THE AFTERMATH OF SANDOZ CASE IN SALES PROMOTION EMPLOYEES ACT

PRADEEP KUMAR

April 30

-PRADEEP KUMAR

"Just as the mistakes princes make are paid for by whole peoples, so the errors of great minds spread their malign influence over whole generations, even for hundreds of years, growing and proliferating until in the end they degenerate into monstrosities".- Arthur Schopenhauer, The World as Will and Representation.

INTRODUCTION

The Sales Promotion Employees (Conditions of Service) Act, 1976 (No. 11 of 1976) was assented to by the President of India on 25 January 1976, was published in Gazette of India on 25 January 1976, and came into the Statute Books.

The Act, however, came into force with effect from 6th March, 1976, i.e. the date of notification in the Gazette of India, Extraordinary, Part II, sec. 3 (ii) vide Notification No. S.O. 176(E), dated 6th March, 1976.

The Sales Promotion Employees (Conditions of Service) Rules, 1976 under the Act were notified vide Government of India MOLE Notification No. G.S.R. 113 (E), Dated 8th March, 1976, published in the Gazette of India, Extraordinary, Pt. II, Section 3 (i), Dated 8th March, 1976.

The Long Title of the Act states that, it is- "An Act to regulate certain conditions of service of sales promotion employees in certain establishments." As per Sec. 1(4) of the Act, itapplies in the first instance to every establishment engaged in pharmaceutical industry.

ENLARGEMENT OF SCOPE:

The Scope of the Act was enlarged in the year 2011, when 10 new occupations added vide GoI MOLE Notification No. 217(E), Dt. 31.01.2011, published in the Govt. of India Gazette Extraordinary Pt. II Sec. 3 (i) No. 177, Dt. 01.02.2011. In addition to its original scope under the Act No. 11 of 1976,i.e. Pharmaceutical Industry; the 10 newly added occupations are-

Cosmetics, soaps, household cleaners and disinfectants.
Readymade garments.
Soft drink manufacturing industries.
Biscuits and confectioneries.
Ayurvedic, Unani and Homoeopathic Medicines.
Automobiles including accessories and spare parts.
Surgical equipments, artificial prosthesis and diagnostics.
Electronics, computers including accessories and spares.
Electrical appliances.
Paints and varnishes.

WHO IS A SALES PROMOTION EMPLOYEE AND WHAT THE ACT REALLY IS:

Sec. 2(d) of the Act defines asunder:

'(d) "sales promotion employees" means any person by whatever name called (including an apprentice) employed or engaged in any establishment for hire or reward to do any work relating to promotion of sales or business, or both, but does not include any such person—

who, being employed or engaged in a supervisory capacity, draws wages exceeding sixteen hundred rupees per mensem; or
who is employed or engaged mainly in a managerial or administrative capacity.'

The SPE (CS) Act consists of 22 Sections in 4 Chapters and prescribes 4 Forms. A cursory glance of the Act shows the following structure of the Act:

CHAPTER -I (Preliminary)

1. Short title

2. Definitions

CHAPTER II (Holidays and Leave)

3. Applicability of Chapter.

4. Number of holidays in a year.

5. Compensatory holidays.

6. Wages for holidays

7. Wages for weekly day or rest

8. Competent officers.

9. Application for leave

10. Recording of reason for refusal or postponement of leave.

11. Affixing of holidays to leave.

12. Holidays intervening during the period of leave.

13. Recall before expiry of leave

14. Earned leave and cash compensation for earned leave not availed of.

15. Medical leave.

16. Quarantine leave.

17. Extraordinary leave.

18. Leave not due.

19. Study leave.

20. Casual leave.

21. An employee on casual leave.

CHAPTER III (Letter of Appointment)

22. Letter of appointment

CHAPTER IV (Registers and other Documents)

23. Maintenance of registers and other documents.

FORMS

FORM A Letter of Appointment [ rule 22 (1)].

FORM B Register of Sales Promotion Employees. [rule 23 (a)]

FORM C Service Bok [See rule 23 (b)]

Form D Register of Service Books for Sales Promotion Employee [rule 23 (c)]

Leave Rules under the SPE (CS) RULES, 1976 made under the Act prescribes as follows:

Rule 2-Definitions:

(b) "authorised medical attendant" = medical practitioner authorised by employer .

(c) "casual leave" = leave to cover casual absence of the sales promotion employee from duty for personal reasons ;

(d) "earned leave" = leave admissible under Cl. (a) of Sec. 4'

(e) "extraordinary leave" = leave granted to SPE in special circumstances and when-

(a) no other leave is admissible ; or

(b) other leave is admissible, but employee applies for grant of EOL;

(g) "leave" includesEL, Medical Leave, EOL, leave not due, CL, study leave or quarantine leave;

(h) "leave not due" = leave which is not due to SPE, but may be granted to him in anticipation of its being earned subsequently ;

(i) "leave on medical certificate" = leave admissible u/Sec. 4 (b) ;

(j) "quarantine leave" = leave of absence from duty by reason of the presence of an infectious disease in the household of the sales promotion employee ;

(l) "study leave" = leave granted to a sales promotion employee to enable him to undertake a course of study.

Rules 4- Casual Leave= 10 holidays in a calendar year.

Rule 5. Compensatory holidays. - If SPE attends to duties on a holiday, a compensatory off shall be given to him, within 30 days immediately following the holiday, on a day mutually to be agreed up on by him and his employer.

Rule 6. Wages for holidays.- SPE is entitled to wages on all holidays, as if he was on duty.

Rule 7. Wages for weekly day or rest.--A sales promotion employee shall be entitled to wages for the weekly day of rest as if he was on duty.

13. Recall before expiry of leave- SPE entitled to travelling allowance for the journey to join duty.

SEC. 6 OF THE SPE (CS) ACT VIS-À-VIS SEC. 2 (S) OF THE ID ACT:

"6. Application of certain Acts to sales promotion employees.— (1) The provisions of the Workmen's (now Employee's) Compensation Act, 1923 (8 of 1923), as in force for the time being, shall apply to, or in relation to, sales promotion employees as they apply to, or in relation to, workmen within the meaning of that Act.

(2) The provisions of the Industrial Disputes Act, 1947 (14 of 1947), as in force for the time being, shall apply to, or in relation to, sales promotion employees as they apply to, or in relation to, workmen within the meaning of that Act and for the purposes of any proceeding under that Act in relation to an industrial dispute, a sales promotion employee shall be deemed to include a sales promotion employee who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute or whose dismissal, discharge or retrenchment had led to that dispute.

(3) The provisions of the Minimum Wages Act, 1948 (11 of 1948), as in force for the time being, shall apply to, or in relation to, sales promotion employees as they apply to, or in relation to, employees within the meaning of that Act.

(4) The provisions of the Maternity Benefit Act, 1961 (53 of 1961), as in force for the time being, shall apply to, or in relation to, sales promotion employees, being women, as they apply to, or in relation to, women employed, whether directly or through any agency, for wages in any establishment within the meaning of that Act.

(5) The provisions of the Payment of Bonus Act, 1965 (21 of 1965), as in force for the time being, shall apply to, or in relation to, sales promotion employees as they apply to, or in relation to, employees within the meaning of that Act. (6) The provisions of the Payment of Gratuity Act, 1972 (39 of 1972), as in force for the time being, shall apply to, or in relation to, sales promotion employees as they apply to, or in relation to, employees within the meaning of that Act.

(7) Notwithstanding anything contained in the foregoing sub-sections,—

(a) in the application of any Act referred to in any of the said sub-sections to sales promotion employees, the wages of a sales promotion employee for the purposes of such Act, shall be deemed to be his wages as computed in accordance with the provisions of this Act;

(b) where an Act referred to in any of the said sub-sections provides for a ceiling limit as to wages so as to exclude from the purview of the application of such Act persons whose wages exceed such ceiling limit, such Act shall not apply to any sales promotion employee whose wages as computed in accordance with the provisions of this Act exceed such ceiling limit."

Thus, from the above, it can be observed that, Sec. 6(2) of the SPE (CS) Act stipulates that theprovisions of the Industrial Disputes Act, 1947 shall apply to, or in relation to, sales promotion employees as they apply to, or in relation to, workmen within the meaning of the ID Act.

Now coming to Sec. 2 (s) of the Industrial Disputes Act, 1947, it is obvious that there is no mention of the sales promotion employees in the definition of the 'workman'. For better elucidation the said clause is mentioned hereunder:

"(s) "workman" means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person—

(i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or

(ii) who is employed in the police service or as an officer or other employee of a prison; or

(iii) who is employed mainly in a managerial or administrative capacity; or

(iv) who, being employed in a supervisory capacity, draws wages exceeding ten thousand rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature."

THE CONSTITUTION AMENDMENT ACT, 1982 (ACT 46 OF 1982):

The Industrial Disputes Amendment Act, 1982 (Act 46 of 1982) intended to make sea change in the Industrial Disputes Act, 1947, but could not be passed in toto due to stiff opposition. The clauses (a), (b) and (d) to (k) of section 2 and sections 3, 4, 5, 6, 8, 9, 10, 11, 12, 14, 15, 16, 17, 18, 19, 20, 21 and 23 of the ID (Amendment) Act, 1982 came into force w.e.f. 21.08.1984 vide Notifn.No.S.O.606(E), dated 21.8.1984.

As regards the other Clauses and Sections of the Amending Act 46 of 1982, it was specified that they shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates maybe appointed for different provisions of this Act. Repealing of Sec. 6(2) of the SPE Act was made a provision of Sec. 24 of the Amending Act, which did not come into force on 21.08.1984.

As of today, only some part of the 1982 Amendment amending the definition of 'wages' under the ID Act has been enforced. But the parts amending the definition of 'industry' under Sec. 2(j) of the ID Act and repealing of Sec. 6(2) of the SPE Act are yet to become effective as law.

SANDOZ CASE & JOURNEY THEREAFTER:

However, unfortunately, these facts were not examined properly by the Supreme Court of India in H. R. Adyanthaya and Others v Sandoz (India) Limited and Others [AIR 1994 SC 2608] case, where SPEs were deprived of the protection and remedy under the ID Act, in case of retrenchment (Sec. 2(oo) ID Act, etc.

A proper interpretation and assessment of the actual enforcement of 1982 Amendment in the Sandoz Case would have saved the day for sales promotion employees. But that was not to be destined for the SPEs.

Hence, a few States have tried to undo the damage that Sandoz case had already done by addressing the issue in right perspective, and have gone ahead in expressly covering 'sales promotion employee' within the definition of 'workman' by making suitable amendments to the ID Act, as a result of which Sales Promotion Employees can be covered under the ID Act in those States. These States include- Assam, Bihar, Jharkhand, Kerala, Odisha, Punjab, Tamil Nadu, Tripura and West Bengal.

The State Amendments to the ID Act are almost worded in similar terms, viz.:

In clause (s) of section 2 of the Industrial Disputes Act, 1947 for the words and comma "operational, clerical or supervisory", the words and commas "sales promotion, operational, clerical or supervisory work or any work for promotion of sales" shall be substituted.

Effect of the State Amendment in Sec. 2 (s) of ID: Pursuant to such amendment the relevant provision under Sec. 2 (s) in respect of the State shall be read as:

"(s) 'workman' means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, sales promotion, operational, clerical or supervisory work or any work for promotion of sales for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been discharged, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose Discharge, discharge or retrenchment has led to that dispute, but does not include any such person— xxx"

Thus any SPE posted in these States, and engaged in sales promotion, operational, clerical or supervisory work or any work for promotion of sales irrespective of nature/ designation/ nomenclature of job and wages can now take recourse under ID Act, as if they were "workman" u/S. 2(s) of the ID Act.

Most of the judgments (including the Sandoz judgment (supra), insofar as SPEs are considered not being "workman", may be inapplicable in these States, if the SPE (CS) Act, 1976 is read in consonance with ID Act, 1947 on incorporating the ID (State Amendment) Act therein.

Besides, some later judgments have rectified this apparent error in judgment in Sandoz case, which was based on misreading of the enforcement of the ID Amendment Act, 1982. Some illustrations showing both the angles are given below:

I. Some Case Laws not favouring SPE as 'workman':

'The work of promotion of sales of the product or services of the establishment is distinct from and independent of the types of work covered by the definition'. Accordingly, the court held, a sales promotion employee will not be considered as a 'workman' as defined under the ID Act. 5-Judge Bench in H. R. Adyanthaya and Others v. Sandoz (India) Limited and Others [AIR 1994 SC 2608]
The labour court incorrectly allowed sales promotion employees to avail the provisions of the ID Act for redressal of their grievances by resorting to section 6(2) of the SPE Act. Indian Drugs and Pharmaceuticals Limited v. State of Jharkhand and Other [2004 (3) JCR 231 (Jhar).
The Labour Court, Coimbatore, was right in its approach 'because of the fact that sub-section (2) of section 6 of the Sales Promotion Employees (Conditions of Service) Act 1976, relating to the application of the ID Act has been omitted on the enforcement of section 24 of the Industrial Disputes (Amendment) Act 1982. The Manager, The Scientific Fertilizer Company Private Limited v. The Presiding Officer, Labour Court and Others [(2007) 6 MLJ 1723.
Further, the Tribunal read the decision of the High Court in H.R. Adyanthaya Etc. Etc. v. Sandoz (India) Ltd. Etc. Etc. reported in 1995(1) LLJ 303 wrongly. The Tribunal mistakenly held that a sales promotion employee is a workman as defined in the Industrial Disputes Act which was the opposite of the finding in. the Supreme Court Judgment. As such, the Tribunal not only failed to identify the issue arising in the case correctly and misdirected itself in deciding the issue considered by it wrongly. Lupin Limited v. G. Suresh & Anr. 2008 (1) KLJ 68 (Ker).
It is an accepted position that in the year 1976, when the SPE Act was enacted there was a controversy whether sales promotion employees will be covered under any of the definitions of Section 2 Clause(s) of the Industrial Disputes Act and the answer has been in the negative. For this a reference may be made to Sandoz (India) Ltd. case reported in (1995-I-LLJ-303) (SC). The learned Judge Justice P.B. Sawant, speaking for five judges has traced the history of the said Clause(s) of Section 2 of the Central enactment right upto the paragraph 2 from time to time. Thereafter in paragraphs 24, 35, 26 and 37 the learned Judge has given reasons as to why conceptually it is not possible to treat them as workmen and thus, in our opinion, as rightly submitted by the learned Advocate General as by way of construction. While construing the said Central Act historically when it is found that the concept of the sales promotion employees is not covered, obviously the definition cannot be stretched. 6. After framing of the said 1976 Act, when provisions have been made thereunder at the Parliament towards the welfare of the sales promotion employees, by the impugned provisions the State Legislature is extending the benefit of the sales promotion employees but for the amendment as per the State Act of M.R.T.U. & P.U.L.P. Act, obviously benefit will be confined only to the workmen as defined in the Central Act and the State Act. Upendra Ramanlal Mehta And Anr. v. State of Maharashtra.: 2000 (85) FLR 787, (2000) IILLJ 111 Bom

II. Some Case Laws, which favour SPE as 'workman':

Once the Medical Representatives are covered by the SPE Act, the dispute resolution maximum is provided under the Industrial Disputes Act, 1947 would be applicable. Deepak Kumar v. The State Of Bihar & Ors LPA 1798/2012 on 9 March, 2016 (Pat)
There appears to be three preliminary objections which have became quite the fashion to be raised by all employers, particularly public sector corporations, whenever an industrial dispute is referred to a tribunal for adjudication. One objection is that there is no industry, a second that there is no industrial dispute and the third that the workman is no workman. It is a pity that when the Central Government, in all solemnity, refers an industrial dispute for adjudication, a public sector corporation which is an instrumentality of the State instead of welcoming a decision by the Tribunal on merits so as to absolve itself of any charge of being a bad employer or of victimisation etc. should attempt to evade decision on merits by raising such objections and never thereby satisfied, carry the matter often times to the High Court and to the Supreme Court, wasting public time and money. We expect public sector corporations to be model employers and model litigants. We do not expect them to attempt to avoid adjudication or to indulge in luxurious litigation and drag.xxx
A perusal of the above extracted terms and conditions of appointment shows that a development officer is to be a whole time employee of the Life Insurance Corporation of India, that his operations are to be restricted to a defined area and that he is liable to be transferred. He has no authority whatsoever to bind the Corporation in anyway. His principal duty appears to be to organise and develop the business of the Corporation in the area allotted to him and for that purpose to recruit active and reliable agents, to train them to canvass new business and to render post-sale services to policy-holders. He is expected to assist and inspire the agents. Even so he has not the authority to appoint agents or to take disciplinary action against them. He does not even supervise the work of the agents though he is required to train them and assist them. He is to be the 'friend, philosopher and guide' of the agents working within his jurisdiction and no more. He is expected to stimulate and excite tho agents to work, while exercising no administrative control over them. The agents are not his subordinates. In fact, it is admitted that he has no subordinate staff working under him. It is thus clear that the development officer cannot by any stretch of imagination be said to be engaged in any administrative or managerial work. He is a workman within the meaning of s. 2 (s) of the Industrial, Disputes Act.
The order of the Industrial Tribunal and the judgment of the High Court are set aside and the matter is remitted to the Industrial Tribunal for disposal according to law. S. K. Verma v. Mahesh Chandra And Another. 1984 AIR 1462, LAB. I. C. 1483, (1983) 2 LABLJ 429, (1983) 2 LAB LN 637, 1983 (4) SCC 214
The employee pointed out that the word "operational" has been added to the definition of the word "workman" and this addition was made to cover all employees including the employees like sales promotion employees whose duties involved a combination of skill, clerical and manual. He said that the sales promotion work of pharmaceutical items required great skill and the work also involved considerable amount of clerical work and also manual work as he had to carry samples to the customer and, therefore, he was a "workman" in view of the ratio in S. K. Verma v. Mahesh Chandra, (1983 II-LLJ-429). A. Ram Mohan v. Labour Court, Bangalore And Anr. 1989 (59) FLR 1, (1989) IILLJ 179 (Kant).
"We are not really deciding that issue as to whether there was exclusion of the jurisdiction of authorities made the Shops Act because it specifically provided that the forum under the ID Act can be approached. In the peculiar circumstances, therefore, we direct that the concerned State Governments i.e. Karnataka, Tamil Nadu and Maharashtra shall make reference to the appropriate forum under the ID Act within a month from today. The concerned forum shall make an effort to dispose of the reference to be made within three months from the date of receipt of the reference." SPIC Pharmaceuticals Division v. Authority under Sec. 48(1) of A.P. & Anr (SC) [CA 768 of 2004, 767 of 2004 and 1498 of 2004 decided on 28.02.2007].
The persons engaged in Sales Promotion do not come within the purview of the definition of 'workmen' under the Industrial Disputes Act, 1947, and as such they have no protection regarding the security of employment and other benefits under that Act. On a petition made by the Federation of Medical Representatives Association of India, the Committee on Petitions (Rajya Sabha) in its 13th Report submitted on March 14, 1972 came to the conclusion that the ends of social justice would be met only by suitably amending the definition of term "workman" in the Industrial Disputes Act, 1947, in a manner that the Medical Representatives are also covered by the definition of 'workman' in the I.D. Act. The Committee also felt that the other workers engaged in Sales Promotion should similarly be considered as workmen. That keeping in view the justification of the demand of Sales Promotion Employees and the recommendations made by the Committee on Petitions and taking other relevant aspects into consideration, the Parliament considered more appropriate to have a separate legislation for governing the conditions of service of Sales Promotion Employees; instead of amending the Industrial Disputes Act, 1947, to bring such employees within its purview. General Manager (Sales), FDC v. Deputy Commissioner of Labour & Anor., 2003 (6) ALD 383, 2003 (5) ALT 679, (2004) ILLJ 364 AP.
Before coming to the main question, we may mention that the various provisions contained in the Industrial Disputes Act, 1947, have been amended by the Industrial Disputes (Amendment) Act, 1982 (Central Act No. 46 of 1982). Section 1 (2) of the Amendment Act provides that it shall come into force on such date as Central Government may, by notification in the Official Gazette, notify. By virtue of Section 24 of the Amendment Act No. 46 of '1982 Act', Section 6(2) of '1976 Act' has been omitted. The provisions contained in Clauses 'a' 'b' 'd' to 'k' of Section 2 and Sections 3, 4, 5, 6, 8, 9, 10, 11, 12, 14, 15, 16, 17, 18, 19, 20, 21 and 23 of the Amendment Act have been brought into force by notification No. S.O. 606(E) dated August 21, 1984. This shows that in its wisdom, the Central Government has not given effect to Clause 24 of Amending Act No. 46 of 1982 Act'. As a logical consequence, it will have to be held that Section 6(2) of '1976 Act' has not been omitted and it continues to remain in force. Ripu Daman Bhanot vs The Presiding Officer, Labour. (1997) ILLJ 557 P & H.

THE SCENARIO AFTER IMPLEMENTATION OF THE ENFORCEMENT IR CODE:

Once the INDUSTRIAL RELATIONS CODE, 2020 (NO. 35 OF 2020) [28th September, 2020] comes into force the dilemma for the Authorities under the Code, and the nightmare for the SPEs will be over, since the Code expressly cover the SPEs in the fold of 'worker' as defined below:

(zr) "worker" means any person (except an apprentice as defined under clause (aa) of section 2 of the Apprentices Act, 1961) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes working journalists as defined in clause (f) of section 2 of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 and sales promotion employees as defined in clause (d) of section 2 of the Sales Promotion Employees (Conditions of Service) Act, 1976, and for the purposes of any proceeding under this Code in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched or otherwise terminated in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person—

(i) who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or

(ii) who is employed in the police service or as an officer or other employee of a prison; or

(iii) who is employed mainly in a managerial or administrative capacity; or

(iv) who is employed in a supervisory capacity drawing wages exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time:

Provided that for the purposes of Chapter III, "worker"—

(a) means all persons employed in trade or industry; and

(b) includes the worker as defined in clause (m) of section 2 of the Unorganised Workers' Social Security Act, 2008."

CONCLUSION:

Even angels make mistakes. For the apparent error and misreading of the amended provisions by the Apex Court in Adyanthaya & Others v Sandoz case, many Sales Promotion Employees are at the receiving end, and are suffering in silence.

Let's hope that their ordeal will soon be over.