Why Kiosks In Malls (Shop In Shop) May Need Separate Registrations

Kiosks in malls or shops in shop operate in a seemingly win-win situation – lower rentals than full fledged outlets and a general impression that there is no requirement for separate registrations under applicable labour laws including the Shops and Establishment (“S&E”) Acts.

The S&E legislation, unlike other Indian labour laws, is formulated as state specific acts and hence requires multiple registrations for every location. In addition, it applies irrespective of the number of employees in the shops/establishment and the wages drawn.

It is generally assumed that since malls have their own S&E registrations, there is no requirement for to obtain separate S&E registration for operating from kiosks out of malls.

However, such an assumption may be incorrect as elaborated below

Provisions of Law

* S&E Acts broadly apply to ‘Shops’ and Commercial Establishments.
* ‘Shops’ are generally construed to mean any premises where any trade or business is carried on/goods are sold (either by retail or wholesale) or where any services are rendered to customers and includes offices, etc ‘whether in the same premises or otherwise’ mainly used in connection with such trade or business.
* Commercial Establishments refer to any premises where any trade, business or profession or work in connection with or ancillary or incidental thereto is carried on.
* The duty to register as per the S&E Act is imposed on the Employer of the Establishment (an Establishment includes Commercial Establishments and Shops).
* Employer refers to a person owning or having ultimate control over the affairs of an Establishment and where the Establishment is not managed by the owner it means the manager, agent or representative of such.
* Employee refers to a person wholly or principally employed, whether directly or through an agency and whether for wages or for other consideration in or connection with any Establishment.

Judicial Precedent

Justice Shah in State of Bombay V. Jamnadas Gordhandas., (1956)II LLJ 307 has inter alia observed:

There is nothing in the Act which suggests that one premises can contain only one shop or that one shop can have only one premise. It is not the unity of premises which makes a shop, it is the unity of trade or business establishment which distinguishes one shop from another. Several different establishments belonging to different owners or under distinct managements but carrying on trade or business in one premises are not un-known and it cannot be suggested that such independent establishments would for the purposes of the Bombay Shops and Establishments Act be regarded as a single shop. Again a single business establishment may occupy distinct and independent structures constructed or adapted for separate activities of the establishment such as executive management, accounts, consultations, preparation and manufacture of goods, and for sale of goods and rendering of services. Independent structures in which different activities are carried on may make them distinct premises but would not make them separately registrable as a shop. In each case it would be a question of fact whether the office is a part of the shop in which goods are sold or services are rendered or whether the office is a distinct shop.’

The above observation may have been made well before the advent of Malls in India, however the same may be applicable even to Malls.

Issues to be factored by KioskCo

In view of the above comments as well as legal provisions discussed above the following issues are relevant to determine whether a kiosk needs to separately apply for S&E registration:

Kiosk Company (KioskCo) as Employer

A kiosk manned by a KioskCo employee may be construed to be a distinct and separate shop/establishment in a Mall especially if KioskCo has ultimate control over the affairs of that particular kiosk/establishment and is therefore the ‘Employer’. While whether KioskCo or Mall has ‘ultimate control’ may be debated, generally KioskCo will have substantial control over the employees deputed, their work hours, the products sold/services provided at these kiosks.

Further if the question ever arises (during an inspection by the S&E department) each of these employees will also identify himself/herself as a KioskCo employee and not a Mall employee.

Mall as Employer

If the Agreements between the Mall and KioskCo executed do not permit KioskCo to be in ‘ultimate control’ over the affairs of the establishment/kiosk, then Mall may be construed to be ‘Employer’.

However, it is unlikely that either the Mall or KioskCo will want to indicate KioskCo employees as Mall employees. Forms for registration and forms to be submitted notifying change require submission of details of employees. KioskCo employees would not have been covered within the Mall’s application. Statutory register concerning employees and leaves obtained, etc. maintained by the Mall will, obviously, not contain details of KioskCo employees.

Further, the question needs to be addressed from the view point that S&E Acts are beneficial Acts oriented to granting certain rights to employees. If KioskCo employees are not covered by either an S&E registration/compliances applicable to KioskCo or Mall registration/compliances, it may tantamount to depriving the KioskCo employees of their entitlement prescribed under the S&E Acts.

While it may be argued that Mall is the Employer, including for reason of common cashiering for KioskCo’s products/services, the failure to cover KioskCo employees under Mall’s registration may unravel such an argument to KioskCo’s disadvantage.

From the above it appears that there may be a requirement for KioskCo to apply for and obtain registration and comply with the other statutory requirements.

Compliances for KioskCo:

In practice shops in shop in India do not obtain separate registrations from the main shop – arising from the fact that it is onerous for KioskCo to obtain registration for each of its kiosks and also ensure compliances under the S&E Acts when mere one or two employees of KioskCo are be deputed to a Mall.

Below is a non-exhaustive list of records and registers to be maintained (which may also need to be displayed at the shop/establishment) and compliances to be made for four states:

1. Delhi:

(a) Providing advance intimation to the concerned authority in case overtime is proposed for employees.
(b) Maintaining records in the prescribed form including –

* A notice of close day
* Record of hours worked, the amount of leave taken by employees, intervals allowed for rest and meals, particulars of overtime etc
* Notice of hours in a week which an employee may work
* Register of employment and remuneration

2. Maharashtra

(a) Applying for registration
(b) Applying for timely renewal of registration
(c) Notifying changes in the information submitted in the application for registration, as applicable
(c) Providing advance intimation to the concerned authority in case overtime is proposed for employees.
(d) Maintaining records in the prescribed form including –

* Register concerning refusal of leave
* Record of opening and closing hours, rest intervals, particulars of overtime etc of each employee
* Register of leave and also provide to each employee a ‘leave book’
* Visit book concerning visits of S&E Inspectors

3. Karnataka:

(a) Applying for registration
(b) Applying for timely renewal of registration
(c) Notifying changes in the information submitted in the application for registration, as applicable
(d) Maintaining records in the prescribed form including –

* Leave with Wages Register
* Provide to each employee a ‘leave with wages book’
* Close day notice
* Visit book concerning visits of S&E Inspectors

4. Madhya Pradesh:

(a) Applying for registration
(b) Applying for timely renewal of registration
(c) Notifying changes in the information submitted in the application for registration, as applicable
(d) Notifying the weekly off/close day to the concerned authority and any change therein
(e) Notifying the change in dates, if any, for additional overtime which are prescribed in the Act
(f) Providing advance intimation to the concerned authority in case overtime is proposed for employees.
(g) Maintaining records in the prescribed form including –

* Record of attendance, wages, overtime work, fine and deductions from wages
* Record of daily hours to be worked, intervals allowed for rest and meals,
* Register of leave
* List of holidays
* Copy of leave rules
* Extracts of S&E Act and Rules in specified language

Consequences for KioskCo:

KioskCos exposure arising from lack of registration is in the form of fines and penalties (usually nominal) imposed by the S&E Acts for contravention of provisions. Below is a broad outline of the consequence of contravention of the S&E Acts:

1. Delhi:

The penalties prescribed for contravention generally range between Rs. 25 and Rs. 250. However, for non-maintenance of prescribed records Rs. 5 for every day of default may be payable. Further, false entries in records and registers makes the person liable to imprisonment of less than 3 months or fine of Rs. 250 or both.

2. Mumbai:

The penalties prescribed for contravention generally range between Rs. 1000 and Rs. 5000. In certain cases additional fine of Rs. 100/- per day may be applicable. Additionally ‘enhanced penalty’ is prescribed for second, third and subsequent offences which may extend up to Rs. 15,000/- fine as an aggregate for employer and the manager.

3. Karnataka:

The penalties prescribed for contravention generally range between Rs. 250 and Rs. 2000.

4. Madhya Pradesh:

The penalties prescribed for contravention generally range between Rs. 50 and Rs. 500. In certain cases additional fine of Rs. 50/- per day may be applicable. Additionally ‘enhanced penalty’ is prescribed for second, third and subsequent offences which may extend up to Rs. 1,500/-. Further, false entries in records and registers makes the person liable to imprisonment of less than 1 year or fine of Rs. 1000 or both.