The Industrial Employment (Standing Orders) Act, 1946: Regulating Conditions of Employment in India

Introduction – The Industrial Employment

In India, the regulation of employment contracts involves significant governmental oversight, a practice less common in many developed nations. The Industrial Employment (Standing Orders) Act, 1946, stands as a cornerstone of this regulatory framework. This legislation mandates that employers formally define and make known to their workmen the conditions of employment, including aspects such as working hours, leave, disciplinary procedures, and worker classifications. The advent of trade unions and collective bargaining, coupled with the previous absence of clearly defined service conditions, necessitated such an enactment to foster industrial peace and protect workmen from arbitrary practices.

This article provides a comprehensive overview of the Act, covering its objectives, applicability, key features, the process of certification and modification of standing orders, and the remedies available for their interpretation or contravention.

Applicability of the Act

The Act extends to the whole of India. The Act applies to every industrial establishment wherein 100 or more workmen are employed or were employed on any day of the preceding 12 months. The Act does not apply to:

• Any industry to which The Bombay Industrial Relations Act, 1946, applies.
• Any industry to which The Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961 applies.

The Centre and State Governments are empowered to extend the provisions of this Act (by notification in the Official Gazette) to any establishment employing less than 100 workmen. Now generally all establishments employing more than 50 workmen are covered by this Act. But the appropriate Government must give a notice of not less than two months of its intention to do so. However, the provisions of Industrial Employment (Standing Orders) Act, 1946 shall apply to all industrial establishments under the control of the Central Government.

The Act came into force on April 23, 1946. It has been amended from time to time.

Object of the Act

The Preamble of the Act states that it is “An Act to require employers in industrial establishments formally to define conditions of employment under them”.

The Act aims to protect the workmen from unlawful exploitation.

1. The object of the Act is to require employers in industrial establishments to define the conditions of employment under them and make the conditions known to workmen employed by them before they accept the employment.
2. To maintain uniformity in terms and conditions of employment in respect of workmen belonging to the same category. The rules made regarding these conditions are called Standing Orders.

Once the Standing Orders come into force, they bind all those presently in the employment of the concerned establishment as well as those who are appointed thereafter. [Agra Electric Supply Co. Ltd. vs. Alladin (1969) 2 SCC 598; U.P. Electric Supply Co. Ltd. v. Their Workman (1972) 2 SCC 54].

In Avery India Ltd. v. Second Industrial Tribunal, W.B. (AIR 1972 SC 1626), held that the provisions as to the age of retirement in the standing orders of an establishment would apply to all employees who joined the service before or after the coming into force of the standing orders even though there was no such provision in the past.

Features of the Act

The following are the main features of the Act:

1. Submission/ modification of draft standing orders: The employer of every industrial establishment is required to submit to the Certifying Officer draft standing orders proposed by him for adoption in his industrial establishment for certification (Sec. 3). Certifying Officer is empowered to modify or add to the draft as is necessary to render the draft standing orders certifiable under the Act. The draft standing orders submitted shall be accompanied by a statement giving prescribed particulars of the workmen employed in the industrial establishment, including the name of the trade union, if any, to which they belong.
2. Joint standing orders by group of employers: A group of employers in similar industrial establishments may submit a joint draft of standing orders for certification (Sec. 4).
3. Government may set out model standing orders: The appropriate Government may set out model standing orders for the purpose of the Act. The draft standing orders framed by an employer should, as far as practicable, conform with model standing orders. Any establishment can accept the Model Standing Orders also. These Model Standing Orders are temporarily applicable to an establishment which comes under the provisions of this Act and whose Standing Orders are not finally certified.
4. Certifying officers and appellate authorities to have powers of Civil Court: Every Certifying officers and appellate authority shall have all the powers of a Civil Court to receive evidence, administering oaths, enforcing the attendance of witness and compelling the discovery and production of documents (Sec. 11). No oral evidence having the effect of adding to or otherwise varying or contradicting standing order as finally certified under this Act shall be admitted in any court (Sec. 12).
5. Penalties: An employer who fails to submit draft standing orders or an employer who does any act in contravention of the standing orders finally certified under the Act shall be punishable with a fine as specified in Sec. 13 of the Act.
6. Power to Exempt: The appropriate Government may, by a Gazette notification, exempt any establishment or class of establishments from any of the provisions of the Act.
7. Powers to make Rules: The appropriate Government may, after previous publication, by notification in the Official Gazette, make rules to carry out the purposes of the Act (Sec. 15).

Certification of Standing Orders

A. Conditions for Certification

As per Section 4 of the Act, Standing orders are certifiable under the Act if:

• Provision is made therein for every matter set out in the Schedule which applies to the industrial establishment.
• The standing orders are otherwise in conformity with the provisions of this Act.

It is the function of the Certifying Officer or appellate authority to adjudicate upon the fairness or reasonableness of the provisions of any standing orders. The employer cannot insist on adding a condition to the Standing Order that relates to a matter not included in the Schedule (Rohtak and Hissar District Supply Co. Ltd. v. State of U.P. (AIR 1966 SC 1471)).

B. Procedure for Certification

The certification process, as laid down in Section 5, involves:

• Copy of the draft standing order to be sent to trade union or workmen: On receipt of the draft, the Certifying Officer shall forward a copy to the trade union, if any, of the workmen, or where there is no such trade union, to the workmen, in the prescribed form requiring objections, if any, which the workmen may desire to make to the draft standing orders to be submitted to him within fifteen days from the receipt of the notice.
• After giving the employer and the trade union or representatives of the workmen an opportunity of being heard, the Certifying Officer shall decide whether or not any modification or addition to the draft submitted by the employer is necessary to render the draft standing orders certifiable under this Act, and shall make an order in writing accordingly.
• The Certifying Officer shall thereupon certify the draft standing orders, after making any modifications, and within seven days send copies of the certified standing orders to the employer and the trade union or other prescribed representatives of the workmen.

While certified Standing Orders are binding and constitute conditions of service, the Act does not explicitly state that they acquire statutory effect or become part of the statute. They are generally not considered metamorphosed into delegated/subordinate legislation, though they are binding (The Rajasthan State Road Transport Corporation v. Krishna Kant AIR 1995 SC 1715).

C. Appeals

Section 6 of the Act deals with the appeal procedure wherein any aggrieved employer, workman, trade union, or representative may appeal to the appellate authority within 30 days from the date of dispatch of certified copies by the Certifying Officer. The appellate authority’s decision is final. It can confirm the standing orders as certified or amend them to ensure certifiability. Copies of the appellate authority’s order are sent within seven days to the Certifying Officer, employer, and workmen’s representatives. Limitation periods for appeals are to be interpreted by relevant general statutes, such as the General Clauses Act (Badrapur Power Engineers Assn.. v. Deputy Chief Labour Commr. (1993)).

D. Date of Operation

As per Section 7 of the Act, certified standing orders come into operation:

• Upon expiry of 30 days from the date authenticated copies are sent, if no appeal is preferred.
• Upon expiry of seven days from the date, copies of the appellate authority’s order are sent, if an appeal is preferred.

E. Register and Posting

A copy of all finally certified standing orders must be filed by the Certifying Officer in a prescribed register (Section 8). Employers are required to prominently post the text of the certified standing orders in English and the local language understood by the majority of workmen, on special boards at the establishment’s entrance and in all departments (Section 9).

Duration and Modification of Standing Orders (Section 10)

Certified standing orders are generally not subject to modification for six months from their operation date, unless there is an agreement between the employer and the workmen or their representatives.

An employer, workman, or trade union may apply to the Certifying Officer for modification, accompanied by proposed changes. If modifications are by agreement, a certified copy of the agreement must be filed with the application.

Modifications are generally considered in cases of changed circumstances, inconvenience, hardship, anomaly, or if a more beneficial provision is identified. Once modified, standing orders can be further modified if new circumstances arise since the last modification (S.S. Light Railway Co. Ltd. v. S.S. Railway Workers Union AIR 1969 SC 513). However, modifications in violation of existing settlements or those imposing additional financial burdens (without agreement) are typically not permissible (Bararhi Refineries P.S.P. v. Indian Oil Corpn. Ltd. (1991)). The Certifying Officer may approve modifications based on prevalent industry practices and financial position (Ghaziabad Engineer Co. v. Certifying Officer AIR 1978 SC 769).

Ancillary Provisions

A. Payment of Subsistence Allowance

As per Section 10A, where a workman is suspended pending investigation or inquiry into misconduct, the employer must pay subsistence allowance.

• At 50% of wages for the first 90 days of suspension.
• At 75% of wages for the remaining suspension period, if the delay in disciplinary proceedings is not directly attributable to the workman’s conduct.

B. Temporary Application of Model Standing Orders

For establishments to which the Act applies but whose standing orders are not yet finally certified, the prescribed model standing orders are deemed to be adopted under Section 12A. Sections 9(2), 13, and 13A apply to these model standing orders as they would to certified standing orders.

C. Penalties and Procedure

Section 13 of the Act provides for the following penalties:

• Failure to Submit/Unlawful Modification: An employer failing to submit draft standing orders or unlawfully modifying them is punishable with a fine up to five thousand rupees, with a further fine of two hundred rupees per day for continuing offenses.
• Contravention of Certified Orders: An employer contravening finally certified standing orders is punishable with a fine up to one hundred rupees, with a further fine of twenty-five rupees per day for continuing offenses.
• Sanction for Prosecution: No prosecution under this section can be instituted without the previous sanction of the appropriate government.
• Jurisdiction: No court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the second class can try offenses under this section.

D. Interpretation of Standing Orders

As per Section 13A, Any question regarding the application or interpretation of a certified standing order can be referred by an employer, workman, trade union, or representative body to a Labour Court constituted under the Industrial Disputes Act, 1947. The Labour Court, after hearing the parties, will decide the question, and its decision is final and binding.

Impact and Judicial Pronouncements

The Act significantly altered the landscape of industrial employment by replacing the common law doctrine of “hire and fire” with statutory regulations, designed to provide security of employment. Judicial pronouncements have consistently reinforced the statutory force of certified standing orders:

• Misconduct: Punishment for acts not enumerated as misconduct in the standing orders is illegal as held in the case of Glaxo Industries (P) Ltd. v. Labour Court Meerut (1984).
• Automatic Termination Clauses: Clauses in certified standing orders providing for automatic termination of a permanent employee’s service (not directly related to factory production) are void if they do not provide an opportunity of being heard (Uptron India Ltd. v. Shammi Bhan AIR 1998 SC 1681). Thus, highlighting the principle that statutory obligations override contractual terms that are less favorable or unconstitutional.
• Conflict with Contractual Terms: In cases of conflict between statutory conditions in Standing Orders and special terms in a contract of employment, the Standing Orders prevail. Employers and workmen cannot enter into contracts overriding the statutory conditions in certified Standing Orders. Standing Orders are, in essence, a contract between the employer and the workmen, deriving statutory force as held in the cases of Co-op. Cr. Bank v. Industrial Tribunal, Hyderabad AIR 1970 SC 245 and Western India Match Co. v. Workmen AIR 1973 SC 2650; Behar Journals v. Ali Hasan AIR 1959 Pat 431.
• Security of Employment: The judiciary has consistently recognized that the Act promotes security of employment, which is vital for industrial peace and harmony. Restrictions on the absolute right to contract are justified as they prevent arbitrary termination and allow employees to challenge unlawful actions (S.S. Light Railway Co. Ltd. v. S.S. Railway Workers Union AIR 1969 SC 513).

Conclusion – The Industrial Employment

The Industrial Employment (Standing Orders) Act, 1946, is a pivotal piece of legislation in Indian labour law. By mandating the formal definition and public circulation of employment conditions, the Act brings clarity, uniformity, and transparency to industrial relations. The rigorous process of certification, involving scrutiny for fairness and reasonableness, coupled with provisions for modification and enforcement, ensures that these ‘Standing Orders’ serve as a robust framework for governing employer-employee interactions.

The Act’s emphasis on security of employment, through its requirements for defined terms of service and limitations on arbitrary termination, underscores its role in fostering industrial harmony. Judicial interpretations have consistently upheld the supremacy of certified standing orders over inconsistent contractual terms and have reinforced the protective intent of the legislature. Ultimately, the Act plays a crucial role in reducing industrial disputes by minimizing ambiguity in employment conditions and providing a stable, regulated environment for both employers and workmen.

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