General

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This Blog is written by Srishti Tiwari from University School of Law and Legal Studies, GGSIU, Delhi. Edited by Harshita Yadav.

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INTRODUCTION

The global economy has been seriously crippled as the planet faces one of the worst pandemics ever in human history. The ‘rent charge’ continues to be the hurdle for commercial/business companies and the common man in these difficult times. Not only has this undermined all of our economic and cultural norms, but has also profoundly influenced our interpersonal and social relationships. Across nearly all the major cities where there is comparatively more concentration of migrant workers, simmering tension and frustration is palpable, due to the problem of tenants/lessee and landlord/lessor not paying rent.

On 29 March, the Ministry of Home Affairs (MHA) released an order to the governments of the Centre, the State and the Union Territory in connection with the coronavirus lockdown that had been placed by the Home Secretary with many welcoming directions regarding migrants, payment of wages to employees/workers and rent.

Under these guidelines, governments of the State / UT (Union Territory) will provide shelters to the poor and vulnerable (including migrant laborers) and transfer migrants (on road to their home states) to quarantine facilities of government. Yet it was not only about states – but some approaches were extended to the private sector as well. All the employers must pay their employees/workers wages on the due date without any deductions for the time the businesses are closed during the lockdown period. Landlords are unable to demand a month’s rent from tenants and cannot evict employees, students, or migrant workers.

SIGNIFICANCE

To alleviate the economic distress of migrant workers, the order of 29 March 2020 [1] also ordered the states and union territories to take steps to ensure that all employers, whether in industry or shops and commercial establishments, pay their workers’ salaries without any deductions for the time their establishments are being closed during the lockdown. Resultantly, all employers are now expected to ensure prompt and complete payment of salaries to their workers even though no work has been completed and no service has been provided by them during the lockdown period, and the establishment has been closed. The order further prohibited landlords from requesting rent from migrant workers living in a rented property, for the same reason.

The order was issued by the Home Secretary in his role as Chairman of the National Disaster Management Authority (NDMA)’s National Executive Committee (NEC). It is relevant because, under Section 10(2)(l) of the Disaster Management (DM) Act, the NDMA’s NEC has the authority to issue instructions for dealing with a ‘disaster’ to Central/State/UT government which is notified COVID-19 crisis. In the case of any threatening disaster situation, the NEC also has the power to organize the response of the country. Generally, the Centre does not have the authority to order states to take particular measures until a declaration of emergency has been issued. Since no emergency has been declared here, the Centre has restricted legal grounds for guiding states to behave in a specific manner.

The NEC has given guidance to get around this question, under which the Center then instructs States / UTs to take appropriate action to comply with. States have a degree of flexibility in determining how exactly certain directives will be applied –for example, whether to impose a curfew, how the curfew will operate, etc. State governments, however, do not have an obligation to follow an NEC path under the DM Act entirely.

IMPACT

Failure by government agencies and government officials to comply with these directives constitutes a crime/offense under Sections 55 and 56 of the DM Act. In the case that a department refuses to follow the instructions it requires, the department manager will be punished under the law.

Nonetheless, this whole situation is unprecedented, and the Disaster Management Act has never been invoked to deal with such a situation, so some confusion remains about how it all works. The fact that there is some uncertainty about this can be seen from how the Center demanded a direction from the Supreme Court that all State / UT governments should follow all directions provided by the Centre, whether they are called instructions, orders, or advisories.

The MHA order contains the NEC’s clear guidance to ensure that all employers –including private sector employers pay their workers’ salaries without deductions. The Supreme Court order also states that citizens are ‘expected’ to follow the directions of the Centre. However, the NEC cannot give a direction that may be flagrantly unconstitutional, i.e. that has no legal basis. And there appears to be no legal basis for any government or a government body to compel workers in the private sector to pay their workers’ salaries. The Ministry of Labour of the Center had also “requested” private companies to allow all employees, including contract staff, to be on duty if they could not get to work due to coronavirus spread.

The advisory also noted that all employers of public/private establishments should extend their cooperation by not dismissing their employees, particularly casual or contract workers, or their wages. It further stated that if any place of employment due to COVID-19 is to become non-operational, the employees of such unit will be deemed to be on duty.

STATUTORY PROVISIONS

The Acts concerning labor law such as the Industrial Disputes Act 1947, the Payment of Wages Act 1936, the Contract Labour Act 1970, the Inter-State Migrant Workmen Act 1979, to name a few govern the payment of wages to workers. In particular, the terms of the Industrial Disputes Act of 1947 which specifically acknowledges the employer’s right to lay off an employee and reduce salaries to 50% up to a maximum of 45 days under some cases, including natural disasters (Sections 25 C and 25 M), and after 45 days if the layoff occurs, no salaries are payable. It seems that the Labour and Employment Ministry has deliberately opted to issue an advisory rather than resorting to a formal order/direction requiring payment of salaries during the lockdown.

COVID- 19 has been identified as a disaster under NDMA. The Industrial Disputes Act explicitly allows for layoffs in the case of natural calamities and not man-made disasters. Employers do not, however, have the right to invoke section 25 M of the Industrial Disputes Act. Besides, if the legislative order of 29 March, explicitly requires payment of salaries, any action aimed at violating this route including layoffs would be deemed a violation.

Whether a tenant or lessee is entitled to exclude himself from the payment of rents by invoking the ‘Force Majeure’ grounds and citing the COVID-19 pandemic is subject to the contractual arrangement between the parties and can only be decided on a case-by-case basis.

CASE LAW

In the case of Ramanand and Others v Girish Soni and another [2], the Delhi High Court dismissed tenant’s request for suspension of rent asserted on the grounds of ‘Force Majeure’ but granted deferment, deferment of rentals, which is a major relief in situations where the landlord refuses any concession. However, the “rental waiver” will depend upon the facts and circumstances of every case. It is also fair to assume in reading the judgment that the mere presence of a ‘Force Majeure’ clause in an agreement does not entitle a tenant to waiver. This is unless and until a scenario of inability to use or enter the premises is stipulated contractually between the parties for reasons as prevalent during the COVID pandemic.

Under the Delhi High Court’s rule, if the tenancy agreement is silent and does not mention a ‘lockdown’ scenario, a rent suspension during the lockdown time cannot be requested merely because of the lockdown or non-use of the land. Notwithstanding the fact that the current pandemic might have created significant distress for tenants and given the fact that governments often order landlords to take a lenient view, under ordinary situations, under the absence of something to the contrary in the rental agreement, the ‘lockdown’ as a consequence of the novel coronavirus cannot be used by the applicant to exempt himself from paying the rent by statute.

ANALYSIS

The objective of the DM Act is to provide for effective disaster management and, in this regard, the NEC (constituted under Section 8 of the DM Act) has the power to provide orders to any Ministry/Department of the Government of India, Government of the State/Union Territory/Authorities concerning the steps to be taken by them in response to any disaster.

A bare reading of the provisions of the DM Act does not appear to suggest that the Central Government may attach any financial liability/burden to the industries or shops and commercial establishments or that the operation/application of the relevant laws governing the employment relationship/labor law of the employer may be suspended/overwritten in order to effectively manage the disaster. It’s far-fetched to say that the powers under the DM Act allow the government to tax private employers financially as a disaster reduction measure.

This intrusion on private employers may be characterized as arbitrary and irrational because it does not seem to have a logical basis for achieving the DM Act’s goals and is simply overriding powers. Employers and employees have a fundamental right to carry on any occupation, trade or business as enshrined in Article 19(1) (g) of the Indian Constitution, which is effectively suspended during the lockdown.

The government’s policies have neglected the employer’s rights/entitlement to policies to alleviate their economic distress and have refused to recognize that COVID-19 adversely affects both employer and employee, and it was incumbent on the government to take a reasonable view so that these two groups could resolve this unprecedented situation. Thus, the order of 29 March 2020, to the degree that it ordered States and UTs to take steps to ensure that all employers, whether in the industry or shops and commercial establishments, pay their employees’ wages without any deductions for the time during which their establishments were closed during the lockdown, besides ultra vires the powers conferred by the DM Act. It seems to violate Article 14 of the Indian Constitution, which guarantees the right of an individual to fair protection of the law.

Although the government’s motives seem good, the steps taken to ensure wage increases are not adequate to tackle the issue. The present need is a dedicated system similar to those proclaimed by governments across the globe in monetary form.

CONCLUSION

The duty under the DM Act to mitigate danger is placed on the Central and State governments and it would be ultra vires the DM Act to pass this responsibility, financial or otherwise, to any industry or shops and business establishments or private employers/individuals without any relevant provisions under the DM Act. As such, even Section 72 of the DM Act, which states that given anything conflicting with it found in any other statute, the provisions of the DM Act would have an overriding effect, will not be attracted in such a situation.

The payment of salaries/wages to employees and staff even during the lockdown period is a moral responsibility of employers because they have no alternative source of jobs or subsistence during that time. “Although these clarifications were made in relation to concerns posed as to whether payment of salaries/wages during the lockdown time would qualify as Corporate Social Responsibility, it seems that there is no uniformity between the ministries as to whether payment of wages without any deductions during the lockdown is a moral obligation or a statutory obligation under the DM Act.

In this scenario, it would not be reasonable or fair to further direct an employer to continue paying wages to its employees without any corresponding business being operated by the industries or shops and businesses. The only way to fix this issue and avoid a complete collapse of all sectors will be to subsidize employers for payments made to their staff and employees during the lockdown period. In the absence of these initiatives, companies or shops and firms would suffer challenges that will most likely force them into bankruptcy.

With regard to suspension of rent or recovery of rent, a tenant/lessee will be compelled to approach the Court of Law to request postponement or deferment or waiver or partial payment of rent, not as a matter of right, but purely on equity principles. The loss of business due to the shutdown, the effect on business due to COVID-19 and the continued payment of salaries and wages, etc. could force private enterprises into insolvency unless the government implements effective economic policies and financial steps to safeguard the industry and the economy. Payment of wages rendered during lockdown for days of no work should be considered under CSR investment for industries to fight against coronavirus. Such an approach would reduce industry / corporate establishment losses and help maintain the current situation.

REFERENCES

[1]https://www.mha.gov.in/sites/default/files/PR_MHAOrderrestrictingmovement_29032020.pdf

[2] RC. Rev. 447/2017.