K.VittalaRao. B.Sc. B.L. DSSA
Any Business segment is surrounded by plethora of Legislations – Company Law, Taxation, Duties, Employment & Separations, Social Security, and Environment and so on. Adherence to the Laws is the fundamental duty of any Business Corporate –being a Corporate Citizen asotherwise the existence itself would be at stake. Corporates, have evolved strategies towards accomplishments of BusinessExcellence, through their Vision, MissionStatements & Objectives . The vision or the mission speaks of the commitment of a Corporate towards being ethical; respect Law of the Land,
The Corporates have also embraced “Corporate Social Responsibility” and reemphasises its commitment to carryout CSR activities – a commitment to the Society. One of the arms of CSR is “Legal Compliance”. The simple reason being the Laws are enacted by the Society in the interest of wellbeing of its members. In other words, Legal Compliance means and includes the desired values back to the Society by a Corporate Citizen.
The Corporates are also subject to various due diligence evaluations, statutory audits, and the most important, nowadays, the due diligence audits by the customers – domestic & foreign. It has been the experience of most of the Corporates who have customers abroad and supply of goods & services to foreign countries, the audits carried out by them have been very severe and their insistence on strict compliances.
Hence, the Legal Compliance assumes greater responsibility & importance being amidst the above compelling environments.
It has been a challenge for any Corporate due to the fact that the Laws – in particular Employee related Laws being very old whereas the Business is moving with rapid speed in terms of technology, applications, process, methods etc. There have been no radical reforms by the Central Government. The other factor is the judicial pronouncements by various Courts in India including Hon,ble Supreme Court of India, varying, overriding pronouncements , varying interpretations of provisions etc.
Indian Corporates have to successfully challenge and in fact, many, have succeeded and its continual improvement process and has rendered itself an Highly Specialised Expertise with Technical Skills.
Non-Compliance can be very costly.
For instance,R.N.Tata, a top and scrupulous industrialist was prosecuted under Sec.92 of the Factories Act – 2 yrs imprisonment or Rs 1 lakh fine & both in2011. NareshGoel, Chairman cum CEO, Jet Airlines for violation of the provisions of the Contract Labour Act in2011. J.J.Irani, MD of Tata Steel was prosecuted and convicted for 2 yrs imprisonment & Rupees one Lakh fine for violation of Factories Act in 2013. UdayKotak, Vice Chairman & MD of KotakMahendra Bank was prosecuted for violation of the provisions of the Contract Labour Act in 2005. [Although these cases have been taken up in appeal and the prosecutions have been dropped, still everyone may not be able to get the advantages].
Madras High Court, in the case of Ms. G V. ISG Novasoft Technologies Ltd awarded Rs. 1.68 crores in damages to an employee for the non-constitution of a Complaints Committee by the employer, as per the Vishaka Guidelines (at the time of the complaint, the Sexual Harassment of Women at Workplace Act 2013 had not been enacted).
Supreme Court in 2016 in the case of HemanthMadhusudanVs State of Jharkhand, upheld the conviction& fined Rs.50,000 for non –compliances of –OT slips not issued, leave books/cards not in Form 14/15, non-display of menu in the canteen etc.
There are cases of prosecutions for not notifying the vacancies under Employment Exchange [Compulsory Notification of vacancies] Act.
We have been witnessing harassments by “Inspectors” under various Labour, Factory & social security agencies like PF, ESI etc to Corporates. The Inspectors are many times, whimsical, intensions, superficial, self-interestsetc during their inspections. There are innumerablenumbers of cases, where the Inspectors have launched prosecutions and have caused embarrassments in the Industry. India’s position in the World Bank’s ease of doing business ranking has jumped significantly and Entrepreneurship Index has significantly moved up. But, the harassment of Corporates still goes on unabated.
Hence, understanding relevant provisions of Law, appreciate the concepts & intents and accordingly comply in true spirit is absolutely necessary to ensure high level of compliance by any Corporate. And further, periodic evaluation of the compliances, identify the potential areas of risks and take appropriate steps to ensure avoiding any lawsuits leading to heavy penalties and liabilities is highly essential. Compliance cannot be viewed as a formality, but to be carried in true spirit.
Corporates must ensure that the Managerial Personnel - HR, LEGAL OR ADMN must possess adequate legal knowledge and must be committed to accomplish the objectives. It is not enough, if they are fully aware of each of the provisions of applicable law, but also be fully possessing the knowledge of changing trends in judicial pronouncements, any additional dimensions of interpretations and also be fully conversant with the amendments etc.
A periodical evaluation will be extremely helpful in addressing any gaps. Further documentations, maintenance of registers forms etc, submissions on time is absolutely essential.
Hence, Compliance is the best counter to “Harassments by Inspectors” and in avoiding law suits and consequent damages.
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