Suspension – The Rationale and its Various Implications

I. Suspension – What it is

Suspension is an interim action by the employer, barring the employee temporarily from performing duties either pending investigation or disciplinary action/departmental enquiry/criminal proceedings or any other administrative expediency.

It is a mechanism to continue the privity of contract between the employer and the employee till the conclusion of domestic enquiry and passing of final orders.

Ranjit Singh & Anr. v. P.O. Industrial Tribunal, Punjab & Ors., 2003 I LLJ 1100 : 2003 (102) FJR 516 : 2003 (96) FLR 854 : 2002 (98) FLR (Sum) 2 : 2003 II LLN 113 : 2003 LLR 396 (P&H.DB)

II. Suspension – How many kinds

Suspension can be said be of four kinds namely :

a) Suspension as a punishment

The standing orders of some establishments might prescribe suspension as one of the penalties. If the disciplinary authority passes an order of punishment on an employee for being held guilty of charges pursuant to such standing order, such suspension is penal in nature.

L.K. Verma v. H.M.T. Ltd. & Anr., 2006 I LLJ 1074 : 2006 (108) FLR 1101 : 2006 AIR (SC) 975 : 2006 (2) SCC 269 (S.C.2J)

For instance, the model standing order 14(2) (central) prescribes suspension for four days as penalty, if a workman is found guilty of misconduct.

b) Suspension as an interim administrative action

The employer may also seek to keep the employee away from duties for some time and pay him the subsistence allowance by suspending him from service for certain administrative reasons like pending investigation or enquiry etc which will be discussed below. This suspension is not by way of punishment.

Ravi Kant Sharma v. Deputy Registrar, Co-operative Societies & Ors., 2005 LIC 1462 (All.HC)

The model standing order (Central) 14(4)(a) empowers the employer to suspend a workman pending disciplinary action.

Similarly Rule 10 of CCS (CCA) Rules governs the suspension of Central Government Servants.

The Sastry and Desai Awards and the Bipartite Settlements deal with the suspension of workmen staff of public sector banks.

c) Suspension pending approval of dismissal u/s. 33 of Industrial Disputes Act 1947

Sec. 33(2)(b) of the Industrial Disputes Act 1947 permits the employer to dismiss an employee for misconduct not connected with the pending dispute but the dismissal does not take effect till the same is approved by the authority before whom the dispute is pending. However the employer can suspend the employee during the pendency of his approval application in exercise of his inherent powers though there is no provision in the statute, to overcome the anomalous situation of keeping a dismissed employee on duty in the intervening period during which the approval application is pending and the courts have upheld this right.

Delhi Cloth & General Mills Co. Ltd. v. Ganesh Dutt & Ors., 1972 I LLJ 172 : 1972 (41) FJR 24 : 1972 (24) FLR 147 : 1972 LIC 594 : 1972 (4) SCC 834 (S.C.2J)

d) Deemed suspension

The service regulations/service rules governing suspension of employees in government service and in public sector undertakings provide for deemed suspension of the employees. As per the relevant rules, if an employee is arrested for any offence and detained for more than forty eight hours, he is deemed to be under suspension from the date of

Suspension Implications

The Rationale and its Various 46 detention. A deemed suspension does not create any administratively anomalous situation or any legal complication with regard to the rights of an employee since he does not attend office from the time of detention. Thus it differs from suspension with retrospective effect which creates conflicts such as how an employee can be treated to be under suspension with back date when he was on duty.

The Officers’ Service Regulations governing conduct and discipline of officers in public sector banks provides for deemed suspension.

Similarly Rule 10 of CCS (CCA) Rules deals with deemed suspension of Government servants.

However the provision for deemed suspension can be invoked by the employer only when the detention is for more than 48 hours or as stipulated therein.

Ayesha Fathima v. A.P. State Minorities Finance Corporation & Anr., 2006 LIC 1036 (A.P.HC)

e) Distinction between suspension as punishment and suspension as an interim measure

In case of suspension as a punishment, the employee should be served with a chargesheet and be given adequate opportunity of hearing before passing the order of punishment. Suspension as interim measure pending enquiry or investigation is not punitive in nature and therefore it is not necessary for the management to hear the employee before suspending him.

If it is enumerated as one of the penalties to be imposed for a misconduct by the Standing Orders /service rules as in the case given below, it is penal in nature and hence principles of natural justice are to be complied with.

A.C.D. Mello of Bombay v. Shipping Corpn. of India Ltd., 1989 LIC 955 (Bom.HC)

III. Circumstances when an employee can be suspended

An employee can be suspended for the following reasons. An employee may be suspended pending enquiry.

(1) If he has committed serious misconduct like an act involving moral turpitude like fraud etc. or disorderly or riotion behaviour.

Lakhan Lal v. Chairman Industrial Tribunal Bihar Patna & Anr., 1969 LIC 1292 (Pat.DB) Or (2) If his presence is not conducive to maintaining industrial peace and harmony.

Delhi Electric Supply Undertaking, New Delhi v. G.P. Satsangi & Anr., 1984 LIC 54 (Del.DB) Or (3) If he is likely to tamper with evidence or intimidate witnesses or impede investigation. Or (4) An employee may be suspended pending criminal proceedings. If he is arrested or detained for any offence or crime by the police. (if so provided under service rules)

Punjab National Bank & Anr. v. Jagdish Singh, 1999 I LLJ 945 : 1998 (80) FLR 888 : 1999 AIR (SC) 1577 : 1998 (9) SCC 265 (S.C.2J)

The conduct regulations particularly of Public Sector undertakings contain a provision whereby an employee who is under police custody for more than 48 hours, is deemed to have been under suspension.

In terms of Central Civil Service Rules (CCA) (Rule 10), a Government servant is deemed to have been under suspension if he is sentenced to a term exceeding 48 hours.

(5) An employee may be suspended pending further investigation, if there is a prima facie evidence of his involvement in a serious misconduct, which requires further investigation.

(6) In case of Government servant, if his continuance in service is against public interest or security of State (Rule 10 of CSS (CCA) Rules).

Suspension Implications – The Rationale and its Various IV. Power to suspend an employee – Whether to be vested under statute/standing orders/service rules

It is necessary that an employer has to be empowered either by a statute or contract of service to suspend an employee. An employer can not exercise such power in the absence of an express provision as stated above.

Hotel Imperial, New Delhi v. Hotel Workers’ Union, 1959 II LLJ 544 : 1959-60 (17) FJR 39 : 1959 AIR (SC) 1342 (S.C.3J)

Thus the Model Standing Order (MSO)14(4)(a) under central rules and similarly MSO 25(5) for manual& technical workmen and MSO 23(5) for clerical and supervisory workmen under Bombay rules 1959 vest in the employer the discretion to suspend an employee against whom disciplinary proceedings are contemplated.

The Bipartite settlements and awards which govern the service conditions of workmen staff of Banks too provide for suspension of employees pending enquiry or investigation.

Similarly Rule 10 of CCS (CCA) Rules govern the suspension of Government servants.

V. How to exercise the power to suspend

(1) Since suspension causes extreme hardship to the employee in terms of finance, career, social esteem, the power has to be exercised carefully but not mechanically.

Kamal Kumar Dutta v. State of Assam & Ors., 2005 (106) FLR 134 (Gau.HC)

(2) The employer shall use his discretion judiciously.

(3) Suspension shall not be allowed to continue for a long period as to be come punitive. Therefore the enquiry or investigation pending which the suspension was effected has to be conducted and concluded expeditiously.

The Model Standing Orders (Central) under standing order 14(4)(bc) has a clause stipulating three months within which an enquiry has to be completed.

VI. Employer to avoid prolonged periods of suspension – Why

It is very frequently observed that employees are kept under suspension for prolonged periods of three years or five years. Such prolonged periods of suspension has to be avoided for the following reasons.

(1) It is beset with financial implications for an establishment. The conduct rules or Standing Orders of establishments particularly in public sector prescribe payment of full salary or wages, if an employee is under suspension for more than a year. Thus the establishment is required to pay him full salary without getting any work from him such prolonged suspensions are non productive.

(2) If an employee is under suspension for more than a year, it is likely to be termed as punitive by the courts, compelling the managements to re-instate the employee in service.

Subhag S. Kavi v. State of Maharashtra & Ors., 2007 (1) BCR 412 : 2006 (5) Mah.LJ 618 (Bom.DB)

The management shall therefore, ensure that all disciplinary proceedings against an employee are concluded within a year or within such period as stipulated in the respective service rules/standing orders beyond which the full salary becomes payable as subsistence allowance, so that it can take decision whether to revoke suspension and reinstate him or terminate his services.

VII. Suspension order – What it should contain

The suspension order should state the following:

(1) The basic details and the reasons for which the employee is suspended. Dr. K.K. Arora v. Union of India (UOI) & Anr., 2005 III CLR 100 (Del.HC)

The Model Standing Order No. 14(4)(a) under central rules directs the employer to furnish a statement setting out reasons in details for such suspension within a week of suspension.

(2) The quantum of subsistence allowance payable.

(3) Requirement of his presence at head quarters.

(4) Requirement of his attendance at enquiry hearings.

(5) His non-eligibility for leave during suspension.

(6) His non-eligibility to perquisites or amenities, if any during suspension.

VIII. pension order – How to serve

(1) It may be served on the employee in person against his acknowledgement on the copy thereof. Or (2) If he refuses to accept it, the refusal may be recorded in writing by the person who went to serve it in the presence of one or two witness. Or
(3) In the event of his not attending office, it may be sent by registered post with ‘acknowledgment due’. If it is returned with remarks ‘not found’ etc. it may be kept on record without being opened. Or
(4) If he is absconding, it may be published in a popular newspaper.

IX. Effect of suspension on contract of employment

a) Suspension does not end master-servant relationship

Suspension does not put an end to the contract of employment or master-servant relationship and therefore the employer is required to pay subsistence allowance as stipulated under standing orders/service rules or any statute enacted by a state and in the absence of any of the aforesaid provisions, he is required to pay full wages as laid down in Hotel Imperial’s case (infra).

Fakirbhai Fulabhai Solanki v. Presiding Officer & Anr., 1986 II LLJ 124 : 1986 (69) FJR 85 : 1986 (52) FLR 688 : 1986 II LLN 74 : 1986 LIC 879 : 1986 I CLR 440 : 1986 SCC (L&S) 411 : 1986 AIR (SC) 1168 : 1986 (3) SCC 131 (S.C.2J) Ranjit Singh & Anr. v. P.O. Industrial Tribunal, Punjab & Ors., 2003 I LLJ 1100 : 2003 (102) FJR 516 : 2003 (96) FLR 854 : 2002 (98) FLR (Sum) 2 : 2003 II LLN 113 : 2003 LLR 396 (P&H.DB)

Effect of suspension on contract of employment

b) Whether employer can instruct suspended employee not to leave head quarters

Yes. Since suspension does not put an end to master-servant relationship, an employee under suspension, is required to fulfil his part of the contract of service like obeying instructions of the management, issued to him during the period of service or maintaining good conduct etc.

The employer can instruct the employee not to leave head quarters during the period of suspension and it is considered a reasonable restriction.

K.S. Periyaswamy v. Bharath Earth Movers Ltd., Bangalore, 2006 I LLJ 570 : 2006 I LLN 610 : 2006 LIC 483 : 2006 I CLR 490 : 2006 LLR 404 (Karn.HC)

c) Whether employer can instruct not to enter the premises without his prior permission

Yes. He can instruct since the contract of employment subsists between the employer and the employee even during suspension as stated above.

V.P. Gidroniya v. The State of Madhya Pradesh & Anr., 1970 II LLJ 143 : 1971 (21) FLR 251 : 1970 LIC 1332 : 1970 AIR (SC) 1494 : 1970 (1) SCC 362 (S.C.CB)

d) Whether an employee can be instructed to mark attendance daily

An employee is suspended from service in terms of the powers granted under standing orders/service rules as the case may be. When suspension means temporarily debarring an employee from the service, it is not prudent to compel him to attend office/workplace daily to mark attendance. Such instruction was held unreasonable in the following case.

Zonal Manager Food Corporation of India v. Khaleel Ahmed Siddiqui, 1982 LIC 1140 (AP.DB) K.S. Periyaswamy v. Bharath Earth Movers Ltd., Bangalore, 2006 I LLJ 570 : 2006 I LLN 610 : 2006 LIC 483 : 2006 I CLR 490 : 2006 LLR 404 (Karn.HC)

e) Whether subsistence allowance can be subject to employee not being gainfully employed

The Model Standing Order 14(4)(e) under central rules states that the payment of subsistence allowance is subject to delinquent employee not being gainfully employed. Similar provision is contained in the Model Standing orders 25(5-B) pertaining to manual& technical workmen and 23(5-B) for clerical and supervisory workmen framed under Bombay Rules 1959. Therefore the employer can incorporate such conditions in the certified standing orders.

Since the privity of contract between the employer and employee is not terminated during the period of suspension and he is receiving allowance for his subsistence, he cannot engage himself gainfully during the period of suspension.

X. Points to be born by the employer while passing final orders after enquiry against employee under suspension

a) Employer to decide the status of suspension period while passing final orders

The order of suspension gets merged with the final order passed by the disciplinary authority either on completion of departmental enquiries or of criminal proceedings. It is therefore necessary for the disciplinary authority to also pass an order stating as to how the suspension period is to be treated.

Kuravilangad Service Co-operative Bank Ltd. v. State of Kerala & Ors., 1984 LIC 1787 (Ker.HC)

If the employer passes the final order of penalty whether by way of dismissal or any lesser penalty against the employee under suspension he should specify in the order of penalty whether or not the employee shall be treated to be under suspension in the intervening period i.e. from the date of suspension to the date of dismissal.

If the final order is silent on the aforesaid aspects, it is likely that the employee may draw an inference in favour of him and stake a claim for full salary for the period of suspension.

Status against of employee

suspension on passing final orders on enquiry Since suspension is effected in exercise of powers conferred by standing orders/service rules/regulations/settlements, the same also provided for the manner as to how the suspension period is to be treated while passing final orders on the conclusion of enquiry against the delinquent employee.

1. What will be the Status of suspension period when exonerated in departmental enquiry

If the employee is exonerated of all charges in the departmental enquiry and is reinstated, the standing orders/service rules normally require the employer to treat the employee to be on duty during the period of suspension and pay him full salary for the said period.

For example, the Model Standing Order 14(4)(d) under central rules state that if the employee under suspension is exonerated in the departmental enquiry or criminal trial, he is deemed to be on duty during the period of suspension and shall be entitled to the same wages as he would have received if he had not been placed under suspension after deducting the subsistence allowance.

Similarly MSO 25 (5A) (ii) for manual 7 technical workmen and MSO 23(5A)(iv) for clerical & supervisory workmen under Bombay Rules 1959 framed under Industrial Employment Standing Orders Act 1946 also treat a suspended workman who is exonerated of charges in departmental enquiry, to be on duty.

If the employee is exonerated in the departmental enquiry and consequently reinstated, the suspension too stands vacated and the employee is entitled to full wages for the period of suspension.

M/s. Kesoram Cotton Mills Ltd. v. Gangadhar & Anr. & vice versa, 1963 II LLJ 371 : 1963-64 (25) FJR 353 : 1963 (7) FLR 213 : 1964 AIR (SC) 708 (S.C.2J) O.P. Sharma v. U.P. State Warehousing Corporation & Ors., 1999 LIC 1447 (All.HC)

i) Whether employee can be granted leave for suspension period instead of treating him on duty

In spite of the employee being exonerated of charges, some employers attempt to treat the period of suspension as leave without pay and try to recover the subsistence allowance from him. Such action is clearly against law and shall not be resorted to.

O.P. Sharma v. U.P. State Warehousing Corporation & Ors., 1999 LIC 1447 (All.HC)

2. What will be the status of suspension period when awarded dismissal

The standing orders/service rules need to be looked into for this purpose. If the standing orders/service rules specify the manner in which the period of suspension is to be treated, the same may be followed. For instance the Model standing Order 14(4)(c) under central rules states that if an order of dismissal is passed, the workman shall be deemed to be absent from duty during the period of suspension and he shall not be entitled to any remuneration for such period and the subsistence allowance already paid to him shall not be recovered.

Thus in the following case, it was held that the suspended employee is only eligible for subsistence allowance from the date of suspension to the date of dismissal unless the dismissal is given retrospective effect.

South India Co-operative Spinning Mills Ltd. v. C. Mariappan & Anr., 1980 (56) FJR 310 : 1980 II LLN 211 (Mad.DB)

It is to be noted that it is not legal to recover subsistence allowance for the period of suspension merely because the standing orders state that it can be treated as absence from duty.

O.P. Sharma v. U.P. State Warehousing Corporation & Ors., 1999 LIC 1447 (All.HC)

3. What will be the status of suspension period if the punishment is other than dismissal

The Model Standing Order 14(4)(c) under central rules further states by way of proviso that if the penalty imposed is fine or stoppage of annual increment, the workman shall be deemed to be on duty during the period of suspension and shall be entitled to the same wages as he would have received if he had not been placed under suspension after deducting the subsistence allowance.

4. What will be the status of suspension when dismissal is set aside by the Court

He is entitled to full salary from the date of suspension since suspension order gets merged with the dismissal order and once the dismissal order is set aside, the suspension also stands vacated consequently.

Tekraj Vasandi Alias, K.L. Basandhi v. Union of India & Anr., 1988 I LLJ 341 : 1988 (72) FJR 290 : 1988 I LLN 892 : 1988 LIC 961 : 1988 AIR (SC) 469 : 1988 (1) SCC 236 (S.C.2J)

5. What will be the status of suspension when employee is acquitted

It is again to be ascertained from the relevant standing orders/service rules only. For instance the model standing order no. 14(4)(d) under central rules states that if the workman has not been found guilty of any of the charges framed against him, he shall be deemed to be on duty during the period of suspension and entitled to the same wages as he would have received if he had not been placed under suspension. The above standing order does not distinguish between an honorable acquittal and an acquittal on benefit of doubt.

Thus where an employee who was suspended pending criminal proceedings, has been acquitted on merits, the employer is required to respect the court’s verdict and is liable to revoke the suspension more so if the offence committed by the employee has nothing to do with the discharge of his official duties.

Hare Krishna Kundu v. Calcutta State Transport Corporation, 2005 III CLR 190 (Cal.HC) Banwari Lal Shrivastava v. State of M.P. & Anr., 2005 (104) FLR 20 (Chhat.HC) 55

Suspension Implications – The Rationale and its Various 56 However the service rules/regulations of some establishments as in the following case may treat the period of suspension where the acquittal is not honorable, as leave without pay disentitling him to pay and allowances for the period of suspension.

The Management of Reserve Bank of India, New Delhi v. Bhopal Singh Panchal, 1994 I LLJ 642 : 194 (84) FJR 277 : 1994 (68) FLR 22 : 1994 I LLN 552 : 1994 LIC 80 : 1994 AIR (SC) 552 : 1994 (1) SCC 541 (S.C.3J)

XI. Points for consideration for revoking suspension

The following factors are to be considered while revoking suspension:

(1) Whether there is inordinate delay in completing investigation and whether there exist justifiable grounds for the delay such as examining huge volume of material and large number of witnesses etc.

(2) Whether there is inordinate delay in completing departmental enquiry and such delay is due to any fault on the part of the employee.

(3) Whether the criminal trial is likely to be prolonged further.

(4) Whether the employee can be assigned non-sensitive job, if the charges are too serious against him.
(5) Whether his reinstatement will not disturb industrial peace and harmony.

(6) Whether his reinstatement will not be opposed to the public interest.

Some corporates or establishments may have framed rules providing for revocation of suspension if the investigation into allegations is continuing or pending beyond a stipulated period say six months or one year.

Whether suspension can be with retrospective effect

However the expiry of such stipulated period does not confer any vested right on the employee to demand revocation if there are justifiable grounds to continue it.

The Brihanmumbai Municipal Corporation thru’ The General Manager, BEST Undertaking v. Mr. Javid Abdul Mulla, 2006 (108) FLR 665 : 2005 (4) BCR 692 (Bom.HC)

XII. Whether chargesheet and explanation to precede suspension

It is not necessary to issue him chargesheet and call for his explanation before suspending an employee for an alleged misconduct since suspension pending enquiry or investigation or further action is not punishment

XIII. Whether suspension as interim measure is a punishment

Suspension effected as an interim measure for committing a misconduct is not a punishment and hence the employer cannot forfeit 50% of his salary along with dismissal when the regulations did not provide for such forfeiture as penalty.

Ravi Kant Sharma v. Deputy Registrar, Co-operative Societies & Ors., 2005 LIC 1462 (All.HC) A.C.D. Mello of Bombay v. Shipping Corporation of India Ltd., 1989 LIC 955 (Bom.HC)

XIV. Whether suspension can be with retrospective effect

An employee cannot be suspended with retrospective effect .It is likely to create anomalous situation since it is not practicable to treat an employee to be suspended from back date when he was on duty during the relevant period or on sanctioned leave. The only exception being in the case of a provision for deemed suspension of an employee on account of his arrest by police for an offence which may usually be found in service rules of public sector undertakings.

Suspension – The Rationale and its Various Implications Furthur MSO 25 (5) for Manual & Technical workmen MSO 23(5) for Clerical & Supervisory workmen lay down that an order of suspension comes into effect immediately on it’s communication to workmen. Similar provisions might have been made under rules by other states also. It is therefore advisable not to suspend an employee with retrospective effect to avoid legal complications.

XV. Whether injunction can be obtained against suspension

While a suit for declaration of suspension as illegal is maintainable since it is not barred by Specific Relief Act, a suit for injunction against suspension is not maintainable in a civil Court since a contract of personal service cannot be enforced by the civil Court under Specific Relief Act.

Siten Bose v. Anand Bazar Patrika Pvt. Ltd. & Ors., 1980 LIC 466 (Cal.DB)

However some states might have passed statutes conferring on the courts the power to grant injunctive kind of relief to the parties. For example the State of Maharastra passed the Maharastra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act which confers on the Labour Court u/s. 30(2) the power to pass an interim order including an order restraining the employer from committing an unfair labour practice. Since suspension is included as one of the unfair labour practices listed in Item 1 under Schedule IV, an employee working in an industry in Maharastra (for which Appropriate Government is Government of Maharastra) can approach for stay against if he apprehends suspension.

Tata Memorial Centre v. Dr. Sanjay Sharma & Ors., 1997 III LLJ 241 : 1997 (75) FLR 4 : 1998 IV LLN 151 : 1996 II CLR 964 (Bom.DB)

XVI. Suspension – No work no pay – Whether principle applicable during suspension

Since it is the employer who suspends the employee and prevents him from performing his duties, the principle of no work – no pay cannot be applied to deny him subsistence allowance.

Kanhaiyalal Parmar v. State of M.P. & Ors., 2006 LIC 2479 (MP.HC

Suspension for illegal strike – Whether it amounts to lock-out

XVII. Whether permission required for suspension as an interim measure u/s. 33 of Industrial Disputes Act 1947 pending an industrial dispute

No permission is required for suspending an employee during pendency of an industrial dispute since suspension pending enquiry is not a punishment.

Lakshmi Devi, Sugar Mills Ltd. v. Pandit Ram Sarup & Anr., AND Lakshmi Devi Sugar Mills Ltd. v. Chini Mills Mazdoor Sangh, 1957 I LLJ 17 : 1956-57 (11) FJR 273 : 1957 AIR (SC) 82 (S.C.CB)

XVIII. Employee on deputation – Who is competent to suspend

In case of deputation of an employee to another department or organization/company, the power to suspend such employee lies with the competent authority in the parent department/parent organization/parent company.

U.P. State Road Transport Corporation, Varanasi v. State of Uttar Pradesh & Ors., 1997 LIC 2438 (All.HC)

XIX. ‘No duty orders’ issued to badli workman – Whether Suspension

No duty orders issued to badli workman does not amount to suspension and hence he is not entitled to subsistence allowance.

Transport Manager & Anr. v. Vilas Sanu Deokar & Ors., 2003 I LLJ 59 : 2002 (94) FLR 772 : 2002 (4) BCR 257 (Bom.HC)

XX. Suspension for illegal strike – Whether it amounts to lock-out

Where the workmen are suspended for resorting to strike, it is likely that such suspension might be construed by the workers as illegal lock-out. This was answered by the Constitutional Bench in Lakshmi Devi Sugar Mills Ltd. (citation given below) that when workmen are suspended pending further orders for participating in illegal strike and on

Suspension Implications – The Rationale and its Various 60 apprehending their indulgence in violence, it is obviously a suspension pending enquiry and thus cannot be construed as lock-out much less an illegal lock-out when the strike itself is illegal.

Lakshmi Devi, Sugar Mills Ltd. v. Pandit Ram Sarup & Anr., AND Lakshmi Devi Sugar Mills Ltd. v. Chini Mills Mazdoor Sangh, 1957 I LLJ 17 : 1956-57 (11) FJR 273 : 1957 AIR (SC) 82 (S.C.CB)

XXI. Suspension – Is it deduction of wages under Payment of Wages Act 1936

Loss of wages on account of suspension cannot be recovered under the Payment of Wages Act since it doses not amount to deduction from wages.

Karnataka Central Co-operative Bank Ltd. v. S.D. Karpi, 1987 I LLJ 179 : 1987 (70) FJR 6 : 1987 I LLN 313 (Karn.HC)

XXII. Effect of suspension on service benefits

a) Leave

No leave including leave without pay can be granted to an employee under suspension. If leave with wages is granted to him, it entitles him to full wages during the period of suspension and even if leave without pay is granted, he will not be treated as being under suspension but mere absence from duties and thus it defeats the very purpose of suspension.

O.P. Sharma v. U.P. State Warehousing Corporation & Ors., 1999 LIC 1447 (All.HC)

b) Increments

It is a widely debated whether increments falling due during the period of suspension will count for subsistence allowance. One view is that increments have to be earned and therefore an employee who works full time for a year is only entitled to increments and since an employee under suspension cannot perform duties, he is not entitled to any increment that falls due during suspension.

A. Raghavan v. T.N.C.S Corporation Ltd., 1995 II LLN 1084 (Mad.HC) Rajasthan State Electricity Board & Anr. v. Narayan Lal Meena, 1996 III LLJ 1152 : 1995 LIC 864 (Raj.DB)

Effect of suspension on service benefits

Another view is that increments accrue in the normal course of employment and an employee is entitled to increment unless he is debarred by the efficiency bar or unless the increment is withheld as penalty.

However the prudent view is that since the suspension of an employee is governed by the standing orders or service rules, the decision whether to count the increments for computing subsistence allowance is to be taken on the basis of the language of the relevant provision. This is evident from the decision of the Madras Division Bench in Indian Overseas Bank’s case which is cited below. In this case the relevant provision of the Bipartite Settlement of the bank which grants subsistence allowance to a workman under suspension states that the subsistence allowance is payable to a workman at the rate of 1/3 for first three months and thereafter at the rate of 1⁄2 of the pay and allowances which the workman would have got but for suspension. Interpreting the expression ‘pay and allowances which the workman would have got but for suspension’, the Division Bench held that the employee is entitled to get all the increments and allowances which he would have got, had he not been suspended.

Indian Overseas Bank, rep. by its Chairman & Managing Director v. All India Overseas Bank Employees’ Union, rep. by its General Secretary & The Presiding Officer, Industrial Tribunal, 2005 III LLJ 59 : 2005 II CLR 741 (Mad.DB)

c) Bonus

Normally bonus is not payable since subsistence allowance is not treated as part of wages for computing bonus.

Motor Industries Co. Ltd. v. Popat Muralidhar Patil & Ors., 1997 II LLJ 1206 : 1997 (75) FLR 589 : 1997 I CLR 169 (Bom.HC)

d) Leave fare concession

No leave travel concession or leave fare concession facility is admissible during the period of suspension since no leave is admissible to an employee under suspension.

e) Loan facilities

Most corporates extend various loan facilities like housing loan, vehicle loan and consumer loan etc to their staff. Since these loans are recoverable from the salaries of employees and the employee under suspension does not draw any salary except subsistence allowance and his future with the company is dependent on the outcome of departmental enquiry, it is prudent not to advance any loan to an employee when he is under suspension at the time of making an application for it.

XXIII. Subsistence allowance

a) Why to be paid

(1) When an employer suspends a workman, he prohibits him from attending to his duties and earning his wages. Therefore the action of the employer affects adversely the fundamental right of the employee to earn his livelihood under Art. 21 of the constitution. An employer cannot deprive the employee of his right to earn his livelihood.

(2) Secondly, the employer who has right to suspend an employee, has corresponding obligation to provide subsistence allowance to the employee.

(3) Thirdly, an employee who is suspended is entitled to subsistence allowance since such right is to be treated as an implied part of contract of employment.

(4) The fourth ground for granting subsistence allowance is that an employee is deemed to be innocent till he is found guilty.

Orissa Road Transport Company Ltd. v. Narayan Parida & Anr., 1986 I LLJ 270 : 1985 (51) FLR 579 : 1986 I LLN 893 (Ori.DB)

Since subsistence allowance is required to be paid during the suspension of an employee therefore an employer has to frame rules for granting subsistence allowance.

XXIV. What shall be the quantum of subsistence allowance

The quantum of subsistence allowance is determined either by the standing orders or service rules or by the contract of service or by a State Act.

a) As per standing orders, if establishment covered by standing Orders Act

If the establishment is covered by Industrial Employment (Standing Orders) Act 1946, the employer is required to pay subsistence allowance as per Sec. 10A of the Act as under:

(1) At the rate of 50% of wages which the workman was entitled to draw immediately preceding the date of such suspension for the first ninety days of suspension and

(2) At the rate of 75% of such wages for the remaining period of suspension, if the delay in the disciplinary proceedings against such workman is not directly attributable to the conduct of such workman.

1. Whether employer can pay at rates u/s. 10A even if rates under standing orders more favourable

It was held by the Division Bench of Bombay High Court in May & Baker’s case Ltd. v. Shri Kishore Jaikrishandas Ichaporia & Ors., 1994 III LLJ 237 : 1991 (63) FLR 319 : 1991 II CLR 176 that though the terms of subsistence allowance prescribed under certified standing orders or model standings are more favourable, the employee is entitled to only the rates, prescribed u/s. 10A of the Act 1946 since certified standing orders do not constitute ‘any other law’ as required under sub-section (3) Of Standing Orders Act 1946.

May & Bakar Ltd. v. Shri Kishore Jaikrishandas Ichaporia & Ors., 1994 III LLJ 237 : 1991 (63) FLR 319 : 1991 II CLR 176 (Bom.DB)

b) If standing orders not applicable, as per service rules/settlements/contract of service

If an establishment is not covered by the Industrial Employment (Standing Orders) Act 1946, it may frame its own rules or regulations prescribing the quantum of subsistence allowance or incorporate a clause in the contract of service such as an appointment letter.

Suspension Implications – The Rationale and its Various 64 For instance in the case of public sector banks, the quantum of subsistence allowance for workmen is stipulated in Sastry Award, Desai Award and Bipartite Settlement. As per the said Awards and Settlement, the subsistence allowance payable pending enquiry is at the rate of 1/3 of the pay and allowances which the workman would have got but for suspension for the first three months and thereafter 2/3 of pay and allowances and after one year, full wages, if the delay in completing enquiry is not due to the workman.

c) As per State Act stipulating the quantum of allowance

If any state has passed any statute or law stipulating the quantum of subsistence allowance for the establishments located in the state, the subsistence allowance may be paid at the said rates in the establishments so covered.

Sub-section (3) of section 10-A of the Industrial Employment (Standing Orders) Act 1946 states that where any state enacts a law for payment of subsistence allowance and the rates specified there in are more beneficial than those specified u/s.tion 10-A of Standing Orders Act, then subsistence allowance is to be paid under the provisions of the state law.

For instance, in West Bengal, a government institute is governed by the West Bengal Payment of Subsistence Allowance Act 1969.

Secretary of the Managing Committee of Rabindra Smriti(s) Bidya Niketan & Ors. v. Mahadeb Bhattacharya & Ors., 2009 II CLR 144 (Cal.DB)

Similarly the Tamil Nadu State enacted laws providing for payment of subsistence allowance during suspension.

Management, Coimbatore District Co-operative Milk Producers Union v. P.O. Labour Court, Coimbatore & Anr., 2000 II LLJ 1436 : 2001 (88) FLR 264 : 2000 (87) FLR 607 : 2000 III LLN 623 : 2000 III CLR 810 (Mad HC)

Non-payment of subsistence allowance

Again the subsistence allowance to an employee working in Delhi Electric supply Undertaking is payable as per Delhi Electricity Act.

Delhi Electric Supply Undertaking, New Delhi v. G.P. Satsangi & Anr., 1984 LIC 54 (Del.DB)

While stipulating the quantum of subsistence allowance, the employers are requested to verify whether there is any state enactment also governing the payment of subsistence allowance and if so whether they are covered or exempted. They are advised to go through the provisions of the state laws scrupulously to determine as to which of the provisions are to be applied for payment of subsistence allowance.

d) What shall be the quantum, if the contract of service or service rules do not contain a provision for suspension

However the Apex Court voices a contrary view in Hotel Imperial’s case by holding that if the employer suspends an employee despite the absence of any provision or clause in the contract of service or rules enabling the employer to suspend an employee, he not only cannot escape from the liability on the ground that there is no provision for payment of subsistence allowance but on the other hand, becomes liable to pay full wages to the employee during the period of suspension.

Hotel Imperial, New Delhi v. Hotel Workers’ Union, 1959 II LLJ 544 : 1959-60 (17) FJR 39 : 1959 AIR (SC) 1342 (S.C.3J)

The Gauhati High Court held that subsistence allowance is not a bounty but a legal right of the suspended employee irrespective of the fact whether or not there is any provision made in the rules for payment of subsistence allowance.

Hanncilal Vaiphei v. State of Manipur & Anr., 2008 LIC 4057 (Gau.HC)

XXV. Non-payment of subsistence allowance

a) Whether vitiates departmental enquiry

Subsistence allowance is paid to an employee for his livelihood during the period of suspension. If the subsistence allowance is not paid to him, it inflicts financial hardship on him or penury so as to render it difficult for him to foot the expenses of undertaking a travel from his place to the

Suspension Implications – The Rationale and its Various 66 venue of enquiry, it is likely that the courts may view such non-payment as vitiating enquiry being violative of principles of natural justice as he is deprived of opportunity to defend himself.

Jagdamba Prasad Shukla v. State of U.P. & Anr., 2000 II LLJ 1513 : 2000 (97) FJR 304 : 2000 (87) FLR 1 : 2000 LIC 3111 : 2000 AIR (SC) 2806 : 2000 (7) SCC 90 (S.C.2J)

b) When does not vitiate enquiry

(1) It does not vitiate enquiry when the suspension period is short say one month as in the following case.

P. Elango v. Labour Court, Maduraj & Management of Enfield India, Ltd. Anaikaraipatti, 2001 II LLN 449 (Mad.HC)

(2) It does not vitiate enquiry if the workman did not apply for subsistence allowance at all as in one case, the award of the Labour Court was held not vitiated for non-payment of subsistence allowance since the employee did not apply for the same.

V. Venugopal & Anr. v. Management of Reed Relays & Electronic Ltd., Madras & Anr., 1999 III LLJ 1455 : 1998 LIC 86 (Mad.DB)

(3) In yet other case, the courts have held that mere non-payment of subsistence allowance does not vitiate enquiry unless the employee pleads that it has prejudiced his defence during the enquiry.

(4) Non-payment will not vitiate enquiry when no such plea is raised during enquiry but raised only before Tribunal for the first time.

Tulsi Ram v. Industrial Trinbunal & Anr., 2001 (90) FLR 1160 (Raj.HC)

(5) Non-payment will not vitiate enquiry unless the employee establishes that it has caused prejudice to his defence.

A.V. Anthony Swamy v. Management of M/s. St. John’s Medical College, Bangalore, 2009 I LLN 680 : 2008 LIC 3572 (Karn.HC)

Nevertheless, it is worth paying subsistence allowance now so as to avoid disputes later about validity of departmental enquiry.

Subsistence allowance – Whether a wage

c) Whether vitiates approval application u/s. 33 of Industrial Disputes Act, 1947

Non-payment of subsistence allowance pending application of approval of dismissal u/s. 33 of Industrial Disputes Act 1947 will render approval granted by the authority unsustainable as it violates the principles of natural justice.

Ranjit Singh & Anr. v. P.O. Industrial Tribunal, Punjab & Ors., 2003 I LLJ 1100 : 2003 (102) FJR 516 : 2003 (96) FLR 854 : 2002 (98) FLR (Sum) 2 : 2003 II LLN 113 : 2003 LLR 396 (P&H.DB)

XXVI. Subsistence allowance – Whether a wage

The definition of ‘wages’ varies under different labour laws. Whether a particular allowance or payment or earning is included in or excluded from the definition depends up on the nature of legislation and objectives of the Act. Thus it has often become a matter of debate and discussion and litigation in labour administration. However an attempt is made to bring certain clarity on the matter on the basis of interpretation and case claws on the subject.

a) Not a wage under Industrial Disputes Act 1947

Subsistence allowance was not held a wage u/s. 2(rr) of Industrial Disputes Act being not a remuneration paid on fulfilling terms of employment.

Orissa Road Transport Company Ltd. v. Narayan Parida & Anr., 1986 I LLJ 270 : 1985 (51) FLR 579 : 1986 I LLN 893 (Ori.DB)

b) Not a wage under EPF and Miscellaneous Provisions Act 1952

Since subsistence allowance is not a kind of remuneration earned in accordance with terms of employment and it is not a kind of remuneration paid to all the employees, it cannot form part of basic wages under EPF Act.

Bridge & Roof Co. (India) Ltd. v. Union of India (UOI), 1962 II LLJ 490 : 1962 (5) FLR 423 : 1963 AIR (SC) 1474 (S.C.CB)

c) Not a wage under Payment of Bonus Act 1961 It is not considered a wage with in meaning of wages u/s. 2(21) under Bonus Act.

Motor Industries Co. Ltd. v. Popat Muralidhar Patil & Ors., 1997 II LLJ 1206 : 1997 (75) FLR 589 : 1997 I CLR 169 (Bom.HC)

d) Is a wage under ESI Act 1948

Having regard to the beneficial nature of the legislation and it being a medical assistance which an employee needs even under suspension, subsistence allowance is considered is a wage under ESI Act.

Regional Director, Employees’ State Insurance Corporation v. Popular Automobiles, 1998 I LLJ 621 : 1997 (91) FJR 723 : 1997 (77) FLR 760 : 1997 III LLN 736 : 1998 LIC 121 : 1997 II CLR 1003 : 1997 LLR 1146 : 1997 AIR (SC) 3956 : 1997 SCC (L&S) 1842 : 1997 (7) SCC 665 (S.C.2J)

e) Is a wage under Payment of Wages Act 1936

Subsistence allowance is considered wage under Payment of Wages Act since suspension does not put an end to the contract of employment and the payment of subsistence too as per the terms of contract of employment only.

V.P. Gidroniya v. The State of Madhya Pradesh & Anr., 1970 II LLJ 143 : 1971 (21) FLR 251 : 1970 LIC 1332 : 1970 AIR (SC) 1494 : 1970 (1) SCC 362 (S.C.CB)

XXVII. Deductions – What can be permissible from subsistence allowance

The following statutory deductions are normally effected from subsistence allowance:

(a) Income tax deductions
(b) Professional tax deductions
(c) ESIC deductions

At the request of the employee, the following deductions can be effected.

(a) Loan installments:

If the company itself financed the employee (quantum of installments may be reviewed in proportion to the subsistence allowance and as per the guidelines, if any , obtaining in the establishment concerned.)

(b) Insurance premium

XXVIII. Recovery of subsistence allowance

a) Recoverable u/s. 33(c)(2) of Industrial Disputes Act 1947

A claim for recovery of subsistence allowance is maintainable u/s. 33(c)(2) of Industrial Disputes Act.

South India Co-operative Spinning Mills Ltd. v. C. Mariappan & Anr., 1980 (56) FJR 310 : 1980 II LLN 211 (Mad.DB)

b) Recoverable under State Subsistence Act if it provides for remedy for recovery

If the State Act provides for remedy for recovery of subsistence allowance and the Act bars claim u/s. 33(c)(2) of Industrial Disputes Act, the claim has to be made under the State Act.

Management, Coimbatore Dist. Co-op. Milk Producers Union v. P.O. Labour Court, Coimbatore & Anr., 2000 II LLJ 1436 : 2001 (88) FLR 264 : 2000 (87) FLR 607 : 2000 III LLN 623 : 2000 III CLR 810 (Mad.HC)

c) Recoverable as interim relief in proceedings u/s. 33(2)(b)

The employee who is suspended by the employer pending approval proceedings u/s. 33(2)(b) is not paid subsistence allowance can approach the Appropriate Court before whom the proceedings are pending for payment of the same and the court can grant subsistence allowance as interim relief.

Air India Ltd. & etc. v. Libio Francisco Colaco & Anr., 2004 I LLJ 850 : 2004 (101) FLR 249 : 2004 I LLN 942 : 2003 LIC 3257 : 2004 I CLR 767 (Bom.DB)

A. Formats

I. Order of deemed suspension for arrest for an offence

(Note: This provision may be in some public sector undertakings.)

*Order/Memorandum

(1) While working as............in.........(dept.)........., you have been arrested by the police for.........(offence)....... On.........(date).........In terms of * Rule/Regulation/Settlement, you are deemed to be under suspension with effect from the date of your suspension and you will be paid subsistence allowance as under as per *Rule/Regulation/Settlement .

(a) for the first days /months, you will be paid the suspension allowance at the rate of (mention the rate) of the wages you were drawing immediately preceding the date of suspension.

(b) for the *succeeding period/ remaining period, you will be paid suspension allowance at the rate of of the wage you were drawing immediately preceding the date of suspension.

(Please quote the rate as stated in the relevant standing order/service rule/regulation/settlement etc.)

(2) You are hereby also directed

(i) not to leave the head office without prior permission of competent authority.

(ii) to attend the enquiry as and when directed by enquiry officer.

(iii) not to enter company premises without permission of competent authority except for purpose of enquiry.

Place : Date : For Company Competent Authority To, Shri.............. ....................

* Strike off whichever is not applicable.

Format of suspension pending departmental enquiry

II. Order of suspension for disorderly behaviour/fraud pending departmental enquiry

You are working as a in department/ section. You have committed (describe misconduct in brief) on (date) . Accordingly a chargesheet no........... dated........ was served on you and a departmental enquiry was initiated against you and pending inquiry/ investigation into the above matter, you are hereby suspended from service with immediate effect in terms of *Model Standing Orders/ Certified Standing Orders/ Rules/ Regulations applicable to you.

(1) During the period of suspension, you will be paid suspension allowance as under:

(a) for the first days /months, you will be paid the suspension allowance at the rate of (mention the rate) of the wages you were drawing immediately preceding the date of suspension.

(b) for the succeeding period/ remaining period, you will be paid suspension allowance at the rate of of the wage you were drawing immediately preceding the date of suspension.

(Please quote the rate as stated in the relevant standing order/service rule/regulation/settlement etc.)

(2) You are hereby also directed

(i) not to leave the head office without prior permission of competent authority.

(ii) to attend the enquiry as and when directed by enquiry officer.

(iii) not to enter company premises without permission of competent authority except for purpose of enquiry. For Co.

Competent Authority

* Strike off whichever is not applicable.

Suspension – The Rationale and its Various Implications

The quantum of subsistence allowance depends upon the rates, prescribed under Standing Orders / Rules / Regulations applicable to the establishment. In the absence of Standing Orders / Rules / Regulations the rates at which the subsistence allowance is payable depends upon the terms of letter of appointment. If there is no clause to this effect in the appointment letter, the company may be required to pay full wages. Please refer to our notes in this connection given above.

III. Order of suspension on arrest and pending criminal proceedings

(Note: This is in case the criminal charges are similar to the charge-sheet and it is not advisable to suspend the employee and pay suspension allowance during the period he is in police/ judicial custody.)

To Place : Date :

You are working as a in department/ section and you have been arrested by the police on in connection with an offence u/s of the Indian Penal Code, 1860 and a criminal proceeding has been initiated against you for the said offence which is pending. During the period you are in police/ judicial custody your absence will be treated as unauthorised and when you are released on bail, you will be deemed to be suspended from service with immediate effect in terms of * Model standing Orders/ Certified Standing Orders / Rules/ Regulations applicable to you.

During the period of suspension you will be paid subsistence allowance as under:

(a) For the first days, you will be paid subsistence allowance at the rate of (mention rate) of the wages you were drawing immediately preceding the date of suspension.

(b) For the succeeding period/ remaining period, you will be paid subsistence allowance at the rate of (mention rate) of the wages you are drawing immediately preceding the date of suspension.

Order of suspension on arrest and pending criminal proceedings

You are hereby also directed

(i) not to leave the head office without prior permission of competent authority.

(ii) you are advised not to enter company premises/ place of work without prior permission of competent authority.

(iii) not to enter company premises without permission of competent authority except for purpose of enquiry.

For Co.

Competent Authority

* Strike off whichever is not applicable.

(The quantum of subsistence allowance depends upon the rates prescribed under S.O/ relevant rules/ regulations and where not under S.O/ rules/ regulation the Shop & Establishments Act.)

IV. Order of revocation of suspension on acquittal in criminal proceedings

(Note: If revocation is stipulated in service rule/regulations/settlements.)

To Place : Date :

While you were working as a in department/section, *a criminal proceeding/investigation had been initiated against you for the offence of u/s of I.P.C, 1860 and pending criminal proceedings/ investigation you had been suspended on .

Suspension Implications – The Rationale and its Various 74 Since you have been acquitted of all the charges/ offences in the criminal proceedings, the suspension order dated has been revoked with immediate effect and you are advised to report to the competent authority (specify department) within days from the date of receiving this notice.

You will be deemed to be in continuous service from the date of suspension and you will get the full wages for the suspension period after deducting the subsistence allowance which have already been paid to you during the period of suspension.

For Company,

Manager/Competent Authority

* Strike off whichever is not applicable.

V. Format of order when employee is acquitted on benefit of doubt

(Note: If service rules/regulations provide for initiating disciplinary action in case of acquittal of benefit of doubt which may be in public sector undertakings and the offence has bearing on the performance of duties of the employee.)

* Order/Memorandum

You have been suspended from service with effect from ......vide order dated ......pending criminal proceedings initiated against you by police vide their letter dated.............It has now been in formed by the *police/Court( write name of the appropriate court) by their *letter/order dated........that you have been acquitted of the charges in the criminal trial. It is observed from the said letter/order that you have been acquitted on grounds of benefit of doubt/technical grounds and thus your acquittal is not honourable. In terms of *service rule/regulation/settlement, you are deemed to be on leave without pay for the period of suspension from...... to......( if they so provide) and you are advised to report for duty at.........within.........days .This is without prejudice to company’s right to initiate disciplinary action against you under * service rule/settlements/regulations.

Revoking suspension on exoneration of charges

In terms of *service rule/regulation/settlement, you are deemed to be on leave without pay for the period of suspension from...... to....... and disciplinary action is contemplated against you under *service rule/regulation/settlement for ......(quote misconduct)........and pending such action, it has been decided to suspend you from service with immediate effect.

Place: Competent Authority/ Date: Disciplinary authority

To Shri............... ...................

* Strike off whichever is not applicable.

VI. Order of revoking suspension on exoneration of charges in departmental inquiry

To
Place :
Date :

You were working as a in department/ section and you were served with chargesheet no............dated........ for............(misconduct)...........You had been suspended pending enquiry into the above mentioned charges.

The enquiry officer has exonerated you from all the charges leveled against you, and *management/disciplinary authority after perusing the enquiry report concurred with him and accordingly exonerated you of the charges vide order no........... dated..........Consequently the suspension order dated has been revoked and you are advised to report to the competent authority (specify department) within days from the date of receiving of this notice.

Suspension Implications – The Rationale and its Various

You will be deemed to be in continuous service during the period of suspension and you will be entitled to full wages for suspension period after deducting the subsistence allowances which was already paid to you during the period of suspension.

For Company,

Manager/Competent Authority

* Strike off whichever is not applicable.

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