The Standard-Vacuum Refining Co., of
India Ltd. Vs. Its Workmen & Ors  INSC 67 (6 April 1960)
GUPTA, K.C. DAS
CITATION: 1960 AIR 948 1960 SCR (3) 466
CITATOR INFO :
F 1967 SC1206 (10) R 1972 SC 319 (15) F 1972
SC1942 (24,95) R 1987 SC 777 (6) RF 1990 SC 532 (6) E 1992 SC 457 (19,20)
Industrial Dispute-Abolition of contract
system of labourDispute raised by regular workmen of company-Reference to
Tribunal, if competent-Industrial Disputes Act, 1947 (14 of 1947), SS. 2 (k),
A dispute was raised by the respondents, the
workmen of the appellant company, with respect to contract labour employed by
it for cleaning maintenance work at the refinery including premises and plant
belonging to it. They made a demand for abolition of the contract system and
for absorbing the workmen employed through the contractors into the regular
service of the company. The matter was referred to the Tribunal under s. 10 of
the Industrial Disputes Act, 1947. The company objected to the reference on the
grounds (1) that it was incompetent inasmuch as there was no dispute between it
and the respondents and it was not open to them to raise a dispute with respect
to the workmen of some other employer, viz., the contractor, and (2) in any
case, it was for the company to decide what was the best method of carrying on
its business and the Tribunal could not interfere with that function of the
management. The Tribunal held that the reference was competent and on the
merits it was of opinion that the work which was being done through the
contractor was necessary for the company to be done daily, that doing this work
through annual contracts resulted in the deprivation of security of service and
other benefits, privileges, leave, etc., of the workmen of the contractor and
that therefore the contract system with respect to this work should be
Held, (1) that the dispute in the present
case was an industrial dispute within the meaning of s. 2(k) of the Industrial
Disputes Act, 1947, as interpreted in Workmen of Dimakuchi Tea Estate v. The
Management of Dimakuchi Tea Estate, , 467 S.C.R. 1156, because (i) the
respondents had a community of interest with the workmen of the contractor,
(ii) they hall also a substantial interest in-the subject-matter of the dispute
in the sense that the class to which they belonged, namely, workmen, was
substantially affected thereby, and (iii) the company could give relief in the
The reference was, accordingly, competent.
(2) that the direction given by the Tribunal
that the contract system should be abolished was just in the circumstances of
the case and should not be interfered with.
D. Macropollo and Co. (P) Ltd. v. D.
Macropollo and Co. (P) Ltd. Employees' Union, A.I.R. 1958 S.C. 1012,
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 130 of 1959.
Appeal by special leave from the Award dated
September 5, 1958, of the Industrial Tribunal, Bombay, in Reference (I.T.) No.
187 of 1958.
C. K. Daphtary, Solicitor-General of India,
G. B. Pai and Sardar Bahadur, for the appellants.
H. R. Gokhale, S. B. Naik and K. R.
Chaudhury, for respondent No. 1.
1960. April 6. The Judgment of the Court was
delivered by WANCHOO, J.-This is an appeal by special leave in an industrial
matter. The appellant is The Standard Vacuum Refining Company of India Limited
(hereinafter called the company). A dispute was raised by the workmen of the
company (hereinafter called the respondents) with respect to contract labour
employed by the company for cleaning maintenance of the refinery, (plant and
premises) belonging to the company. The system in force in the company is that
this work is given to contractors for a period of one year from October 1 to
September 30. At the time when the reference was made the contract. was with Ramji
Gordhan and Company for the period from October 1, 1957, to September 30, 1958.
On April 27, 1957, the respondents made a demand for abolition of the contract
system that prevailed in the company and for absorbing the workmen employed
through the contractors into the regular service of the company with
retrospective effect from the date of their employment in the company through
the contractors. The case of the respondents was that the contractor used to
change sometimes from year to year with the 468 result that the workmen
employed by the previous contractor were thrown out of employment. As an
instance, it was said that previous to October 1, 1957, the contract was with
Gowri Construction Company. That company employed 67 workmen to do the work.
But when the contract was given to Ramji Gordhan and Company, all these 67
workmen were thrown out of employment, though 40 of them were subsequently reemployed
as fresh employees by Ramji Gordhan and Company.
The result of the system therefore was that
there was no security of service to the workmen who were in effect doing the
work of the company. Besides the contractors were paying much less to the
workmen than the amount paid by the company to its unskilled regular workmen.
Further, the workmen of the contractors were not entitled to other benefits and
amenities such as provident fund, gratuity, bonus, privilege leave, medical
facilities and subsidised food and housing to which the regular workmen of the
company were entitled. The work was of a permanent nature, but the contract
system was introduced to deny the workmen the rights and benefits which the
company gave to its own workmen.
The dispute was taken to the conciliation
officer. When conciliation failed, the Government of Bombay made the following
reference on May 13, 1958.
" The contract system for cleaning the
premises and plant should be abolished and workers working in the refinery
through the Ramji Gordhan and Company should be treated as workers of the
Standard Vacuum Refining Company of India Limited, Bombay, and wage-scales,
conditions of service, etc., that are applicable to the workers of the refinery
be made applicable to them. Past service of these workers should be counted and
they should be treated as continuously in the service of the Stanvac refinery
from the date of their entertainment." The company resisted the claim and
raised two main contentions. In the first place it was contended that the
reference under s. 10 of the Industrial Disputes Act, No. 14 of 1947
(hereinafter called the Act), was incompetent. In the second place it was
contended 469 that the work done by the contractor's workmen was not germane to
the manufacturing process and was therefore entrusted to the contractor. If the
workmen of the contractor were not satisfied with the conditions of service,
they could take up the, matter with the contractor and the company had nothing
to do with it. As to the difference between the wages and benefits and amenities
of the regular workmen of the company and the contractor's workmen, it was said
that the work of the two sets of workmen was very different and that in any
case this was a matter between the contractor and its workmen. The contractor
was an independent employer and it was incorrect to say that the real employer
was the company. It was for the company to decide what was the best method of
carrying on its business and the industrial tribunal should not interfere with
that function of the management.
The tribunal held that the reference was
competent. On the merits it was of -opinion that the work which was being done
through the contractor was necessary for the company and had to be done daily,
though it was not a part of the manufacturing process. It further held that
doing of this work through annual contracts resulted in the deprivation of
security of service and other benefits, privileges, leave, etc., for the
workmen of the contractor. Therefore considering the nature of the case it was
of opinion that this was a proper case where a direction should be given to the
company to abolish the contract system with respect to this work. In the result
the company was directed with effect from November 1, 1958, to discontinue the
practice of getting this work done through contractors and to have it done
through workmen engaged by itself. The other part of the demand, namely, that
all the workmen of the contractor should be taken over by the company and their
past services should be counted and that they should be given the same wage
scale and conditions of service, etc., which were applicable to the regular
workmen of the company was rejected. The company was further directed to engage
regular workmen for this work and in so doing it was to give preference to the
workmen employed by Ramji 60 470 Gordhan and Company. Wage-scale and other
benefits to be given to these workmen were left to the company to be determined
Learned. Solicitor-General appearing for the
company raised two contentions before us, namely, (i) is this dispute an
industrial dispute and therefore the reference was competent ? and (ii) is the
tribunal justified in interfering with the management function as to how it
should get its work done ? Re. (i) :
The contention under this head is that there
is no dispute between the company and the respondents and that it was not open
to the respondents to raise a dispute with respect to the workmen of some other
employer (in this case, Ramji Gordhan and Company). Reliance in this connection
was placed on the definition of " industrial dispute " in s. 2 (k) of
the Act and the judgment of this Court in Workmen of Dimakuchi Tea Estate v.
The Management -of Dimakuchi Tea Estate (1). The definition of "
industrial dispute " in s. 2 (k) requires three things(i) There should be
a dispute or difference;
(ii) The dispute or difference should be
between employers and employers, or between employers and workmen or between
workmen and workmen;
(iii) The dispute or difference must be
connected with the employment or non-employment or the terms of employment or
with the conditions of labour, of any person.
The first part thus refers to the factum of a
real and substantial dispute, the second part to the parties to the dispute and
the third to the subject-matter of the dispute.
The contention of the learned Solicitor
General is two-fold in this connection, namely, (i) that there is no real or
substantial dispute between the company and the respondents, and (ii) that the
subject matter of the dispute is such that it cannot come within the terms of
the definition in s. 2 (k).
The first submission can be disposed of
shortly. There is undoubtedly a real and substantial dispute between the
company and the respondents on the question of the employment of contract-labour
for the (1)  S.C.R. 1156.
471 work of the company. The fact that the
respondents who have raised this dispute are not employed on contract basis
will not make the dispute any the less a real or substantial dispute between
them and the company as to the manner in which the work of the company should
be carried on. The dispute in this case is that the company should employ
workmen directly and not through contractors in carrying on its work and this
dispute is undoubtedly real and substantial even though the regular workmen
(i.e., the respondents) who have raised it are not employed on contract labour.
In Dimakuchi case (1) to which reference has been made, the dispute was
relating to an employee of the tea estate who was not a workman. It was nevertheless
held that this was a real and substantial dispute between the workmen and the
company. How the work should be carried on is certainly a matter of some
importance to the workmen and in the circumstances it cannot be said that this
is not a real and substantial dispute between the company and its workmen.
Thus out of the three ingredients of s. 2(k)
the first is satisfied; the second also is ,satisfied because the dispute is
between the company and the respondents ; it is the third ingredient which
really calls for determination in the light of the decision in Dimakuchi case
Section 2(k), as it is worded, would allow
workmen of a particular employer to raise a dispute connected with the
employment or non-employment, or the terms of employment or with the conditions
of labour of any person. It was this aspect of the matter which was considered
in Dimakuchi case (1) and it was held that the words " any person "
used in s. 2(k) would not justify the workmen of a particular employer to raise
a dispute about anyone in the world, thoughthe words " any person "
in that provision may not be equated with the words " any workman ".
The test therefore to be applied in determining the scope of the words "
any person " in s. 2(k) was stated in the following words at pp. 1174-75:"
If, therefore, the dispute is a collective dispute, the party raising the
dispute must have either a direct interest in the subject-matter of dispute or
a (1)  S. C. R. 1156.
472 substantial interest therein in the sense
that the class to which the aggrieved party belongs is substantially affected
thereby. It is the community of interest of the class as a whole-class of
employers or class of workmen-which furnishes the real nexus between the
dispute and the parties to the dispute. We see no insuperable difficulty in the
practical application of this test. In a case where the party to a dispute is
composed of aggrieved workmen themselves and the subject-matter of the dispute
relates to them or any of them, they clearly have a direct interest in the
Where, however, the party to the dispute also
composed of workmen espouse the cause of another person whose employment or
non-employment, etc., may prejudicially affect their interest, the workmen have
a substantial interest in the subject-matter of dispute. In both such cases the
dispute is an industrial dispute. " We have therefore to see whether the
respondents who have raised this dispute have a direct interest in the subjectmatter
of the dispute or a substantial interest therein in the sense that the class to
which the respondents belong is substantially affected thereby and whether
there is community of interest between the respondents and those whose cause
they have espoused. There can be no doubt that there is (community of interest
in this case between the respondents and the workmen of Ramji Gordhan and
They belong to the same class and they do the
work of the same employer and it is possible for the -company to give the
relief which the respondents are claiming. The respondents have in our opinion
also a substantial interest in the subject-matter of the dispute, namely, the
abolition of the contract system in doing work of this kind. The learned
Solicitor-General particularly emphasised that there was no question of the
interest of the respondents being prejudicially affected by the employment or
non-employment or the terms of service or conditions of labour of the workmen
of Ramji Gordhan and Company and placed reliance on the words " may
prejudicially affect their interest " appearing in the observations quoted
above. We may, however, mention that 473 the test laid down is that the workmen
espousing the cause should have a substantial interest in the subject matter of
the dispute, and it was only when illustrating the practical application of the
test that this Court used the words "may prejudicially affect their
interest ". Besides it is contended by Mr. Gokhale for the respondents
that even if prejudicial effect on the interest of the workmen espousing the
cause is necessary, this is a, case where the respondents' interest may be
prejudicially affected in future in case the contract system of work is allowed
to prevail in this branch of the work of the company. He submits that if the
company can carry on this part of the work by contract system it may introduce
the same system in other branches of its work which are now being done by its
regular workmen. We do not think it necessary to go into this aspect of the
matter as we have already indicated that prejudicial effect is only one of the
illustrations of the practical application of the test laid down in Dimakuchi
case (1), viz., substantial interest in the sense that the class to which the
aggrieved party belongs is substantially affected thereby. It seems to us
therefore that the respondents have a community of interest with the workmen of
Ramji Gordhan and Company who are in effect working for the same employer. They
have also a substantial interest in the subject-matter of the dispute in the
sense that the class to which they belong (namely, workmen) is substantially
affected thereby. Finally the company can give relief in the matter. We are
therefore of opinion that all the ingredients of s. 2(k) as interpreted in
Dimakuchi case(1) are present in this case and the dispute between the parties
is an industrial dispute and the reference was competent.
Re. (ii) :
We now come to the question whether the
tribunal was justified in giving the direction for the abolition of the
contract system in the manner in which it has done so. In dealing with this
question it may be relevant to bear in mind that industrial adjudication
generally does not encourage the employment of contract labour in modern times.
As has been observed by the Royal Commission
on Labour " whatever the merits of the system (1)  S. C. R. 1156.
474 in primitive times, it is now desirable,
if the management is to discharge completely the complex responsibility laid
upon it by law and by equity, that the manager should have full control over
the selection, hours of work and payment of the workers ". The same
opinion has been expressed by several Labour Enquiry Committees appointed in
different States. We agree-that whenever a dispute is raised by workmen in
regard to the employment of contract labour by any employer it would be
necessary for the tribunal to examine the merits of the dispute apart from the
general consideration that contract labour should not be encouraged, and that
in a given case the decision should rest not merely on theoretical or abstract
objections to contract labour but also on the terms and conditions on which
contract labour is employed and the grievance made by the employees in respect
thereof. As in other matters of industrial adjudication so in the case of contract
labour theoretical or academic considerations may be relevant but their
importance should not be overestimated. Let us then consider the contract
labour system in the present case.
The contract in this case related to four
matters. But the reference is confined to one only, viz., cleaning maintenance
work at the refinery including premises and plant and we shall deal with that
only. So far as' this work is concerned, it is incidental to the manufacturing
process and is necessary for it and of a perennial nature which must be done
every day. Such work is generally done by workmen in the regular employ of the
employer and there should be no difficulty in having regular workmen for this
kind of work. The matter would be different if the work was of intermittent or
temporary nature or was so little that it would not be possible to employ
full-time workmen for the purpose. Under the circumstances the order of the
tribunal appears to be just and there are no good reasons for interfering with
Our attention in this connection was drawn to
D. Macropollo And Co. (P) Ltd. v. D. Macropollo And Co. (P) Ltd.
Employees' Union (1) and it was urged that
the tribunal should not have interfered with the (1) A.I.R. 1958 S.C. 1012.
475 management's manner of having its work
done in the most economical and convenient way that it thought proper. It was
pointed out that this was not a case where the contract system was a camouflage
and the workmen of the contractor were really the workmen of the company. It
may be accepted that the contractor in the present case is an independent
person and the system is genuine and there is no question of the company
carrying on this work itself and camouflaging it as if it was done through
contractors in order to pay less to the workmen. But the fact that the contract
in this case is a bona fide contract would not necessarily mean that it should
not be touched by the industrial tribunals. If the contract had been mala fide
and a cloak for suppressing the fact that the workmen were really the workmen
of the company, the tribunal would have been justified in ordering the company
to take over the entire body of workmen and treat it as its own workmen. But
because the contract in this case was bona fide the tribunal has not ordered
the company to take over the entire body of workmen. It has left to it to
decide for itself how many workmen it should employ and on what terms and has
merely directed that when selection is being made preference should be given to
the workmen employed by the present contractor. In Macropollo case (1), this
Court held that the reorganisation had been adopted by the employer for reasons
of economy and convenience and was bona fide. In that case the main business of
the concern was the selling agency of various cigarette manufacturing concerns.
Before 1946 the concern used to employ distributors for the purpose and these
distributors used to employ salesmen. In 1946 there were communal riots in Calcutta and therefore the concern took over the salesmen in its direct employment in
order to reorganise them on communal basis in the then prevailing
circumstances. In 1954 the concern decided to close down its own outdoor sales
department and revert to the distributor system. It was in that context that
certain workmen had to be retrenched, and this Court held that the
reorganisation scheme adopted in 1954 for reasons of economy and convenience
was bona fide (1) A.I.R. 1958 S.C. 1012.
476 and if it resulted in retrenchment that
These facts would show that in that case
there was reorganisation of the business resulting in retrenchment.
In the present case no such thing arises and
the only question for decision is whether the work which is perennial and must
go on from day to day and which is incidental and necessary for the work of the
refinery and which is sufficient to employ a considerable number of whole time
workmen and which is being done in most concerns through regular workmen should
be allowed to be done by contractors.
Considering the nature of the work and the
conditions of service in the present case we are of opinion that the tribunal's
decision is right and no interference is called for, except that the date
;should now be changed, for such a direction cannot be put into force with
retrospective effect from November 1, 1958. It appears that a few months remain
before the present contract will come to an end. We think that for these few
months the present system may continue.
We therefore dismiss the appeal with this
modification that the order of the tribunal will be carried into effect from
such date on which the present contract in force in the company comes to an
end. The respondents will get their costs from the company.
Appeal dismissed subject to modification.