Denial of salary on the ground that the Employees did not open account with Company’s preferred Bank is illegal!

The employer cannot compel and even insist that employees should open bank account with banking firm preferred by employer, for the credit of salary in bank account.

Even if the employer claims that the bank is IT’s official bank, IT cannot insist that employees should open salary account with IT’s official bank.

(A)  In certain other cases employees were apprehensive since the employer was also owner/promoter/director in bank in which employees were being pressed to open salary account.

In many cases employees are asked to issue cheques/security cheques before getting employed.

In some cases employees have been asked to submit Fixed Deposits and bank shall mark a lien on it favoring employer and lien cannot be vacated without consent of employer.

(B) M/s State Bank of India: For salary accounts maintained with it provided;

Benefits to Employees

Various Personal loans like Home loan/ Auto loan/ Xpress Credit loan, etc. at attractive terms
https://www.sbi.co.in/portal/documents/25328/14500503/Annexure+1.pdf/87a21aac-14e9-439f-b86d-b536c046255b

Whereas the Bankers provide benefits to employers : Concessions in rate of interest on various loans, waiver of charges on purchasing demand drafts, interest-free overdraft, credit cards, loan for Corporate Social responsibilities,  etc are given.
Pressing employees to open accounts with banking partner of employer implies that employees should forgo benefits that tthey are getting from bank of their choice for the benefits that employer and IT’s attorney’s shall be getting from their banking partner at the cost of employees.

(C) The employer changed IT’s bank from SBI to IDBI to avail the additional benefits that employer shall get from IDBI for employer, and asked all employees to open new accounts with IDBI or give their personal accounts number with IDBI for credit of salary. The employer and IT’s attroney’s issued circulars to all employees to open salary account with their official banking partner M/s IDBI, and started pressing the employees.

The employees were united and had a union also.
 
The employees found that salary account with SBI was more beneficial to them and asked employer to credit salary in their account maintained with SBI, and that they do not want to shift their account.

The employer and IT’s attroney’s in HR/legal wanted IBDI bank since it was beneficial for IT and stopped the payouts and employees were not paid salaries for 9 month (since August 2016) and were also deprived of festival allowances such as Onam Advance and other festival allowances.

The Kerala High Court issued the ruling that ‘An employer cannot insist that all employees open a salary account with its official banking firm.’

The court ruled that ‘that denial of salary for not opening account with IDBI Bank is illegal’.

The High Court pointed out that;

“As far as the withdrawal of salary through a bank account is concerned, it will not be necessary that each of the employees should have the salary account with official bank itself. The official bank can very well transfer the salary of the petitioners to their accounts existing in SBI, on a request/standing instruction from the accounts wing of the 1st respondent (MCC). For such transfers, the 1st respondent need not compel the petitioners to open zero balance account or salary account with IDBI, in case they do not want to have any transaction with the IDBI."

The High Court also expressed concern on dispute due to ego of bosses at helm of affairs which arose on the ground that no discussion was held with employees regarding the account change that could have been resolved at the end of MCC's governing body itself. The matter reached the high court as a result of the ego which played ……… those at the helm of affairs at MCC,  and the court criticized. The court ordered MCC to transfer the salaries and allowances, including arrears, of the petitioners to their accounts with SBI without any further delay. “

(D)  The provision of Payment of Wages Act enable employers to pay wages to workers through cheque or by transferring into their bank account and this can erase the complaint of being underpaid even less than Minimum Wages.
This was also the purpose of amendment.

(i) THE PAYMENT OF WAGES (AMENDMENT) BILL, 2017

A BILL further to amend the Payment of Wages Act, 1936.

"6. All wages shall be paid in current coin or currency notes or by cheque or by crediting the wages in the bank account of the employee:

Provided that the appropriate Government may, by notification in the Official Gazette, specify the industrial or other establishment, the employer of which shall pay to every person employed in such industrial or other establishment, the wages only by cheque or by crediting the wages in his bank account.".

2. With the passage of time, technology has been changed and a large section of the employed persons have their bank accounts. The payment of wages through cheque or crediting it in the bank account of employed persons will reduce the complaints regarding non-payment or less payment of minimum wages, besides serving the objectives of digital and less cash economy. 

The State Governments of Andhra Pradesh, Uttarakhand, Punjab, Kerala and Haryana have already made provisions in the said Act for payment of wages to the employed persons either by cheque or by crediting the wages in their bank account, by making State amendments to the Act.

(ii) THE PAYMENT OF WAGES (AMENDMENT) ACT, 2017
NO. 1 OF 2017
[15th February, 2017]

An Act further to amend the Payment of Wages Act, 1936.

2. For section 6 of the Payment of Wages Act, 1936, the following section shall be substituted, namely:—

"6. All wages shall be paid in current coin or currency notes or by cheque or by crediting the wages in the bank account of the employee:

Provided that the appropriate Government may, by notification in the Official Gazette, specify the industrial or other establishment, the employer of which shall pay to every person employed in such industrial or other establishment, the wages only by cheque or by crediting the wages in his bank account.".

The Act does not vest any power with Employer and IT’s Attorney’s to compel the employees to open bank account with their banking partner.

(E)  Dated; 14 March, 2017: Kerala High Court:

Employer cannot force employees to open salary accounts with official bank.

Employer/ official bank can transfer the salaries of the employees to the existing accounts of employees in other banks.

Employees cannot be compelled to open zero balance or salary accounts with the official bank if they do not otherwise have any transactions with that bank.

Denial of salary on the ground that the employees did not open accounts with IDBI is illegal

JUDGMENT

8 employees of the Malabar Cancer Centre ('MCC' for short) -the 1st respondent, have filed this writ petition challenging Exts.P3 to P10 letters by which they were requested to open their savings account in IDBI (Industrial Development  Bank of India), the official bank of the 1st respondent, for disbursement of salary. By these letters they were also informed that they can retain their existing bank account giving a request to the IDBI bank to transfer their salary to the existing bank
account. The petitioners submit that they are not paid their salary since they did not oblige to the request/demand of 1st respondent.

2. The MCC had issued Ext.P12 circular on 3.6.2013 informing that its banking transactions had been shifted to the IDBI, Thalassery and accordingly salary accounts of all the staff need be maintained with the new bank. All permanent staff members were requested to fill up the application form for starting new account and to submit the duly filled forms on or before 12.6.2013. On coming to know about the circular, the staff association of the 1st respondent, of which the petitioners are also members, protested against the same and submitted Ext.P11 mass representation saying that the 1st respondent had taken a unilateral decision without having any discussion with
the members of the staff.

3. According to the petitioners, they did neither shift their account to the IDBI bank nor open new account with it. Therefore, their salary was being paid in cash. While so, they received Exts.P3 to P10 letters dated 19.08.2016 from the 3rd respondent asking them to open the account with the IDBI bank immediately. It was stated that the statutory auditors of the 1st respondent had in their interim report for the year 2014-15 raised objections to the effect that few permanent staff members were yet to open their savings account through the official bank (IDBI bank) for salary disbursal. In those circumstances, the administrative officer of the 1st respondent informed the petitioners that in view of the objections raised in the audit, salary can be disbursed only through bank account and not by any other means. The petitioners, while challenging these letters allege that they have not received salary from August, 2016 onwards and they did not get the festival (Onam advance and other) allowances. According to the petitioners, the 1st respondent continues to have their several transactions like payment of tax through SBI, Thalassery itself and therefore, the 1st respondent cannot insist the petitioners to change their bank account to IDBI. According
to them it is their right to decide the Bank in which they should open an account. It is also their case that being a public sector bank it is possible for them to avail loans from the SBI. It is also stated that earlier, financial transactions of the 1st respondent were through Corporation Bank, which was later shifted to State Bank of India.

4. Thus the petitioners insist that they should get salary through the existing account with the SBI itself without insisting them to open accounts with the IDBI.

6. According to Ms. Aruna the learned counsel appearing for the petitioners, it is for the petitioners to decide the bank in which they should have account. She points out that the customers having salary account are given several benefits and they are not prepared to give up those benefits available from a nationalised bank by opening their salary account with the IDBI as requested in Exts.P3 to P10. It is also their case that IDBI is not a nationalised bank and at any rate petitioners are getting more benefits from SBI.

8. Having considered the rival contentions on either side, it would appear that all these objections initially arose on the ground that there was no discussion held with the employees' association regarding the shifting to the new official bank, as seen from Ext.P11. Therefore, it was a matter which could have been resolved at the end of the 1st respondent itself and the matter has reached this court as a result of the ego …………. as those who are at the helm of affairs of the 1st respondent.

9. As far as the drawal of salary through a bank account is concerned, it will not be necessary that each of the employees should have the salary account with official bank itself. The official bank can very well transfer the salary of the petitioners to their accounts existing in SBI, on a request/standing instruction from the accounts wing of the 1st respondent. For such transfers, the 1st respondent need not compel the petitioners to open zero balance account or salary account with IDBI, in case they do not want to have any transaction with the IDBI. The audit objection raised against making payment in cash could have been rectified by placing proper instructions to the official bank of the 1st respondent having the financial transactions including salary of the staff of the 1st respondent to transfer the salary due to the petitioners to their account. As soon as the account number and other details of the petitioners are furnished to the official Bank, it is quite possible that the amounts due to each of the employee are credited to their account. Thereby the 1st respondent will get the services of the IDBI also as explained by them in the counter affidavit even without insisting the petitioners to have accounts with the IDBI.

Such trivial matters could have been solved at the end of the 1st respondent itself. Therefore, denial of salary to the petitioners on the ground that they did not open account with IDBI bank is illegal. Under the above circumstances, 1st respondent is directed to take appropriate action to see that the pay and allowances and all the monetary benefits due to the petitioners are credited to their account from the IDBI bank to the respective existing salary accounts of the petitioners in SBI, along with arrears if any without any further delay and at any rate within a period of two weeks from the date of receipt of a copy of the judgment.

The writ petition is disposed of accordingly.

PETITIONER(S):
-------------
1. T.M.DINESH KUMAR,
CLERK/CASHIER/TYPIST, MALABAR CANCER CENTRE,
MOOZHIKKARA P.O., KANNUR-670 103.

2. P.PRAMOD,
ATTENDER, MALABAR CANCER CENTRE,
MOOZHIKKARA P.O., KANNUR-670 103.

3. BINDU T.K,
CLERK/CASHIER/TYPIST, MALABAR CANCER CENTRE,
MOOZHIKKARA P.O., KANNUR-670 103.

4. SUREKHA M.C,
CLERK/CASHIER/TYPIST, MALABAR CANCER CENTRE,
MOOZHIKKARA P.O., KANNUR-670 103.

5. R.P.SHAJITH,
ATTENDER, MALABAR CANCER CENTRE,
MOOZHIKKARA P.O., KANNUR-670 103.

6. MAHIJA P.M,
HOSPITAL ASSISTANT, MALABAR CANCER CENTRE,
MOOZHIKKARA P.O., KANNUR-670 103.

7. P.P.PRASOONAN,
CLERK/CASHIER/TYPIST, MALABAR CANCER CENTRE,
MOOZHIKKARA P.O., KANNUR-670 103.

8. RAJEEVAN U,
TELEPHONE OPERATOR, MALABAR CANCER CENTRE,
MOOZHIKKARA P.O., KANNUR-670 103.
BY ADVS.SRI.KALEESWARAM RAJ
SMT A.ARUNA

RESPONDENT(S):
--------------

1. MALABAR CANCER CENTRE SOCIETY,
REPRESENTED BY ITS SECRETARY TO GOVERNING BODY,
MALABAR CANCER CENTRE, THALASSERY,
MOOZHIKKARA P.O., KANNUR DISTRICT,
KERALA, INDIA-670 103.
-
2. THE DIRECTOR
MALABAR CANCER CENTRE, THALASSERY,
MOOZHIKKARA P.O., KANNUR DISTRICT,
KERALA, INDIA-670 103.

3. THE ADMINISTRATIVE OFFICER,
MALABAR CANCER CENTRE, THALASSERY,
MOOZHIKKARA P.O., KANNUR DISTRICT,
KERALA, INDIA-670 103.

WP(C).No. 37894 of 2016 (J)
IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT:
THE HONOURABLE SMT. JUSTICE P.V.ASHA
TUESDAY, THE 14TH DAY OF MARCH 2017

(F) The employees should work sincerely and justify every penny of the salary paid and endeavor to keep establishment healthy and contribute to revenues and profits. The employee should remain gentle and amiable even while agitating in disputes.

The properly informed employees can handle the disputes much better and resolve in their favor. The united and firm employees can address and handle even large ego issues of bosses, attorney’s of employer at helm of affairs, even issues of rowdiness by bosses.

The employees that are united and have formed unions and are embraced by trade unions have a better standing. The employees should unite and defend their interests.

 

Kumar Doab 
on 04 October 2017
Published in Labour & Service Law
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