Yogita,
I sense that this thread has been turned into an HR vs Employee debate, which in my humble opinion is wrong.
Coming back to your question, I want to know, as to why is attendance such a major concern for you (there are other more important issues like retention, talent management, etc). Is it because there have been issues of indiscipline like late coming always or what else? If that is the case, I think it makes better sense to talk to your employees about the concern of them being late always.
Or is it your senior management feels strongly about discipline and believe that attendance is the most prominent way to show you mean business? You had mentioned about Godrej, let me point to you that, Godrej has a flexitime policy i.e. you can come to office anytime between 7am to 10.30 am and then work for 8.5 hours from the time you came in. Do you also such flexitimes? Please note that for the labour in factories it is based on shift timings and hence they have to be on time. But, Godrej provides accomodation to its employees which is very near to the compound. Does your company provide that? Or does your company arrange for transportation of employees?
There were a few posts which I believe were extremely stupid, wherein someone said that with better planning you can arrive on time, what if the local trains break down due to water seepage onto tracks (very common occurrence, any Mumbaikar would tell you that) and trains stop, how do you expect the person to come?
I will quote the example of HCL, which has recently been voted as the Best Company to Work For, in there they allow people to work from home if such a thing happens, I know their nature of business maybe different from yours and hence that may not be a viable solution.
HR is Human Relations, and not just implementation of policies, I think HCL is a wonderful example because of their policy of 'Employee First'. Remember, it is your employee who generates revenues for you and makes it possible for the organization to thrive. An organization which helps its employees in difficult times will see the employee go extra lengths when the organization needs their help.
I think you need to impress upon the management that sometimes there is an issue, especially when you know it is raining heavily wherein trains can be affected and you can verify this online via google or online news sites, so I don't think it can be misused as an excuse.
To those who said rules are not to be broken etc - I would like to ask you a question, what is the relationship between the company and the employee, if it is of a service provider (employee providing service to company) then yes what you say makes sense, there will be a Service Level Agreement (KRAs and KPIs) and they should stick to it, which would mean that the company cannot expect the employee to stay longer than 8.5 hours regardless of whether you pay OT or not, because its not in the employees SLA, will that go down well with you. There are two sides to a coin, please see the other point of view too.
To those who made it a HR vs Employees debate - Yogita just asked a question to solve her dilemma, she was here asking for advice and she had not made a decision, we can provide her with alternatives but then it is upto her to take the decision she feels is right for her organization, so I would request you guys to help her out by giving suggestions and not by attacking her/HR managers as a whole.