EMPLOYMENT UPDATE | INDUSTRIAL RELATIONS CODE, 2020 

Parliament recently promulgated the Industrial Relations Code, 2020 (IR Code) which received the assent of the President on 28 September 2020. The Code will come into effect on a date notified by the Central Government in the Official Gazette. This marks the second of four labour codes which the Government announced last year. The first being the Code on Wages was passed in 2019. More detailed analysis of the Code on Wages, 2019 can be found here .

The IR Code subsumes the following acts (i) The Industrial Disputes Act, 1947 (IDA); (ii) The Trade Unions Act, 1926 (TU Act); and (iii) The Industrial Employment (Standing Orders) Act, 1946 (IE-SO Act).

Applicability:

The IR Code redefines the term Industry, to bring it in accordance with the other labour laws. Section 2(p) of the IR Code, excludes the following from the definition of Industry: (i) Charitable institutions; or (ii) Government activities relating to sovereign functions including defence research, atomic energy and space; or (iii) any domestic service.

The definition of Industry has not categorically excluded hospitals, agricultural operations, educational institutions and even those places run by clubs, individuals or bodies of individuals, employing less than 10 people, unlike the IDA. Therefore, it can be assumed that they are deemed to be included.

Salient features of the IR Code:

• Definitions: The IR Code defines and re-defines the terms relating to labour laws to bring them in consonance with the other labour laws and remove discrepancies: A few examples are:
  
  (i)The term worker has been used to substitute workman which was used under the IDA and has also brought in certain changes such as excluding an apprentice from the definition of worker, but including sales promotion employees and working journalists under its ambit.
  
  (ii)The IR Code has defined an employee, which was absent in the IDA. It has been defined to include persons doing managerial, clerical, supervisory and technical work, thereby covering a larger pool of persons engaged by industrial establishments.
  
  (iii)The term employer has been expanded to include contractors and the legal representative of deceased employers as well. As per the revised definition, ‘employer’ now means and includes the head of the department, occupier of the factory, manager of the factory, managing director, contractor and legal representatives of a deceased employer. These provisions were missing in the definition of ‘employer’ under the ID Act.
  
  
• Standing Orders: The IR Code, like the Standing Orders Act, provides for the adoption of the standing orders in line with the model standing orders to be made by the Central Government. The IR Code provides that all industrial establishments, with 300 workers (previously 100) or more must prepare standing orders. The IR Code has further removed the provision for the Central Government making the provisions related to standing orders, applicable to establishments with less than the statutory threshold of 300 workers.
  
  
• Grievance Redressal: While a Grievance Redressal Committee (GRC) is constituted for an establishment with 20 or more workers, a Works Committee (WC) is envisioned for an establishment with 100 or more workers. While they are broadly similar, they differ in certain aspects. One such aspect is that there is a compulsory and proportional representation of women envisioned in the GRC, which is absent in a WC.
  
  
• Industrial Tribunals: The IR Code provides for the constitution of Industrial Tribunals and a National Industrial Tribunal to adjudicate disputes which may arise in the labour industry. While Section 55 of the IR Code empowers the tribunal to pass an award enforceable after 30 days, it also provides the central government to defer the enforcement of an award on the grounds of being against national economy or social justice. In place of multiple adjudicating bodies like the Court of Inquiry, Board of Conciliation and Labour Courts under the ID Act, only Industrial Tribunals have been envisaged as the adjudicating body to decide appeals against the decision of the conciliation officer, making the process of dispute resolution streamlined and less complicated.
  
  
• Strikes and Lockouts: The IR Code requires all persons to give a prior notice of 14 days’ notice before a strike or a lockout. As per the IDA, this criterion was only applicable for public utility services. The definition of strike has been amended to include within its ambit, ‘concerted casual leave on a given day by 50% or more workers employed in an industry’.
  
  
• Negotiating Union and Council: As per the IR Code, when there is more than one trade union in the establishment, the trade union with 51% of the workers as its members will be recognized as the sole negotiation union. This trade union shall be authorized solely to bargain with the employer and reach an agreement. In cases where none of the trade unions have 51% membership of the workers, then a Negotiating Council shall be set up by the employer.
  

MHCO Comment: The IR Code seeks to streamline the labour laws relating to trade unions, conditions of employment and industrial disputes. The rules for implementation of the IR Code have been recently codified by the Central Government. It is aimed by the government to bring the IR Code in enforcement by April, 2021.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

RERA UPDATE | BOMBAY HIGH COURT CLARIFIES THAT REAL ESTATE DEVELOPERS CANNOT RELY ON ‘FORCE MAJEURE’ CLAUSE TO DENY INTEREST TO HOMEBUYERS

The Bombay High Court recently in case of ‘Westin Developers Pvt Ltd. v. Raymond Alexis Nunes’ held that a real estate developer cannot rely on the usual ‘force majeure’ clauses to deny interest on delayed possession to homebuyers. This update analyses the said case.

BACKGROUND OF THE CASE:

• Raymond Alexis Nunes (Homebuyer) had purchased a flat in the project known as ‘Joanita Villa’ promoted by Westin Developers Private Limited (Developer). The parties had agreed that the Developer would handover possession of the flat on or before 30 June 2017.
  
  
• The Developer defaulted in handing over possession. Accordingly, the Homebuyer filed a Complaint before the Maharashtra Real Estate Regulatory Authority Tribunal (MahaRERA) for handing over possession of the flat along with interest for the delay. The Developer disputed the claim of the Homebuyer and argued that the delay in handing over possession of the flat was caused on the part of the competent authority namely Municipal Corporation of Greater Mumbai (MCGM) in granting the Developer the commencement certificate on time. The Developer argued that the delay in obtaining the commencement certificate was beyond its control and hence was covered under the force majeure clause in the agreement for sale.
  
  
• MahaRERA held that the Developer could not blame the MCGM for the incomplete work pending in the project and stated that the reasons cited by the Developer were not covered under the force majeure clause mentioned in the agreement. MahaRERA further held that the Developer had not provided any plausible reasons for the delay in handing over possession to the Homebuyer and directed the Developer to pay interest to the Homebuyer from 1 January 2018, giving the Developer six months extension as by way of a grace period.
  
  
• Being aggrieved by the order of MahaRERA, the Homebuyer filed an appeal before the Maharashtra Real Estate Regulatory Authority Appellate Tribunal (Appellate Tribunal) challenging the grace period granted to the Developer in payment of interest. The Appellate Tribunal allowed the appeal and held that there was no specific clause in the agreement, entitling Developer to any grace period of six months. The Appellate Tribunal directed the Developer to pay interest to the Homebuyer from 1 July 2017, which was the date agreed by the Developer to handover possession in the agreement till the actual date of possession.
  
  
• The Developer preferred an appeal before the Bombay High Court against the order of the Appellate Tribunal.
  
  
• The Developer submitted before the Bombay High Court that the agreement contained a clause that the possession date was subject to any cause beyond the control of the Developer including any order by Central or Local Authorities which included delay in issuance of the completion or occupation certificate by these authorities. The Developer stated that this fact was not considered neither by MahaRERA nor Appellate Tribunal.
  

THE BOMBAY HIGH COURT HELD:

• It was noted that the clause referred and relied upon by the Developer was nothing but a force majeure clause where the Developer could not be faulted for any delay in delivery of possession, if the delay is caused by any reason beyond the Developers control. Further the Bombay High Court held that a simple force majeure clause in the agreement does not provide for or entitle the Developer to any grace period and that the Developer has to make out a case that the delay caused in handing over of possession was due to factors referred to in the force majeure clause.
  
  
• The Bombay High Court further considering the facts of the case stated that it was apparent from the record that the MahaRERA and Appellate Tribunal were not impressed by any of the reasons submitted by the Developer towards the justification for the delay.
  
  
• Before dismissing the appeal the Bombay High Court held that the grace period of six months granted by the MahaRERA was nothing but an ad-hoc measure and was rightly not accepted by the Appellate Tribunal.

MHCO Comment: This judgment provides much needed clarification to the interpretation of the clause ‘Force Majeure’ and it is a welcome precedent to all homebuyers who are generally denied of interest on the delayed possession by the Developers on account of a standard Force Majeure clause in their respective purchase agreements.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance. 

 IBC UPDATE | AVOIDANCE PROCEEDINGS CANNOT SURVIVE BEYOND THE TERM OF CIRP

The Delhi High Court has recently passed an order in Venus Recruiters Private Limited vs Union of India & Others, wherein it has held that proceedings for avoidance of preferential and / or other kinds of suspect transactions cannot survive after the term of Corporate Insolvency Resolution Process (CIRP).

BACKGROUND

• CIRP was instituted against Bhushan Steel Limited (Corporate Debtor) and thus, a Resolution Professional (RP) was appointed for conducting the CIRP of the Corporate Debtor.
  
  
• Thereafter, the resolution plan submitted by Tata Steel Limited was approved by the Committee of Creditors (CoC) and the same was filed with the National Company Law Tribunal, Principal Bench, New Delhi (NCLT) seeking its approval.
  
  
• In the interim i.e. before approval of the Resolution Plan, the RP filed an avoidance application under Section 43 of the Insolvency and Bankruptcy Code, 2016 (IBC), enumerating various transactions as `suspect preferential transactions’ with related parties (Avoidance Application).
  
  
• NCLT approved the Resolution Plan. However, there was no separate order passed by the NCLT with respect to the Avoidance Application. NCLT’s order approving the Resolution Plan was upheld by the National Company Appellate Law Tribunal (NCLAT).
  
  
• After approval of the Resolution Plan, the NCLT, vide an order (Order), impleaded Venus Recruiters Private Limited (Petitioner), as a party in the Avoidance Application, and issued notice to it.
  
  
• The said Order of the NCLT, was challenged by the Petitioner, by way of a writ petition before the Delhi High Court.
  

The Delhi High Court held:

• The role of the RP is finite in nature and comes to an end after the approval of the resolution plan. Hence, the RP cannot act on behalf of the Corporate Debtor after the approval of the Resolution Plan. Thus, the “Former RP” does not possess the required locus standi to initiate avoidance proceedings.
  
  
• The Court observed that once the Resolution Plan was approved by the NCLT and the management of the Corporate Debtor was handed over to the successful resolution applicant i.e. Tata Steel Limited, the NCLT had no further jurisdiction to adjudicate, except on issues pertaining to the Resolution Plan itself.
  
  
• Therefore, the Court held that since the Resolution Plan was approved by the NCLT before the date of passing the Order, CIRP of the Corporate Debtor had come to an end, and thus, the NCLT lacked jurisdiction to adjudicate upon the Avoidance Application subsequently.
  
  
• The Court further held that from a perusal of section 44 of the IBC, the orders that can be passed by the NCLT are supposed to benefit the creditors and not the new management of the corporate debtor. Since after the approval of the Resolution Plan, the proceeds of preferential transactions cannot be included in the Resolution Plan to be distributed amongst the creditors, the Avoidance Application cannot be permitted.
  
  
• Thus, in light of the above, the High Court held that the process of determination of preferential or suspect transactions would run parallel to the other steps involved in the CIRP and avoidance applications cannot survive beyond the term of CIRP as the same would be contrary to the mandate of the IBC.

MHCO Comment :

The judgment of the Delhi High Court would ensure that third parties are not dragged into litigation, even after the conclusion of CIRP over alleged suspect transactions. However, it also implies that applications pertaining to preferential and / or other suspect transactions should be decided before the conclusion of the CIRP in order to ensure that avoidance proceedings are decided on merits.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.