Corona-Hit Corporates Rush for Legal Advice
Faced with the double whammy of an economic downtrend and the coronavirus-triggered nationwide lockdown, the corporate world is making a beeline for law firms across the country seeking legal advice on myriad issues.
the back-to-back crises have placed the business sector in an unprecedented situation, even as they struggle to keep afloat. On the one hand, they are faced with dwindling earnings and on the other, have to adopt humanitarian considerations while dealing with employees, not an easy proposition.
Manish Kumar Sharma, a Delhi-based corporate lawyer and partner in Singhania and Partners, a law firm, says: “Most of our clients are now seeking legal options and position on issues like imposing salary cuts, laying off part of the workforce and dealing with commercial rental lease agreements.”
Sharma, who says that they have at least a dozen clients approaching them on these issues since the lockdown, points out that it’s a delicate and unprecedented situation that they are faced with.
“It’s a tough call and we walk a very thin line. While we lay out the legal position to our corporate clients, we also advise them to be sensitive given the fact that the entire world is faced with a unique situation,” he said. He says the advisory from the Government of India on salary payments under the Disaster Management act clearly overrides all other laws. “the advisory is binding on all and has an overriding effect on all other legislations.” “In the case of employees in companies dealing with non-essential services, managements are bound to pay full salaries to them under the advisory. In situations where the companies are facing major financial issues, we advise the managements to make adjustments against the leave entitlements of employees.
We suggest them that deduction in salaries should be the last resort,” Sharma says, adding that it is for the companies, however, to take a call on percentage of salary cuts based on ground realities. “after all, they also need to run the companies while being compassionate towards their staff,” he said.
However, when it comes to employees of companies dealing in essential services, Sharma says such companies have to take permission from the government for the number of employees that can be called to work. “them remaining staff not working will also have to be paid salaries, but if someone is asked to work and he doesn’t report for duty, then his/her salary can be deducted,” the lawyer said.
On the issue of commercial leases, he says there are grey areas in such lease agreements essentially because it is an unprecedented situation and are not factored into the lease agreements. “they have to pay the rent but both parties have to be understanding in such a situation. We can’t find fault with either side,”
he said. abhishekh Patwari, a Hyderabad-based lawyer, points out that future rental agreements are bound to change given the present experience.
“there is no “act of God” clause presently in most rental lease agreements, simply because nobody expected something like a coronavirus would happen and then its ramifications,” he said.
another lawyer from Kochi, who requested anonymity, said several traders and merchants associations had been approaching him for PIL to be filed seeking directions from courts of law for reduction in rents.
“We are dissuading the parties from doing so to prevent a cascading effect on landlords and further down the chain. these are unprecedented times with unknown ramifications,” he said, adding that if such a situation is handled irresponsibly, it might cause more harm than ensuring succour for the affected parties.