hundred and fifty workers are ordinarily employed in it.

Question 6. Is a laundry attached to the hospital (main Institution) used for washing linen used in the hospital is factory within the meaning of the Factories Act, of 1948? 
Answer:

• When the hospital is not a factory, any department in another hospital cannot be treated as s factory.
• In Dr. PSS Sundar Rao, GS v Inspector of Factories Vellore 1984 LLJ 237 Mad, the question was whether a laundry attached to the Christian Medical College and Hospital, Vellore is a Factory within the meaning of this Act.
• The Madras High Court held that the laundry run by the hospital cannot be separated from the main institution to ensure e high degree of hygiene standards for the Hospitahasng in the laundry for washing the linen in the hospital.
• Therefore, laundry is only a subsidiary, min, or incidental establishment of the hospital which is not a factory.
• One department of the Hospital established for the efficient functioning of the Hospital cannot be therefore disjoined from the main Institution and termee a factory.
• The paramount or the primary character of the main Institution alone has to be taken into consideration and when the main Institution is not a factory; a department thereof cannot become so, even though a manufacturing process is carried on there.

Question 7. Explain the right of workers to warn about imminent danger under the Factories Act, of 1948.
Answer:

As per Section 41H of the Factories Act, of 1948, it is the right of workers to warn about imminent danger

• Where the workers employed in any factory engaged in a hazardous process have e reasonable apprehension that there is a likelihood of imminent danger to their lives or health due to any accident, they may bring the same to the notice of the occupier, agent, manager or any other person who is in charge of the factory or the process concerned directly or through their representatives in the safety committee and simultaneously bring the same to the notice of the Inspector.
• It shall be the duty of such occupier, agent, manager, er, or the person in charge of the factory or process to take immediate remedial action if he is satisfied with the existence of such imminent danger and send a report forthwith the action taken to the nearest Inspector.
• If the occupier, agent manager, or the person in charge referred to in the sub-section is not satisfied without the existence of any imminent danger as apprehended by the workers, he shall, nevertheless, refer the matter forthwith to the nearest Inspector whose decision on the question of the existence of such imminent danger shall be final.

Question 8. Employees of an electricity generation station claimed that their unit is covered under the definition of ‘factory’ considering the process of transforming and transmission of electricity generated at the power station as a ‘manufacturing process’. Will their claim succeed and the er Factories Acof t, 1948.
Answer:

As per Section 2(k) of the Factories Act of , 1948the , manufacturing process means any process for:

1. Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or
2. Pumping oil, water, sewa, get, or any other substance: or;
3. Generating, transforming, or transmitting power; or
4. Composing types for printing, printing by letter press, lithography, photogravure,ure or other similar processes or book binding;
5. Constructing, reconstructing, repairing, refitting, finishing, or breaking up ships or vessels;
6. Preserving or storing any article in cold storage

The process undertaken at the electricity generating station, Sub-station is transferring and transmitting electricity is not a manufacturing process and is not thus factory- [Delhi Electricity Supply Undertaking vs Management of DESU, AIR(1973)SCC 365].

Question 9. What are the responsibilities of an occupier in a factory?
Answer:

Responsibility of the occupier

The occupier has to follow the procedure:

• to lay down a detailed law concerning the health and safety of the workers;
• disclose all the information regarding dangers including health hazards and the measures to overcome such hazards arising from the exposure to or handling of the materials or substances in the manufacture, transportation, storing, get, and other processes to the workers employed in the factory;
• To draw up an onsite emergency plan and detailed disaster control measures for the factory and make known to the workers and the general public living in the vicinity of the factory, the safety measures required to be taken in the event of an accident taking place.
• To lay down measures for the handling usage, transportation, and storage of hazardous substances inside the factory premises and the disposal of such substances outside the factory premises and publicize them in the manner prescribed among the workers and the general public living in the vicinity.

Section 41C provides that the occupihasing specific responsibility for hazardous processes. He has to maintain the health records of the employees. He is to appoint experienced persons who possess specified qualifications in handling hazardous substances and are competent to supervise such handling within the factory.

Question 10. Critically examine the duties of certified surgeons under the Factories Act, of 1948.
Answer:

Section 10 under the Factories Act, of 1948 provides that the State Government may appoint qualified medical practitioners to be certifying surgeons for this Act within such local limits or for such factory or class or description of factories as it may assign to them respectively.

The duties of certified surgeons are as follows-.

• the examination and certification of young persons;
• the examination of a person engaged in factories in such dangerous occupations or processes as may be prescribed;
• the exercising of such medical supervision as may be prescribed for any factory or class or description of factories, where
• cases of illness have occurred which it is reasonable to believe are due to the nature of the manufacturing process carried on, or other conditions of work prevailing, therein;
• because of any change in the manufacturing process carried on or in the substances used therein or because of the adoption of any new manufacturing process or any new substance for use in a manufacturing process, there is a likelihood of injury to the health of workers employed in that manufacturing process;
• Young persons are, or are about to be, employed in any work which is likely to cause injury to their health.

Question 11. Discuss the welfare measures to be taken in a factory for the workmen employed therein as per the Factories Act, of 1948.
Answer:

The following are the welfare measures prescribed in the Factories Acof t, 1948 to be provided by the factory to their workmen:

Question 12. Discuss the different powers that can be exercised by an inspector under the Factories Act
Answer:

Section 8 of the Factories Act, 1948 provides that the government may appoint a person possessing the prescribed qualifications to be inspector of this Act and may also assign local limits as may be thought fit by the said government.

As per Section 9 of the Factories Act, 1948 the following powers can be exercised by the inspector:

1. He may enter any pathetic is used, or which has reason to believe is used as a factory,
2. He can examine the premises, plant, machinery, article or substance,
3. He may inquire into any accident or dangerous occurrence whether resulting in bodily injury, or disability, or not take on the spot statements of any person which he may consider necessary for such inquiry,
4. He can require the production of any document relating to the factory,
5. He may seize or take copies of any register, record, or other documents of any portion thereof as he may consider necessary,
6. He can take possession of any article or substance or part thereof and detain it for so long as is necessary for such examination
7. He can exercise any such other powers as may be prescribed

Factories Act 1948 Practicalcal Questions and Answers

Question 1. ABC Ltd. carried ng manufacturing activities with the aid of power and with eight workers for the last two years ending on 31.03.2014. Three more workers were appointed on 01.04.2014, two workmen left the company on 30.04.2014. Thereafter no workman was employed nor any workmen left. Mr. Basant, one of the workmen demanded that the Factories Act, of 1948 apply to this company but the management denied it. Give your opinion.
Answer:

According to Sec. 2 (m) of the Factories Act, 1948, ‘factory’ means any premises including the precincts thereof:

Wherein 10 or more workers are working or were working on any day of the preceding 12 months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or

Wherein 20 or more workers are working or were working on any day of the preceding 12 months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on.

In the given case, during the period 01.04.2014 to 30.04.2014, there were 11 workers carrying ng manufacturing activities with the aid of power. So, the Factories Act, of 1948 applies to ABC Ltd. Mr. Basant is correct.

Payment Of Gratuity 1972

Question 1. Objective and Scope of Gratuity Act, 1972
Answer:

• An act to provide for payment of gratuity to employees engaged in certain establishments.
• Applies to the whole of India including Jammu and Kashmir.
• The objective of the act is to provide an old-age retirement social security ‘ benefit to an employee at the time of termination of services, a lump sum payment/amount.
• Amended by Gratuity (Amendment Act), 2018.
• The ceiling of gratuity has been enhanced from $ 10 lakhs to $ 20 lakhs.

Question 2. Applicability of the Act
Answer:

• National Pension System
• National Pension System Trust
• Pension Fund.
• Point of presence
• Document
• Individual pension Account
• Intermediary

Question 3. Employee for the Act
Answer:

The person employed for wages.

Excludes: Apprentice Teachers are to be considered employees.

Read and Learn More CMA Laws and Ethics Paper

Question 4. Payment of Gratuity.
Answer:

• Gratuity is payable on termination of employment provided he/she has rendered continuous service for a minimum of 5 years
• Gratuity is calculated based on continuous service( for every completed year or part above 6 months), at the rate of 15 days wages last drawn
• Gratuity Payable = Wages x Completed years of service x 15/26

Question 5. Gratuity is payable on
Answer:

• Retirement or resignation
• Death or disability
• Superannuation

Question 6. Forfeiture of Gratuity
Answer:

• Gratuity forfeited on account of such act, omission, or negligence which causes loss, damage, or destruction is termed as partial forfeiture o gratuity since the same can be carried out only to the extent of loss damage, or destruction so caused.
• As against this, in case the services of an employee get terminated due to violence or riotous act or committing an offense involving moral turpitude concerning his employment, the same can lead to forfeiture of the whole or part of the gratuity.
• If the services of an employee are terminated due to willful omission c negligence which causes damage to the property of an employee gratuity can be forfeited to the extent of damage or loss caused. The whole amount cannot be forfeited for the wilful omission by the employee.

Question 7. Rights and Obligations of the Employer
Answer:

• As soon as the Gratuity becomes payable the employer shall determine the amount of gratuity and shall give the notice to the person to whom the gratuity is payable and to the controlling authority.
• The employer shall arrange to pay the amount of gratuity within 30 days of the date of its becoming payable to the person to whom it is payable
• If such amount is not payable within due time, the employer shall pay from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at the rate of 10% per annum.

Payment of Gratuity 1972 Short Note Question And Answers

Question 1. Write a short note on the Protection of Gratuity;
Answer:

No gratuity payable under the Payment of Gratuity Act, 1972, and no gratuity payable to an employee employed in any establishment, factory, mine, oil field, plantation, port, Railway company, or shop exempted u/s 5 shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court. [Sec. 13, The Payment of Gratuity Act, 1972]

Question 2. Write a short note on the Forfeiture of Gratuity.
Answer:

Forfeiture of Gratuity :

Gratuity can be forfeited for any employee whose services have been terminated for any act of violence, wilful omission, or negligence causing damage or destruction to the property belonging to the employer.

• It can also be forfeited for any act which constitutes an offense involving moral turpitude.
• Where services have not been terminated on any of the above grounds, the employer cannot withhold gratuity due to the employee.
• Where the land of the employer is not vacated by the employee, gratuity cannot be withheld.

Payment of Gratuity 1972 Descriptive Question And Answers

Question 1. State the nature of the dispute as to gratuity that may be decided by the Controlling Authority.
Answer:

The Controlling Authority may decide the following disputes:

• Dispute as to the amount of gratuity payable to an employee under the Payment of Gratuity Act.
• Dispute as to the admissibility of any claim of, or about an employer for payment of gratuity.
• Dispute as to the person entitled to receive gratuity [Sec. 7(4)(a)].

Question 2. Under what circumstances the gratuity payable to an employee be forfeited?
Answer:

Forfeiture of Gratuity:

The legal provisions relating to the forfeiture of gratuity are contained In Section 4 (6) of the Payment of Gratuity Act, 1972, and may be summed up as under:

1. The gratuity payable to an employee shall be forfeited where the services of an employee have been terminated due to any act, willful omission or negligence on the part of the employee and the employee’s such act, etc. has caused:

1. damage or loss to the property belonging to the employer, or
2. destruction of the property belonging to the employer.

In this case, the gratuity payable to the employee shall be forfeited to the extent of the damage or loss caused to the employer’s property due to the employee’s act, omission, or negligence [Section 4(6)(a)]

2. The gratuity payable to an employee may be forfeited:

1. If the services of such an employee have been terminated for his riotous or disorderly conduct or any other Act of violence on his part, or
2. If the services of such employee have been terminated for any Act which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of his employment.

In the above-stated cases, the gratuity payable to an employee may be forfeited wholly or partially. [Section 4(6)(b)]

The following judicial decisions are important to note in connection with the forfeiture of gratuity by the employer:

• The right of the employer to forfeit the amount of gratuity of an employee whose services were terminated due to any Act, willful omission, or negligence causing any damage to the employer’s property is limited to the extent of damage and the proof of such damage. [Permali Wallance Ltd. Vs. State of Nl.P. (1996) ULLJ 515 (MP)].
• The right of the employer to forfeit the gratuity is available only in the circumstances enumerated in Section 4(6), as stated in points (1) and (2)above, and is not available in any other circumstances as the employee’s right to gratuity is the statutory right. [K.C.Mathew Vs. Plantation Corpn. of Kerala Ltd. (2001) LLR 123 (ker.)].
• The refusal by the employees to surrender land belonging to the employer is not a ground for forfeiture of gratuity. [Travancore Plywood Industries Ltd. Vs. Regional Joint Labour Commissioner, (1996) IILLJ 85 (ker.)].
• in case of termination of services on account of. offence involving moral turpitude the gratuity may be wholly or partially forfeited. In this regard, the Karnataka High Court has held that when an offense of theft under the law involves moral turpitude, gratuity stands wholly forfeited given Section 4 (6) of the Act. [Bharat Gas Mines Ltd. Vs. Regional Labour Commissioner. (Central) (1987) 70 FJR 11 (Karnataka)].

Question 3. Explain how the gratuity payable to employees in a seasonal establishment is calculated under the Payment of Gratuity Act, 1972. The state also the maximum amount of gratuity payable under the Act.
Answer:

Seasonal Establishments:

In the case of seasonal establishment, the employees can be classified into 2 groups.

1. Those who work throughout the year and
2. Those who work only during the season.

The former is entitled to get the gratuity at the rate of 15 days’ wages for every completed year of service or part thereof more than 6 months. The latter are entitled to receive gratuity at the rate of 7 days for each season. Section 4(3) provides that the amount of gratuity payable to an employee shall not exceed? 20 lakhs.

Question 4. Discuss the procedure for determination of the amount of gratuity as per Section 7 of the Payment of Gratuity Act, 1972.
Answer:

Section 7 prescribes the procedure for the determination of the amount of gratuity. As soon as the gratuity becomes payable, the employer shall, whether the employee has made an application or not, determine the amount of gratuity. Then he is to give notice to the person to whom the gratuity is payable and also to the Controlling Authority, specifying the amount of gratuity so determined. The notice shall be in Form L.

• The employer shall arrange to pay the amount of gratuity within 30 days from the date of its becoming payable to the person to whom it is payable. If it is not paid within the stipulated period the employer is liable to pay interest at the rate of 10% per annum. If the delay in payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment, on this ground, no interest is payable.
• If the claim for gratuity is not found admissible, issue a notice in Form ‘M’ to the applicant employee, nominee, or legal heir, as the case may be, specifying the reasons why the claim for gratuity is not considered admissible. In either case, a copy of the notice shall be endorsed to the controlling authority.

Question 5. Mr. Gill, an employee of M/s Sonabheel Tea Ltd., continued to occupy the quarter of the company for eight months after superannuation, the company decided to forfeit the amount of gratuity Mr. Gill. Examine the decision taken by the company to forfeit the amount of gratuity in the light of the Payment of Gratuity Act, 1972.
Answer:

The gratuity of an employee, whose services have been terminated for any Act, willful omission, or negligence causing any damage or loss to, or destruction of, property belonging to the employer, can be forfeited to the extent of the damage or loss so caused.

The gratuity payable to an employee may be wholly or partially forfeited:

1. if the services of such employee have been terminated for his riotous or disorderly conduct or any other Act of violence on his part or
2. if the services of such employee have been terminated for any Act which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of his employment.

It is not a valid ground forfeiture of the entire gratuity. In the above case, the company is entitled to charge the quarter rent as per rules and after adjustment of such charges, Mr. Gill is entitled to receive the balance gratuity.

Question 6. Discuss the procedure for determination of the amount of gratuity.
Answer:

Amount of Gratuity:

Section 7 of the Payment of Gratuity Act, 1972 provides the procedure for the determination of the amount of gratuity. As soon as the gratuity becomes payable the employer shall whether the employee has made an application or not, determine the amount of gratuity.

• Then he is to give notice to the person to whom the gratuity is payable and also to the controlling authority) specifying the amount of gratuity so determined.
• The employer shall arrange to pay the amount of gratuity within 30 days from the date of its becoming payable to the person to whom it is payable. If it is not paid within the stipulated period the employer is liable to pay interest at the rate of 10 % per annum.
• If the delay in payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment, on this ground, no interest is payable.
• If the claim for gratuity is not found admissible, issue a notice in Form ‘M’ to the applicant employee, nominee, or legal heir, as the case may be, specifying the reasons why the claim for gratuity is r.ot considered admissible. In either case, a copy of the notice shall be endorsed to the controlling authority.

Payment of Gratuity 1972 Practical Question And Answers

Question 1. Comment on the following based on legal provisions Mr. S.K. Paul employed in seasonal establishment and was not employed throughout the year claimed gratuity at the rate of 15 days wages for each year of service. But Employer refused to pay any Gratuity to employees of seasonal establishments.
Answer:

Employer shall pay gratuity at the rate of seven days wages for each season to employees who are employed in a seasonal establishment and who are not so employed throughout the year. Wages will include Basic and D.A. Hence Mr. Paul is entitled to Gratuity.

Question 2. ABC Pvt. Ltd. was incorporated on 2nd January 1980 carrying on business from the date of incorporation employing 50 persons. Due to loss, the number of employees reduced to five w.e.f. 02.06.2011. Mr. ‘A’ who retired on 31.05.2013 was refused gratuity on the ground that the total number of employees is below 10 (ten). The employer was justified?
Answer:

• The Payment of Gratuity Act, of 1972 was enacted to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops, or other establishments who have rendered a minimum of five years of continuous service with the establishment employing ten or more persons.
• Every employee, other than apprentice irrespective of his wages is entitled to receive gratuity after he has rendered continuous service for five years or more. Gratuity is payable at the time of termination of his service either

1. 1. on superannuation
   2. retirement or resignation or
   3. death or disablement due to accident or disease. Termination of services includes retrenchment.

• However, the condition of five years of continuous service is not necessary if services are terminated due to death or disablement. In case of death of the employee, the gratuity payable to him is to be paid to his nominee, and if no nomination has been made, then to his heirs.
• If the Act has become applicable to any establishment, it will continue to be applicable even if the number of persons employed falls below ten or any number as specified by the Central Government.
• All the employees irrespective of salary or status are entitled to the payment of gratuity on completion of 5 years of service, in case of death or disablement there is no minimum eligibility period.

In light of the above the employer is not justified in refusing gratuity to A.

Question 3. Anurag was an employee of Coffee Estate Ltd. The whole undertaking of Coffee Estate Ltd. was taken over by a new company Asian Coffee Ltd. The Service of Anurag remained continuous in the new company. After serving for one year, Anurag met with an accident and became permanently disabled. Anurag applied to the new company for the payment of gratuity. The company Asian Estate Ltd. refused to pay gratuity because Anurag has served only for a year in the company. Examine the validity of the refusal of the company in the light of the provisions of the Payment of Gratuity Act, 1972.
Answer:

According to Section 4(1) of the Payment of Gratuity Act,1972, gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years or on his superannuation or, on his retirement or resignation or his death or disablement due to accident or disease.

• The condition of the completion of five years of continuous service is not essential in case of the termination of the employment of any employee due to death or disablement for this section.
• Disablement means such disablement as incapacities of an employee for the work that he was capable of performing before the accident or disease resulting in such disablement.
• The given problem fulfills all the above requirements as stated.
• Therefore, Anurag is entitled to recover gratuity after becoming permanently disabled, and continuous service of five years is not required in this case.
• Hence, the company cannot refuse to pay gratuity on the ground that he has served only for a year.

Question 4. Mr. Mahavir joined the company on 25.05.1987 and retired on 30.11.2012 when his salary was INR 70,000 per month. He also received a conveyance allowance of INR 20,000 per month and an average overtime of INR 1,000 per month, calculated as the amount of gratuity.
Answer:

He superannuated on 30.11.2012

Joined on 25.05.1987

He is entitled to 25 years 6 months + 5 = 26 years

Amount of gratuity =

⇒ \(\frac{15 \times 26 \times 70,000}{26}\)

= INR 10,50,000

The maximum ceiling is INR 20,00,000

His gratuity is INR 10,50,000

Question 5. Ram is employed in Sweet Sugar factory, a seasonal establishment. The factory was in operation for four months only during the financial years 2011-12. Ram was not in continuous service during this period. However, he has worked only 60 days. Referring to the provisions of The Payment of Gratuity Act, 1972, decide whether Ram is entitled to gratuity payable under the Act. Would your answer be the same in case Ram works for 100 days?
Answer:

For entitlement of gratuity, one must work for at least 75% of the days on which the establishment was open and in operation. The factory was in operation for 120 days.

• One must work for 75% of 120 therefore 90 days to claim gratuity. Ram is not entitled to gratuity, since he has worked for less than 75% of the number of days on which the establishment was in operation during such period.
• If Ram had worked for 100 days, then he would have been entitled to gratuity since the number of days on which he would have worked, in that case, would have been 75% or more of the number of days on which the establishment was in operation.

6. Ajit an employee of Supertech Copper Ltd., continued to occupy the quarter of the company for eight months after superannuation, the company decided to forfeit the amount of gratuity of Ajit. Examine the decision taken by the company to forfeit the amount of gratuity in the light of the Payment of Gratuity Act, 1972.
Answer:

The gratuity of an employee, whose services have been terminated for any act, willful omission, or negligence causing any damage or loss to, or destruction of, property belonging to the employer, can be forfeited to the extent of the damage or loss so caused.

The gratuity payable to an employee may be wholly or partially forfeited:

• If the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part or
• If the services of such an employee have been terminated for any act. which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of his employment.
• It is not a valid ground for the forfeiture of the entire gratuity. In such a case, the company is entitled to charge the quarter rent as per rules and after adjustment of such charges, Ajit is entitled to receive the balance gratuity

Question 7. Deepak is employed in Assam Coffee Estate Ltd., a seasonal establishment. The factory was in operation for four months only during the financial year 2018-19. Deepak was not in continuous service during this period. However, he has worked only 60 days. Referring to the provisions of The Payment of Gratuity Act, 1972, decide whether Deepak is entitled to gratuity payable under the Act. Would your answer be the same in case Deepak works for 100 days? (5 marks)
Answer:

For entitlement of gratuity, one must work for at least 75% of the days on which the establishment was open and in operation. The factory was in operation for 120 days.

One must work for 75% of 120 – 90 days to claim gratuity. Deepak is not entitled to gratuity, since he has worked for less than 75% of the number of days on which the establishment was in operation during such period.

If Deepak had worked for 100 days, then he would have been entitled to gratuity since the number of days on which he would have worked, in that case, would have been 75% or more of the number of days on which the establishment was in operation.

Question 8. M/s TNT Pvt. Ltd. was incorporated on 2nd March 2009 carrying on business from the date of incorporation employing 70 persons. It’s one of the most renowned companies in the country.

There have been certain turn of events recently and the company has started to face challenges since mid of the year of 2020 due to the COVID-19 pandemic. Like most parts of the world this company was also badly hit by this pandemic, A larger number of companies in India were affected directly or indirectly by this pandemic and complete lockdown. Due to this pandemic and losses, the number of employees reduced to 7 w.e.f. 15-07-2020 by Ms. TNT Pvt. Ltd. Mr. Jain who retired on 30-12-2020 was refused gratuity on the ground that the total number of employees is below 10. Another senior employee of the company Mr. T. K. Singhania retired on 31-12-2020. Mr. Singhania continued to occupy the quarter of the company for eight months after superannuation and as a result, the company decided to forfeit the amount of gratuity of Mr. Singhania. Mr. Arun Bharat an employee of the company was frustrated with his work and willfully caused damage to a machine. M/s TNT Pvt Ltd. had to spend? 95000 to get the machine in working condition and due to this damage Ms. TNT Pvt. Ltd. withholds the gratuity of Mr. Arun Bharat. On the other hand, one employee Mr. Jain retired on 30-11-20 was refused gratuity on the ground that the total number of employees is below ten. Ms TNT Pvt. Ltd. has a separate factory which is a seasonal establishment. Mr. Barun Bharat brother of Mr. Arun Bharat is employed in this factory. The factory was in operation for four months only during the financial year: 2020-21 due to the COVID-19 pandemic. Mr. Barun Bharat was not in continuous service during this period and he has worked only 60 days.

Examine the validity of the decision taken by Ms. TNT Pvt. Ltd. to forfeit the amount of gratuity of Mr. Singhania in the light of the Payment of. Gratuity Act, 1972.
Answer:

1. The gratuity of an employee, whose services have been terminated for any act, willful omission, or negligence causing any damage or loss to, or destruction of, property belonging to the employer, can be forfeited to the extent of the damage or loss so caused.
2. The gratuity payable to an employee may be wholly or partially forfeited:

• 1. If the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part or.
  2. If the services of such employee have been terminated for any act which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of his employment.

Hence, it is not a valid ground for the forfeiture of the entire gratuity. In such case, the company is entitled to charge the quarter rent as per rules, and after adjustment of such charges, (Mr. Singhania is entitled to receive the balance amount of gratuity).

Question 9. M/s TNT Pvt. Ltd. was incorporated on 2nd March 2009 carrying on business from the date of incorporation employing 70 persons. It’s one of the most renowned companies in the country. There have been certain turn of events recently and the company has started to face challenges since mid of the year of 2020 due to the COVID-19 pandemic. Like most parts of the world, this company was also badly hit by this pandemic. A larger number of companies in India were affected directly or indirectly by this pandemic and complete lockdown. Due to this pandemic and losses, the number of employees reduced to 7 w.e.f. 15-07-2020 by Ms. TNT Pvt. Ltd. Mr. Jain who retired on 30-12-2020 was refused gratuity on the ground that the total number of employees is below 10. Another senior employee of the company Mr.T.K.Singhania retired on 31-12-2020. Mr. Singhania continued to occupy the quarter of the company for eight months after superannuation and as a result, the company decided to forfeit the amount of gratuity of Mr. Singhania. Mr. Arun Bharat an employee of the company was frustrated with his work and willfully caused damage to a machine. Ms TNT Pvt Ltd. had to spend? 95000 to get the machine in working condition and due to this damage Ms. TNT Pvt. Ltd. withheld the gratuity of Mr. Arun Bharat. On the other hand, one employee Mr. Jain retired on 30-11 -20 was refused gratuity on the ground that the total number of employees was below ten. Ms TNT Pvt. Ltd. has a separate factory which is a seasonal establishment. Mr. Barun Bharat brother of Mr. Arun Bharat is employed in this factory. The factory was in operation for four months only during the financial year: 2020-21 due to the COVID-19 pandemic. Mr, Barun Bharat has not been in continuous service during this period and he has worked only 60 days. Examine the validity of the decision taken by Ms. TNT Pvt. Ltd. to withhold the amount of gratuity of Mr. Arun Bharat in light of the Payment of Gratuity Act,1972.
Answer:

The Employer cannot withhold or forfeit the gratuity of Mr. Arun Bharat since his services were not terminated for the damages caused by the worker as per the Payment of Gratuity Act, 1972.

Question 10. M/s TNT Pvt. Ltd. was incorporated on 2nd March 2009 carrying on business from the date of incorporation employing 70 persons. It’s one of the most renowned companies in the country.

There have been certain turn of events recently and the company has started to face challenges since mid of the year of 2020 due to the COVID-19 pandemic. Like most parts of the world, this. the company was also badly hit by this pandemic. A larger number of companies in India were affected directly or indirectly by this pandemic and complete lockdown. Due to this pandemic and losses, the number of employees reduced to 7 w.e.f. 15-07-2020 by Ms. TNT Pvt. Ltd. Mr. Jain who retired on 30-12-2020 was refused gratuity on the ground that the total number of employees is below 10. Another senior employee of the company Mr. T. K. Singhania retired on 31-12-2020. Mr. Singhania continued to occupy the quarter of the company for eight months after superannuation and as a result, the company decided to forfeit the amount of gratuity of Mr. Singhania. Mr. Arun Bharat an employee of the company was frustrated with his work and willfully caused damage to a machine. Ms TNT Pvt Ltd. had to spend? 95000 to get the machine in working condition and due to this damages M/s TNT Pvt. Ltd. Withheld the gratuity of Mr. Arun Bharat. On the other hand, one employee Mr. Jain retired on 30-11-20 was refused gratuity on the ground that the total number of employees is below ten. Ms TNT Pvt. Ltd. has a separate factory which is a seasonal establishment. Mr. Barun Bharat brother of Mr. Arun Bharat is employed in this factory. The factory was in operation for four months only during the financial year: 2020-21 due to the COVID-19 pandemic. Mr. Barun Bharat was not in continuous service during this period and he has worked only 60 days. From the above decide whether Mr. Barun Bharat is entitled to claim gratuity under the provisions of the Payment of Gratuity Act,1972
Answer:

• In the above case: For entitlement of gratuity one must work for at least 75% of the days on which the establishment was open and in operation. The factory was in operation for 120 days.
• One must work for 75% of 120 – 90 days to claim gratuity.
• Mr. Barun Bharat is not entitled to gratuity, since he has worked for less than 75% of the number of days on which the establishment was in operation during such period.

Question 11. M/s TNT Pvt. Ltd. was incorporated on 2nd March, 2009 carrying on business from the date of incorporation employing 70 persons. It’s one of the most renowned companies in the country.

There have been certain turn of events recently and the company has started to face challenges since mid of the year of 2020 due to the COVID-19 pandemic. Like most parts of the world, this company was also badly hit by this pandemic. A larger number of companies in India were affected directly or indirectly by this pandemic and complete lockdown. Due to this pandemic and losses, the number of employees reduced to 7 w.e.f. 15-07-2020 by Ms. TNT Pvt. Ltd. Mr. Jain who retired on 30-12-2020 was refused gratuity on the ground that the total number of employees is below 10. Another senior employee of the company Mr. T. K. Singhania retired on 31-12-2020. Mr. Singhania, continued to occupy the quarter of the company for eight months after superannuation and as a result, the company decided to forfeit the amount of gratuity of Mr. Singhania. Mr. Arun Bharat an employee of the company was frustrated with his work and willfully caused damage to a machine. Ms TNT Pvt Ltd. had to spend? 95000 to get the machine in working condition and due to this damage Ms. TNT Pvt. Ltd. withheld the gratuity of Mr. Arun Bharat. On the other hand, one employee Mr. Jain retired on 30-11-20 was refused gratuity on the ground that the total number of employees is below ten. Ms TNT Pvt. Ltd. has a separate factory which is a seasonal establishment. Mr. Barun Bharat brother of Mr. Arun Bharat is employed in this factory. The factory was in operation for four months only during the financial year: 2020-21 due to the COVID-19 pandemic. Mr. Barun Bharat was not in continuous service during this period and he has worked only 60 days. Examine the validity of the decision taken by Ms. TNT Pvt. Ltd. for Mr. Jain to refuse to pay the gratuity since the number of employees was reduced to seven w.e.f. 15-07-20 under the provisions of the Payment of Gratuity Act, 1972.
Answer:

Payment of Gratuity Act states that a shop or establishment to which this Act has become applicable shall continue to be governed by this Act despite persons employed therein at any time it has become so applicable falls below ten. Therefore TNT Pvt. Ltd. cannot refuse payment of gratuity to Mr. Jain.

Employees State Insurance Act 1948

Question 1. Objective and Scope of Employees’ State Insurance Act
Answer:

• An act to provide benefits to employees of the organized sector.
• This applies to the whole of India including Jammu and Kashmir.
• The objective of the act is to protect the interest of workers in contingencies such as sickness, disability, maternity, or death due to employment injury.
• Amended in 2010 by the ESI (Amendment) Act, 2010 to increase the purview of the Act.
• Applies to employees receiving wages monthly up to 21,000 per month.

Question 2.Dependent in Employees’ State Insurance Act
Answer:

“Dependant” means any of the following relatives of a deceased insured person, namely

• a widow, a legitimate or adopted son who has not attained the age of twenty-five years, or an unmarried legitimate or adopted daughter.
  [(a) a widowed mother].
• if wholly dependent on the earnings of the insured person at the time of his death, a legitimate or adopted son or daughter who has attained the age of twenty-five years and is infirm;
• if wholly or in part dependent on the earnings of the insured person at the time of his death
  1. parent other than a widowed mother,
  2. a minor illegitimate son, an unmarried illegitimate daughter, or a daughter legitimate or adopted or illegitimate if married and a minor or if widowed and a minor,
  3. A minor brother an unmarried sister or a widowed sister if a minor,
  4. A widowed daughter-in-law,
  5. A minor child of a pre-deceased son,
  6. A minor child of a pre-deceased daughter where no parent of the child is alive, or
  7. A paternal grand-parent if no parent of the insured person is alive,

Read and Learn More CMA Laws and Ethics Paper

Question 3. Employment injury in Employees’ State Insurance Act
Answer:

• Employment injury means an injury caused to an employee arising out of and in the course of his employment being an insurable employee.
• whether the accident occurs within or outside the territorial limits of India.
• Employment injury need not be confined to the employer’s premises only.
• It extends to time and place(theory of notional extension).
• It is not limited to injury or wound but has broader coverage.
• There needs to be some nexus (means relation) between the employment and the accident.

Includes:

• Injury by knocking the belt of pulley though caused by ignorance of employee himself
• Injury caused by a person who was beaten at the job though there was a threat pre-announced due to a call for strike

Excludes: Accident while on the way to the office

Question 4. Types of disablement in Employees’ State Insurance Act
Answer:

Temporary Disablement in Employees’ State Insurance Act : A condition resulting from an employment injury that requires medical treatment and results in the employee being temporarily incapable.

Permanent Partial Disablement in Employees’ State Insurance Act

• It means such disablement of a permanent nature, as reduced the earning capacity of an employee in every employment which he was capable of undertaking at the time of the accident resulting in the disablement.
• Provided that every injury specified in Part II of the Second Schedule to the Act shall be deemed to result in permanent partial disablement.

Permanent Total Disablement in Employees’ State Insurance Act

• It means such disablement of a permanent nature as incapacitates an employee for all work which he was capable of performing at the time of the accident resulting in such disablement.
• Provided that permanent total disablement shall be deemed to result from every injury specified in Part -1 of the Second Schedule to the Act or from any combination of injuries specified in Part- 2 thereof, where the aggregate percentage of loss of earning capacity, as specified in the said Part – 2 against those injuries, amount to 100% or more.

Employees’ State Insurance Act Noteworthy Points:

• The rate of contribution towards the Employees’ State Insurance Fund is 3.25% and 0.75% of employee’s wages by the employers and employees respectively.
• According to the ESI Act, 1948 wages include any remuneration paid at intervals not exceeding two months.
• Factory or establishment to which the Employees’ State Insurance Act,1948 applies has to be registered within 15 days.
• The judge of the Employees Insurance Court (ElC)should be either a Judicial Officer or a Legal practitioner for at least 5 years.

Question 5. Changes in Employees State Insurance Act, 1948
Answer:

• Employees must be registered online on the date of appointment; the online system shall allow a maximum of 10 days to register the new employee.
• The employee will have to collect their Biometric ESI permanent card from the nearest Branch Office.
• Contribution against an employee must be deposited within the due date. One shall not be able to deposit a contribution online after 42 days from the end date of the contribution period.
• Exemption from payment of employee’s contribution
• The average daily wages during a wage period for exemption from payment of employee’s contribution under section 42 shall be up to and inclusive of rupees one hundred seventy-six only.

Contribution has been reduced:

Employees State Insurance Act 1948 Short Note Question And Answers

Question 1. Write a note on the following Purposes for which ESI funds may be expended under the Employees’ State Insurance Act, 1948.
Answer:

• Various purposes for which ESI funds may be expended under the Employees State Insurance Act, of 1948. are as follows:-
• Payment of benefits to the insured person or their families.
• Payment about any contract entered for implementing the provisions of the Act.
• Payment of salaries to the employees of Employee State Insurance Corporation.
• Payment of fees to members of the standing committee

2. Write a short note on the following term Dependent in Employees’ State Insurance Act
Answer:

“Dependant” means any of the following relatives of a deceased insured person, namely,

• A widow, a legitimate or adopted son who has not attained the age of twenty-five years, or an unmarried legitimate or adopted daughter.
• A widowed mother].
• If wholly dependent on the earnings of the insured person at the time of his death, a legitimate or adopted son or daughter who has attained the age of twenty-five years and is infirm;
• If wholly or in part dependent on the earnings of the insured person at the time of his death,
• A parent other than a widowed mother,
• A minor illegitimate son, an unmarried illegitimate daughter, or a (b)daughter legitimate or adopted or illegitimate if married and a minor or if widowed and a minor,
• A minor brother an unmarried sister or a widowed sister if a minor,
• A widowed daughter-in-law,
• A minor child of a pre-deceased son,
• A minor child of a pre-deceased daughter where no parent of the child is alive, or
• A paternal grandparent if no parent of the insured person is alive.

Employees State Insurance Act 1948 Distinguish Between Question And Answers

Question 1. Distinguish between the following ‘Principal employer’ and ‘immediate employer ‘1 under the Employees’ State Insurance Act, 1948.
Answer:

According to Section 2(17) of the Employees’ State Insurance Act, 1948 principal employer means:

‘Immediate employer’ means a person, about employees employed by or through him, who has undertaken the execution on the premises of a factory or an establishment to which this Act applies or under the supervision of the principal employer or his agent, of the whole or any part of any work which is ordinarily part of the work of the factory on the establishment of the principal employer.

Employees’State Insurance Act 1948 Descriptive Question And Answers

Question 1. What are the different purposes for which employees’ state insurance funds may be utilized by the central government?
Answer:

• Purposes for which the fund may be expended Section 28 of the Act provides the Central Government may utilize the State Insurance Fund only for the following purposes:
• payment of benefits and provision of medical treatment and attendance to insured persons and, where the medical benefit is extended to their families, the provision of such medical benefit to their families by the provisions of this Act and defraying the charges and costs in connection therewith;
• payment of fees and allowances to members of the corporation, the Standing Committee and the Medical Benefit Council, the Regional Boards, Local Committees, and Regional and Local Medical Benefit Councils;
• payment of salaries, leave and joining time allowances, traveling and compensatory allowances, gratuities, and compassionate allowances, pensions, contributions to provident or another benefit fund of officers and
• servants of the corporation and meeting the expenditure in respect of offices and other services set up to give effect to the provisions of this Act;
• establishment and maintenance of hospitals, dispensaries, and other institutions and the provision of medical and other ancillary services for the benefit of insured persons and, where the medical benefit is extended to their families;
• payment of contributions to any State Government, local authority, or any private body or individual, towards the cost of medical treatment and attendance provided to insured persons and, where the medical benefit is extended to their families, including the cost of any building and equipment, by any agreement entered into by the Corporation; ‘.
• defraying the cost (including all expenses) of auditing the accounts of the Corporation and of the valuation of its assets and liabilities;
• defraying the cost (including all expenses) of the Employees’ insurance Courts set up under this Act;
• payment of any sums under any contract entered into for this Act by the Corporation or the Standing Committee or by any officer duly authorized by the Corporation or the Standing Committee on that behalf;
• payment of any sums under any doctor, order, or award of any Court or tribunal against the corporation or any of Its officers or servants for any net done In the execution of his duty or under a compromise or settlement of any suit or other legal proceedings or claim Instllulod or made against the corporation;
• defraying the cost and other charges of instituting or defending any civil or criminal proceedings arising out of any action taken under this Act;
• defraying oxpondlturo, within the limits proscribed, on measures for the Improvement of the health, will of Insured persons and lor tho rehabilitation and ro-employment of Insured person who has boon disabled or Injured; and
• such other purposes as may be authorized by the corporation with the previous approval of the Control Government.

Question 2. Mention the benefits that are entitled to the insured persons under the Employees’ State Insurance Act, 1948. (6 marks)
Answer:

• Section 46 of the Employees State Insurance Act, 1948 states that the insured persons and their dependents shall be entitled to the following benefits,
• Annual payments to any insured person in case of his sickness
• Annual payments to an insured woman in case of confinement miscarriage or sickness arising out of the pregnancy, confinement, premature birth of a child, or miscarriage
• Annual payments to an insured person suffering from a disablement as a result of an employment injury sustained as an employee
• Annual payments to such dependents of an insured person who dies as a result of an employment injury sustained as an employee
• Medical treatment for and attendance of insured persons
• Payment to the eldest surviving member of the family of an insured person, who has died, towards the expenditure on the funeral of the deceased insured person; if the injured person at the time of his death does not have a family, the funeral payment will be paid to the person who incurs the expenditure.
• The amount of such payment shall not exceed such amount as may be proscribed by the Central Government.
• The claim for such payments shall be made within 3 months of the death of the Insured person or within such an extended period as the Corporation allows on this behalf.

Question 3. Mention any seven purposes for which the ESI fund may be expended.
Answer:

• Section 28 of the Employees State Insurance Act, 1948 provides the Central.
• Government may utilize the State Insurance Fund only for the following purposes:
• payment of benefits: and provision of medical treatment and attendance to insured persons and, where the medical benefit is extended to their families, the provision of such medical benefit to their families by the provisions of this Act and defraying the charges and costs in connection therewith
• payment of fees: and allowances to members of the Corporation, the Standing Committee and the Medical Benefit Council, the Regional Boards, Local Committees, and Regional and Local Medical Benefit Councils
• payment of salaries: leave and joining time allowances, traveling and compensatory allowances, gratuities, and compassionate allowances, pensions, contributions to provident or another benefit fund of officers and servants of the Corporation, and meeting the expenditure in respect of offices and other services set up to give effect to the provisions of this Act
• establishment and maintenance of hospitals, dispensaries, and other institutions and the provision of medical and other ancillary services for the benefit of insured persons and, where the medical benefit is extended to their families
• payment of contributions: to any State Government, local authority, or any private body or individual, towards the cost of medical treatment and attendance provided to insured persons and, where the medical benefit is extended to their families, including the cost of any building and equipment, by any agreement entered into by the Corporation
• defraying the cost: of auditing the accounts of the Corporation and of the valuation of its assets and liabilities;
• payment of any sums: under any contract entered into for this Act by the Corporation or the Standing Committee or by any officer duly authorized by the Corporation or the Standing Committee on that behalf
• payment of sums under any decree, order, or: award of any Court or Tribuna against the Corporation or any of its officers or servants for any act done in the execution of his duty or under a compromise or settlement of any suit or other legal proceeding or claim instituted or made against the Corporation
• defraying expenditure: within the limits prescribed, on measures for the improvement of the health, and welfare of insured persons and forth© rehabilitation and re-employment of insured persons who have been disabled or injured.

Employees State Insurance Act 1948 Practical Question And Answers

Question 1. Attempt the following stating relevant legal provisions and decided case law, if any: Visual Electronics Ltd. sells household consumer durables such as TVs, washing machines, electric stoves, etc., of various manufacturers in its sales outlet. While delivering these items to the homes of the customers, it deputes its employees to install and explain the salient features of these items. It pays its employees an additional amount of defray for the actual traveling expenses. The Employees’ State Insurance Corporation demanded contribution to this additional payment including traveling expenses under the head “wages’. Is the demand of the Employees’ State Insurance Corporation justified?
Answer:

• In the above case, the employer is not liable to contribute to the traveling allowance.
• Traveling allowance does not form part of wages as defined under Section 2 (22) of the ESI Act as held in “S. Ganeshan wasThe Regional Director, ESI Corporation.’
• The demand of Employee’s State Insurance Corporation is not justified.

Question 2. Attempt the following stating relevant legal provisions and decided case law, if any: Lecktronics Ltd. is an establishment covered under the Employees’ State Insurance Act, 1948. The salesmen of the company were paid a commission of 10 % of the sales done by them every month. The ESI Inspector asked the employer to deposit contributions (the sum of money payable to the ESI Corporation by the principal employer in respect of an employee) in respect of the commission paid. Is he justified? Give reasons.
Answer:

• According to the ESI Act, 1948 wages include any remuneration paid at, intervals not exceeding two months.
• The employee receives incentives or commissions in addition to wages.
• As the commission is paid every month, the ESI Inspector can ask the employer to deposit contributions.

Employees Provident Fund and Miscellaneous Provisions Act 1952

Question 1. Objective and Scope of the Employees Provident Fund
Answer:

• An act to provide for the institution of provident funds, pension funds, and deposit-linked insurance fund
• Applies to the whole of India excluding Jammu and Kashmir.
• Administered by Govt, of India through the Employees’ Provident Fund Office.
• The objective of the act is to protect the interest of workers and provide them security in old age.
• This applies to employees receiving wages less than or equal to $ 15,000 per month.

Question 2. Applicability of Employees Provident Fund
Answer:

• Factory having 20 or more persons engaged in the industry mentioned under Schedule I
• Any other establishment to which Central Govt, notifies.

Employees Provident Fund  Excludes:

• Co-operative establishments with less than 50 persons and working without power
• Establishment of under control or under Act of CGor SG where employees are entitled to benefits of provident or pension schemes.

Employees Provident Fund  Note:

• Act to apply even if later on the number of persons is reduced to less than 20
• Act to apply even if the unit divides itself and operates as an independent unit

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Question 3. Employee for Employees Provident Fund
Answer:

A person employed for wages.

Employees Provident Fund  Includes:

• Contract employee
• Apprentice excluding apprentice engaged under Apprenticeship Act
• Part-time employee.

Question 4. Provident Fund
Answer:

• Every employee working in a factory or establishment shall be entitled and required to be a member from the date of joining onwards.
• Contribution is mandatory.
• 10% of the basic wage, dearness allowance, and retaining allowance of an employee to be paid by the employer as the Employer’s Contribution.
• The employee needs to pay an amount equal to the employer’s contribution.
• Employees may even opt to pay higher, but this casts no obligation on the employer.

Question 5. Pension Scheme
Answer:

• Pension to be provided in case of: Superannuation ; Retirement; Total Disablement; Death during service; death after superannuation; widow pension (minimum : ? 450 p.m.); children pension (minimum : ? 115 p.m.); orphan pension (minimum ; ? 170 p.m.)
• A minimum of 10 years is required for entitlement of pension under the Act.
• Superannuation refers to the attainment of the age of 58 years.

⇒ \(\text { Pension }=\frac{\text { PensionableSalary } \times(\text { PensionableService }+2)}{70}\)

• Pensionable Salary to be computed as 12 months’ average salary

Question 6. Employee Deposit Linked Insurance Scheme
Answer:

• 1 % of the basic wage, dearness allowance retaining allowance, and cash value of food concessions of an employee to be paid by the employer as Employer’s Contribution.
• The employee does not make any contribution.
• The employer is also required to pay charges at the rate of 0.01% of the employee members for meeting the administrative charges, subject to a minimum of 2 per month.

Question 7. Noteworthy Points
Answer:

• Casual/temporary/workers called on an urgent basis or for short durations are not to be regarded as employees of the EPF Act.
• Employees Provident Fund Appellate Tribunal presides over cases for determining monies due from employers.

Employees Provident Fund and Miscellaneous Provisions Act 1952 Descriptive Question And Answers

Question 1. What are the benefits of a member of an Employees Provident Fund & Misc? Provisions Act 1952 can get on retirement/death?
Answer:

Retirement benefits are:

1. Accumulated Balance in PF A/C of the employee.
2. The employee pension on reaching 50/58 years of age or leaving/ retirement capital return of pension.
3. Widow pension, children pension, nominee pension, or death of member.
4. Deposit-linked insurance to the family or the nominee.

Question 2. Explain basic wages under The Employees Provident Fund Act, of 1952. Enumerate the items which are not included in it.
Answer:

Basic Wages: As per Section 2(b) of the Employees Provident Funds and Miscellaneous Provision Act, 1952, the term “Basic Wages” means all emoluments which are earned by an employee while on duty or leave

or on holidays with v/ages in either case by the terms of the contract of employment and which are paid or payable in cash to him, but do not include:

1. the cash value of any food concessions;
2. any dearness allowance (that is to say all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or pay, and other similar allowance payable to the employee in respect of his employment or of work done in such employment; or
3. any presents made by the employer.

Question 3. State the Salient features of Employees Deposit Linked Insurance as outlined in Employee’s Provident Fund & Misc. Provisions Act, 1952.
Answer :

Employees Deposit-linked Insurance Scheme:

1. The Central Government may, by notification in the Official Gazette, frame a scheme to be called the Employees’ Deposit-linked Insurance Scheme to provide life insurance benefits to the employees of any establishment or class of establishments to which this Act applies.
2. There shall be established, as soon as may be after the framing of the Insurance Scheme, a Deposit linked Insurance Fund into which shall be paid by the employer from time to time in respect of every such employee about whom he is the employer, such amount, not being more than one percent of the aggregate of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable about such employee as the Central Government may, by notification in the Official Gazette, specify.
   • Explanation: For this sub-section, the expressions “dearness allowance” and “retaining allowance’’ have the same meanings as in Section 6.
3. The employer shall pay into the Insurance Fund such further sums of money, not exceeding one-fourth of the contribution which he is required to make under sub-section (2), as the Central Government may, from time to time, determine to meet all the expenses in connection with the administration of the Insurance Scheme other than that expenses towards the cost of any benefits provided by or under that scheme.
4. The Insurance Fund shall vest in the Centra! Board and be administered by it in such manner as may be specified in the Insurance Scheme.
5. The Insurance Scheme may provide for all or any of the matters specified in Schedule IV.
6. The Insurance Scheme may provide that any of its provisions shall take effect either prospectively or retrospectively on such date as may be specified on this behalf in that Scheme.

Question 4. A person was declared insolvent and the Court ordered the attachment of all his properties. State whether the accumulations in the Provident Fund Account of the person is attachable.
Answer:

• According to Sec. 10 of E.P.F. & M.P. Act, 1952 the amount standing to the credit of any member in the fund or of any exempted employee in a fund shall not in any way be capable of being assigned or charged and shall not be liable to attachment
• under any decree or order of any Court respect of any debt or liability incurred by member or order of any Court in respect of any debt or liability incurred by the member or exempted employee and neither the Official Assignee nor any Receiver appointed under respective
• Acts shall be entitled to or have any claim on any such amount.
• The said treatment will also hold good in case of the death of the person and the accumulated amount is payable to his nominee.

Question 5. Is the amount standing to the credit of a member of the Provident Fund attachable in the execution of a decree or order of the Court Examine the law, on this point, laid down in the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Answer:

Protection against attachment:

• Statutory protection is provided to the amount of contribution to Provident Fund under Section 10 from attachment to any Court decree.
• Sub-section (1) of Section 10 provides that the amount standing to the credit of any member in the fund or any exempted employee in a provident fund shall not in any way, be capable of being assigned or charged and shall not be liable to attachment under any decree or order or any Court in respect of any debt or liability incurred by the member or the exempted employee and neither the official assignee appointed under the Presidency
• Towns Insolvency Act, 1909 nor any receiver appointed under the Provincial Insolvency Act, 1920 shall be entitled to or have any claim on any such amount.
• ‘The amounts standing to the credit of aforesaid categories of persons at the time of their death and payable to their nominees under the scheme or the rules, and the amount shall be free from any debt or other liability incurred by the deceased or the nominee before the death of the member or the exempted employee and shall also not be liable to attachment under any decree or order of any Court.

Question 6. Employees provident funds and Miscellaneous Provisions Act, 1952 does not apply to certain establishments. List out those establishments, (5 marks)
Answer:

The Employees Provident Fund and Miscellaneous Provisions Act, 1952 does not apply to certain establishments as specified under Section 16 of the said Act.

They are as follows:

• Any establishment registered under the Co-operative Societies Act, 1912, or under any other law for the time being in force in any potato relating to co-operative societies employing less than 50 persons and working without the aid of power or
• To any establishment belonging to or under the Control of the Central Government or a State Government and whose employees are entitled to the benefit of a Contributory Provident Fund or old age pension. Or
• Any other establishment set up under any Central Provincial or State Act and whose employees are entitled to any Contributory provident fund or old age pension.
• Any newly set up establishment (less than 3 years). Central Government having regard to the financial position of any class of establishment or other circumstances of the case may exempt that class of establishment from the operation of this Act for such period as specified in the notification Issued for this purpose.

Question 7. When can a member withdraw from his National Pension Funds account? 
Answer:

Withdrawal from the National Pension Fund Account is allowed for the following purposes-

• For the purchase of a dwelling house/flat or the construction of a dwelling house including the acquisition of a suitable site for this purpose;
• For repayment of loans in special cases;
• Withdrawal within one year before the retirement;
• Such withdrawals are not required to be repaid.

Question 8. Enumerate the Central Record Keeping Agency under the Pension Fund Regulatory and Development Act 2013.
Answer:

Section 21 of the Pension Fund Regulatory and Development Act, 2013 deals with the Central Record keeping Agency:

• The Authority shall, by granting a certificate of registration under sub-section (3) of Section 27, appoint a central record-keeping agency: Provided that the Authority may, in the public interest, appoint more than one central record-keeping agency.
• The central record-keeping agency shall be responsible for receiving instructions from subscribers through the points of presence, transmitting such instructions to pension funds, effecting switching instructions received from subscribers, and discharging such other duties and functions, as may be assigned to it under the certificate of registration^ as may be determined by regulations.
• All the assets and properties owned, leased, or developed by the central record-keeping agency, shall constitute regulated assets and upon expiry of the certificate of registration or earlier revocation thereof, the Authority shall be entitled to appropriate and take over the regulated assets, either by itself or through an administrator or a person nominated by it in this behalf:
• Provided that the central record-keeping agency shall be entitled to be compensated the fair value, to be ascertained by the Authority, of such regulated assets as may be determined by regulations:
• Provided further that where the earlier revocation of the certificate of registration is based on violation of the conditions in the certificate of registration or the provisions of this Act or regulations, unless otherwise determined by the Authority, the central record-keeping agency shall not be entitled to claim any compensation in respect of such regulated assets.

Employees Provident Fund and Miscellaneous Provisions Act 1952 Practical Question And Answers

Question 1. Mr. Malhotra aged 50 years joined the P.F. Scheme on 01.01.2003. He decided to leave the service w.e.f. 01.07.2012 provided he gets a Pension under the E.P.F. Scheme. Advise based on Rules.
Answer:

Pension is allowed when:

• an employee attains the age of 50 Years or more and
• When he has completed a total sen/ice of 10 years or more and
• when he is not receiving any other EPF Pension from any other

Employer. It is presumed he is not receiving any other EPF Pension.

• He has attained the minimum age of 50 years but he has not completed a minimum of 10 years of service.
• Hence, he will not be entitled to a pension if he leaves w.e.f. 1.7.12. He will, however, be entitled to a pension if he leaves the Employment after 1.1.2013.

Question 2. ‘A’ on retirement withdrew the entire amount of his accumulation in the Provident Fund. Later on, he was appointed for a fixed tenure. Employer disagreed to allow P.F. benefit given his retirement and withdrawal of the entire amount. Offer your views based on Rule’s position.
Answer:

When any employee withdraws all his deposited amount from his provident fund account, his account is treated as closed and no further benefit can be given to the employee on this account. Hence employer was right.

Question 3. An inspector appointed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 inspects 10 p.m. (five hours after factory timings) and seeks to take copies of the “shareholders Register”. How far under the Act is his action reasonable?
Answer:

Under Section 13(2) of the Employees Provident Funds and Miscellaneous Provision Act,1952, an inspector can inspect and make copies of, take an extract from any book, register, or other documents maintained about the establishment and where he has reason to believe that any offense under this Act has been committed by an employer seize with assistance as he may think fit, such book, register or other documents or portions thereof as he may consider relevant in respect of that offense.

• The register of shareholders is not relevant to any offense mentioned in the Act.
• He is not justified in taking copies of such a register. Moreover, he should take copies of documents during working hours.
• It is unreasonable on his part to take copies at 10.00 p.m.
• In the present case, the inspector had sought to take copies of the shareholder’s register which is irrelevant to the offense, after working hours (10.00 pm) which is not reasonable.

Question 4. Sushil retired from the services of ABC Limited, on 31st March 2014. He had a sum of? 10 lakhs in his Provident Fund Account. It became due for payment to Sushil on 30 April 2014, but the company made the payment of the said amount after one year. Sushil claimed for the payment of interest on the due amount at the rate of 15 percent per annum for one year. Decide, whether the claim of Sushil is tenable under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Answer:

According to Section -7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the employer shall be liable to pay simple interest of 12% per annum or at such higher rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till the date of its actual payment.

However, the higher rate of interest specified in the Scheme cannot exceed the lending rate of interest charged by any scheduled bank. As per the above provision, Sushil can claim for the payment of interest on the due amount of 12 percent per annum or at the rate specified in the Scheme, whichever is higher, for one year. Here in the absence of a specified rate, Sushil can claim only 12 percent per annum interest on the due amount. Hence, the claim of Sushil for an interest rate of 15% is not tenable.

Question 5. After serving 15 years, Mr. Anand died on 30.09.2015 when his last twelve months’ average monthly wages were? 5,000. Calculate the amount to Employees Linked Deposit Insurance (ELDI) which can be paid to the nominee of Anand. (3 marks)
Answer:

As per the current amendment [The Employees Deposit Linked Insurance Scheme, 1976 as amended by the Employees Deposit Linked Insurance (Amendment) Scheme, 2011], higher of the below-mentioned would be paid to the nominee of the deceased. –

Average monthly wages drawn (up? to 6,500) during the twelve months preceding the month of death, multiplied by twenty. (Maximum amount payable is ? 1,30,000)

Or

An amount equal to the average balance in the accounts of the deceased in . the fund where the average balance exceeds? 50,000, the amount payable shall be? 50,000 plus 40% of the amount over $ 50,000 (subject to a maximum benefit of $ 1,00,000). [In this case, it is assumed that the average Fund balance is $ 1,00,000]

Hence,

Option A = 5,000 x 20= 1,00,000

Option B = 50,000 + 40% of 50,000 =  70,000

Therefore, the amount to be paid to the nominee of Mr. Anand (Higher than A and B) is $ 1,00,000

Payment Of Bonus Act 1965

Question 1. Applicability and Objective of the Payment of Bonus Act, 1965
Answer:

• The Act extends to the whole of India and applies to
• Factory defined under Factories Act, 1948
• Another establishment in which twenty or more persons are employed on any day during an accounting year.
• The objective of the Payment of Bonus Act, of 1965 is the timely payment of bonuses to the employees.
• The Payment of Bonus Act contains provisions relating to applicability, valuation, set off, set on, payment, calculation of allocable surplus, etc. which ensures that the employers do not exploit the employees while making the payment.

Question 2.Employee
Answer:

• Any person employed on a salary or wage not exceeding 7,21,000 per month in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical, or clerical work for hire or reward whether the terms of employment be express or implied.
• Does not include an apprentice.

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Question 3. Classes of employees not covered by the Payment of Bonus Act
Answer:

Following are the classes of persons not governed by the Payment of Bonus Act, of 1965:

• Employees employed by the Life Corporation of India.
• Seamen as per Section 3(42) of the Merchant Shipping Act, 1958.
• Employees registered or listed under any scheme made under the Dock Workers (Regulation of Employment) Act, 1948.
• Employees employed by an establishment engaged in any industry called or by or under the authority of any department of Central Government a State Government or a local authority.
• Employees employed by:
  • the Indian Red Cross Society or any other institution of a like nature.
  • universities and other educational institutions.
  • institutions established not for profit.
• Employees employed by RBI
• Employees employed by
  1. IFCI
  2. SFC (State Financial Corporation)
  3. Deposit Insurance Corporation
  4. NABARD (National Bank for Agriculture & Rural Development)
  5. UTI (Unit Trust of India)
  6. IDBI (Industrial Development Bank of India)
  7. SIDBI (Small Industries Development Bank of India)
  8. NHB (National Housing Bank)
  9. Any other financial institution (other than a Banking Company) being an establishment in the public sector, which the central government may by notification specify.

Question 4. What is Allocable Surplus
Answer:

• About the employer is a company (not being a banking company) that has not made the arrangements prescribed under the Income for the declaration and payments of the dividends within India: 67% of the available surplus in an accounting year.
• Other Employers: 60% of the available surplus

Question 5.Meaning of Salary Or Wage as per Bonus Act
Answer:

All remuneration (other than remuneration in respect of overtime work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment

Includes-

• Dearness Allowance (DA)

Excludes-

• Any other allowance which the employee is for the time being entitled to.
• Value of any house accommodation or supply of light, water, medical attendance, or other amenity
• Travelling concession
• Bonus (including incentive, production, and attendance bonus)
• Contribution paid or payable by the employer to any pension or provident fund
• Retrenchment compensation or any gratuity or other retirement benefit payable to the employee
• Commission payable to the employee.

Note:

• Free food allowance or free food by his employer shall be deemed to form part of the salary or wage of such employee.
• Retaining allowance and dearness allowance paid to the workman are also included in the definition of salary or wage.
• Lay-off compensation is also included within the ambit of wages.
• Subsistence allowance given during suspension is not included in wages.

Question 6. Calculation of Amount payable as Bonus
Answer:

Gross profit is calculated as per the First or Second Schedule.

Computation of Gross Profits

The gross profits derived by an employer from an establishment in respect of any accounting year shall:

• In the case of a banking company, be calculated in the manner specified in the First Schedule.
• In any other case, be calculated in the manner specified in the Second Schedule.
• From this Gross profit, the sum deductible under Section 6 is deducted.

Sums Deductible from Gross Profits

• any amount by way of depreciation admissible under the provisions of sub-section (1) of Section 32 of the Income-tax Act
• any amount by way of development rebate or investment allowance or development allowance which the employer is entitled to deduct from his income under IT Act.
• Any direct tax that the employer is liable to pay for the accounting year in respect of his income, profits, and gains during that year
• Any other sums as are specified in respect of the employer in the Third Schedule.
  • Add the sum equal to the difference between the direct tax calculated on gross profit for the previous year and the direct tax calculated on gross profit arrived at after deducting the bonus paid or payable to the employees.
  • The figure so arrived is available surplus.
  • Of this surplus, 67% in the case of a company (other than a banking company) and 60% in all other cases shall be the “allocable surplus” which is the amount available for Payment of bonuses to employees.

Question 7. Who is Eligible for Bonus
Answer:

Every employee shall be entitled to be paid by his employer an accounting year, bonus, under the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year.

Question 8. When is an employee disqualified for a Bonus
Answer:

An employee shall be disqualified from receiving a bonus if he is dismissed from service for:

• Fraud
• Riotous or Violent behavior while on the premises or the establishment.
• Theft, misappropriation, or sabotage of any property of the establishment.

Question 9. Concept of Minimum Bonus
Answer:

• Where in respect of any accounting year, the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section the employer shall, instead of such minimum bonus, be bound to pay to every employee in respect of that accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty percent of such salary or wage.
• Where the salary or wage of an employee exceeds three thousand and five hundred rupees per mensem, the bonus payable to such employee shall be calculated as if his salary or wage were three thousand and five hundred rupees per mensem.

Question 10.The time limit for payment of Bonus
Answer:

• Where there is a dispute regarding payment of bonus pending before any authority: Within a month from the date on which the award becomes enforceable ‘
• In any other case: Within eight months from the close of the accounting year.

Payment Of Bonus Act 1965 Descriptive Question And Answers

Question 1. Comment on the following based on legal provisions:  ABC Ltd. which incurred heavy loss during 2011-12 has not paid Bonus to any of its employees.
Answer:

• As per the Payment of Bonus Act, of 1965, the employer should pay a minimum bonus of 8.33% to the employee for his salary or wages earned during the accounting year. The minimum bonus should not be less than INR 100 otherwise INR 100 will be paid. Minimum bonus will have to be paid even if
• the employer, does not have any allocable surplus in the concerned accounting year. If the employee has not attained fifteen years of age at the beginning of the year, the minimum bonus will not be less than INR 60.

Question 2. The workers of a factory were paid a lump sum Bonus during the Id festival, which was not at a fixed time of the year. When the statutory bonus becomes due, can the employer adjust the festival bonus from it? What other dues, if any, may be deducted from the statutory bonus?
Answer:

• It is very customary these days to pay interim bonuses in the form of puja bonuses or other customary bonuses, then the employer is entitled to deduct the amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year and the employee will be entitled to receive only the balance.
• Moreover, if an employee is found guilty of misconduct causing financial loss to the employer, then the employer can deduct the amount of loss from the amount of bonus payable by him to the employee under this Act in respect of that accounting year only.
• If an employee has not worked for all the working days in an accounting year, the minimum bonus of one hundred rupees or, as the case may be, of sixty rupees, if such bonus is higher than 8.33 percent of his salary or wage for ‘the days he has worked in that accounting year, is proportionately reduced.

Question 3. A worker was caught red-handed for theft and was suspended for four days after a proper inquiry. Is he entitled to a bonus payable to an employee under The Payment of Bonus Act, of 1965? 
Answer:

Notwithstanding anything contained in this Act, an employee shall be disqualified from receiving a bonus under this Act, if he is dismissed from service for:

1. Fraud; or
2. Riotous or violent behavior while on the premises of the establishment; or
3. Theft, misappropriation, or sabotage of any property of the establishment
4. Hence, the worker is not entitled to a bonus.

Question 4. What procedure shall an employee adopt for the recovery of the amount of bonus due to him from his employer under the Payment of Bonus Act, 1965?
Answer:

Recovery of bonus due from an employer:

• In those cases where any money by way of bonus is due to an employee from his employer under a settlement or an award or agreement, the employee is entitled to recover the same by following the procedure prescribed in Section 21 of the Act.
• It is important to note here that the mode of recovery of the bonus prescribed under this section shall be available only if the bonus sought to be recovered is due under a settlement an award or an agreement.
• It will not apply to the recovery of the bonus which is payable under the act.

The provisions relating to the recovery of the bonus, as contained in Section 21, are as under:

1. The bonus due to an employee from his employer under a settlement orawardard’ or agreement, can be recovered by him by making an application to the Appropriate Government for the recovery of the same.
2. The application may be made by the employee himself or by any person
   authorized by him in writing. In case of the death of the employee, such an application may be made by his assignee or heirs. ‘
3. On receipt of the application, if the Appropriate Government is satisfied that any money is so due to the employee, it shall issue the certificate for that amount to the collector, and the collector shall proceed to recover the same in the same manner as an arrear of land revenue.
4. The application to the Appropriate Government should be made within one year from the date on which the money became due to the employee from the employer. However, the Government may entertain such application even after the expiry of said one year, if it is satisfied that the applicant had sufficient cause for not making the application within the prescribed period of one year.

Question 5. Explain the “time limit for payment of bonus’ to the employees in different circumstances under the provisions of the Payment of Bonus Act, 1965.
Answer:

The time limit for payment of bonus:

Section 19 of the Payment of Bonus Act, 1965 prescribes the time limit for the payment of bonuses under the following conditions:

1. Under Section 19 (1) (a) of the said Act, where the dispute is between the employer and the employees regarding the payment of a bonus and such dispute is under reference to the prescribed authority, the employer is bound to pay his employee bonus in cash within one month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute.
2. Under Section 19 (1) (b) of the said Act, in all other cases, the payment of the bonus is to be made within 8 months from the closing of the accounting year. But this period of 8 months may be extended up to a maximum of 2 years by the Appropriate Government or by any authority prescribed by the Appropriate Government only on an application to it by the employer and is satisfied that sufficient reasons exist for granting an extension. Moreover, the extension can be made only by an order.

Question 6. Discuss the procedure for the recovery of a bonus due from an employer.
Answer:

Procedure for the Recovery of Bonus Due from an Employer Section 21 of the Act provides the procedure for the recovery of a bonus in case the employer has not paid under a settlement or an award or agreement. In such cases:

• The employee himself or
• Any other person authorized by him in writing on this behalf or
• In the case of the death of the employee, his assignee or heirs may make an application to the appropriate Government for the recovery of the money due to him.
• If the appropriate Government or such authority authorized is satisfied that any money is due, it shall issue a certificate to the Collector for that amount to the Collector who shall proceed to recover the said amount in the same manner as an arrear of land revenue.
• It may be noted that every such application shall be made within one year from the date on which the money becomes due to the employee from the employer.
• As such application may be entertained after the expiry of the said period of one year; if the Appropriate Government is satisfied that the applicant had sufficient cause for not making the application within the said period.

Payment Of Bonus Act, 1965 Practical Question And Answers

Question 1. All the employees who are covered under the Bonus Act were paid a Holi Bonus of  500/- each. Later on, due to loss, the Employer paid a minimum Bonus of 8.33% but after a deduction of said $ 500/-. Whether Employer was justified.
Answer:

Yes, the Employer was justified as per provisions of Section 17the the Payment of Bonus Act, 1965. The Employer is entitled to deduct the amount of any Puja Bonus or other customary Bonus (here Holi Bonus) so paid from the amount of bonus payable to the employees m respect of that accounting year.

Question 2. Comment tho following based on legal provisions Mr, E joined as Supervisor on a monthly salary of INR 6/50 on 1 Feb 2013 and resigned on 28 Feb 2013. His employer paid a Bonus of 10% (to all the eligible employees. Hence Mr. E is entitled to a Bonus for the tho period of his service.
Answer:

The following conditions should be satisfied for entitlement of bonus under the Payment of Bonus Act.

1. He has worked for less than 30 days
2. His salary Wages does not exceed  21,000 per month [Section 2(13))
3. Provided such establishment comes under the Payment cf Bcnus Act. Mr. E is not entitled to the bonuses because he has not worked for a minimum period of 30 days.

Question 3. A company having its registered head office in Kolkata has three departments in Delhi, Chennai, and Mumbai. The company paid minimum bonus under the Payment or Bonus Act, to all its entitled employees or head office except tho employees or departments located outside Kolkata. Stale whether the employer was right.
Answer:

The employer Is wrong. As per Section 3 of the Pnymont of Bonus Act, 1965, the purpose of computation of bonus, an establishment shall include departments, undertakings, and branches. It is important whether they are situated in Sano Placolaco or not.

Exception: A branch, department o ultra shift not be treated as a pad of an establishment if the following 2 cohorts are satisfied:

• A separate B/S and PSL A/c has been p?  prepared for such branch, department, or undertaking.
• Such branch, department, or undertaking has never even* been treated as part of the establishment for computation of bonus
• But since the question is silent regarding the returned exceptions, we may assume that the establishment consists of different departments, undertakings, and branches, and all such units are treated as part of the same establishment for computer on to bonus.

Hence, the employer’s contention is not correct and the employees of ah the three departments are entitled to bonuses.

Question 4. Mr. Sharma is a supervisor in a factory drawing a salary of 77,000 pm. In a particular accounting year, he is on one month’s leave with a salary. Ha, the employer declared the minimum bonus payable as per the Payment 0! Bonus Act. 1955. to a!! eligible employees State in this connection:

1. What shall: be the salary that should” be taken into account for the cash-out bonus payable to him?
2. What shall be the total bonus payable to him? m that accounting year?
3. What would be your answer if the company suffered losses in that accounting year?
4. Is the bonus payable to him if he was illegally terminated?

Answer:

1. The bonus will be calculated at 77,000 even if the employee earns a higher salary. Where the salary or wage of an employee exceeds 77,000 per mensem, the bonus payable to such employee under Section 10 or. as the case may be under Section 11, shall be calculated as if his salary and wage were 77,000 per mensem (Section 12). This means employees getting a salary or wage up to 71,000 will be covered by the Act. but for payment of bonus, the* salary will be taken as 77.000. Amendment of Calculation of Bonus through Amendment of Sec. 12.
   • Sec. 12 of the Principal Act, provided that the bonus payable to an employee shall be in proportion to his/her salary. However, where an employee’s salary was over INR 3,500 per month, to calculate a bonus, the salary was assumed to be? 3,500 per month. To maximize bonus earnings, the Amendment Act has increased the wage ceiling from $ 3,500 per month to $ 7,000 per month or the minimum wage for the scheduled employment as fixed by the appropriate government, whichever is higher.
     Again of this section, the Scheduled Employment shall have the same meaning as assigned to it in Clause of Sec. 2 of the Minimum Wages Act, 1948.
2. The total bonus payable to him in that accounting year should be (7,000 x 12 x 8.33) = $ 6,997 To calculate the total working days, leave with salary or wages shall be deemed to be working days for the employee. Therefore, Mr. Sharma would be eligible for 12 months bonus.
3. The bonus shall have to be paid by the employer notwithstanding
   anything contained in Section 10(1), but this payment is subject to the other provisions of the Act. Even if the employer suffers a loss during the accounting year, he is bound to pay the minimum bonus as prescribed in Section 10 (State vs Sardar Dalip Singh Majhithia, 1979).
4. Disqualifications for payment of Bonus: (Section  9)’ notwithstanding anything contained in the Act, an employee shall be disqualified from receiving bonus under the Act, if he is dismissed from services for:

• • Fraud
  • Riotous or violent behavior while on the premises of the establishment; or
  • Theft, misappropriation,tion, or sabotage of any property of the establishment.
  • If an employee is illegally terminated from service, illegal remains qualified and eligible to receive a bonus.
  • If an employee was prevented from work because of an illegal order, he would be eligible for the bonus.

Question 5. A workshop is employing 50 workmen. A shop- supervisor draws monthly wages of? 9,000. HRD paid bonuses to all employees except the supervisor. The supervisor contends that he is also entitled to the bonus. Referring to the provisions of the Payment of Bonus Act, 1965, decide whether HRD’s action is cor. ect?
Answer:

• No, HRD’s action is not correct. The upper limit of sales is fixed in Section 2 (13) by the Payment of Bonus (Amendment) Act, 2015.
• Every employee whose gross salary is less than $ 21,000 shall be entitled to be paid an aid bonus by his employer provided he has worked in the establishment for not less than thirty working days
• Given this, the supervisor draws ing monthly salary of $ 9,000 and is entitled to receive five bonuses from the company.

Question 6. Kelson Limited has two separate units in Delhi and Mumbai in India. Every unit of the said company prepares and maintains its separate Balance Sheet and Profit and Loss Account. Delhi unit is incurring continuous losses and hence bonus is not paid to the employees of this unit. Decide, under the Payment of Bonus Act, 1965 whether the employees of the said unit can claim an aim bonus on the ground that the unit incurring loss is a part of one single establishment. NT?
Answer:

All the two units shall be treated as two separate establishments since all the two units maintain separate B/S and accounts.

Employees of the nuthatch are incurring losses:

• Are not entitled to claim a bonus on the ground sound that the unit incurring loss is a part of one single establishment;
• Are entitled to a minimum bonus per the provisions of Sections 10,12,13 and 14 of the Payment of Bonus Act, 1965, the new minimum bonus is payable whether or not there is any allocable surplus (and whether the establishment has made a profit or incurred a loss).

However, for computation of bonus, the amount of allocable surplus shall be taken for that particular unit only, and not of all the two units taken together.

Minimum Wages Act 1948

Question 1. Objective and Scope of the Minimum Wages Act, 1948
Answer:

• An Act to protect the interests of workers employed in the unorganized sector.
• The Act extends to the whole of India.
• The objective of the Act was to prevent the exploitation of labor and prescribe the minimum wages for employees in certain employment.

Question 2. Who is an Employee
Answer:

• Employee means any person who is employed for:
• Hire or reward to do any work
• skilled or unskilled
• manual or clerical in scheduled employment in respect of which minimum rates of wages have been fixed

Includes:

• • An out-worker to whom any articles or materials are given out by another person to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted, or otherwise processed.
  • Employee declared to be an employee by the appropriate Government;
  • Employeo includes contract employees

Excludes: Member of the Armed Forces.

Question 3. What is meant by the term Wages
Answer:

Wages means all remunerations, capable of being expressed in terms of money, which would be payable to a person employed in respect of his employment in case the terms of the contract of employment were fulfilled.

Includes: House rent allowance

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Excludes:

• Any house accommodation supply of light, water, medical attendance
• Any other amenity or any service excluded by Appropriate Government
• Any contribution paid by the employer to any PF
• Any traveling allowance
• Any sum paid to the person employed to defray special expenses
• Any gratuity payable on discharge

Question 4. Who fixes the minimum rates of Wages
Answer:

• The Appropriate Government has to fix the minimum rates of wages payable to employees employed in employment.
• The appropriate Government shall review the minimum rates so fixed at such intervals as it may think fit, such intervals not exceeding 5 years, and revise the minimum rate of wages, if necessary.
  • This can be fixed only if there are a minimum of 1000 employees in the state in that Scheduled Industry
  • Minimum wages can be revised on a retrospective basis.
• Minimum wages under the Minimum Wages Act, of 1948 may be fixed as:
  • Time work
  • Piece work
  • Guaranteed time rate
  • Overtime rate
• Apart, from the aforesaid manner, it can also be fixed as follows:
  • Different scheduled employments
  • Different classes of work
  • Based on adults, adolescents, etc.

Question 5. Procedure for Fixing End Revising Minimum Wages
Answer:

There are two methods the Appropriate government may follow in fixing the minimum rate of wages:

Committee Method:

• Under the committee method, the appropriate Government appoints Committees and sub-committees
• After considering the toe ed/tee of the committee, the appropriate Government  one  fix or revise the minimum wages by official notification in the Official Gazette
• The government is not bound to accept the recommendations given by, the rate.

Notification Method:

• Notification MetUndernder’s notification  method is the appropriate Government by rate-caution to the Office Gazette publish the proposals for “horn rates of wages from a date rat less than 2 months from the date of ras-etcetera, The persons so affected by the rates of wages may t^/e them represented,
• After remastering tea representation from the various groups, the Government will prescribe the minimum rates of wages

Other Noteworthy Points:

• Payment of less than  minimum wage is an offense
• Even though the Company is running into Josses it has to pay minimum wages
• Minimum wages need to be paid in cash, though they may be paid in kind too.
• In case of termination of service of an employee, wages are to be paid within 2 days from the date of such termination.
• Imprisonment of 6 months or a fine of up to 500 or both in case of breach of the Act by paying lesser than stipulated minimum wages.

Question 6. Central Government
Answer:

For Scheduled employment carried under the authority of the central Act

• Railway
• Mines
• Oil field

Minimum Wages Act 1948 Short Note Question And Answers

Question 1. Write short notes on Overtime under the Minimum Wages Act, of 1943 )
Answer:

Overtime:

Section 14(1) states that where an employee whose minimum rate of wages is fixed under this Act by the hour, by the day, or by such a longer wage period as may be authorized, works on any day over the number of hours constituting a normal working day, the employer shall pay him for every hour or part of an hour so worked in excess at the eve rime rate fixed under this Act or any law of the appropriate government for the time being in force whichever is higher.

1. Rule 25 states that when a worker works more than 9 hours on any day or more than 48 hours in a week, he shall be entitled to overtime v/ages.
2. In the case of employment in agriculture – one and a half times the ordinary rate of wages; in the case of any other scheduled employment – double the ordinary rate of wages.
3. A register in this regard should be maintained. If no overtime wage is paid for a particular month a NIL entry in the register should be made.
4. Section 14(2) states that this Act shall not prejudice the operation of the provisions of Section 59 of the Factories Act in any case where those provisions are applicable.

Minimum Wages Act 1948 Descriptive Question And Answers

Question 1. Explain the Cost of Living Index Number under the Minimum Wages Act, of 1948.
Answer:

“Cost of living Index Number” about employees in any scheduled employment in respect of which minimum rates of wages have been fixed,
means the Index Number ascertained and declared by the Competent Authority by notification in the official gazette to be the cost of living index number applicable to employees in such employment.

Question 2. A is engaged in two types of jobs in a factory, that of mechanic and watchman. The wage rates are different for two different jobs. The employer calculates his minimum wage on an average rate. State whether this is correct, and explain your views as per the Payment of Minimum Wages Act, 1948.
Answer:

• Where an employee does two or more classes of work, to each of which a different minimum rate of wages is applicable, the employer shall pay
• such employee in respect of the time respectively occupied in each such class of work, wages at not less than the minimum rate in force in respect of each such class.
• Thus, the employer just cannot pay him at a simple average rate of both wages of both classes of job.

Question 3. Explain the procedure for fixing and revising minimum wages under the Minimum Wages Act, of 1948.
Answer:

Procedure for Fixing and Revising Minimum Wages (Sec.5):

1. In fixing minimum rates of wages in respect of. any scheduled employment for the first time under this Act or in revising minimum rates of wages so fixed the appropriate government shall either:
   • appoint as many committees and sub-committees as it considers necessary to hold inquiries and advise it in respect of such fixation or revision as the case may be, or
   • by notification in the Official Gazette, publish its proposals for the information of persons likely to be affected thereby and specify a date not less than two months from the date of the notification on which the proposals will be taken into consideration.
2. After considering the advice of the committee or committee appointed under clause (a) of sub-sec. (1) or as the case may be, all representations received by it before the date specified in the notification under clause (b) of that sub-section, the appropriate government shall by notification in the Official Gazette, fix or as the case may be revise the minimum rates of wages in respect of each scheduled employment and unless such notification otherwise provides it shall come into force on the expiry of three months from the date of its issue :
   • Provided that where the appropriate government proposes to revise the minimum rates of wages by the mode specified in clause (b) of sub-sec. (1) the appropriate government shall consult the Advisory Board also.

Question 4. The Minimum Wages Act, of 1948 prescribes payment of wages in cash only. Comment.
Answer:

1. Minimum wages payable under this Act shall be paid in cash.
2. Where it has been the custom to pay wages wholly or partly in kind, the Appropriate Government thinking that it is necessary in the circumstances of the case may by notification in the Official Gazette authorize the payment of minimum wages either wholly or partly in kind.
3. If the Appropriate Government thinks that provision should be made for the supply of essential commodities at concession rates the Appropriate Government may by notification in the Official Gazette authorize the provision of such supplies at concessional rates.
4. The cash value of wages in kind and of concessions in respect of supplies of essential commodities at concessional rates authorized under sub-section (2) and (3) shall be estimated in the prescribed manner

Question 5. Explain the procedure for fixing and revising minimum wages under the Minimum Wages Act, of 1948.
Answer:

Procedure for Fixing and Revising Minimum Wages (Sec. 5)

In fixing minimum rates of wages in respect of any scheduled employment for the first time or in revising minimum rates of wages so fixed, the appropriate Government shall follow either of the following 2 methods:

1. Appointment of committees: The appropriate Government shall appoint 1. as many committees and sub-committees as it considers necessary to hold inquiries and advise it in respect of fixation or revision of minimum rates of wages, as the case may be
2. Publication of proposals in the Official Gazette: The appropriate Government shall, by notification in the Official Gazette, publish its proposals for the information of persons likely to be affected by the fixation or revision of minimum rates of wages. It shall also specify a date on which the proposals will be taken into consideration. The date so specified shall not be less than 2 months from the date of the notification.

• • After considering the advice of the committee or committees [under Sec. 5(1) or all representations received by it before the date specified in the notification [under Sec. 5(1) (b)], the appropriate Government shall, by notification in the Official Gazette, fix or revise the minimum rates of wages in respect of each scheduled employment.
  • The fixation or revision shall come into force on the expiry of 3 months from the date of the issue of notification unless the notification otherwise provides [Sec. 5(2)].
  • The power of the Government under Sec. 5(2) to issue notification revising minimum wages includes the power to give retrospective effect to the notification.

Question 6. Describe the procedures for an employee to claim the short payment of wages or non-payment of wages under the Minimum Wages Act, of 1948.
Answer:

• If there is any short payment of wages or wages over time etc., may be claimed by the employee himself or through any legal practitioner or any official of a registered trade union authorized by him or any Inspector or any person acting with the permission of the Authority by applying to the concerned authority.
• For this purpose the appropriate Government may appoint any commissionerforworkmen’s Compensation; or any Officer of the Central Government exercising functions as a Labour Commissioner for any region; or any Officer of the State Government not below the rank of Labor Commissioner; or any other Officer with experience as a Judge of a Civil Court or as a stipendiary Magistrate to be the authority to hear and decide for any specified area for all claims.
• The claim shall be presented to the authority by the employee within six months from the date on which the minimum wages or other amount became payable.
• The Authority may a claim beyond the six months if he is satisfied that the applicant had sufficient cause for not making the application within the prescribed period.
• Rule 27 provides that a single application in respect of several employees may be filed before the authority.
• The application shall be made in duplicate in Forms 6, 6A, or 7, one copy of which shall bear the prescribed court fee.
• The authorization shall be given in Form 8.
• The Authority shall serve the copy of the application to the employer by registered post a notice in Form 9 to appear before him on a specified date.
• He shall hear the applicant and the employer and after such further inquiry, if any, as it may consider necessary may, without prejudice of any other penalty to the employer, direct the payment to the employee of the amount by which the minimum wages payable to him exceed the amount paid, together with compensation as the authority may think fit, not exceeding 10 times the amount of such excess; in any other case, the payment of the amount together with the payment of such compensation as the Authority may think fit, not exceeding $ 10.
• If the employer fails to appear on the specified date the Authority may hear and determine the application ex-parte.
• If the applicant fails to appear on the specified date the application will be dismissed.
• Any such order may be set aside on sufficient cause being shown by the defaulting party within one month of the date of the said order and the application shall be re-heard.
• If the Authority finds the application is a vexatious one he may impose a penalty on the employees not exceeding $ 50 to the employer.
• The amount due may be recovered as if it were a fine imposed by the Authority of a Magistrate.
• Every direction of the Authority shall be final.

Payment Of Wages Act 1936

Question 1. Objective and Scope of the Payment of Wages Act, 1936
Answer:

• Regulates the payment of wages to certain classes of persons employed in the industry.
• Prevents exploitation of workers by ensuring timely payment without unauthorized deductions
• The scope of this act is limited to the person drawing the wages for the month, which does not exceed $ 24,000 per month w.e.f. 29.08.2017.
• The department is enforcing this legislation on the persons employed at the registered factories.
• Applies to the whole of India including J&K.
• Prevents exploitation of workers by ensuring timely payment without unauthorized deductions.

Question 2.Responsibility for payment of wages
Answer:

• Every employer shall be responsible for the payment to persons employed by him of all wages required to be paid under this Act.
• Employer includes legal representatives of the deceased employer.

Question 3. Fixation of wage period and time of payment of wages
Answer:

• The wage period should not exceed one month.
• In case an employee is engaged in an establishment in which less than one thousand persons are employed, wages shall be paid before the expiry of the seventh day after the last day of the wage period.
• In case an employee in an establishment in which more than one ‘ thousand persons are employed, wages shall be paid before the expiry
  of the tenth day after the last day of the wage period.
• Prevents exploitation of workers by ensuring timely payment without unauthorized deductions.

Wages to be paid in currency coins and currency notes

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Question 4. Deduction which may be made from wages
Answer:

Following deductions can be made by an employer while making payment of wages:

• Fines.
• Deduction for absence of duty.
• Deduction for damage to or loss of goods expressly entrusted to the employed person.
• Deduction for house accommodation supplied by an employer.
• Deduction for amenities and services provided by the employer.
• Deduction for recovery of advances provided by employer.
• Deduction for recovery of loan given by employer.
• The deduction is required to be made by order of a Court.
• Deduction for subscription to, and repayment of advances from any provident fund.
• The deduction is made with the written authorization of the person employed for payment of any premium on his Life Insurance Policy.
• Deduction for contribution to funds made for the welfare of employees.
• Deduction for contributions to any insurance scheme framed by the Central Government for the benefit of its employees.

Question 5.Mode of Payment
Answer:

• Wages can be paid in coins or currency notes or both
• employers may pay by cheque or by crediting the wages in the bank A/C of the employee.

Question 6.Maintenance of registers and records
Answer:

An employer shall maintain registers and records giving full particulars of the person employed by him, work performed by them, wages paid to them, the deduction made from wages, etc.

Question 7.Claims arising out of deduction from wages or delay in payment of wages and penalty for malicious or vexatious claims
Answer:

• The State Government shall appoint an authority to hear and decide claims arising out of deductions from the wages or delay in payment of wages.
• An aggrieved person can apply to the authority appointed by The State Government.
• Where an application is made by an applicant, the authority shall hear the applicant and the employer.
• After hearing and further enquiry the authority can direct the refund to the employed person of the amount deducted or the payment of delayed wages.

Question 8.Other Noteworthy Points
Answer:

• Includes contract employees
• The deduction of the fine imposed cannot exceed 3% of the wage

Payment Of Wages Act 1936 Short Note Question And Answers

Question 1. Write a short note on the following Limit of deductions from wages
Answer:

Limit of Deductions from Wages:

Section 7(3) provides up to which limit of the wage, the deductions may be made from the wages of the employees. Notwithstanding anything contained in this Act, the total amount of deductions that may be made in any wage period from the wages of any employed person shall not exceed:

• In cases where such deductions are wholly or partly made for payments to cooperative societies – 75% of such wages and
• In any other case – 50% of such wages.

Where the total deductions authorized under sub-section (2) exceed seventy-five percent or as the case may be, fifty percent of the wages the ‘ excess may be recovered in such manner as may be prescribed.

Payment Of Wages Act 1936 Descriptive Question And Answers

Question 1. Comment on the following based on legal provisions Works Manager has deducted INR 500 from wages towards the cost of tools and raw materials supplied to workers for employment (Payment of Wages Act).
Answer:

As per the Payment of Wages Act, of 1936, the deductions will be made only if there is a provision in this regard. Tools etc. are not eligible for deductions as per this Act, hence the works manager is wrong if he deducts any amount on account. of tools and raw materials.

Question 2. Wages can not be paid by cheque but can be paid in kind. Answer based on the provision of Payment of Wages Act 1936.
Answer:

An employer may after obtaining the written authorization of employed persons pay them the wages either by cheque or by crediting to their Bank A/c. In all other cases, wages shall be paid in current coins or currency notes or both but cannot be paid in kind.

Question 3. What are the conditions to deduct for recovery of advances made under the Payment of Wages Act, of 1936?
Answer:

Deductions under Clause (f) of sub-Section (2) of Section 7 (the Payment of Wages Act, 1936) shall be subject to the following conditions namely:

• Recovery of the advance of money given before employment began shall be made from the first payment of wages in respect of a complete wage period, but no recovery shall be made of such advances given for traveling expenses;
• Recovery of advances of money given after employment began shall be subject to such conditions as the Appropriate Government may impose;
• Recovery of advances of wages not already earned shall be subject to any rules made by the Appropriate Government regulating the extent to which such advances may be given and the installments by which they may be recovered.

Question 4. Anil Pvt. Ltd. imposed a fine on Anurag, one of its employees for regularly reporting late for work. The fine was imposed on 4ft June 2014. The management wanted to recover the amount in November 2014 during a half-yearly increment. Can the Company recover this amount of fine, state your views as per the Payment of Wages Act, 1936.
Answer:

As per Section 8 (6) of the Payment of Wages Act 1936, no fines can be recovered after the expiry of 90 days from the date on which it is imposed. So ABC Pvt. Ltd. will not be able to recover the fine in November 2014 as the gap exceeded 90 days.

Question 5. The responsibility for the payment of wages is that of the employer. Explain.
Answer:

Sec. 3 of the Payment of Wages Act, 1936, lays down that every employer shall be responsible for the payment to persons employed by him of all wages
required to be paid under the Act. In Addition To the employer, the following persons shall also be responsible for the payment of wages.

1. In factories, the person named as manager,
2. In industrial or other establishments, the person, if any, who is responsible to the employer for the supervision and control of the industrial or other establishments;
3. Upon railways otherwise than in factories, the person nominated by the railway administration on this behalf for the local area concerned;
4. In the case of a contractor, a person designated by such contractor;
5. In any other case, a person designated as responsible for complying with the provisions of the Act.

Question 6. What are the different kinds of deductions that can be made from wages under the Payment of Wages Act, of 1936?
Answer:

• Section 7 gives the details of the deduction from wages.
• The wages of an employed person shall be paid to him without deductions of any kind except those authorized by or under this Act.
• Every payment made by the employed person to the employer or his agent shall for this Act, be deemed to be a deduction from wages.
• Any loss of wages resulting from the imposition, for good and sufficient cause upon a person employed of any of the following penalties, namely:-
• The withholding of increment or promotion (including the stoppage of increment at an efficiency bar);
• The reduction to a lower post or time scale or a lower stage in a time scale; or
• Suspension;
  • Shall not be deemed to be a deduction from wages in any case where the rules framed by the employer for the imposition of any such penalty conform with the requirements if any which may be specified on this behalf by the Appropriate Government by notification in the Official Gazette.
  • Section 7(2) provides that Deductions from the wages of an employed person shall be made only by the provisions of this Act and may be of the following kinds only namely:
• Fines;
• Deductions for absence from duty;
• Deductions for damage to or loss of goods expressly entrusted to the employed person for custody, or for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default;
• Deductions for house accommodation supplied by the employer or by the government or any housing board set up under any law for the time being in force (whether the government or the board is the employer or not) or any other authority engaged in the business of subsidizing house accommodation which may be specified in this behalf by the appropriate Government by notification in the Official Gazette;
• Deductions for such amenities services supplied by the employer as the Appropriate Government or any officer specified by it on this behalf may by general or special order authorize;
• Deductions for recovery of advances of whatever nature (including
  advances for traveling allowance or conveyance allowance), and the interest due in respect thereof, or for adjustment of over-payments of wages;
• Deductions for recovery of loans made from any fund constituted for the welfare of labor by the rules approved by the appropriate Government and the interest due in respect thereof;
• Deductions for recovery of loans granted for house-building or other purposes approved by the appropriate Government and the interest due in respect thereof;
• Deductions of income-tax payable by the employed person;
• Deductions required to be made by order of a court or other authority competent to make such order;
• Deductions for subscriptions to and for repayment of advances from any provident fund to which the Provident Funds Act, 1952 applies or any recognized provident funds as defined in Section 2(38) of the Indian Income Tax Act, 1961 or any provident fund approved in this behalf by the appropriate Government during the continuance of such approval;
• Deductions for payments to cooperative societies approved by the appropriate Government or any officer specified by it on this behalf or to a scheme of insurance maintained by the Indian Post Office and
• Deductions, made with the written authorization of the person employed for payment of any premium on his life insurance policy to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 or for the purchase of securities of the Government of India or any State Government or for being deposited in any Post Office Saving Bank in furtherance of any savings scheme of any such government.
• Deductions made with the written authorization of the employed person, for the payment of his contribution to any fund constituted by the employer or a trade union registered under the Trade Unions Act, 1926 for the welfare of the employed persons or the members of their families, or both, and approved by the appropriate Government or any officer specified by it in this behalf, during the continuance of such approval;
• Deductions made, with the written authorization of the employed person, for payment of the fees payable by him for the membership of any trade union registered under the Trade Unions Act, 1926;
• Deductions, for payment of insurance premium on Fidelity Guarantee Bonds;
• Deductions for recovery of losses sustained by a railway administration on account of acceptance by the employed person of counterfeit or base coins or mutilated or forged currency notes;
• Deductions for recovery of losses sustained by a railway administration on account of the failure of the employed person to invoice, bill, collect, or account for the appropriate charges due to that administration, whether in respect of fares, freight, demurrage wharfage, and carnage or respect of the sale of food in catering, establishments or respect of the sale of commodities in grain shops or otherwise;
• Deductions for recovery of losses sustained by a railway administration on account of any rebates or refunds incorrectly granted by the employed person where such loss is directly attributable to his neglect or default;
• Deductions, made with the written authorization of the employed person, for contribution to the Prime Minister’s National Relief Fund or to such other Fund as the Central Government may, by notification in the Official Gazette specify;
• Deductions for contributions to any insurance scheme framed by the Central Government for the benefit of its employees.

Nothing contained in this section shall be construed as precluding the employer from recovering from the wages of the employed person or otherwise any amount payable by such person under any law for the time being, in force other than the Indian Railways Act 1890.

Pension Fund Regulatory And Development Act 2013

Question 1.National Pension System
Answer:

National Pension System means the contributory pension system referred to in Section 20 whereby contributions from a subscriber are collected and accumulated in an individual pension account using a system of points of presence, a central record-keeping agency, and pension funds as may be specified by regulations;

Question 2.National Pension System Trust
Answer:

National Pension System Trust means the Board of Trustees who hold the assets of subscribers for their benefit;

Question 3.Pension Fund
Answer:

A pension fund means an intermediary that has been granted a certificate of registration under sub-section (3) of Section 27 by the Authority as a pension fund for receiving contributions, accumulating them, and making payments to the subscriber in the manner, as may be specified by regulations;

Question 4. Point of presence
Answer:

Point of presence” means an intermediary registered with the Authority under sub-section (3) of Section 27 as a point of presence and capable of electronic connectivity with the central record-keeping agency to receive and transmit funds and instructions and payout of funds;

Question 5.Document
Answer:

The document shall include any matter written, expressed, or described upon any substance using letters, figures, or marks, or by more than one of those means, in printed or in electronic version, which is intended to be used, or which may be used, by the Interim Pension Fund Regulatory and Development Authority, or Authority or an intermediary or any other entity connected with the National Pension System, to record that matter;

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Question 6.Individual pension Account
Answer:

Individual pension account means an account of a subscriber, executed by a contract setting out the terms and conditions under the National Pension System;

Question 7.Intermediary
Answer:

Intermediary include pension funds, central record-keeping agencies, National Pension System Trust, pension fund advisers, retirement advisers, point of presence, and such other persons or entities connected with the collection, management, record keeping, and distribution of accumulations;

Question 8. Central Record-Keeping Agency
Answer:

A central record-keeping agency is an agency registered under Section 27 to perform the functions of record-keeping, accounting, administration, and customer service for subscribers to schemes;

Question 9. Regulated Assets
Answer:

Regulated assets means the assets and properties, both tangible and intangible, owned, leased, or developed by and other rights belonging to, the central record-keeping agency;

Question 10.Securities Appellate Tribunal
Answer:

Securities Appellate Tribunal means a Securities Appellate Tribuna established under sub-section (1) of Section 15-K of the Securities and Exchange Board of India Act, 1992

Pension Fund Regulatory And Development Act 2013 Short Note Question And Answers

Question 1. Write short notes on the Central Recording Keeping Agency.
Answer:

Central Recordkeeping Agency:

• The Authority shall, by granting a certificate of registration under sub-section (3) of Section 27, appoint a central record-keeping agency: Provided that the Authority may, in the public interest, appoint more than one central record-keeping agency.
• The central record-keeping agency shall be responsible for receiving instructions from subscribers through the points of presence, transmitting such instructions to pension funds, effecting switching instructions received from subscribers, and discharging such other duties and functions, as may be assigned to it under the certificate of registration or as may be determined by regulations.
• All the assets and properties owned, leased, or developed by the central record-keeping agency, shall constitute regulated assets and upon expiry of the certificate of registration or earlier revocation thereof, the Authority shall be entitled to appropriate and take over the regulated assets, either by itself or through an administrator or a person nominated by it in this behalf:
• Provided that the central record-keeping agency shall be entitled to be compensated the fair value, to be ascertained by the Authority, of such regulated assets as may be determined by regulations:
• Provided further that where the earlier revocation of the certificate of registration is based on violation of the conditions in the certificate of registration or the provisions of this Act or regulations, unless otherwise determined by the Authority, the central record-keeping agency shall not be entitled to claim any compensation in respect of such regulated assets.

Question 2. Write short notes on Point of Presence.
Answer:

Point of presence:

• The Authority may, by granting a certificate of registration under sub-section (3) of Section 27, permit one or more persons to act as a point of presence to receive contributions and instructions, transmitting them to the Trustee Bank or the central record-keeping agency, as the case may be, and pay out benefits to subscribers in. accordance with the regulations made by the Authority from time to time in this regard.
• A point of presence shall function by the terms of its certificate of registration and the regulations made under this Act.

Question 3. Write short notes on the Pension Fund.
Answer:

Pension funds:

• The Authority may, by granting a certificate of registration under sub-section (3) of Section 27, permit one or more persons to act as a pension fund to receive contributions, accumulate them, and make payments to the subscriber in such manner as may be specified by regulations.
• The number of pension funds shall be determined by regulations and the Authority may, in the public interest, vary the number of pension funds: Provided that at least one of the pension funds shall be a Government company.
• The pension fund shall function by the terms of its certificate of registration and the regulations made under this Act.
• The pension fund shall manage the schemes according to the regulations.

Pension Fund Regulatory And Development Act 2013 Descriptive Question And Answers

Question 1. What are the basic features of the national pension system as contained in the Pension Fund Regulatory and Development Authority Act, 2013?
Answer:

The National Pension System shall have the following basic features, namely:

• every subscriber shall have an individual pension account under the National Pension System
• withdrawals, not exceeding twenty-five percent of the contribution made by the subscriber, may be permitted from the individual pension account subject to the conditions, such as purpose, frequency, and limits, as may be specified by the regulations
• The functions of record keeping, accounting, and switching of options by the subscriber shall be effected by the central record-keeping agency
• there shall be a choice of multiple pension funds and multiple schemes.

Provided that

1. the subscriber shall have an option of investing up to a hundred percent of his funds in Government Securities; and
2. the subscriber, seeking minimum assured returns, shall have the option to invest his funds in such schemes providing minimum assured returns as may be notified by the Authority
3. there shall be the portability of individual pension accounts in case of a change of employment
4. collection and transmission of contributions and instructions shall be through points of presence to the central record-keeping agency
5. there shall not be any implicit or explicit assurance of benefits except a market-based guarantee mechanism to be purchased by the subscriber
6. a subscriber shall not exit from the National Pension System except as may be specified by the regulations; and
7. at exit, the subscriber shall purchase an annuity from a life insurance company according to the regulations.

Question 2. Discuss the different provisions relating to pension funds as per section 23 of the PFRDA Act, 2013
Answer:

The following provisions relating to pension funds have been laid down in Section 23 of the PFRDA Act, 2013:

1. The Authority may, by granting a certificate of registration under Sub Section (3) of Section 27, permit one or more persons to act as a pension fund to receive contributions, accumulate them, and make payments to the subscriber in such manner as may be specified by regulations.
2. The number of pension funds shall be determined by regulations and the Authority may, in the public interest, vary the number of pension funds: Provided that at least one of the pension funds shall be a Government company. Here, for this sub-section, the expression “Government Company” shall have the meaning assigned.
3. The pension fund shall function by the terms of its certificate of registration and the regulations made under this Act.
4. The pension fund shall manage the schemes according to the regulations.

Question 3. Explain the Provision of the National Pension System.
Answer:

National Pension System [Section 20]

1. The contributory pension system notified by the Government of India in the Ministry of Finance vide notification number F. No. 5-7-2003 ECB And PR, dated the 22nd December 2003, shall be deemed to be the National Pension System with effect from the 1st day of January 2004, and such National Pension System may be amended from time to time by regulations.
2. Notwithstanding anything contained in the said notification, the National Pension System shall, on the commencement of this Act, have the following basic features, namely:
   • every subscriber shall have an individual pension account under the National Pension System;
   • withdrawals, not exceeding twenty-five percent of the contribution made by the subscriber, may be permitted from the individual pension account subject to the conditions, such as purpose, frequency, and limits, as may be specified by the regulations;
   • the functions of record keeping, accounting, and switching of options by the subscriber shall be effected by the central record keeping agency;
   • there shall be a choice of multiple pension funds and multiple schemes Provided that
   • the subscriber shall have an option of investing up to a hundred percent of his funds in Government Securities; and
   • the subscriber, seeking minimum assured returns, shall have the option to invest his funds in such schemes providing minimum assured returns as may be notified by the Authority.
   • There shall be portability of individual pension accounts in case of a change of employment.
   • collection and transmission of contributions and instructions shall be through points of presence to the central record-keeping agency;
   • there shall not be any implicit or explicit assurance of benefits except a market-based guarantee mechanism to be purchased by the subscriber;
   • a subscriber shall not exit from the National Pension System except as may be specified by the regulations; and
   • at exit, the subscriber shall purchase an annuity from a life insurance company according to the regulations.
3. In addition to the individual pension account mentioned in Clause (1) of sub-section (2), a subscriber may also, at his option, have an additional account under the National Pension System having the features mentioned in Clauses (3) to (5) of sub-section (2) and also have the additional feature that the subscriber shall be free to withdraw part or all of his money at any time from the additional account.

Question 4. What are the eligibility norms of the central record-keeping agency?
Answer:

Eligibility norms of the central record-keeping agency:

The central record-keeping agency, points of presence, and pension funds shall satisfy the eligibility norms as may be specified by the regulations, including minimum capital requirement, past track- record including the ability to provide guaranteed returns, costs and fees, geographical reach, customer base, information technology capability, human resources, and such other matters.