D. C. Dewan Mohideen Sahib and Sons Vs.
The Industrial Tribunal, Madras [1964] INSC 112 (6 April 1964)
06/04/1964 WANCHOO, K.N.
WANCHOO, K.N.
GAJENDRAGADKAR, P.B. (CJ) GUPTA, K.C. DAS
CITATION: 1966 AIR 370 1964 SCR (7) 646
CITATOR INFO:
RF 1970 SC 66 (10) E&D 1974 SC 37 (14) RF
1974 SC1832 (36,87) RF 1978 SC 481 (3) E&D 1987 SC 447 (9) RF 1992 SC 573
(37)
ACT:
Industrial Dispute--Employer and
Employee--Relationship Depends upon circumstances of each case.
HEADNOTE:
On a reference of industrial disputes between
the appellants, the proprietors of bidi concerns, and their workmen, the
appellants contended before the Industrial Tribunal that the workers in
question were not their workmen, but were the workmen of independent
contractors. The Tribunal found on the basis of evidence led, that the modus
operandi was that contractors took leaves and tobacco from the appellant and'
employed workmen for manufacturing bidis. After bidis were manufactured, the
contractors took them back from the workmen and delivered them to the
appellants. The workmen took the leaves home and cut them there; however the
process of actual rolling by filling the leaves with tobacco took place in what
was called contractors' factories. The contractors kept no attendance register
for the workmen, there was no condition for their coming and going at fixed:
hours, nor were they bound to come for work every day; sometimes they informed
the contractors if they wanted to be absent and sometimes they did not. The
contractors said that they could take no action if the workmen absented
themselves even without leave. The payment was made to the workmen at piece
rates after the bidis were delivered to the appellants. The system was that the
appellant paid a certain sum for the manufactured bidis, after deducting there from
the cost of tobacco and the leaves already fixed, to the contractors who in
their turn paid to the workmen, who rolled bid is, their wages. Whatever
remained after paying the workmen would be contractors' commission for the work
done, The Tribunal held that there was no sale either of the raw materials or
of the finished products, for, according to the agreement, if the bidis were
not rolled, raw materials had to, he returned to the appellants and the
contractors were forbidden from selling the raw materials to anyone else.
Further the manufactured bidis could only be delivered to the appellants who
supplied the raw materials. Further price of raw materials and finished
products fixed by the appellants always remained the same and never fluctuated
according to market rate. The Tribunal concluded that the bidi workers were the
employees of the appellants and not of the so called contractors who were
themselves nothing more then employees or branch managers of the appellants.
Thereupon, the appellants filed writ petitions in the High Court, which held
that neither the bidi roller nor the intermediary was an employee of the
appellants and allowed the writ petitions. On appeal by the workmen the appeal
court allowed the appeal and restored the order and conclusion of the Tribunal.
On appeal by certi-ficate:
Held: On the facts found the appeal court
'was right in holding that the conclusion reached by the Tribunal that the
intermediaries were merely branch managers appointed' by the 647 management and
the relationship of employers and employees subsisted between the appellants
and the bidi rollers was correct.
Dharangadhara Chemical Works Ltd., v. State
of Saurashtra, [1957] S.C.R. 152, Shri Chintsman Rao v. State of Madhya Pradesh,
[1958] S.C.R. 1340, Shri Birdhichand Sharma v. First Civil Judge Nagpur, [1961]
3 S.C.R. 161, Shankar Balaji Waje v. State of Maharashtra, [1962] Supp. 1
S.C.R. 249 and Bikusu Yamasa Kashtriya (P) Ltd. v. Union of India, [1964] 1
S.C.R. 860, discussed.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 721 and 791 of 1963. Appeals by certificate and special leave from the
judgment and order dated February 16, 1962 of the Madras High Court in Writ
Appeals Nos. 16 and 15 ,of 1959 respectively.
V. P. Ran an and R. Ganapathy Iyer, for the
appellant in C.A. No. 721 of 1963).
G. B. Pai, J. B. Dadachanji, 0. C. Mathur and
Ravinder Narain, for the appellant (in C.A. No. 791/63).
T. S. Venkataraman, for the respondent No. 2
(in both the appeals).
April 6, 1964. The Judgment of the Court was
delivered by WANCHOO, J.-These two appeals by special leave raise a common
question and will be decided together. The appellants are proprietors of two
bidi concerns. A reference was made by the Government of Madras of dispute
between the appellants and their workmen with respect to three matters.
In the present appeals however we are
concerned with only one matter, namely, whether reduction of annas two in the
wages of workers employed under the agents of the appellants was justified and
to what relief the workers were entitled.
The contention of the appellants before the
tribunal was that the workers in question were not their workmen and therefore
there being no relation of employers and employees between them and the
workmen, the reference itself was incompetent and there could be no industrial
dispute between them and the workmen concerned, their case being that the
workmen concerned were the workmen of independent contractors. It was found by
the tribunal on the basis of evidence led before it by both parties that the
modus operandi with respect to manufacture of bidis in the appellants' concerns
was that contractors took leaves and tobacco from the appellants and employed
workmen for manufacturing bidis.
After bidis were manufactured, the
contractors took them back from the workmen and delivered them to the
appellants.
648 The workmen took the leaves home and cut
them there; however the process of actual rolling by filling the leaves with
tobacco took place in what were called contractors' factories. The contractors
kept no attendance register for the workmen. There was also no condition that
they should come and go at fixed hours. Nor were the workmen bound to come for
work every day; sometimes the workmen informed the contractors if they wanted
to be absent and sometimes they did not. The contractors however said that they
could take no action if the workmen absented them,-selves even without leave.
The payment was made to the workmen at piece rates.
After the bidis were delivered to the
appellants payment was made therefor. The system was that the appellants fixed
the price of tobacco and leaves supplied to the contractors who took them to
the places where work of rolling was done and gave them to the workmen. Next
day, the manufactured bidis were taken by the contractors to the appellants who
paid a certain price for the manufactured bidis after deducting therefrom the
cost of the tobacco and the leaves already fixed. The balance was paid to the
contractors who in their turn paid to the workmen, who rolled bidis, their
wages.
Whatever remained after paying the workmen
would be the contractors' commission for the work done. It may also be
mentioned that there were written agreements on the same pattern between the
appellants and the contractors in that behalf, though no ,such agreement has
been printed in the paper books.
as if there was a sale of leaves and tobacco
by the appellants to contractors and after the bidis were rolled there was a
resale of the bidis to the appellants by the contractors. The; tribunal however
held that it was clear that there was no sale either of the raw materials or of
the finished products, for, according to the agreement, if bidis were not
rolled, raw materials had to be returned to the appellants and the contractors
were forbidden from selling the raw materials to anyone else. Further after the
bidis were manufactured they could only be delivered to the appellants who
supplied raw materials and not to anyone else. Further price of raw materials
fixed by the appellant, as well as the price of the finished products always
remained the same and never fluctuated according to market rates. The tribunal
therefore concluded that there was no sale of raw materials followed by resale of
the finished products and this system was evolved in order to avoid regulations
under the Factories Act. The tribunal also found that the contractors generally
got only annas two per thousand bidis for their trouble. The tribunal 649 also
referred to a clause in the agreement that the appellants would have no concern
with the workers who rolled bidis for whom only the contractors would be
responsible.
But it was of the view that these provisiors
were deliberately put into the agreement by the appellants to escape such
statutory duties and obligations, as may lie on them under the Factories Act or
under the Madras Shops and Establishments Act. Finally on a review of the
entire evidence, the tribunal found that this system of manufacture of bidis
through the so-called contractors was a mere camouflage devised by the
appellants. The tribunal also found that the contractors were indigent persons
and served no particular duties and discharged no special functions.
Raw materials were supplied by the appellants
to be manufactured into finished products by the workmen and the contractors
had no other function except to take the raw materials to the workmen and
gather the manufactured material. It therefore held that the so-called
contractors were not independent contractors and were mere employees or were
functioning as branch managers of various factories, their remuneration being
dependent upon the work turned out.
It therefore came to the conclusion that the
bidi workers were the employees of the appellants and not of the socalled
contractors who were themselves nothing more than employees or branch managers
of the appellants. It finally held that reduction in the wages by two annas per
thousand bidis was not justified and the workmen were entitled to the old
rates. It therefore ordered the reduction in wages to be restored.
Thereupon the appellants filed two writ
petitions in the High Court, their contention being that the tribunal was wrong
in holding that the contractors and the workmen employed by the contractors
were the workmen of the appellants. It seems that a sample agreement was
produced before the High Court, which provided inter alia for the following
terms: (1) That the proprietor should supply the tobacco and the bidi leaves;
(2) that the intermediary should engage
premises of his own and obtain the requisite license to carry on the work of
having the bidis rolled there;
(3) that at no time should more than nine
bidi rollers work in the premises of that intermediary;
(4) that the intermediary should meet all the
incidental charges for rolling the bidis including the cost of thread and the
remuneration paid to the bidi rollers;
650 (5) that for every unit of 1,000 bidis
rolled and delivered by the intermediary to the proprietor, the latter should
pay the stipulated amount, after deducting the cost of the tobacco and the bidi
leaves supplied by the proprietor;
(6) that the intermediary should not enter
into similar engagement with any other industrial concern;, (7) that the price
of the raw materials and price to be paid for every unit of 1,000 bidis rolled
and delivered were to be fixed at the discretion of the proprietor.
Besides these conditions, the contract also
provided that it was liable to termination on breach of any of the conditions,
and that the proprietors had no connection with and that they assumed no
responsibility for the bidi workers who had to look to the intermediary for
what was payable to them for rolling the bidis.
The learned Single Judge on a review of the
terms of the contract and the evidence on record held that neither the bidi
roller nor the intermediary was an employee of the appellants. In consequence
there could be no industrial dispute within the meaning of s. 2 (k) of the
Industrial Disputes Act between the appellants and the bidi rollers.
The petitions were therefore allowed and the
award of the tribunal was set aside.
Thereupon there were two appeals by the
workmen. The appeal court on a consideration of the terms of the contract and
the findings of the tribunal came to the conclusion that the so-called
contractors were really the agents of the appellants and that there was no
utter lack of control by the appellants on the bidi workers who actually rolled
the bidi.
The appeal court also found that the intermediaries
were impecunious and according to the evidence could hardly afford to have
factories of their own. It also found that the evidence revealed that the
appellants took the real hand in settling all matters relating to the workers,
and the intermediary was a mere cipher and the real control over the workers
was that of the appellants. The appeal court therefore held that the appellants
were the real employers of the workmen and the so-called intermediaries or
so-called independent contractors who were in some cases ex-employees, were no
more than agents of the appellants. In this view of the matter the appeal court
held that the conclusion reached by the tribunal that the intermediaries were
merely branch managers 651 appointed by the management and the relationship of
employer and employees subsisted between the appellants and bidi rollers was
correct. The appeals were therefore allowed, and the order of the tribunal was
restored. The appellants have come before us on certificates granted by the
High Court.
The question whether relationship of master
and servant subsists between an employer and employee has been the subject of
consideration by this Court in a number of cases.
In Dharangadhara Chemical Works Limited v.
State of Saurashtra(1) it was held that the question whether a person was a
workman depended on whether he had been employed by the employer and the
relationship of employer and employee or master and servant subsisted between
them. It was well settled that a prima facie test of such relationship was the
existence of the right in the employer not merely to direct what work was to be
done but also to control the manner in which it was to be done, the nature or
extent of such control varying in different industries and being by its very
nature incapable of being precisely defined. The correct approach therefore was
to consider whether, having regard to the nature of the work there was due
control and supervision by the employer. It was further held that the question
whether the relation between the parties was one as between an employer and
employee or master and servant was a pure question of fact, depending upon the
circumstances of each case. In that case, the dispute was whether certain
agarias who were a class of professional labourers, were workmen or independent
contractors. The facts found in that case were that the agarias worked
themselves with members of their families and were free to engage extra labour
on their own account. No hours of work were prescribed. No muster rolls were
maintained; nor were working hours controlled by the master. There were no
rules as regards leave or holidays and the agarias were free to go out of the
factory after making arrangements for the manufacture of salt. Even so, though
certain features which were usually to be found in a contract of service were
absent, the tribunal held that on the whole the status of agarias was that of
workmen and not that of independent contractors, particularly as supervision
and control was exercised by the master extending to all stages ,of manufacture
from beginning to end. This Court upheld the view of the tribunal on a review
of the facts found in that case.
The next case to which reference has been
made is Shri Chintaman Rao v. The State of Madhya Pradesh(2).
(1) [1957] S.C.R. 152.
(2) [1958] S.C.R. 1340.
652 That was a case of bidi manufacture, and
the question that arose for determination was whether certain persons known as
sattedars and those who worked under the sattedars were workmen or not. It was
found that the sattedars undertook to supply bidis by manufacturing them in
their own factories or by entrusting the work to third parties at a price to be
paid by the management after delivery and approval. Reference was made to the
principles laid down in Dharangadhara Chemical Works Limited's case(1) to
determine whether the persons employed were workmen or not, and it was found
that the sattedars were not under the control of the factory management and
could manufacture the bidis wherever they pleased. It was therefore held that
the coolies were neither employed by the management directly nor by the
management through the sattedars. A special feature of that case was that none
of the workmen under the sattedars worked in factories. The bidis could be manufactured
anywhere and there was no obligation on the sattedars to work in the factory of
the management. The sattedars were even entitled to distribute tobacco to the
workers for making bidis in the workers' respective homes. It was in these
circumstances that this Court held that the sattedars were independent
contractors and the workers employed by them were not the workers of the
management.
Then we come to the case of Shri Birdhichand
Sharma v. First Civil Judge Nagpur(2). That was also a case of bidi
manufacture. The facts found were that the workmen who rolled the bidis had to
work at the factory and were not at liberty to work at their houses; their
attendance was noted in the factory and they had to work within the factory
hours, though they were not bound to work for the entire period and could come
and go away when they liked; but if they came after midday they were not
supplied with tobacco and thus not allowed to work even though the factory
closed at 7 p.m. Further they could be removed from service if absent for eight
days. Paymentwas made on piece rates according to the amount of work done, and
the bidis which did not come upto the proper standard could be rejected. On
these facts it was held that the workers were workmen under the Factories Act
and were not independent contractors.
This Court pointed out that the nature and
extent of control varied in different industries and could not by its very
nature be precisely defined. When the operation was of a simple nature and did
not require supervision all the time, control could be exercised at the end of
day by the method of rejecting bidis which did not come upto proper standard,
(1)[1957] S.C.R. 152.
(2)[1961] 3 S.C.R. 161.
653 such supervision by the employer was
sufficient to make the workers, employees of the employer and not independent
contractors. The nature of the control required to make a person a servant of
the master would depend upon the facts of each case.
The next case is Shankar Balaji Waje v. State
of Maharashtra(1). That was also a bidi manufacturing case. On the facts of
that case the majority held that decision in Shri Birdhichand Shama's case(2)
was distinguishable and the appellant was not a worker within the meaning of
the Factories Act. It may be noted however that that case also followed the
line of decisions of this Court since the decision in the case Dharangadhara
Chemical Works Limited(3) as to the criteria for coming to the conclusion
whether a person was an employee or an independent contractor.
The last case to which reference has been
made is again a bidi manufacturing case, namely, Bhikusa Yamasa Kashtriya (P)
Limited v. Union of India(4). In that case the main question raised was about
the constitutionality of s. 85 of the Factories Act and the notification issued
by the State of Maharashtra thereunder. The Constitutionality of s. 85 and the
notification made thereunder was upheld. The question there involved was about
the application of s. 79 of the, Factories Act with reference to leave and the
difficulty felt in Shankar Balaji Waje's case(1) as to how leave could be
calculated in the circumstances was explained with reference% to the decision
in Shri Birdhichand Sharma's case(2).
It is in the light of these decisions that we
have to decide whether the workmen who work under the so-called independent
contractors in these cases are the workmen of the appellants. It has been found
by the tribunal and this view has been confirmed by the appeal court that
so-called independent contractors were mere agents or branch managers of the
appellants. We see no reason to disagree with this view taken by the tribunal
and confirmed by the appeal court on the facts of these cases. We are not
unmindful in this connection of the view taken by the learned Single Judge when
he held that on the agreements and the facts found the so-called intermediaries
were independent contractors. We are however of opinion that the view taken by
the appeal court in this connection is the right one. As the appeal court has
rightly pointed out the (1)[1957] S.C.R. 152.
(2) [1961] 3 S.C.R. 161.
(3) (1962) Supp 1. I S.C.R. 249.
(4) [1964] 1 S.C.R. 860.
654 so-called independent contractors were
indigent persons who were in all respects under the control of the appellants.
There is in our opinion little doubt that
this system has been evolved to avoid regulations under the Factories Act.
Further there is also no doubt from whatever
terms of agreement are available on the record that the so-called independent
contractors have really no independence at all.
As the appeal court has pointed out they are
impecunious persons who could hardly afford to have factories of their own.
Some of them are even ex-employees of the appellants.
The contract is practically one sided in that
the proprietor can at his choice supply the raw materials or refuse to do so,
the so-called contractor having no right to insist upon the supply of raw
materials to him. The so-called independent contractor is even bound not to
employ more than nine persons in his so-called factory. The sale of raw
materials to the so-called independent contractor and resale by him of the
manufactured bidis is also a mere camouflage, the nature of which is apparent
from the fact that the socalled contractor never paid for the materials. All
that happens is that when the manufactured bidis are delivered by him to the
appellants, amounts due for the socalled sale of raw materials is deducted from
the so-called price fixed for the bidis. In effect all that happened is that
the socalled independent contractor is supplied with tobacco and leaves and is
paid certain amount-, for the wages of the workers employed and for his own
trouble. We can therefore see no difficulty in holding that the so-called
contractor is merely an employee or an agent of the appellants as held by the
appeal court and as such employee or agent he employs workers to roll bidis on
behalf of the appellants. The work is distributed between a number of
:-so-called independent contractors who are told not to employ more than nine
persons at one place to avoid regulations under the Factories Act. We are not
however concerned with that aspect of the matter in the present appeals. But
there can be no doubt that the workers employed by the so-called contractors
are really the workmen of the appellants who are employed through their agents
or servants whom they choose to call independent contractors.
It is however urged that there is no control
by even the agent over the bidi workers. Now the evidence shows that the bidi
workers are permitted to take the leaves homes in order to cut them so that
they might be in proper shape and size for next day's work; but the real work
of filling the leaves with tobacco (i.e. rolling the bidis) can only be done in
the so-called factory of the so-called independent contractor. No tobacco is
ever given to the workers to be taken home to be rolled into bidis as and when
they liked.
They have to 655 attend the so-called factory
of the so-called independent contractor to do the real work of rolling bidis.
As was pointed out by this Court in Shri Birdhichand Sharma's case(1) the work
is of such a simple nature that supervision all the time is not required. In
Birdhichand Sharma's case(1) supervision was made through a system of rejecting
the defective bidis, at the end of day. In the present cases we have not got
the full terms of the agreement and it is therefore not possible to say that
there was no kind of supervision or control over the workers and that the socalled
independent contractors had to accept all kinds of bidis whether made upto
standard 'or not. It is hardly likely that the so-called independent contractor
will accept bidis which are not upto the standard; for that is usually the
system which prevails; in this trade as wilt be apparent from the facts of the
many bidi manufacturing cases to which we have referred. We are therefore not
prepared to hold in the absence of any evidence one way or the other that there
is no supervision whatsoever of the work done by the workers. In the circumstances
we are of opinion that the relationship of master and servant between the
appellants and the workmen employed by the ;so-called independent contractors
is established. As the appeal court has' pointed out whenever there was a
dispute in connection with the manufacture of bidis the workers looked to the
appellants for redress. In one of the cases the manager of one of the
appellants sent a letter to the labour officer that the factory was agreeable
to increase the wages of the workers from, Rs. 1/14/ to Rs. 2/per thousand
bidis. In the other case also a similar letter was addressed showing that
whenever there was increase or decrease in wages of the workers who, work under
the so-called independent contractors the real decision was taken by the appellants.
This conduct on the part of the appellants is
clearly inconsistent with their plea that the workers are not their employees
and there is no privity between them and the said workers. We are therefore of
opinion that on the facts found in these cases the appeal court was right in
holding that the conclusion reached by the tribunal that the intermediaries
were merely branch managers appointed by the management and the relationship of
employers and employees subsisted between the appellants and the bidi rollers
is correct. In this view the appeals fail and are hereby dismissed with
costs-one set of hearing costs.
Appeal dismissed (1)[1961] 3 S.C.R. 161.
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