Diciplinary Process - Rights of Employees

NATURAL JUSTICE

(For Malaysia and almost all Commonwealth countries)

An employer ought to give an employee the opportunity to be heard because it is one of the fundamental principles of natural justice which no employer can afford to ignore.  In R vs CambridgeUniversity (1715) I Strange 557 at 567;93 ER 698 at 704 Fortescue J explained that “Even God did not pass sentence on Adam before he was called upon to make his defence”

Industrial Court (IC) Award 88/74 The court made a remark “Natural justice requires that no man be condemned unheard”

the Principles of Natural Justice :

1.      Audi alteram partem  - both sides shall be heard

IC Award 138/85, the Court held that there should be due inquiry with charge or charges framed and the employee given ample opportunity to defend himself or be heard.

2.      Nemo judex in propia causa  -  no man shall be judge in his own cause.

IC Award 247/86 is emphatic when it states :-  IC Award No. 142 of 1986 serves as a good lesson for the employer.  Great care must be taken to see that the rules of natural justice are followed……..

In Surinder Singh Kanda vs Government of the Federation of Malaya (1962) MLJ 169 Lord Denning had this to say:  …..The rule against bias is one thing.  The right to be heard is another.  Those two rules are the essential characteristics of what is often called ‘natural justice’.  They are the twin pillars supporting it.  They have recently been put in two words ‘impartiality’ and ‘fairness’.  But they are separate concepts and are governed by separate conditions.  The workman must know what evidence has been given and what statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them.  In the case of  Board in Ceylon University vs Fernando (1960) the Lordship made a remark ‘whoever has to adjudicate must not hear evidence or receive representative from one side behind the back of the other’.

CHARGES

The charges or allegation against the accused must be very clear.  The charges cannot be vague and  baseless as company’s rules and regulation must be  cited with the charges.  IC has made it clear vide Award No. 86 of 1977 and Award 82 of 1982 that charges should not be vague and should cite the company rules and regulation which have been breached.

NOTICE OF INQUIRY

1.      That the notice of inquiry should mention the  right of the accused to cross-examine the bank’s witness.

2.      To provide the accused with copies of all statements of all witnesses together with the notice of this inquiry for the accused to prepare his defence before the inquiry.  Copies of statements of all witness should be extended to the accused before the inquiry as per Award 164/85, 87/86, 279/86 and 252/88 which held that copies of the statements of all witnesses should be extended to the accused before the inquiry.

3.      The CHARGES.  

PUNISHMENT

IC Award no 50/86: was stated that withholding of annual increment is considered a form of punishment.

VICTIMISATION

we should observed the defects of  victimisation  is very clear such as :

the Investigation Officer (IO)  who investigated this case :

1.      never ever issue any query to the accused and also failed as IO to take proper statements from the accused.  IO should identify that his investigation should not violate the internal system of the organization.  E.g. that it is clear that the Audit Division violated their own rule as clearly stated in the Audit Manual that “ Workman will be provided with the opportunity to formally respond queries and their comments will be included in the final report” and that “a draft report for discussions with the workman will be produced at the end of each investigation within 4 weeks after the completion of the investigation work”  The IO should ensure not to  violate the company’s own rule and  ethics.

2.      IO should look out for contradictions in the statements by various witnesses.

3.      IO to check and ensure whether the company has in the past condoned such misconduct by me and other employees. Award 136/93 and 179/93. 

4.      IO should not attempt to cover up major weaknesses on the company’s system in the course of his investigations and thereby violate his own code of ethics.  IC Award  148/85, whereby in the course of his investigation, the IO should not cover up weaknesses of the company.

i)                    IO should be independent while investigating the case.  He should maintain fairness and not allow prejudices or bias or influence of the others to override objectivity.  IO state whether the incident occurred because of the shortcomings in the company’s working system.  He should highlight the integrity of the data and facts obtained  Also IO should  highlight the mitigating factors that certain consideration should be given to the accused, if any such facts exist. He should not rely on one person or one source to obtain facts.

5.      IO should be  sure which particular rule or regulation of the company that the accused breached. IO should not proceed to propose there is a case against the workman if he is uncertain of the violation, as the accused may later prove  the uncertainty of the Investigation Officer.  I wish to refer to IC Award 82/82 whereby he should ensure that the charges relate to the company rules and regulations.  To punish a worker for a misconduct which do not appear in the company’s rules and regulations is very questionable.  Management should not be misrepresented by the IO. 

6.      The IO did not check all other departments/units/sectors as the way he checked on the accused to ensure that there were so such similar issues in the past or presently happenings.  This is a clear victimisation as no other departments/units/sectors were checked in this manner i.e checked backwards eventhough the various years audit reported satisfactory and the checking was done after the accused was transferred out of that position.  IO should be sure to confirm whether there were earlier such similar incidents that were condoned by the management.  

IO should not give his personal opinions   

The IO should not give his personal opinion or views during presentation, but confine himself to the facts arising from his investigations.     Award 279/86

IO is not allowed to ask any question       

Award  157/84  & 137/86   IO is not allowed to ask question, he can only present his case to the panel for their observations

IO should remain a neutral position  

IO should present his case as this is his job and should remain neutral.  He should not have personal interest against the accused.

Prosecutor (failed to) : Obligations of the Prosecutor

1.  Must call the complainant to be a witness during the prosecution and to allow the accused to cross examine him.   When prosecutor failed to call the complainant - Ref. Holiday Inn Hotel, Penang and National Union of Hotel and Restaurant Workers (Award No. 90 of 1987) whereby the company failing to call two material witnesses to give evidence at the enquiry and by failing to take into account their recorded statements, has violated the principles of natural justice. 
2.  That the notice of inquiry did not mentioned the  right of the accused to cross-examine the employer’s witness.
3. To provide the accused with copies of all statements of all witnesses together with the notice of this inquiry for the accused to prepare his defence before the inquiry.  Copies of statements of all witness should be extended to the accused before the inquiry as per Award 164/85, 87/86, 279/86 and 252/88 which held that copies of the statements of all witnesses should be extended to the accused before the inquiry.   Call all witnesses that gave statements to the IO during his investigation for the accused to cross-examine. - IC Award 282/87.    
4. That the  person who made the allegation did not personally see the incident.   IC Award 304/87. 
5. The charges or allegation against the accused must be very clear.  The charges cannot be vague and  baseless as company’s rules and regulation must be  cited with the charges.  IC has made it clear vide Award No. 86 of 1977 and Award 82 of 1982 that charges should not be vague and should cite the company rules and regulation which have been breached.
6. Management must allow the accused to call any witness as he wish and expenses to be borne by the company, if any.  Management should not harass the witness requested by the accused.  Witnesses should not be  intimidated by harassing him/her on the expenses claimed
7. A clear victimisation and injustice when the request by the accused to postpone on an inquiry  session for purpose of preparation being denied.  There is a clear  case of reference :  United Traction Co. Sdn Bhd Butterworth and Transport Workers Union (Award No. 40 of 1987) whereby workman requires sufficient time to study the statements made by the witness. 
8. The Industrial Relation manager took very lightly on the request for  witnesses and informed the accused that it is just a request and is not an order is violation of natural justice.
9. Comply to IC award No. 164/85, 87/86, 279/86, 152/85 & 142/86 when documents pertaining to the case were given to the panel prior to the inquiry i.e. before the start of the first session.  The award stressed that the panel should not read any statements or reports pertaining to the accused or the case prior to the inquiry

PANEL OF INQUIRY

1.  Which should have only copies of the charge sheets prior to the inquiry had already had and read the file of the case prior to the charge being read out to the accused.  Panel member should not read any statements or even look into any records pertaining to the case before the inquiry.  In this instance, this inquiry is indeed defective and  unfair -  IC Award 152/85 and 142/86.  Panel put questions as they had previous knowledge of the facts.  Panel should never be briefed before, during or even after the hearing of the case.    Ref.  Malayan Tobacco Co. Bhd and Chow Yong Peng (Award No. 87 of 1986)   &   Ref.  Lori Malaysia Bhd and Transport Workers Union (Award No. 69 of 1987)

2.   The Chairman or any of the Panel members did not explain the ground rules of the inquiry to the accused as to the process when he should cross-examine the witness and when to commence his defence.

3.      The panel members should ask, listen and  consider the valid preliminary objections raised by the accused.

4.      It is of primary importance to bring to the attention of the Panel members, even though all the Panel members are being appointed by the management to conduct the inquiry it does not necessarily follow that the Panel members should uphold the management’s  case against the accused.   He should not be found guilty just simply because one or more senior member of the management personally wanted so.  This inquiry should not be a vehicle for the management’s victimisation against the accused.  The panel’s decision should be based on facts that are substantial and reasonable.

5.      Panel should not ask incriminating questions    

  Panel should confine themselves to questions that would clear any doubts.

 Award 347/86

6.   Chairman and Panel members should know and have knowledge that IO should not give his personal opinions   pertaining to the case against the accused.

The IO should not give his personal opinion or views during presentation,   but confine himself to the facts arising from his investigations.    

Award 279/86  and  also IO is not allowed to ask any question       

      Award  157/84  & 137/86

 7.  Appointment of the panel, by whom? 

      The panel should be appointed by Head of HR or any other such person   who is higher than the accused.

ERROR BY MANAGEMENT

1.      Condonation : By doing so the management had condoned the misconduct, if any.  Chairman of Industrial Court  in the Bank Bumiputra (M) Bhd and George Thomas warned that  “Even if the workman is guilty of the charge, the bank having failed to take action after a very long period of time had condoned the mistake/misconduct, if any.”  The award went to say that  “once an employer had condoned any misconduct which would have justified dismissal or fine, the employer cannot after such condonation go back upon the employer’s election to condone and claim right to dismiss the employee or to impose fine or any other punishment in respect of the offence which has been condoned”  (Condonation :  forgiveness or passing over without any blame.)  Another case is there should be no discrimination between one employee and another for the same offence committed under the same or similar circumstances.  The panel and the PO should not try to cover the company’s weaknesses.  The bank should not adopt double standards in meting out punishments  Ref. Chartered Bank and NUBE (Award No. 104 of 1983) and also Award 115/87. 

2.      Failed to conduct the inquiry within reasonable time.  In the IC Award 282/87 “the inquiry was found improper that the bank did not take action against the accused until seven and a half months after the incident. Employer extend beyond the time within which the employer might reasonably be expected to take decision.  In this IC case, the bank should have acted within a reasonable time and certainly waiting for about 6 months is not considered to be reasonable time.  Ref. BBMB and George Thomas  (Award No. 282 of 1987) 

3.      Postpone the cases several times after written notice being issued to the accused beside the verbal information being conveyed by the Industrial Relation officer.  This has caused duress on the accused and had effected his health and if able to prove shall be considered as victimisation.

4.      If the charges related in the process of inquiry  show or  prove gross negligence and lack of efficiency on the part of the management.  The Industrial Court Award No. 137 of 1986 ( UMBC and ABOM) found it necessary to emphasise the unsatisfactory system of operation which prevailed in the bank during the material time which suggested gross negligence and lack of efficiency on the part of management.  The accused may reiterate the inefficiency on the part of the management which now tried to throw the blame on an employee in the process of victimisation against employees.

5.      Code of Conduct for Industrial Harmony

      The issue of Code of Conduct for Industrial Harmony which was signed by the Malayan Council of Employers’ Organisation (MCEO) and Malaysian Trades union Congress (MTUC) and the Minister of Labour and Manpower Malaysia signed on 9^th February 1975 and became law as from 30^th May 1980 as the code is envisaged by Section 30(5A) of the Industrial Relation Act 1967. 

It is doubted that  management of many companies are aware of the existence of such Code of Conduct. 

To highlight few points:

When management is seen to be very keen to punish employees, management neglect their essential duties to establish complete and proper rules and regulations and to make such rules and regulation readily available.  That is not all, management should make every effort to ensure that employees know and understand them (rules & regulations) and the best way to achieve the same is to give every employee a copy of the rules and by explaining them orally.

6.    DOUBLE JEOPARDY

1.  Punished Twice

Another issue that should be noted is the issue of  double jeopardy whereby a suspect or wrong-doer is dismissed after an earlier punishment say, in the form of transfer.  Ref.  MAS and A.T. Xavier (Award No. 92 of 1983)

Withholding annual increment.  Award no. 50/86, it was stated that withholding of annual increment could be considered a form of punishment for misconduct.

Principles of  Nemo Debat Bis Puniri Pro Uno Delicto  ie. No one should be punished twice for one fault  Where is the natural justice, only victimisation of highest degree is obvious.  I wish to quote the Industrial Court President Fong Seng Yee in the IC Award No. 247 of 1986 as said “Award No. 142 of 1986 serves as a good lesson for the employer.  Great care must be taken to see that the rules of natural justice are followed.  If there is any failure in that respect by the employer, the employer has to pay dearly for the error, so that security of employment, a commodity now precious, can be safeguarded.” 

2.  Charged Twice

A person should not be charged twice for the same offence.

7.   Charges cannot be amended when case is taken to Industrial Court    

      Decide specifically as regards to the offences and the charges because no change is permitted.   Ref.  UMBC, Taiping and ABOM (Award No. 137 of 1986)

8.   Amend of charges at the inquiry      

      Should the company amend or add to the charges, an extension is compulsory.

      IC Award 55/84

To amend the charges at the inquiry would give the accused insufficient time to     prepare his case and this would certainly be a violation of the principles of natural justice. Award 137/86     

9.    Charges cannot be added at the inquiry     

       (Award no. 89 of 1982) Charges cannot be added or amended during the inquiry process.

10.   Reluctant to allow senior executives to be a witness  Award 7/74 

WITNESS        

The company failing to call two material witnesses to give evidence at the enquiry and by failing to take into account their recorded statements, has violated the principles of natural justice.  Ref. Holiday Inn Hotel, Penang and National Union of Hotel and Restaurant Workers (Award No. 90 of 1987)

12.   EVIDENCE

Oral evidence must be direct        -  

must be from person who saw it.

-          Must be from person who heard it

The employer must produce convincing evidence that the workman is guilty of the charge.  Ref.  Wah Soon Sdn Bhd and Lau Ah Yu and Low Sang Lee (Award no. 240 of 1986)

13.   Equality of punishment

There should be equality of punishment, if the charges and the past records(of a previous case) are the similar, there should be no difference in punishments.  Award no. 115/87.

14.   Unsatisfactory system of operations in the company

The court found it necessary to emphasise the unsatisfactory system of operations which prevailed in the bank during the material time in which suggested gross negligence and lack of efficiency on the part of management.   Ref. UMBC, Taiping and ABOM (1986) ILR 684 (award no. 137 of 1986)

15.   Panel should not read reports prior to the inquiry    

Panel should not read any other statements or report pertaining to the accused or the case prior to the inquiry.  Award 152/85 & 142/86

IO should not extend copies of the statements of witnesses to the panel. Award 164/85, 87/86 and 279/86

16.   Copies of statements of all witness should be extended to accused    before the inquiry.

            Award 164/85,  87/86,  279/86 and 252

     

RIGHTS OF THE ACCUSED

The simple but golden rule for the accused -  which employers will do well to remember when conducting inquiries of this kind is to make certain that the worker against whom disciplinary action may be taken, actually see and hear all the witnesses from whom statements are taken and that he is allowed the opportunity of not only confronting but also questioning them one by one.

Withholding annual increment

Award no. 50/86, it was stated that withholding of annual increment could be considered a form of punishment for misconduct.

Panel should not ask incriminating questions

Panel should not play the role of asking incriminating questions.  Instead the panel should confine themselves to questions that would clear any doubts.  Award 347/86

Condoned to similar acts    

The IO should verify that the company has not condoned to similar acts of misconduct in the past and examine the company’s security system and working procedure.  The purpose of this exercise is to ensure that the company itself is beyond reproach before the company pursues a case against the accused.  The company should not use the accused as a scapegoat for its fault and shortcomings.  Award136/93 & 179/93

IO should not cover company’s weaknesses  

In the course of his investigations, the IO should not attempt to cover the major weaknesses of the company.

CHECK AND TO DISCUSS THE METHOD OF RECORDING

Notes should be verbatim, i.e. in the form of questions and answers (award no. 66 of 1976)

Closing remarks

For the summary -  Misconduct outside the sphere of employment 

If the employers had carried defective inquiry or the rules of natural justice had not been observed during the inquiry process.  The inquiry must be seen to be must in fact be conducted in a fair and impartial manner       

For further questions, email to :  bang.the.bank.my@gmail.com

Domestic Inquiry - Rights of Employees

NATURAL JUSTICE

An employer ought to give an employee the opportunity to be heard because it is one of the fundamental principles of natural justice which no employer can afford to ignore.  In R vs CambridgeUniversity (1715) I Strange 557 at 567;93 ER 698 at 704 Fortescue J explained that “Even God did not pass sentence on Adam before he was called upon to make his defence”

Industrial Court (IC) Award 88/74 The court made a remark “Natural justice requires that no man be condemned unheard”

the Principles of Natural Justice :

1.      Audi alteram partem  - both sides shall be heard

IC Award 138/85, the Court held that there should be due inquiry with charge or charges framed and the employee given ample opportunity to defend himself or be heard.

2.      Nemo judex in propia causa  -  no man shall be judge in his own cause.

IC Award 247/86 is emphatic when it states :-  IC Award No. 142 of 1986 serves as a good lesson for the employer.  Great care must be taken to see that the rules of natural justice are followed……..

In Surinder Singh Kanda vs Government of the Federation of Malaya (1962) MLJ 169 Lord Denning had this to say:  …..The rule against bias is one thing.  The right to be heard is another.  Those two rules are the essential characteristics of what is often called ‘natural justice’.  They are the twin pillars supporting it.  They have recently been put in two words ‘impartiality’ and ‘fairness’.  But they are separate concepts and are governed by separate conditions.  The workman must know what evidence has been given and what statements have been made affecting him: and then he must be given a fair opportunity to correct or contradict them.  In the case of  Board in Ceylon University vs Fernando (1960) the Lordship made a remark ‘whoever has to adjudicate must not hear evidence or receive representative from one side behind the back of the other’.

CHARGES

The charges or allegation against the accused must be very clear.  The charges cannot be vague and  baseless as company’s rules and regulation must be  cited with the charges.  IC has made it clear vide Award No. 86 of 1977 and Award 82 of 1982 that charges should not be vague and should cite the company rules and regulation which have been breached.

NOTICE OF INQUIRY

1.      That the notice of inquiry should mention the  right of the accused to cross-examine the bank’s witness.

2.      To provide the accused with copies of all statements of all witnesses together with the notice of this inquiry for the accused to prepare his defence before the inquiry.  Copies of statements of all witness should be extended to the accused before the inquiry as per Award 164/85, 87/86, 279/86 and 252/88 which held that copies of the statements of all witnesses should be extended to the accused before the inquiry.

3.      The CHARGES.  

PUNISHMENT

IC Award no 50/86: was stated that withholding of annual increment is considered a form of punishment.

VICTIMISATION

we should observed the defects of  victimisation  is very clear such as :

the Investigation Officer (IO)  who investigated this case :

1.      never ever issue any query to the accused and also failed as IO to take proper statements from the accused.  IO should identify that his investigation should not violate the internal system of the organization.  E.g. that it is clear that the Audit Division violated their own rule as clearly stated in the Audit Manual that “ Workman will be provided with the opportunity to formally respond queries and their comments will be included in the final report” and that “a draft report for discussions with the workman will be produced at the end of each investigation within 4 weeks after the completion of the investigation work”  The IO should ensure not to  violate the company’s own rule and  ethics.

2.      IO should look out for contradictions in the statements by various witnesses.

3.      IO to check and ensure whether the company has in the past condoned such misconduct by me and other employees. Award 136/93 and 179/93. 

4.      IO should not attempt to cover up major weaknesses on the company’s system in the course of his investigations and thereby violate his own code of ethics.  IC Award  148/85, whereby in the course of his investigation, the IO should not cover up weaknesses of the company.

i)                    IO should be independent while investigating the case.  He should maintain fairness and not allow prejudices or bias or influence of the others to override objectivity.  IO state whether the incident occurred because of the shortcomings in the company’s working system.  He should highlight the integrity of the data and facts obtained  Also IO should  highlight the mitigating factors that certain consideration should be given to the accused, if any such facts exist. He should not rely on one person or one source to obtain facts.

5.      IO should be  sure which particular rule or regulation of the company that the accused breached. IO should not proceed to propose there is a case against the workman if he is uncertain of the violation, as the accused may later prove  the uncertainty of the Investigation Officer.  I wish to refer to IC Award 82/82 whereby he should ensure that the charges relate to the company rules and regulations.  To punish a worker for a misconduct which do not appear in the company’s rules and regulations is very questionable.  Management should not be misrepresented by the IO. 

6.      The IO did not check all other departments/units/sectors as the way he checked on the accused to ensure that there were so such similar issues in the past or presently happenings.  This is a clear victimisation as no other departments/units/sectors were checked in this manner i.e checked backwards eventhough the various years audit reported satisfactory and the checking was done after the accused was transferred out of that position.  IO should be sure to confirm whether there were earlier such similar incidents that were condoned by the management.  

IO should not give his personal opinions   

The IO should not give his personal opinion or views during presentation, but confine himself to the facts arising from his investigations.     Award 279/86

IO is not allowed to ask any question       

Award  157/84  & 137/86   IO is not allowed to ask question, he can only present his case to the panel for their observations

IO should remain a neutral position  

IO should present his case as this is his job and should remain neutral.  He should not have personal interest against the accused.

Prosecutor (failed to) : Obligations of the Prosecutor

1.  Must call the complainant to be a witness during the prosecution and to allow the accused to cross examine him.   When prosecutor failed to call the complainant - Ref. Holiday Inn Hotel, Penang and National Union of Hotel and Restaurant Workers (Award No. 90 of 1987) whereby the company failing to call two material witnesses to give evidence at the enquiry and by failing to take into account their recorded statements, has violated the principles of natural justice. 
2.  That the notice of inquiry did not mentioned the  right of the accused to cross-examine the employer’s witness.
3. To provide the accused with copies of all statements of all witnesses together with the notice of this inquiry for the accused to prepare his defence before the inquiry.  Copies of statements of all witness should be extended to the accused before the inquiry as per Award 164/85, 87/86, 279/86 and 252/88 which held that copies of the statements of all witnesses should be extended to the accused before the inquiry.   Call all witnesses that gave statements to the IO during his investigation for the accused to cross-examine. - IC Award 282/87.    
4. That the  person who made the allegation did not personally see the incident.   IC Award 304/87. 
5. The charges or allegation against the accused must be very clear.  The charges cannot be vague and  baseless as company’s rules and regulation must be  cited with the charges.  IC has made it clear vide Award No. 86 of 1977 and Award 82 of 1982 that charges should not be vague and should cite the company rules and regulation which have been breached.
6. Management must allow the accused to call any witness as he wish and expenses to be borne by the company, if any.  Management should not harass the witness requested by the accused.  Witnesses should not be  intimidated by harassing him/her on the expenses claimed
7. A clear victimisation and injustice when the request by the accused to postpone on an inquiry  session for purpose of preparation being denied.  There is a clear  case of reference :  United Traction Co. Sdn Bhd Butterworth and Transport Workers Union (Award No. 40 of 1987) whereby workman requires sufficient time to study the statements made by the witness. 
8. The Industrial Relation manager took very lightly on the request for  witnesses and informed the accused that it is just a request and is not an order is violation of natural justice.
9. Comply to IC award No. 164/85, 87/86, 279/86, 152/85 & 142/86 when documents pertaining to the case were given to the panel prior to the inquiry i.e. before the start of the first session.  The award stressed that the panel should not read any statements or reports pertaining to the accused or the case prior to the inquiry

PANEL OF INQUIRY

1.  Which should have only copies of the charge sheets prior to the inquiry had already had and read the file of the case prior to the charge being read out to the accused.  Panel member should not read any statements or even look into any records pertaining to the case before the inquiry.  In this instance, this inquiry is indeed defective and  unfair -  IC Award 152/85 and 142/86.  Panel put questions as they had previous knowledge of the facts.  Panel should never be briefed before, during or even after the hearing of the case.    Ref.  Malayan Tobacco Co. Bhd and Chow Yong Peng (Award No. 87 of 1986)   &   Ref.  Lori Malaysia Bhd and Transport Workers Union (Award No. 69 of 1987)

2.   The Chairman or any of the Panel members did not explain the ground rules of the inquiry to the accused as to the process when he should cross-examine the witness and when to commence his defence.

3.      The panel members should ask, listen and  consider the valid preliminary objections raised by the accused.

4.      It is of primary importance to bring to the attention of the Panel members, even though all the Panel members are being appointed by the management to conduct the inquiry it does not necessarily follow that the Panel members should uphold the management’s  case against the accused.   He should not be found guilty just simply because one or more senior member of the management personally wanted so.  This inquiry should not be a vehicle for the management’s victimisation against the accused.  The panel’s decision should be based on facts that are substantial and reasonable.

5.      Panel should not ask incriminating questions    

  Panel should confine themselves to questions that would clear any doubts.

 Award 347/86

6.   Chairman and Panel members should know and have knowledge that IO should not give his personal opinions   pertaining to the case against the accused.

The IO should not give his personal opinion or views during presentation,   but confine himself to the facts arising from his investigations.    

Award 279/86  and  also IO is not allowed to ask any question       

      Award  157/84  & 137/86

 7.  Appointment of the panel, by whom? 

      The panel should be appointed by Head of HR or any other such person   who is higher than the accused.

ERROR BY MANAGEMENT

1.      Condonation : By doing so the management had condoned the misconduct, if any.  Chairman of Industrial Court  in the Bank Bumiputra (M) Bhd and George Thomas warned that  “Even if the workman is guilty of the charge, the bank having failed to take action after a very long period of time had condoned the mistake/misconduct, if any.”  The award went to say that  “once an employer had condoned any misconduct which would have justified dismissal or fine, the employer cannot after such condonation go back upon the employer’s election to condone and claim right to dismiss the employee or to impose fine or any other punishment in respect of the offence which has been condoned”  (Condonation :  forgiveness or passing over without any blame.)  Another case is there should be no discrimination between one employee and another for the same offence committed under the same or similar circumstances.  The panel and the PO should not try to cover the company’s weaknesses.  The bank should not adopt double standards in meting out punishments  Ref. Chartered Bank and NUBE (Award No. 104 of 1983) and also Award 115/87. 

2.      Failed to conduct the inquiry within reasonable time.  In the IC Award 282/87 “the inquiry was found improper that the bank did not take action against the accused until seven and a half months after the incident. Employer extend beyond the time within which the employer might reasonably be expected to take decision.  In this IC case, the bank should have acted within a reasonable time and certainly waiting for about 6 months is not considered to be reasonable time.  Ref. BBMB and George Thomas  (Award No. 282 of 1987) 

3.      Postpone the cases several times after written notice being issued to the accused beside the verbal information being conveyed by the Industrial Relation officer.  This has caused duress on the accused and had effected his health and if able to prove shall be considered as victimisation.

4.      If the charges related in the process of inquiry  show or  prove gross negligence and lack of efficiency on the part of the management.  The Industrial Court Award No. 137 of 1986 ( UMBC and ABOM) found it necessary to emphasise the unsatisfactory system of operation which prevailed in the bank during the material time which suggested gross negligence and lack of efficiency on the part of management.  The accused may reiterate the inefficiency on the part of the management which now tried to throw the blame on an employee in the process of victimisation against employees.

5.      Code of Conduct for Industrial Harmony

      The issue of Code of Conduct for Industrial Harmony which was signed by the Malayan Council of Employers’ Organisation (MCEO) and Malaysian Trades union Congress (MTUC) and the Minister of Labour and Manpower Malaysia signed on 9^th February 1975 and became law as from 30^th May 1980 as the code is envisaged by Section 30(5A) of the Industrial Relation Act 1967. 

It is doubted that  management of many companies are aware of the existence of such Code of Conduct. 

To highlight few points:

When management is seen to be very keen to punish employees, management neglect their essential duties to establish complete and proper rules and regulations and to make such rules and regulation readily available.  That is not all, management should make every effort to ensure that employees know and understand them (rules & regulations) and the best way to achieve the same is to give every employee a copy of the rules and by explaining them orally.

6.    DOUBLE JEOPARDY

1.  Punished Twice

Another issue that should be noted is the issue of  double jeopardy whereby a suspect or wrong-doer is dismissed after an earlier punishment say, in the form of transfer.  Ref.  MAS and A.T. Xavier (Award No. 92 of 1983)

Withholding annual increment.  Award no. 50/86, it was stated that withholding of annual increment could be considered a form of punishment for misconduct.

Principles of  Nemo Debat Bis Puniri Pro Uno Delicto  ie. No one should be punished twice for one fault  Where is the natural justice, only victimisation of highest degree is obvious.  I wish to quote the Industrial Court President Fong Seng Yee in the IC Award No. 247 of 1986 as said “Award No. 142 of 1986 serves as a good lesson for the employer.  Great care must be taken to see that the rules of natural justice are followed.  If there is any failure in that respect by the employer, the employer has to pay dearly for the error, so that security of employment, a commodity now precious, can be safeguarded.” 

2.  Charged Twice

A person should not be charged twice for the same offence.

7.   Charges cannot be amended when case is taken to Industrial Court    

      Decide specifically as regards to the offences and the charges because no change is permitted.   Ref.  UMBC, Taiping and ABOM (Award No. 137 of 1986)

8.   Amend of charges at the inquiry      

      Should the company amend or add to the charges, an extension is compulsory.

      IC Award 55/84

To amend the charges at the inquiry would give the accused insufficient time to     prepare his case and this would certainly be a violation of the principles of natural justice. Award 137/86     

9.    Charges cannot be added at the inquiry     

       (Award no. 89 of 1982) Charges cannot be added or amended during the inquiry process.

10.   Reluctant to allow senior executives to be a witness  Award 7/74 

WITNESS        

The company failing to call two material witnesses to give evidence at the enquiry and by failing to take into account their recorded statements, has violated the principles of natural justice.  Ref. Holiday Inn Hotel, Penang and National Union of Hotel and Restaurant Workers (Award No. 90 of 1987)

12.   EVIDENCE

Oral evidence must be direct        -  

must be from person who saw it.

-          Must be from person who heard it

The employer must produce convincing evidence that the workman is guilty of the charge.  Ref.  Wah Soon Sdn Bhd and Lau Ah Yu and Low Sang Lee (Award no. 240 of 1986)

13.   Equality of punishment

There should be equality of punishment, if the charges and the past records(of a previous case) are the similar, there should be no difference in punishments.  Award no. 115/87.

14.   Unsatisfactory system of operations in the company

The court found it necessary to emphasise the unsatisfactory system of operations which prevailed in the bank during the material time in which suggested gross negligence and lack of efficiency on the part of management.   Ref. UMBC, Taiping and ABOM (1986) ILR 684 (award no. 137 of 1986)

15.   Panel should not read reports prior to the inquiry    

Panel should not read any other statements or report pertaining to the accused or the case prior to the inquiry.  Award 152/85 & 142/86

IO should not extend copies of the statements of witnesses to the panel. Award 164/85, 87/86 and 279/86

16.   Copies of statements of all witness should be extended to accused    before the inquiry.

            Award 164/85,  87/86,  279/86 and 252

     

RIGHTS OF THE ACCUSED

The simple but golden rule for the accused -  which employers will do well to remember when conducting inquiries of this kind is to make certain that the worker against whom disciplinary action may be taken, actually see and hear all the witnesses from whom statements are taken and that he is allowed the opportunity of not only confronting but also questioning them one by one.

Withholding annual increment

Award no. 50/86, it was stated that withholding of annual increment could be considered a form of punishment for misconduct.

Panel should not ask incriminating questions

Panel should not play the role of asking incriminating questions.  Instead the panel should confine themselves to questions that would clear any doubts.  Award 347/86

Condoned to similar acts    

The IO should verify that the company has not condoned to similar acts of misconduct in the past and examine the company’s security system and working procedure.  The purpose of this exercise is to ensure that the company itself is beyond reproach before the company pursues a case against the accused.  The company should not use the accused as a scapegoat for its fault and shortcomings.  Award136/93 & 179/93

IO should not cover company’s weaknesses  

In the course of his investigations, the IO should not attempt to cover the major weaknesses of the company.

CHECK AND TO DISCUSS THE METHOD OF RECORDING

Notes should be verbatim, i.e. in the form of questions and answers (award no. 66 of 1976)

Closing remarks

For the summary -  Misconduct outside the sphere of employment 

If the employers had carried defective inquiry or the rules of natural justice had not been observed during the inquiry process.  The inquiry must be seen to be must in fact be conducted in a fair and impartial manner       

For further questions, email to :  bang.the.bank.my@gmail.com

RECOVERY NPL - CORRUPTION THROUGH LEGAL FEES

Why are banks in Malaysia seems to be very efficient on proceeding legal suit against default borrowers?
Don't the bank should avoid the account from turning to Non Performing Loan (NPL) by restructuring and giving room to the borrowers for breathing instead of just transferring the account to NPL and hand it over to the recovery department.  Don't bank learned during the 1997 crisis when banks are in financial difficulties due to the Asian Currency Financial turmoil, loans can be restructured despite of the increasing interest rates.  Those actions were done with the instructions from the Government lead by the former Prime Minister, Tun Dr Mahathir Mohamad.  Legal suit was the last resort for borrowers who are unwilling to pay instead of proceeding immediately to those unable to pay.

Banks should professionally clearly define between those UNWILLING and those UNABLE to pay.  However, what happen today is that those bankers are happy to have accounts falling into NPL for few various reasons such as :
1.  To proceed legal suit where corruption will take place that will benefit bank personnel in two ways i.e that legal firm will give a cut on all legal fess charged while proceeding the legal suit. Another reason is to help client get discount later to pay to the bank with some special cut for the recovery officer or manager.
2.  To get high NPL figures for the bank and later when recovery is made, proudly showed to the Board of Directors of the bank that recoveries being made, mitigating that effort were made to recover.  Actual fact the borrowers were just in temporary financial difficulties and borrowers themselves made effort to pay to clear their names from the bad CCRIS system available today.
3.  Comes year-end, the NPL department will try to make high provision of the NPL account and some were purposely wirtten-off, eventhough recovery chances are very high.  This again is for two personal reasons, one is to show high recovery to BOD when client made payment and second reason to get discount of certain percentage of the outstanding amount for the borrower to pay and with certain cut to them personally.

It is seems ridiculous that banks very much prefer to sought to legal suit against default borrowers and incurring penalty interest, further charges and cost to the defaulters account claiming for full outstanding while even the normal monthly instalment were not being able to service, how could the full outstanding be paid.  Banks should sought to negotiations with defaulters to restructure by reducing instalments which they will continue paying at a lower amount instead of not paying at all.

Banks should realise that  not everyday is sunshine.  During bad times, bankers still get their salary, while outside in the market there are people who loose their jobs, paycut and some businessman running loosing business just to keep floating.

Banks should do away with the penalty charges to defaulters, as that will actually inject poison to a sick man.

Banks should not be worst than standing armies killing the public.

CEOs and Successful Entrepreneurs have to coach aspiring entrepreneurs

Many steps of enterprise starting can be taught through formal couses.  But success as an entrepreneur depends on a fairly unusual combination of personality traits and innovative skills, most of which can be honed on the job only.  Hence most novice entrepreneurs need the kind of guidance and critics that the successful CEOs and entrepreneurs provide in the role of mentors.   There can be knowledge, traits and skills particularly relevant to the current environment and these can be articulated better by the current successful businessmen and the persons willing to start new ventures can benefit by being aware of them.  Then only they can start attempts to know more about them and use available learning opportunities.  Even persons who are in the business of coaching new entrepreneurs may come to know new knowledge, traits and skill through the coaching and discussions with the successful business people.

In order to build a good economy in a developing country, those successful CEOs and entrepreneurs must provide a platform for new business people or the younger generation enter into successful business and stay afloat.  As we are fully aware that new small business failed before reaching three years and most collapse during the infant stage.  Without sincere coaching of successful business individual the growth of younger business generation will be very much less except for those where their fathers left a handsome amount of capital where they can mange failures to success.  Otherwise the failures will not stand again.

Beware of Banking System

PROCESS OF RELATIONSHIP

CCRIS  -  Is it a guide or extreme sources of information.  Banks in Malaysia used this useful info like a fool, by using it against the public.  Even with simple negative report or rectified situation is still seen as negative issue.

Utilisation of limit is being taken up almost immediately, however settlements are updated  after about 90 days.

Restructured facilities is been deemed the individual’s financial health is at stake eventhough being regularized after three years.  In the report that showed restructure of facilities, present application will 99% be rejected.  Banking system today is seen to see as though no one shall fall sick.   Banks never learn to nurse their clients instead of injecting poison to kill clients and creating Non-Performing Loans (NPL).  Bankers have reason to create NPL, will be discussed later.

CTOS -  Being used against customers only,  eventhough outdated or inaccurate.  There are banks that rigidly used this info as a masterpiece, not knowing that it is outdated, never updated by their fellow bankers like them from other bank.

BANK CHARGES - Never on reducing trend, always on the increase of reasons and amounts to find ways to charge public.  The bank never learn that their clients should be profitable in order for the bank to stay too.  But today banks are competing among banks to declare higher profits, ignoring that the profits they make are at the expense of their clients.  They never learn through the 1986 and 1990 crisis that if their client is sick, they will be sick too. If their client die, they may die too, if not rescued by authorities.

BANK CREDIT OFFICERS - NOT LOYAL TO BANK OR CLIENTS,  will only process loans when they are are being agreed/promised certain benefits either direct or through portion of legal fees.

CORRUPTION - NO DEAL NO WORK.  Is growing at a fast phase and very alarming. Anti Corruption Agencies should be looking into this matter seriously.  Corruption are through direct dealing and mostly are through percentage of legal fees.  Bar Council make the rule happily to deny discounts to clients had gave room to introduction fees be paid by legal firms to bank officers that give legal cases for new loan or for litigation to be taken on clients.  This is real blood sucking.

LEGAL FEES - APPOINTED SPECIAL ARRANGEMENT LEGAL FIRMS ONLY. Bank officers will not allow client to choose legal firms eventhough from the bank's panel list, as arrangements being made for certain percentage of the legal fees to them.  Bar council made the ruling that clients shall not be discounted of the legal fees, however today the discount are being discounted to the bank officers from the legal firm.  Bar Council and SPRM should audit legal firm fees and check the net left over to the legal firms as compare to the amount charged to loan borrowers.  This standard of corruption is very alarming,  Legal firms that are not willing to give away this portion to the bankers, will have to close shop if they are relying to the business from the banks.

NON-PERFORMING LOANS -  When clients have financial difficulties, bank will not accommodate to judge and negotiate for lower repayment amount, instead will recall the entire loan. Just imagine a client that may need to pay RM2000 for 20 years and had been paying very promptly for the past 10 years and due to unforeseen circumstances face financial difficulties.  Bank will just recall the entire outstanding instead of negotiating for lower monthly instalment.  Would it be logic, that one who is not able to pay the normal RM2,000 had been instructed to pay the entire outstanding amount of may be RM30,000.

RECOVERY - DESPITE OF FINANCIAL PROBLEMS

RECOVERY - BANK WILL NOT ACCOMODATE OR ASISST

RECOVERY NPL - CORRUPTION THROUGH LEGAL FEES

NON-DEDICATED PERSONNELS

BANK - PROFIT ORIENTED

BANK - NO SOCIAL OBLIGATION TO THE COUNTRY

ISLAMIC BANKING PRODUCTS

ISLAMIC BANKING PRODUCTS

in Insurance, Islamic Banking, Retail Banking |

One of the best ways to understand Islamic banking is to gain an understanding of the products that are considered acceptable. Several of these are covered below. The important thing to remember, however, is that, as with the Christian Bible, there are several differing interpretations of what the Holy Quran and the Hadith actually intend. As a result, not all of these products are universally acceptable (particularly those where the return is determinable in advance), but they are a useful guide. A subsequent piece in the series will cover some of the debate in this area.

This is the second in this series.

WADIAH (SAFEKEEPING)

In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it. The depositor, at the bank’s discretion, may be rewarded with a ‘hibah’ (gift) as a form of appreciation for the use of funds by the bank. In this case, the bank compensates depositors for the time-value of their money (i.e. pays interest) but refers to it as a “gift” because it does not officially guarantee payment of the gift.

MUDARABAH (PROFIT LOSS SHARING)

Mudarabah is an arrangement or agreement between a capital provider and an entrepreneur, whereby the entrepreneur can mobilise funds for its business activity. Any profits made will be shared between the capital provider and the entrepreneur according to an agreed ratio, where both parties share in profits and only capital provider bears all the losses if occurred. The profit-sharing continues until the loan is repaid. The bank is compensated for the time value of its money in the form of a floating interest rate that is pegged to the debtor’s profits.

MUSHARAKAH (JOINT VENTURE)

This concept is normally applied for business partnerships or joint ventures. The profits made are shared on an agreed ratio, while losses incurred will be divided based on the equity participation ratio. This concept is distinct from fixed-income investing (i.e. issuance of loans).

MURABAHAH (COST PLUS)

This concept refers to the sale of goods at a price, which includes a profit margin agreed to by both parties. The purchase and selling price, other costs and the profit margin must be clearly stated at the time of the sale agreement. The bank is compensated for the time value of its money in the form of the profit margin. This is a fixed-income loan for the purchase of a real asset (such as real estate or a vehicle), with a fixed rate of interest determined by the profit margin. The bank is not compensated for the time value of money outside of the contracted term (i.e. the bank cannot charge additional interest on late payments), however the asset remains in the ownership of the bank until the loan is paid in full.

This type of transaction is similar to “rent-to-own” arrangements for furniture or appliances that are very common in the United States.

BAI’ BITHAMAN AJIL (DEFERRED PAYMENT SALE)

This concept refers to the sale of goods on a deferred payment basis at a price, which includes a profit margin agreed to by both parties. This is similar toMurabahah, except that the debtor makes only a single installment, on the maturity date of the loan. By the application of a discount rate, an Islamic bank can collect the market rate of interest.

WAKALAH (AGENCY)

This occurs when a person appoints a representative to undertake transactions on his/their behalf, similar to a power of attorney.

QARDUL HASSAN (BENEVOLENT LOAN)

This is a loan extended on a goodwill basis, and the debtor is only required to repay the amount borrowed. However, the debtor may, at his or her discretion, pay an extra amount beyond the principal amount of the loan (without promising it) as a token of appreciation to the creditor. In the case that the debtor does not pay an extra amount to the creditor, this transaction is a true interest-free loan. Some Muslims consider this to be the only type of loan that does not violate the prohibition on riba, since it is the one type of loan that truly does not compensate the creditor for the time value of money.

IJARAH THUMMA AL BAI’ (HIRE PURCHASE)

These are variations on a theme of purchase and lease back transactions. There are two contracts involved in this concept. The first contract, Ijarahcontract (leasing/renting) and the second contract, Bai’ contract (purchase) are undertaken one after the other. For example, in a car financing facility, a customer enters into the first contract and leases the car from the owner (bank) at an agreed rental over a specific period. When the lease period expires, the second contract comes into effect, which enables the customer to purchase the car at an agreed price.

In effect, the bank sells the product to the debtor, at an above market-price profit margin, in return for agreeing to receive the payment over a period of time; the profit margin on the lease is equivalent to interest earned at a fixed rate of return.

This type of transaction is particularly reminiscent of “contractum trinius”, a complicated legal trick used by European bankers and merchants during the Middle Ages, which involved combining three individually legal contracts in order to produce a transaction of an interest bearing loan (something that the Church made illegal).

BAI’ AL-INAH (SELL AND BUY BACK AGREEMENT)

The financier sells an asset to the customer on a deferred payment basis and then the asset is immediately repurchased by the financier for cash at a discount. The buying back agreement allows the bank to assume ownership over the asset in order to protect against default without explicitly charging interest in the event of late payments or insolvency.

HIBAH (GIFT)

This is a token given voluntarily by a debtor to a creditor in return for a loan.Hibah usually arises in practice when Islamic banks voluntarily pay their customers interest on savings account balances.

TAKAFUL (ISLAMIC INSURANCE)

In modern business, one of the ways to reduce the risk of loss due to misfortunes is through insurance. The basic idea behind insurance is the sharing of risk. The concept of insurance where resources are pooled to help the needy does not contradict Shariah.
Conventional insurance involves the elements of uncertainty (Al-gharar) in the contract of insurance, gambling (Al-maisir) as the consequences of the presence of uncertainty and interest (Al-riba) in the investment activities of the conventional insurance companies which contravene the rules of Shariah. It is generally accepted by Muslim Jurists that the operation of conventional insurance does not conform to the rules and requirements of Shariah.

Takaful is an alternative form of cover which a Muslim can avail himself against the risk of loss due to misfortunes. The concept of takaful is not a new concept, in fact it had been practised by the Muhajrin of Mecca and the Ansar of Medina following the hijra of the Prophet over 1400 years ago.

Takaful is based on the idea that what is uncertain with respect to an individual may cease to be uncertain with respect to a very large number of similar individuals. Insurance by combining the risks of many people enables each individual to enjoy the advantage provided by the law of large numbers.

SUKUK (ISLAMIC BONDS)

In keeping with the prohibition of riba, a conventional bond is not permitted. ASukuk bond, however, is asset-backed and the returns on it are not fixed, but are linked to the return on the assets purchased with the proceeds of the issue. 

These asset-based bonds of medium-term maturity have been issued internationally by sovereign and corporate entities. Sukuk paper has the advantage of competitive pricing as a risk-mitigation structure. In 2001, the Bahrain Monetary Agency was among the first central banks to issue this paper, in its case in three- and five-year maturities, with most issues oversubscribed.