Steel
Authority of India Ltd. & Ors etc. Vs. National Union Water Front Workers & Ors [2001] Insc 445 (30 August 2001)
B.N.
Kirpal, Syed Shah Mohammed Quadri, M.B. Shah, Ruma Pal, K. G. Balakrishnan, Syed
Shah Mohammed Quadri, J.
[Arising
out of S.L.P. (C) NOS.12657-58/98] With (C.A.No.6011/2001@S.L.P.(C)
No.20926/1998, C.A. No.6012/2001 @ S.L.P.(C) No.9568/2000, T.C. No.1/2000, T.C.
Nos.5 to 7/2000, T.C.(C)No.14/2000, T.C.Nos.17&18/2000, C.A.Nos.719-
720/2001,C.A.Nos.5798-99/98, C.A.Nos.6013-22/2001 @ SLP(C) Nos.16122- 31/98,
C.A. No.6023/2001 @ SLP(C) No.19391/99, C.A.Nos.4188-94/98, C.A.No.4195/98,
C.A. Nos.6024-25/2001 @SLP (C) Nos.8282-83/2000, TP(C) No.169/2000, TP(C)
Nos.284- 302/2000, C.A.No.6029/2001@ SLP (C) No.16346/2000,
C.A.Nos.6030-34/2001@SLP(C)Nos.13146-150/2000,T.P.(C) No.308 -337/2000,
C.A.No.141/2001)
Leave
is granted in the Special Leave petitions.
In
Food Corporation of India, Bombay & Ors. vs. Transport
& Dock Workers Union & Ors. , a two-Judge Bench of this Court, having
noticed the conflict of opinion between different Benches including two
three-Judge Benches of this Court on the interpretation of the expression
appropriate Government in Section 2(1)(a) of the Contract Labour (Regulation
and Abolition) Act, 1970 (for short, the CLRA Act) and in Section 2(a) of the
Industrial Disputes Act, 1947 (for short, the I.D.Act) and having regard to the
importance of the question of automatic absorption of the contract labour in
the establishment of the principal employer as a consequence of an abolition
notification issued under Section 10(1) of the CLRA Act, referred these cases
to a larger Bench. The other cases were tagged with the said case as the same
questions arise in them also. That is how these cases have come up before us.
To
comprehend the controversy in these cases, it will suffice to refer to the
facts in Civil Appeal Nos.6009-10 of 2001@ S.L.P.Nos.12657-12658 of 1998 which
are preferred from the judgment and order of the Calcutta High Court in
W.P.No.1773 of 1994 and FMAT No.1460 of 1994 dated July 3, 1998. The appellants, a Central Government Company and its
branch manager, are engaged in the manufacture and sale of various types of
iron and steel materials in its plants located in various States of India. The
business of the appellants includes import and export of several products and
bye-products through Central Marketing Organisation, a marketing unit of the
appellant, having network of branches in different parts of India. The work of handling the goods in
the stockyards of the appellants, was being entrusted to contractors after
calling for tenders in that behalf. The Government of West Bengal issued
notification dated July 15, 1989 under Section 10(1) of the CLRA Act (referred
to in this judgment as the prohibition notification) prohibiting the employment
of contract labour in four specified stockyards of the appellants at Calcutta.
On the representation of the appellants, the Government of West Bengal kept in
abeyance the said notification initially for a period of six months by
notification dated August
28, 1989 and
thereafter extended that period from time to time. It appears that the State
Government did not, however, extend the period beyond August 31, 1994.
The
first respondent-Union representing the cause of 353 contract labourers filed
Writ Petition No.10108/89 in the Calcutta High Court seeking a direction to the
appellants to absorb the contract labour in their regular establishment in view
of the prohibition notification of the State Government dated July 15, 1989 and
further praying that the notification dated August 28, 1989, keeping the
prohibition notification in abeyance, be quashed.
A
learned Single Judge of the High Court allowed the writ petition, set aside the
notification dated August
28, 1989 and all
subsequent notifications extending the period and directed that the contract labour
be absorbed and regularised from the date of prohibition notification - July 15, 1989 - within six months from the date
of the judgment i.e., April
25, 1994.
The
appellants adopted a two-pronged attack strategy.
Assailing
the said judgment of the learned Single Judge, they filed writ appeal (FMAT
No.1460 of 1994) and challenging the prohibition notification of July 15, 1989 they filed Writ Petition No.1733 of
1994 in the Calcutta High Court. While these cases were pending before the High
Court, this Court delivered judgment in Air India Statutory Corporation &
Ors. vs. United Labour Union & Ors. holding, inter alia, that in case of
Central Government Companies the appropriate Government is the Central
Government and thus upheld the validity of the notification dated December 9, 1976 issued by the Central Government
under Section 10(1) of the CLRA Act prohibiting employment of contract labour
in all establishments of the Central Government Companies. On July 3, 1998, a Division Bench of the High Court
nonetheless dismissed the writ appeal as well as the writ petition filed by the
appellants taking the view that on the relevant date the appropriate Government
was the State Government. The legality of that judgment and order is under
challenge in these appeals.
Three
points arise for determination in these appeals :
(i) what
is the true and correct import of the expression appropriate government as
defined in clause (a) of sub-section (1) of Section 2 of the CLRA Act;
(ii)
whether the notification dated December 9, 1976 issued by the Central
Government under Section 10(1) of the CLRA Act is valid and applies to all
Central Government companies; and (iii) whether automatic absorption of contract
labour, working in the establishment of the principal employer as regular
employees, follows on issuance of a valid notification under Section 10(1) of
the CLRA Act, prohibiting the contract labour in the concerned establishment.
Inasmuch
as in some appeals the principal employers are the appellants and in some
others the contract labour or the union of employees is in appeal, we shall
refer to the parties in this judgment as the principal employer and the
contract labour.
Before
taking up these points, it needs to be noticed that the history of exploitation
of labour is as old as the history of civilisation itself. There has been an
ongoing struggle by labourers and their organisations against such exploitation
but it continues in one form or the other. The Industrial Disputes Act, 1947 is
an important legislation in the direction of attaining fair treatment to labour
and industrial peace which are sine qua non for sustained economic growth of
any country. The best description of that Act is given by Krishna Iyer, J,
speaking for a three-Judge Bench of this Court in Life Insurance Corporation of
The Industrial Disputes Act is a benign measure which seeks to pre-empt
industrial tensions, provide the mechanics of dispute- resolutions and set up
the necessary infrastructure so that the energies of partners in production may
not be dissipated in counter-productive battles and assurance of industrial
justice may create a climate of goodwill.
After
the advent of the Constitution of India, the State is under an obligation to
improve the lot of the work force. Article 23 prohibits, inter alia, begar and
other similar forms of forced labour. The Directive Principle of State Policy
incorporated in Article 38 mandates the State to secure a social order for
promotion of welfare of the people and to establish an egalitarian society.
Article 39 enumerates the principles of policy of the State which include
welfare measures for the workers. The State policy embodied in Article 43
mandates the State to endeavour to secure, by a suitable legislation or
economic organisation or in any other way for all workers, agricultural,
industrial or otherwise, work, a living wage, conditions of work ensuring a
decent standard of life and full enjoyment of leisure and social and cultural opportunities.
Article 43A enjoins on the State to take steps by suitable legislation or in
any other way to secure the participation of workers in the management of
undertakings, establishment, or other organisations engaged in any industry.
The
fundamental rights enshrined in Articles 14 and 16 guarantee equality before
law and equality of opportunity in public employment. Of course, the preamble
to the Constitution is the lodestar and guides those who find themselves in a
grey area while dealing with its provisions. It is now well settled that in
interpreting a beneficial legislation enacted to give effect to directive
principles of the state policy which is otherwise constitutionally valid, the
consideration of the Court cannot be divorced from those objectives. In a case
of ambiguity in the language of a beneficial labour legislation, the Courts
have to resolve the quandary in favour of conferment of, rather than denial of,
a benefit on the labour by the legislature but without rewriting and/or doing
violence to the provisions of the enactment.
The
CLRA Act was enacted by the Parliament to deal with the abuses of contract labour
system.` It appears that the Parliament adopted twin measures to curb the
abuses of employment of contract labour -- the first is to regulate employment
of contract labour suitably and the second is to abolish it in certain
circumstances. This approach is clearly discernible from the provisions of the
CLRA Act which came into force on February 10, 1971. A perusal of the Statement of
Objects and Reasons shows that in respect of such categories as may be notified
by the appropriate Government, in the light of the prescribed criteria, the
contract labour will be abolished and in respect of the other categories the
service conditions of the contract labour will be regulated. Before
concentrating on the relevant provisions of the CLRA Act, it may be useful to
have a birds eye view of that Act. It contains seven chapters. Chapter I has
two sections; the first relates to the commencement and application of the Act
and the second defines the terms used therein. Chapter II which has three
sections provides for the constitution of a Central Advisory Board by the
Central Government and a State Advisory Board by the State Government and
empowers the Boards to constitute various committees.
Chapter
III contains regulatory provisions for registration of establishments which
employ contract labour. Section 10 which prohibits the employment of contract labour
falls in this chapter;
we
shall revert to it presently. Chapter IV contains provisions for purposes of
licensing of Contractors to make sure that those who undertake or execute any
work through contract labour, adhere to the terms and conditions of licences
issued in that behalf. Power is reserved for revocation, suspension and
amendment of licenses by the Licensing Officer and a provision is also made for
appeal against the order of the Licensing Officer. Chapter V takes care of the
welfare and health of contract labour obliging the appropriate Government to
make rules to ensure that the requirements of canteen, rest-rooms and other
facilities like sufficient supply of wholesome drinking water at convenient
places, sufficient number of latrines and urinals accessible to the contract labour
in the establishment, washing facilities and the first aid facilities, are
complied with by the contractor. Where the contractor fails to provide these
facilities the principal employer is enjoined to provide canteen, rest-rooms
etc., mentioned above, for the benefit of the contract labour. Though the
contractor is made responsible for payment of wages to each worker employed by
him as contract labour before the prescribed period yet for effective
implementation of this requirement, care is taken to ensure presence of a
nominee of the principal employer at the time of the disbursement of wages.
Here again, it is prescribed that if the contractor fails to pay the wages to
the contract labour, the principal employer shall pay the full wages or unpaid
wages, as the case may be, to the contract labour and a right is conferred on
him to recover the same from the amount payable to the contractor; if however,
no amount is payable to him then such amount is treated as a debt due by the
contractor to the principal employer. Chapter VI deals with the contravention
of the provisions of the Act, prescribes offences and lays down the procedure
for prosecution of the offenders. Chapter VII is titled miscellaneous and it
contains eight sections which need not be elaborated here.
Now we
shall advert to point No.1.
The
learned Solicitor General for the appellant - principal employer - has conceded
that the State Government is the appropriate Government in respect of the
establishments of the Central Government companies in question. Mr. Shanti Bhushan,
the learned senior counsel appearing for the respondents - contract labour in
these appeals, submitted that in view of the concession made by the learned
Solicitor General, he would not address the Court on that aspect and prayed
that the judgment and order of the High Court, under appeal, be confirmed.
Mr.
G.L. Sanghi, the learned senior counsel appearing for the appellants in the
appeals filed by the Food Corporation of India (FCI)- principal employer-and
Mr. K.K. Venugopal, the learned senior counsel for the appellant - the
principal employer - in the appeals filed by the Oil and Natural Gas Commission
(ONGC) among others sail with the learned Solicitor General, submitted that the
appropriate Government on the relevant date was the State Government and for
that reason the notification issued by the Central Government on December 9,
1976 was never sought to be applied to the establishments of FCI and ONGC but
in view of the amendment of the definition of the expression, appropriate Government
with effect from January 28, 1986, the Central Government would thereafter be
the appropriate Government. The learned Additional Solicitor General who
appeared for Indian Farmers and Fertiliser Co- operative Ltd. ( IFFCO) and Mr.
B. Sen, the learned senior counsel appearing for the appellant, adopted the
arguments of the learned Solicitor General on this point.
Ms. Indira
Jaisingh, the learned senior counsel appearing for the contract labour
(respondents in the appeals filed by FCI), argued that in the case of FCI the
appropriate Government before and after the notification issued by the Central
Government on January 28, 1986, was the Central Government.
Mr.
K.K. Singhvi, the learned senior counsel for the contract labour (respondents
in the appeal of ONGC), has argued that all Central Government Undertakings
which fall within the meaning of other authorities in Article 12 are agents or
instrumentalities of the State functioning under the authority of the Central
Government, as such the Central Government will be the appropriate Government;
the Heavy Engineerings case was wrongly decided by the two Judge Bench of this
Court which was followed by a three-Judge Bench in the cases of Hindustan
Aeronautics Ltd. and Rashtriya Mill Mazdoor Sangh; in those cases the judgments
of this Court in Sukhdev Singhs case, Ajay Hasias case, Central Inland Water
Transport Corporations case, C. V. Ramans case and R.D. Shetty International
Airports case were not considered; the approach of the Court in the Heavy Engineerings
case was based on private law interpretation and that the approach of the Court
ought to be based on public law interpretation. It is submitted that in a
catena of decisions of this Court, it has been held that where there is deep
and pervasive control, a company registered under the Companies Act or a
society registered under the Societies Act would be State and, therefore, it
would satisfy the requirement of the definition of appropriate Government. He
contended that in Air Indias case (supra) a three-Judge Bench of this Court had
correctly decided that for all the establishments of the Air India the Central
Government was the appropriate Government, which deserved to be confirmed by
us.
Notwithstanding
the concession made by the learned Solicitor General which has the support of
Mr. Shanti Bhushan, we cannot give a quietus to this issue as the other learned
counsel strenuously canvassed to the contra. We, therefore, propose to decide
this point in the light of the contentions put forth by the other learned counsel.
To
begin with the relevant provisions of Section 1 of the CLRA Act which deals,
inter alia, with its extent and application, may be noticed here:
Section
1 - (1) to (3) *** *** *** (4) - It applies -- (a) to every establishment in
which twenty or more workmen are employed or were employed on any day of the
preceding twelve months as contract labour;
(b) to
every contractor who employs or who employed on any day of the preceding twelve
months twenty or more workmen :
Provided
that the appropriate Government may, after giving not less than two months
notice of its intention so to do, by notification in the Official Gazette,
apply the provisions of this Act to any establishment or contractor employing
such number of workmen less than twenty as may be specified in the
notification.
(5)(a)
It shall not apply to establishments in which work only of an intermittent or
casual nature is performed.
(b) If
a question arises whether work performed in an establishment is of an
intermittent or casual nature, the appropriate Government shall decide the
question after consultation with the Central Board or, as the case may be, a
State Board, and its decision shall be final.
Explanation
: For the purpose of this sub-section, work performed in an establishment shall
not be deemed to be of an intermittent nature -- (i) if it was performed for
more than one hundred and twenty days in the preceding twelve months, or (ii)
if it is of a seasonal character and is performed for more than sixty days in a
year.
A
perusal of this section brings out that CLRA Act applies to every establishment
and every contractor of the specified description. However, the establishments
in which work only of an intermittent or casual nature is performed are
excluded from the purview of the Act.
We
shall also refer to definitions of relevant terms in sub- section (1) of
Section 2 which contains interpretation clauses.
Clause
(a) defines the expression appropriate Government thus :
2(1) In
this Act, unless the context otherwise requires -- (a) appropriate Government
means -- (i) in relation to an establishment in respect of which the
appropriate Government under the Industrial Disputes Act, 1947 (14 of 1947) is
the Central Government, the Central Government;
(ii) in
relation to any other establishment, the Government of the State in which that
other establishment is situated.
Addressing
to the definition of appropriate Government, it may be pointed out that clause
(a) of Section 2(1) was substituted by the Contract Labour (Regulation and
Abolition) Amendment Act, 1986 with effect from January 28, 1986. Before the said amendment, the definition read as under:
2(1).
(a) appropriate Government means –
(i) in
relation to any establishment pertaining to any industry carried on by or under
the authority of the Central Government, or pertaining to any such controlled
industry as may be specified in this behalf by the Central Government; or
(ii) any
establishment of any railway, Cantonment Board, major port, mine or oil-field,
or
(iii) any
establishment of a banking or insurance company, the Central Government,
(2) in
relation to any other establishment the Government of the State in which that
other establishment is situated.
A
plain reading of the unamended definition shows that the Central Government
will be the appropriate Government if the establishment in question answers the
description given in sub- clauses (i) to (iii). And in relation to any other
establishment, the Government of the State, in which the establishment in
question is situated, will be the appropriate Government. So far as sub-
clauses (ii) and (iii) are concerned, they present no difficulty.
The
discussion has centred round sub-clause (i). It may be seen that sub-clause (i)
has two limbs. The first limb takes in an establishment pertaining to any
industry carried on by or under the authority of the Central Government and the
second limb embraces such controlled industries as may be specified in that
behalf by the Central Government.
Before
embarking upon the discussion on the first limb, it will be apt to advert to
the amended definition of appropriate Government which bears the same meaning
as given in clause (a) of Section 2 of the Industrial Disputes Act, quoted
hereunder:
2. (a)
appropriate Government means –
(i) in
relation to any industrial disputes concerning any industry carried on by or
under the authority of the Central Government or by a railway company [or
concerning any such controlled industry as may be specified in this behalf by
the Central Government] or in relation to an industrial dispute concerning [a
Dock Labour Board established under section 5-A of the Dock Workers (Regulation
of Employment) Act, 1948 (9 of 1948), or [the Industrial Finance Corporation of
India Limited formed and registered under the Companies Act, 1956 (1 of 1956)],
or the Employees State Insurance Corporation established under section 3 of the
Employees State Insurance Act, 1948 (34 of 1948), or the Board of trustees
constituted under section 3-A of the Coal Mines Provident Fund and
Miscellaneous Provisions Act, 1948 (46 of 1948), or the Central Board of
Trustees and the State Boards of Trustees constituted under section 5-A and
section 5-B, respectively, of the Employees Provident Fund and Miscellaneous
Provisions Act, 1952 (19 of 1952), or the Life Insurance Corporation Act, 1956
(31 of 1956), or [the Oil and Natural Gas Corporation Limited registered under
the Companies Act, 1956 (1 of 1956)], or the Deposit Insurance and Credit
Insurance and Credit Guarantee Corporation established under section 3 of the
Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of 1961), or
the Central Warehousing Corporation established under section 3 of the
Warehousing Corporations Act, 1962 (58 of 1962), or the Unit Trust of India
established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963),
or the Food Corporation of India established under section 3, or a Board of
Management established for two or more contiguous States under section 16 of
the Food Corporations Act, 1964 (37 of 1964), or [the Airports Authority of
India constituted under section 3 of the Airports Authority of India Act, 1994
(55 of 1994)], or a Regional Rural Bank established under section 3 of the
Regional Rural Banks Act, 1976 (21 of 1976), or the Export Credit and Guarantee
Corporation Limited or the Industrial Reconstruction Corporation of India
Limited], or [the National Housing Bank established under section 3 of the
National Housing Bank Act, 1987 (53 of 1987) or [the Banking Service Commission
established under section 3 of the Banking Service Commission Act, 1975,] or
[an air transport service, or a banking or an insurance company], a mine, an
oil field], (a Cantonment Board] or a major port, the Central Government; and
(ii) in relation to any other industrial dispute, the State Government;
An
analysis of this provision shows that the Central Government will be the
appropriate Government in relation to an industrial dispute concerning :
(1) any
industry carried on by or under the authority of the Central Government, or by
a railway company; or
(2) any
such controlled industry as may be specified in this behalf by the Central
Government; or
(3) the
enumerated industries (which form part of the definition quoted above and need
not be reproduced here).
What
is evident is that the phrase any industry carried on by or under the authority
of the Central Government is a common factor in both the unamended as well as
the amended definition.
It is
a well-settled proposition of law that the function of the Court is to interpret
the Statute to ascertain the intent of the legislature-Parliament. Where the
language of the Statute is clear and explicit the Court must give effect to it
because in that case words of the Statute unequivocally speak the intention of
the legislature. This rule of literal interpretation has to be adhered to and a
provision in the Statute has to be understood in its ordinary natural sense
unless the Court finds that the provision sought to be interpreted is vague or
obscurely worded in which event the other principles of interpretation may be
called in aid. A plain reading of the said phrase, under interpretation, shows
that it is lucid and clear. There is no obscurity, no ambiguity and no
abstruseness. Therefore the words used therein must be construed in their
natural ordinary meaning as commonly understood.
We are
afraid we cannot accept the contention that in construing that expression or
for that matter any of the provisions of the CLRA Act, the principle of literal
interpretation has to be discarded as it represents common law approach
applicable only to private law field and has no relevance when tested on the
anvil of Article 14, and instead the principle of public law interpretation
should be adopted. To accept that contention, in our view, would amount to
abandoning a straight route and oft treaded road in an attempt to create a
pathway in a wilderness which can only lead astray. We have not come across any
principles of public law interpretation as opposed to private law
interpretation for interpreting a statute either in any authoritative treatise
on interpretation of statutes or in pronouncement of any Court nor is any
authority of this Court or any other Court brought to our notice. We may,
however, mention that there does exist a distinction between public law and
private law. This has been succinctly brought out by the Rt. Hon. Sir Harry Woolf
(as he then was, now Lord Woolf) in The Second Harry Street Lecture delivered
in the University of Manchester on February
19, 1986.
The
learned Law Lord stated :
I
regard public law as being the system which enforces the proper performance by
public bodies of the duties which they owe to the public. I regard private law
as being the system which protects the private rights of private individuals or
the private rights of public bodies. The critical distinction arises out of the
fact that it is the public as a whole, or in the case of local government the
public in the locality, who are the beneficiaries of what is protected by
public law and it is the individuals or bodies entitled to the rights who are
the beneficiaries of the protection provided by private law.
The
divide between the public law and the private law is material in regard to the
remedies which could be availed when enforcing the rights, public or private,
but not in regard to interpretation of the Statutes. We are not beset with the
procedural mandate as in the R.S.C. Order 53 of 1977 of England which was the subject matter of
consideration by the House of sought declaration by ordinary action that the
order passed by the Prisons Board of visitors awarding penalty against him was
void and of no effect. The House of Lords, dismissing the appeal filed against
the judgment of the Court of Appeal, held that where a public law issue arises,
the proceedings should be brought by judicial review under R.S.C. Order 53 and
not by private law action which would be abuse of the process of court.
Now,
going back to the definition of the said expression, it combines three
alternatives, viz., (a) any industry carried on by the Central Government; (b)
any industry carried on under the authority of the Central Government; and (c)
any industry carried on by a railway company. Alternatives (a) and (c) indicate
cases of any industry carried on directly by the Central Government or a
railway company. They are too clear to admit of any polemic. In regard to
alternative (b), surely, an industry being carried on under the authority of
the Central Government cannot be equated with any industry carried on by the
Central Government itself. This leaves us to construe the words under the
authority of the Central Government. The key word in them is authority.
The
relevant meaning of the word authority in the Concise Oxford Dictionary is
delegated power. In Blacks Law Dictionary the meanings of the word authority
are: permission;
right
to exercise powers -- often synonymous with power. The power delegated by a
principal to his agent. The lawful delegation of power by one person to
another. Power of agent to affect legal relations of principal by acts done in
accordance with principals manifestations of consent to agent. In Corpus Juris Secundum
(at p.1290) the following are the meanings of the term authority: in its broad
general sense, the word has been defined as meaning control over; power;
jurisdiction; power to act, whether original or delegated. The word is
frequently used to express derivative power; and in this sense, the word may be
used as meaning instructions, permission, power delegated by one person to
another, the result of the manifestations by the former to the latter of the
formers consent that the latter shall act for him, authority in this sense ---
in the laws of at least one state, it has been similarly used as designating or
meaning an agency for the purpose of carrying out a state duty or function;
some one to whom by law a power has been given. In Words and Phrases we find
various shades of meaning of the word authority at pp.603, 606, 612 and 613:
Authority, as the word is used throughout the Restatement, is the power of one
person to affect the legal relations of another by acts done in accordance with
the others manifestations of consent to him; an agency of one or more
participating governmental units created by statute for specific purpose of
having delegated to it certain functions governmental in character; the lawful
delegation of power by one person to another; power of agent to affect legal
relations of principal by acts done in accordance with principals
manifestations of consent to him.
From
the above discussion, it follows that the phrase any industry carried on under
the authority of the Central Government implies an industry which is carried on
by virtue of, pursuant to, conferment of, grant of, or delegation of power or
permission by the Central Government to a Central Government Company or other
Govt. company/undertaking. To put it differently, if there is lack of
conferment of power or permission by the Central Government to a government
company or undertaking, it would disable such a company/undertaking to carry on
the industry in question.
In
interpreting the said phrase, support is sought to be drawn by the learned
counsel for the contract labour from the cases laying down the principles as to
under what circumstances a Government company or undertaking will fall within
the meaning of State or other authorities in Article 12 of the Constitution.
We
shall preface our discussion of those cases by indicating that for purposes of
enforcement of fundamental rights guaranteed in Part III of the Constitution
the question whether a Government Company or undertaking is State within the
meaning of Article 12 is germane. It is important to notice that in these cases
the pertinent question is appropriateness of the Government - which is the
appropriate Government within the meaning of CLRA Act;
whether,
the Central or the State Government, is the appropriate Government in regard to
the industry carried on by the Central/State Government Company or any
undertaking and not whether such Central/State Government company or
undertaking come within the meaning of Article 12. The word State is defined in
Article 12 which is quoted in the footnote.
In Sukhdev
Singh & Ors. vs. Bhagatram Sardar Singh Raghuvanshi & Anr. , this
Court, in the context whether service Regulations framed by statutory
corporations have the force of law, by majority, held that the statutory
corporations, like ONGC, IFFCO, LIC established under different statutes fell
under other authorities and were, therefore, State within the meaning of that term
in Article 12 of the Constitution. The Court took into consideration the
following factors,
(a) they
were owned, managed and could also be dissolved by the Central Government;
(b) they
were completely under the control of the Central Government and
(c)
they were performing public or statutory duties for the benefit of the public
and not for private profit; and concluded that they were in effect acting as
the agencies of the Central Government and the service Regulations made by them
had the force of law, which would be enforced by the Court by declaring that
the dismissal of an employee of the corporation in violation of the
Regulations, was void.
In Ramanna
Dayaram Shetty vs. The International Airport of India & Ors. , a three-Judge Bench of this Court
laid down that Corporations created by the Government for setting up and
management of public enterprises and carrying out public functions, act as
instrumentalities of the Government; they would be subject to the same
limitations in the field of constitutional and administrative laws as
Government itself, though in the eye of law they would be distinct and
independent legal entities. There, this Court was enforcing the mandate of
Article 14 of the Constitution against the respondent - a Central Govt. Corporation.
Managing
Director, U.P.Warehousing Corporation & Anr. respondent-employee of the
appellant-Corporation in violation of the principles of natural justice. There
also the Court held the Corporation to be an instrumentality of the State and
extended protection of Articles 14 and 16 of the Constitution to the employee
taking the view that when the Government is bound to observe the equality
clause in the matter of employment the corporations set up and owned by the
Government are equally bound by the same discipline. etc. , the question
decided by a Constitution Bench of this Court was: whether Jammu & Kashmir
Regional Engineering College, Srinagar, registered as a society under the Jammu
& Kashmir Registration of Societies Act, 1898, was State within the meaning
of Article 12 of the Constitution so as to be amenable to writ jurisdiction of
the High Court. Having examined the Memorandum of Association and the Rules of
the Society, the Court decided that the control of the State and the Central
Government was deep and pervasive and the society was a mere projection of the
State and the Central Government and it was, therefore, an instrumentality or
agency of the State and Central Government and as such an authority-state
within the meaning of Article 12.
The
principle laid down in the aforementioned cases that if the government acting
through its officers was subject to certain constitutional limitations, a fortiorari
the government acting through the instrumentality or agency of a corporation
should equally be subject to the same limitations, was approved by the
Constitution Bench and it was pointed out that otherwise it would lead to
considerable erosion of the efficiency of the Fundamental Rights, for in that
event the government would be enabled to override the Fundamental Rights by
adopting the stratagem of carrying out its function through the instrumentality
or agency of a corporation while retaining control over it. That principle has
been consistently followed and reiterated in all subsequent cases - Equipment Corpn.
Of India Ltd. , Central Inland Water Transport Education & Research Centre
& Ors. and G.B. Mahajan & Ors. burden this judgment by adding to the
list and referring to each case separately.
We
wish to clear the air that the principle, while discharging public functions
and duties the Govt.
Companies/Corporations/Societies
which are instrumentalities or agencies of the Government must be subjected to
the same limitations in the field of public law -- constitutional or
administrative law -- as the Government itself, does not lead to the inference
that they become agents of the Centre/State Government for all purposes so as
to bind such Government for all their acts, liabilities and obligations under
various Central and/or State Acts or under private law.
From
the above discussion, it follows that the fact of being instrumentality of a
Central/State Govt. or being State within the meaning of Article 12 of the
Constitution cannot be determinative of the question as to whether an industry
carried on by a Company/Corporation or an instrumentality of the Govt. is by or
under the authority of the Central Government for the purpose of or within the
meaning of the definition of appropriate Government in the CLRA Act. Take the
case of a State Government corporation/company/undertaking set up and owned by
the State Government which is an instrumentality or agency of the State
Government and is engaged in carrying on an industry, can it be assumed that
the industry is carried on under the authority of the Central Government, and
in relation to any industrial dispute concerning the industry can it be said
that the appropriate Government is the Central Government? We think the answer
must be in the negative. In the above example if, as a fact, any industry is carried
on by the State Government undertaking under the authority of the Central
Government, then in relation to any industrial dispute concerning that
industry, the appropriate Government will be the Central Government. This is so
not because it is agency or instrumentality of the Central Government but
because the industry is carried on by the State Govt.
Company/Corporation/Undertaking under the authority of the Central Government.
In our view, the same reasoning applies to a Central Government undertaking as
well. Further, the definition of establishment in CLRA Act takes in its fold
purely private undertakings which cannot be brought within the meaning of
Article 12 of the Constitution. In such a case how is appropriate Government
determined for the purposes of CLRA Act or Industrial Disputes Act? In our
view, the test which is determinative is: whether the industry carried on by
the establishment in question is under the authority of the Central Govt? Obviously, there cannot be one
test for one part of definition of establishment and another test for another
part.
Thus,
it is clear that the criterion is whether an undertaking/instrumentality of
Government is carrying on an industry under the authority of the Central
Government and not whether the undertaking is instrumentality or agency of the
Government for purposes of Article 12 of the Constitution, be it of Central
Government or State Government.
There
cannot be any dispute that all the Central Government companies with which we
are dealing here are not and cannot be equated to Central Government though
they may be State within the meaning of Article 12 of the Constitution. We have
held above that being the instrumentality or agency of the Central Government
would not by itself amount to having the authority of the Central Government to
carry on that particular industry. Therefore, it will be incorrect to say that
in relation to any establishment of a Central Government Company/undertaking,
the appropriate Government will be the Central Government. To hold that the
Central Government is the appropriate Government in relation to an
establishment, the court must be satisfied that the particular industry in
question is carried on by or under the authority of the Central Government. If
this aspect is kept in mind it would be clear that the Central Government will
be the appropriate Government under the CLRA Act and the I.D.Act provided the
industry in question is carried on by a Central Government company/an
undertaking under the authority of the Central Government. Such an authority
may be conferred, either by a Statute or by virtue of relationship of principal
and agent or delegation of power. Where the authority, to carry on any industry
for or on behalf of the Central Government, is conferred on the Government
company/any undertaking by the Statute under which it is created, no further
question arises. But, if it is not so, the question that arises is whether
there is any conferment of authority on the Government company/ any undertaking
by the Central Government to carry on the industry in question. This is a
question of fact and has to be ascertained on the facts and in the
circumstances of each case.
We
shall refer to the cases of this Court on this point.
In
Heavy Engineering Mazdoor Union vs. State of Bihar & Ors. the said
expression (appropriate Government) came up for consideration. The Heavy
Engineering Corporation is a Central Government company. The President of India
appoints Directors of the company and the Central Government gives directions
as regards the functioning of the company. When disputes arose between the
workmen and the management of the company, the Government of Bihar referred the
disputes to the Industrial Tribunal for adjudication. The union of the workmen
raised an objection that the appropriate Government in that case was the
Central Government, therefore, reference of the disputes to the Industrial
Tribunal for adjudication by the State Government was incompetent. A two-Judge
Bench of this Court elaborately dealt with the question of appropriate
Government and concluded that the mere fact that the entire share capital was
contributed by the Central Government and the fact that all its shares were
held by the President of India and certain officers of the Central Government,
would not make any difference. It was held that in the absence of a statutory
provision, a commercial corporation acting on its own behalf even though it was
controlled, wholly or partially, by a Government Department would be ordinarily
presumed not to be a servant or agent of the State. It was, however, clarified
that an inference that the corporation was the agent of the Government might be
drawn where it was performing in substance Governmental and not commercial
functions. It must be mentioned here that in the light of the judgments of this
Court, referred to above, it is difficult to agree with the distinction between
a governmental activity and commercial function of government companies set up
and owned by government, insofar as their function in the realm of public law
are concerned.
However,
the contention that the decision in that case is based on concession of the
counsel for the appellant is misconceived.
This
Court summed up the submission in para 4 thus :
The
undertaking, therefore, is not one carried on directly by the Central
Government or by any one of its departments as in the case of posts and
telegraphs or the railways. It was, therefore, rightly conceded both in the
High Court as also before us that it is not an industry carried on by the Central
Government. That being the position, the question then is, is the undertaking
carried on under the authority of the Central Government? It is evident that
the concession was with regard to the fact that it was not an industry carried
on by the Central Government and not in regard to was the undertaking carried
on under the authority of the Central Government? Indeed that was the question
decided by the Court on contest and it was held that the undertaking was not
carried on by the Central Government company under the authority of the Central
Government and that the appropriate Government in that case was the State
Government and not the Central Government. From the above discussion, it is
evident that the Court correctly posed the question- whether the State Govt. or
the Central Govt. was the appropriate Government and rightly answered it.
Ors. ,
this Court was called upon to decide the question as to whether the expression
appropriate Government, as defined in Section 2(a)(i) of the Industrial
Disputes Act, was the State Government or the Central Government. In that case
dispute arose between the management of the Barrackpore branch (West Bengal) of the appellant and its
employees. The Governor of West Bengal referred the dispute to Industrial
Tribunal under Section 10 of the I.D. Act. The competence of the State
Government to make the reference was called in question. A three-Judge Bench of
this Court, relying on the decision in Heavy Engineerings case (supra), held
that the reference was valid. The Court took note of the factors, viz; if there
is any disturbance of industrial peace at Barrackpore where a considerable
number of workmen were working, the appropriate Government concerned in the
maintenance of the industrial peace was the West Bengal Government; that Barrackpore
industry was a separate unit; the cause of action in relation to the industrial
dispute arose at Barrackpore. Having regard to the definitions of the terms
appropriate Government and establishment, in Section 2 of CLRA Act, it cannot
be said that the factors which weighed with the Court were irrelevant. It was
also pointed out therein that from time to time certain statutory corporations
were included in the definition but no public company of which the shares were
exclusively owned by the Government, was roped in the definition. What we have
expressed above about Heavy Engineerings case (supra) will, equally apply here.
The
aforementioned phrase an industry carried on by or under the authority of the
Central Government again fell for consideration of a three-Judge Bench of this
Court in Rashtriya Mill Mazdoor Sangh, Nagpur vs. Model Mills, Nagpur & Anr. .
The
case arose in the context of Section 32(iv) of the Payment of Bonus Act, 1965,
which provides that nothing in that Act shall apply to employees employed by an
establishment engaged in any industry carried on by or under the authority of
any department of the Central Government or a State Government or a local
authority. Under Section 18-A of the Industries (Development and Regulation) Act,
1951, the Central Government appointed an authorised Controller to replace the
management of the respondent - Model Mills. That was done to give effect to the
directives issued by the Central Government under Section 16 of the said Act.
On behalf of the respondent it was contended that substitution of the
management by the Controller appointed under Section 18-A of the Industries
(Development & Regulation) Act would tantamount to the industry being run
under the authority of the department of the Central Government. Negativing the
contention it was held :
While
exercising power of giving directions under Section 16 the existing management
is subjected to regulatory control, failing which the management has to be
replaced to carry out the directions. In either case the industrial undertaking
retains its identity, personality and status unchanged. On a pure grammatical
construction of sub-section (4) of Section 32, it cannot be said that on the
appointment of an authorised controller the industrial undertaking acquires the
status of being engaged in any industry carried on under the authority of the
department of the Central Government.
Food
Corporation of India, Bombays case (supra) is the only case which arose
directly under the CLRA Act. The Food Corporation of India (FCI) engaged, inter
alia, the contract labour for handling of foodgrains. Complaining that their
case for departmentalisation was not being considered either by the Central
Government or by the State Government, nor were they extended the benefits
conferred by the CLRA Act, a representative action was initiated in this Court
by filing a writ petition under Article 32 of the Constitution seeking a writ
of mandamus against the Central/State Government to abolish contract labour and
to extend them the benefits under that Act.
The
FCI resisted the claim for abolition of contract labour on the ground that the
operations of loading/unloading foodgrains were seasonal, sporadic and varied
from region to region. However, it pleaded that the State Government and not
the Central Government was the appropriate Government under the CLRA Act. In
view of the unamended definition of the expression appropriate Government under
CLRA Act, which was in force on the relevant date, it was pointed out that the
FCI was not included in the definition by name as it was done under the
Industrial Disputes Act. Following the judgment of this Court in Heavy Engineerings
case (supra) and referring to the decision of this Court in Rashtriya Mill Mazdoor
Sanghs case (supra), the Court took the view that the same principle would
govern the interpretation of the expression appropriate Government in the CLRA
Act and held that the State Government was the appropriate Government
pertaining to the regional offices and warehouses which were situate in various
States. We find no illegality either in the approach or in the conclusion
arrived at by the Court in these cases.
It was
in that background of the case law that the Air Indias case (supra) came to be
decided by a three-Judge Bench of this Court. The Air India Corporation engaged
contract labour for sweeping, cleaning, dusting and watching of the buildings
owned and occupied by it. The Central Government having consulted the Central
Advisory Board constituted under Section 3(1) of the CLRA Act issued
notification under Section 10(1) of the Act prohibiting employment of contract labour
on and from 9.12.1976 for sweeping, cleaning, dusting and watching of the
buildings owned or occupied by the establishment in respect of which the appropriate
Government under the said Act is the Central Government. However, the Regional Labour
Commissioner, Bombay opined that the State Government was the appropriate
Government under the CLRA Act. The respondent-Union filed writ petition in the
High Court at Bombay seeking a writ of mandamus to the appellant to enforce the
said notification prohibiting employment of contract labour and for a direction
to absorb all the contract labour doing sweeping, cleaning, dusting and
watching of the buildings owned or occupied by the Air India with effect from
the respective dates of their joining as contract labour with all consequential
rights/benefits. A learned Single Judge of the High Court allowed the writ
petition on November 16, 1989 and directed that all the contract labour should
be regularised as employees of the appellant from the date of filing of the
writ petition. On appeal, the Division Bench, by order dated April 3, 1992,
confirmed the judgment of the learned Single Judge and dismissed the appeal.
On further
appeal to this Court, it was held that the word control was required to be
interpreted in the changing commercial scenario broadly in keeping with the
constitutional goals and perspectives; the interpretation must be based on some
rational and relevant principles and that the public law interpretation is the
basic tool of interpretation in that behalf relegating common law principles to
purely private law field. In that view of the matter, it concluded that the
two-Judge Bench decision in Heavy Engineerings case narrowly interpreted the
expression appropriate Government on the common law principles which would no
longer bear any relevance when it was tested on the anvil of Article 14. It
noted that in Hindustan Aeronautics Ltd., Rashtriya Mill Mazdoor Sangh and Food
Corporation of India, the ratio of Heavy Engineering formed the foundation but
in Hindustan Aeronautics Ltd. there was no independent consideration except
repetition and approval of the ratio of Heavy Engineering case which was based
on concession; in Food Corporation of India, the Court proceeded on the premise
that warehouses of the corporation were situate within the jurisdiction of the
different State Governments and that led to conclude that the appropriate
Government would be the State Government.
Thus,
distinguishing the aforementioned decisions, it was held therein (Air Indias
case) that from the inception of the CLRA Act the appropriate Government was
the Central Government.
We
have held above that in the case of a Central Government company/undertaking,
an instrumentality of the Government, carrying on an industry, the criteria to
determine whether the Central Government is the appropriate Government within
the meaning of the CLRA Act, is that the industry must be carried on by or under
the authority of the Central Government and not that the company/undertaking is
an instrumentality or an agency of the Central Government for purposes of
Article 12 of the Constitution; such an authority may be conferred either by a
statute or by virtue of relationship of principal and agent or delegation of
power and this fact has to be ascertained on the facts and in the circumstances
of each case. In view of this conclusion, with due respect, we are unable to
agree with the view expressed by the learned Judges on interpretation of the
expression appropriate Government in Air Indias case (supra). Point No.1 is
answered accordingly.
Point
No.2 relates to the validity of the notification issued by the Central
Government under Section 10(1) of the Contract Labour (Regulation &
Abolition) Act, 1970, dated December 9, 1976. The main contention against the
validity of the notification is that an omnibus notification like the impugned
notification would be contrary to the requirements of Section 10 of the CLRA Act
and is illustrative of non-application of mind.
It
would be profitable to refer to Section 10 of the Act :
10.
Prohibition of employment of contract labour –
(1)
Notwithstanding anything contained in this Act, the appropriate Government may,
after consultation with the Central Board or, as the case may be, a State
Board, prohibit, by notification in the Official Gazette, employment of
contract labour in any process, operation or other work in any establishment.
(2)
Before issuing any notification under sub-section (1) in relation to an
establishment, the appropriate Government shall have regard to the conditions
of work and benefits provided for the contract labour in that establishment and
other relevant factors, such as –
(a) whether
the process, operation or other work is incidental to, or necessary for the
industry, trade, business, manufacture or occupation that is carried on in the
establishment;
(b)
whether it is of perennial nature, that is to say, it is of sufficient duration
having regard to the nature of industry, trade, business, manufacture or
occupation carried on in that establishment;
(c) whether
it is done ordinarily through regular workmen in that establishment or an
establishment similar thereto;
(d) whether
it is sufficient to employ considerable number of whole-time workmen.
Explanation : If a question arises whether any
process or operation or other work is of perennial nature, the decision of the
appropriate Government thereon shall be final.
A
careful reading of Section 10 makes it evident that sub- section (1) commences
with a non obstante clause and overrides the other provisions of the CLRA Act
in empowering the appropriate Government to prohibit by notification in the
Official Gazette, after consultation with Central Advisory Board/State Advisory
Board, as the case may be, employment of contract labour in any process,
operation or other work in any establishment. Before issuing notification under
sub-section (1) in respect of an establishment the appropriate Government is
enjoined to have regard to:
(i) the
conditions of work;
(ii) the
benefits provided for the contract labour; and
(iii) other
relevant factors like those specified in clauses (a) to (d) of sub-section (2).
Under
clause (a) the appropriate Government has to ascertain whether the process,
operation or other work proposed to be prohibited is incidental to, or
necessary for the industry, trade, business, manufacture or occupation that is
carried on in the establishment; clause (b) requires the appropriate Government
to determine whether it is of perennial nature, that is to say, it is of
sufficient duration having regard to the nature of industry, trade, business,
manufacture or occupation carried on in that establishment; clause (c)
contemplates a verification by the appropriate Government as to whether that
type of work is done ordinarily through regular workmen in that establishment
or an establishment similar thereto; and clause (d) requires verification as to
whether the work in that establishment is sufficient to employ considerable
number of whole-time workmen. The list is not exhaustive. The appropriate
Government may also take into consideration other relevant factors of the
nature enumerated in sub-section (2) of Section 10 before issuing notification
under Section 10(1) of the CLRA Act.
The
definition of establishment given in Section 2(e) of the CLRA Act is as
follows:
In
clause (e) - establishment is defined to mean - (i) any office or department of
the Government or a local authority, or (ii) any place where any industry,
trade, business, manufacture or occupation is carried on.
The
definition is in two parts : the first part takes in its fold any office or
department of the Government or local authority - the Government establishment;
and the second part encompasses any place where any industry, trade, business,
manufacture or occupation is carried on - the non-Govt. establishment. It is
thus evident that there can be plurality of establishments in regard to the
Government or local authority and also in regard to any place where any
industry, trade, business, manufacture or occupation is carried on.
Now,
reading the definition of establishment in Section 10, the position that
emerges is that before issuing notification under sub-section (1) an
appropriate Government is required to:
(i) consult
the Central Board/State Board;
(ii) consider
the conditions of work and benefits provided for the contract labour and
(iii)
take note of the factors such as mentioned in clauses (a) to (d) of sub-section
(2) of Section 10, referred to above, with reference to any office or
department of the Government or local authority or any place where any
industry, trade, business, manufacture or occupation is carried on. These being
the requirement of Section 10 of the Act, we shall examine whether the impugned
notification fulfils these essentials.
The
impugned notification issued by the Central Government on December 9, 1976, reads as under :
S.O.No.779(E)
8/9.12.76 in exercise of the power conferred by Sub-section (1) of Section 10
of the Contract Labour (Regulation and Abolition) Act, 1970 (37 of 1970) the
Central Government after consultation with the Central Advisory Contract Labour
Board hereby prohibits employment of contract labour on an from the 1st March,
1977, for sweeping, cleaning, dusting and watching of buildings owned or
occupied by the establishments in respect of which the appropriate Government
under the said Act is the Central Government.
Provided
that this notification shall not only apply to the outside cleaning and other
maintenance operations of multi-storeyed buildings where such cleaning or
maintenance operations cannot be carried out except with specialised
experience.
A
glance through the said notification, makes it manifest that with effect from
March 1, 1977, it prohibits employment of contract labour for sweeping,
cleaning, dusting and watching of buildings owned or occupied by establishment
in respect of which the appropriate Government under the said Act is the
Central Government. This clearly indicates that the Central Government had not
adverted to any of the essentials, referred to above, except the requirement of
consultation with the Central Advisory Board.
Consideration
of the factors mentioned above has to be in respect of each establishment,
whether individually or collectively, in respect of which notification under
sub-section 1 of Section 10 is proposed to be issued. The impugned notification
apart from being an omnibus notification does not reveal compliance of sub-
section (2) of Section 10. This is ex facie contrary to the postulates of
Section 10 of the Act. Besides it also exhibits non- application of mind by the
Central Government. We are, therefore, unable to sustain the said impugned
notification dated December 9, 1976 issued by the Central Government.
Point
No.3 remains to be considered. This is the moot point which generated marathon
debate and is indeed an important one.
The
learned Solicitor General contended that contract labour had been in vogue for
quite some time past; having regard to the abuses of the contract labour
system, the CLRA Act was enacted by the Parliament to regulate the employment
of contract labour and to cause its abolition in an establishment when the
given circumstances exist; prior to the Act no mandamus could have been issued
by courts creating relationship of employer and the employee between the
principal employer and the contract labour and the Act did not alter that
position. When the principal employer entrusts the work to a contractor there
will be principal to principal relationship between them as such the work force
of the contractor cannot be said to be the employees of the establishment. It
was argued that under the Specific Relief Act a contract of employment could
not be enforced specifically much less can a new contract of employment between
the principal employer and the contract labour be created by the court. He has
also pointed out that in every government company/establishment which is an
instrumentality of the State there are service rules governing the appointment
of staff providing among other things for equality of opportunity to all
aspirants for posts in such establishments, calling for candidates from the
employment exchange and the reservation in favour of Scheduled Castes/Scheduled
Tribes/other Backward Classes, so a direction by the court to absorb the
contract labour en bloc could be complied with only in breach of the statutory
service rules. He has further contended that conceding that the CLRA Act is a
beneficial legislation, the benefits which the Parliament thought it fit to
confer on the contract labour are specified in the Act and the court by way of
interpretation cannot add to those benefits.
The
contentions of Mr. G.L. Sanghi for the principal employer are : that there was
never the relationship of master and servant between the F.C.I. and the
contract labour; the various provisions of the Act which require the contractor
to maintain canteen, rest-rooms and other facilities like a sufficient supply
of wholesome drinking water at convenient places, sufficient number of latrines
and urinals accessible to the contract labour in the establishment, washing
facilities and the first aid facilities negative the existence of any direct
relationship as sought to be made out. The responsibilities of the principal
employer under the CLRA Act arise only in the event of failure of the
contractor to fulfil his statutory obligations and in such an event he is bound
to reimburse the principal employer. Whenever a contractor undertakes to
produce a given result or to provide services to an establishment/undertaking
by engaging contract labour, the relationship of the master and servant exists
between the contractor and the contract labour and not between the principal
employer and the contract labour. When the Central Government/State
Government/local authority entrusts any work to a contractor who recruits
contract labour, in connection with that work, obviously the recruitment will
not be in conformity with the statutory service rules and the same position
would obtain with regard to non-governmental organisations, factories, mines
etc. Further, having regard to the distinction between the principal employer
and the establishment, in the absence of conferment of any authority on the
manager by his principal employer to enter into a contract of employment on his
behalf, the manager by entrusting work to a contractor cannot make a contract
of service between the principal employer and the contract labour; if this
analogy is applied to the case of the Central Government/the State
Government/local authority, the contractor who undertakes to produce a given
result would be creating a status of government servant by selecting and
appointing persons for a particular establishment/undertaking. Such a consequence
will obliterate the constitutional scheme in relation to government employment
resulting in uncontemplated and unimaginative liabilities in financial terms.
He pointed out that under the Mines Act the manager has no authority to employ
persons so as to create master and servant relationship; the same position will
equally apply in the case of occupier of a factory under the Factories Act. The
provisions of the CLRA Act do not make the contractor an agent for creating
relationship of master and servant between the principal employer and the
contract labour in the situations pointed out above. In all such cases
absorbing the contract labour would amount to opening a new channel of
recruitment and it could not have been the intention of the Parliament in enacting
CLRA Act to provide for appointment to the posts in various
government/non-government establishments by circumventing the service rules. He
canvassed that no direction could be issued to the principal employer by the
Court to absorb the contract labour in the establishment.
Mr.
T.R. Andhyarujina, the learned senior counsel appearing for the principal
employer (respondents in Transfer Union of India & Anr.), urged that prior
to coming into force of the CLRA Act, the Industrial Courts were ordering abolition
of contract labour system and giving appropriate directions to the employer to
employ contract labour on such terms and conditions as the employer might deem
fit but no direction was given to make automatic absorption on abolition of
contract labour. In 1946 in the Rege Committee Report or in 1969 in the Report
of Mr. Justice P.B. Gajendragadkar who was himself a party to the judgment in
The Standard-Vacuum Refining Co. of India Ltd.
automatic
absorption of the contract labour by the principal employer; the Statement of
Objects and Reasons of the CLRA Act also does not speak of automatic absorption
of contract labour which would show that the Parliament deliberately did not
make any provision for automatic absorption; when the contract is terminated either
by the principal employer or by the contractor or when the contractor himself
terminates services of his workers or when he abandons the contract, the
workmen go along with the contractor or may have a cause against the contractor
but they can have no claim against the principal employer as such on
prohibition of employment of contract labour also the same consequence should
follow; by prohibiting the contract labour the Parliament intended that labour
in general should be benefitted by making it impossible for the principal
employer to engage contract labour through a contractor and the benefit of
automatic absorption is not conferred by the CLRA Act on the contract labour
working in an establishment at the time of issuing the notification prohibiting
engagement of contract labour.
Mr.
K.K. Venugopal, the learned senior counsel appearing for the principal employer
(appellant in O.N.G.C.) contended that Section 10 of the CLRA Act did not speak
of automatic absorption so giving a direction to make absorption of the
contract labour as a consequence of issuance of notification thereunder,
prohibiting the engagement of contract labour in various processes, would be
contrary to the Act. Had it been the intention of the Parliament to establish
relationship of master and servant between the principal employer and the
contract labour, submitted the learned counsel, Section 10 of the CLRA Act
would have been differently worded and new sub section to that effect would
have been enacted. If the court were to accept the contention of the contract labour
that automatic absorption should follow a notification prohibiting employment
of contract labour, the court would be adding a sub-section to Section 10
prescribing for automatic absorption on issuance of notification under
sub-section (1) of Section 10 which would be impermissible.
Mr. Shanti
Bhushan argued that a contractor employing contract labour for any work of an
establishment would, in law, create relationship of master and servant between
the establishment and the labour; he sought to derive support from judgments of
this court in the following cases: The Maharashtra Ors. . His further
contention is that a joint reading of definitions of contract labour in clause
(b) and of establishment in clause (e) of Section 2 of the CLRA Act would show
that a legal relationship between a person employed to work in an industry and
the owner of the industry comes into existence and it would not make any
difference whether that relationship was brought about by the act of the principal/master
or by the act of his authorised agent; the very fact of being employed in
connection with an industry, creates rights in favour of the person employed
and against the owner of the industry by bringing into existence, in law, a
relationship of employer and the employee (master and servant) between them. He
pointed out that the definition of the expression workman in clause (i)
excludes an out-worker, a person to whom any articles and materials are given
out by or on behalf of the principal employer to be made up, cleaned, washed,
altered, ornamented, finished, repaired, adapted or otherwise processed for
sale for the purposes of the trade or business of the principal employer when
the process is to be carried out either in the home of the out-worker or in
some other premises not being premises under the control and management of the
principal employer and argued that it would show that those who work at the
place either of or under the Control and management of the principal employer,
must be treated as the workmen of the principal employer. It is further argued
that where the work is of a perennial nature, sub-section (2) of Section 10 of
the CLRA Act requires that the contract labour should be abolished so it would
be an abuse on the part of the employer to resort to employing contract labour
in such a case. Reliance is also placed on Rules 21(2), 25(2)(V)(a), 72, 73,
74-Form XII, Rules 75, 76, 77, 81(3), 82(2) and Forms I, II, III and IV
relating to certificate of registration, Form VI relating to licence, Form XIV
relating to issue of employment card and Form XXV relating to annual returns of
the principal employer, to contend that the principal employer has to keep
track with the number of workmen employed, terms and conditions on which they
are employed and, therefore, the employer cannot be permitted to plead that no
relationship of master and servant exists between the principal employer and
the contract labour. It is elaborated that under the CLRA Act, the action of
the contractor who is the agent of the principal employer to engage contract labour,
binds him and creates relationship of master and servant between them,
therefore, the only consequence of notification under Section 10(1) could be to
remove the contractor (middle-man) and mature the relationship which had
already existed between the workman and the principal employer into a
completely direct relationship and that the effect of the notification could
never be to extinguish the rights of the persons for whose benefit the notification
was required to be issued; reliance is placed on the three Judge Bench of this
Court in Air Indias case (supra) and it is pointed out that Justice S.B. Majmudar
who was a party to Gujarat Electricity Board, Thermal Power Station, Ukai,
Gujarat reasons for automatic absorption in his concurring judgment.
Insofar
as the reservation quota in favour of Scheduled Castes, Scheduled Tribes and
Backward Classes is concerned, he submitted that there would be many situations
in which the rule of reservation could not be complied with, e.g. when a
private company had made appointments without following the rule of reservation
and if such a company were to be taken over by the State the claim of the
workers for absorption could not be denied on the ground that it would upset
the rule of reservation. It is further contended that if on issuing
notification under Section 10(1) prohibiting employment of contract labour,
there is no automatic absorption, the employer cannot employ work force which
will result in closing down the industry producing a crippling affect on the
establishment; but if automatic absorption is held to be the rule, no
disturbance will be caused in the functioning of the industry and the contract labourers
would become employees of the principal employer and that the employer will,
however, have a right to retrench any excess staff by following the principles
of retrenchment and paying retrenchment compensation as provided in the
Industrial Disputes Act.
Mr. Bhaskar
P. Gupta, the learned senior counsel appearing for the contract labour
(respondents in Civil Appeal Nos.719-720 of 2001), submitted that
identification forms for working in different departments of the company were
issued by the appellant company to the contract labour and, therefore, there was
a direct relationship of master and servant between the management and the labourers;
and if it were to be held that there was no automatic absorption on prohibition
of engagement of contract labour the workers would be placed in a position
worse than that held by them before abolition. He urged for construction of the
provisions of the Act on the principles laid down in Heydons case to support
the plea that the Act provided for absorption of the contract labour on issuing
abolition notification by necessary implication and provided penal consequences
to prevent exploitation and abuse of the contract labour. In that case, it is
submitted, the company itself understood that the provisions of the Act
required automatic absorption and absorbed 1550 workers leaving only 400
workers to be absorbed.
Ms. Indira
Jaisingh has contended that the primary object of the labour laws is to
effectuate the Directive Principles of State policy and, therefore, the
provisions of CLRA Act have to be interpreted accordingly; the principles of
contract law are inapplicable in sricto sensu to labour-management relations;
she relied on the following judgments of this Court : Western India Bharat Bank
Ltd., Delhi & Anr. , Rai Bahadur Diwan Badri Das Shammi Bhan & Anr. .
Prior to the enactment of CLRA Act, it is pointed out, the courts have ordered
abolition of contract labour and their departmentalisation in The
Standard-Vacuums case (supra) and Hussainbhais (supra). She has argued that the
Statement of Objects and Reasons does not say that the CLRA Act is intended to
alter the then existing law; it codifies the existing law and confers quasi
legislative power upon the government to prohibit contract labour; it does not
affect the powers of the court to direct absorption of contract labour [see
abolition notification is issued after consideration of all the facts and
circumstances so the consequence can only be that the contractor is displaced
and a direct relationship is established between the principal employer and the
contract labour; in Air Indias case (supra), it was held that the consequence
of the abolition of contract labour, by necessary implication, would result in
the principal employer absorbing the contract labour;
the
linkage between the contractor and the employee would be snapped and a direct
relationship between the principal employer and the contract labour would
emerge to make them its employees; she invited our attention to Vegoils Private
Limited Ltd. & Ors. and Gujarat Electricitys case (supra) and submitted
that the award proceedings stipulated in Gujarat Electricitys Case (supra) was
cumbersome procedure making the remedy a teasing illusion, therefore, automatic
absorption alone was the proper solution. Our attention was also invited to
various Forms prescribed under the Rules to bring home the point that the
principal employer had complete control over the number of contract labourers
being employed and there could be no over- employment without the knowledge of
the employer and it was urged that the fact that the labourers had been working
for quite a number of years would show that their continuance was necessary.
Mr. R.
Venkatramani, the learned senior counsel appearing for the respondents in the
appeal filed by the O.N.G.C. submitted that though the CLRA Act itself did not
abolish the contract labour, it empowered the appropriate government to abolish
the system in any establishment in the given circumstances. His contention is
that Section 10 is intended to remove the contractor from the picture and that
it can not be read as leading to removal of workers. He has also relied on the
reasoning of Justice Majmudar in Air Indias case (supra) and added that if the
contract labour is not absorbed the remedy of the abolition of the contract labour
would be worse than the mischief sought to be remedied. He submitted that this
Court directed absorption in Anr. , G. B. Pant University of Agriculture &
Technology, Pant Mr. K.K. Singhvi, the learned senior counsel for the contract labour,
referred to the reports of the Royal Commission appointed by the then British
Government, the Rege Committee, the Second Planning Commission and the Second
National Commission of Labour headed by Justice Gajendragadkar to emphasise
that the practice of contract labour is an unfair practice of exploiting the labour
and that each of these reports recommended abolition of the contract labour and
where it was not possible so to do, to regulate the same. He pleaded for
absorption of the contract labourer by the principal employer on the abolition
of the contract labour system in the process, operation or other work in the
establishment in which it was employed in three situations :
(1) where
there has been notification for abolition of contact labour;
(2) where
in violation of the notification, contract labour is employed; and
(3) where
principal employer resorts to employing of contract labour without getting
itself registered or through a contractor who is not licensed. He laid emphasis
upon the Directive Principles contained in Articles 39, 41, 42 & 43 and
urged for interpreting the beneficial legislation like CLRA Act to promote the
intention of the legislature; he argued that the purpose of abolition of the
contract labour was to discontinue the exploitation of the contract labour and
to bring it on par with the regular workmen, therefore, it was implicit that on
abolition of the contact labour system, the concerned workmen should be
absorbed as regular employees of the principal employer; relying upon the
reasoning of Justice Majmudar in his concurring judgment in Air Indias case
(supra), it was submitted that in labour laws the development had been on the
basis of the judgments of the Courts and, therefore, we should interpret
Section 10 to hold that as a result of issuance of prohibition notification,
the contract labour working in an establishment at that time should stand
absorbed automatically.
Ms. Asha
Jain Madan, the learned counsel appearing for the contract labour (respondents
in C.A. Nos. of 2001 @ S.L.P. (C) Nos.12657-12658 of 1998), adopted the
argument of the other learned senior counsel; she also relied on the concurring
judgment of Justice Majmudar in Air Indias case (supra) in support of her
contention that automatic absorption should follow prohibition of contract labour
by the appropriate Government in any given establishment.
The
contentions of the learned counsel for the parties, exhaustively set out above,
can conveniently be dealt with under the following two issues :
A.
Whether the concept of automatic absorption of contract labour in the
establishment of the principal employer on issuance of the abolition
notification, is implied in Section 10 of the CLRA Act; and B. Whether on a
contractor engaging contract labour in connection with the work entrusted to
him by a principal employer, the relationship of master and servant between him
(the principal employer) and the contract labour, emerges.
For a
proper examination of these issues, a reference to Section 10 which provides
for prohibition of employment of contract labour and Clauses (b), (c), (e), (g)
and (i) of Section 2 of CLRA Act which define the terms contract labour,
contractor, establishment, principal employer and workman respectively will be
apposite. To interpret these and other relevant provisions of the CLRA Act, to
which reference will be made presently, we may, with advantage, refer to CRAIES
on Statute Law quoting the following observation of Lindley M.R. in Re Mayfair
Property Co. in regard to Rule in Heydons case, in order properly to interpret
any statute it is as necessary now as it was when Lord Coke reported Heydons
Case, to consider how the law stood when the statute to be construed was
passed, what the mischief was for which the old law did not provide, and the
remedy provided by the statute to cure that mischief.
What
the learned Master of the Rolls observed in 1898 holds good even in 2001, so we
proceed in the light of Rule in Heydons case.
We
have extracted above Section 10 of the CLRA Act which empowers the appropriate
Government to prohibit employment of contract labour in any process, operation
or other work in any establishment, lays down the procedure and specifies the
relevant factors which shall be taken into consideration for issuing
notification under sub-section (1) of Section 10. It is a common ground that
the consequence of prohibition notification under Section 10(1) of the CLRA
Act, prohibiting employment of contract labour, is neither spelt out in Section
10 nor indicated anywhere in the Act. In our view, the following consequences
follow on issuing a notification under Section 10 (1) of the CLRA Act:
(1) contract
labour working in the concerned establishment at the time of issue of
notification will cease to function;
(2) the
contract of principal employer with the contractor in regard to the contract labour
comes to an end;
(3) no
contract labour can be employed by the principal employer in any process,
operation or other work in the establishment to which the notification relates
at any time thereafter;
(4)
the contract labour is not rendered unemployed as is generally assumed but
continues in the employment of the contractor as the notification does not
sever the relationship of master and servant between the contractor and the
contract labour;
(5)
the contractor can utilise the services of the contract labour in any other
establishment in respect of which no notification under Section 10 (1) has been
issued; where all the benefits under the CLRA Act which were being enjoyed by
it, will be available;
(6) if
a contractor intends to retrench his contract labour he can do so only in
conformity with the provisions of the I.D. Act. //The point, now under
consideration, is : whether automatic absorption of contract labour working in
an establishment, is implied in Section 10 of the CLRA Act and follows as a
consequence on issuance of the prohibition notification thereunder. We shall
revert to this aspect shortly.
Now we
shall notice the definitions of the terms referred to above.
The
term contract labour as defined in clause (b) of Section 2 reads:
(2)(1)(b)
a workman shall be deemed to be employed as contract labour in or in connection
with the work of an establishment when he is hired in or in connection with
such work by or through a contractor, with or without the knowledge of the
principal employer.
By
definition the term contract labour is a species of workman. A workman shall be
so deemed when he is hired in or in connection with the work of an
establishment by or through a contractor, with or without the knowledge of the
principal employer. A workman may be hired:
(1) in
an establishment by the principal employer or by his agent with or without the
knowledge of the principal employer; or
(2) in
connection with the work of an establishment by the principal employer through
a contractor or by a contractor with or without the knowledge of the principal
employer.
Where
a workman is hired in or in connection with the work of an establishment by the
principal employer through a contractor, he merely acts as an agent so there
will be master and servant relationship between the principal employer and the
workman. But where a workman is hired in or in connection with the work of an
establishment by a contractor, either because he has undertaken to produce a
given result for the establishment or because he supplies workman for any work
of the establishment, a question might arise whether the contractor is a mere
camouflage as in Hussainbhai Calicuts case (supra) and in Indian Petrochemicals
Corporations case (supra) etc.; if the answer is in the affirmative, the
workman will be in fact an employee of the principal employer; but if the
answer is in the negative, the workman will be a contract labour.
Clause
(c) of Section 2 defines contractor as under:
(2)(1)(c)
Contractor, in relation to an establishment, means a person who undertakes to
produce a given result for the establishment, other than a mere supply of goods
or articles of manufacture to such establishment, through contract labour or
who supplies contract labour for any work of the establishment and includes a
sub-contractor.
It may
be noticed that the term contractor is defined in relation to an establishment
to mean a person who undertakes to produce a given result for the establishment
through contract labour or supplies contract labour for any work of the
establishment and includes sub-contractor but excludes a supplier of goods or
articles of manufacture to such establishment.
The
definition of principal employer in clause (g) of Section 2 runs thus:
(2)(1)(g)(i)
in relation to any office or department of the Government or a local authority,
the head of that office or department or such other officer as the Government
or the local authority, as the case may be, may specify in this behalf.
(ii)
in a factory, the owner or occupier of the factory and where a person has been
named as the manager of the factory under the Factories Act, 1948 ( 63 of
1948), the person so named, (iii) in a mine, the owner or agent of the mine and
where a person has been named as the manager of the mine the person so named,
(iv) in any other establishment, any person responsible for the supervision and
control of the establishment.
Explanation:
For the purpose of sub-clause (iii) of this clause, the expressions mine, owner
and agent shall have the meanings respectively assigned to them in clause (j),
clause (l) and clause (c) of sub-section (1) of section 2 of the Mines Act,
1952 ( 35 of 1952).
It
contains four parts. Under the first part, the head of any office or department
or such other officer as the Government or the local authority, as the case may
be, may specify in that behalf, is called the principal employer. The second
part takes in the owner or occupier of the factory and where a person has been
named as the manager of the factory under the Factories Act, 1948, the person
so named is treated as the principal employer.
The
third part includes, within the meaning of the principal employer, the owner or
agent of a mine or where a person has been named as the manager of the mine,
the person so named .
And
the fourth part embraces every person responsible for the supervision and
control of any establishment within the fold of principal employer.
The
term workman as defined in clause (i) of Section 2 of the CLRA Act is as
follows:
workman
means any person employed in or in connection with the work of any
establishment to do any skilled, semi-skilled or un-skilled manual,
supervisory, technical or clerical work for hire or reward, whether the terms
of employment be express or implied but does not include any such person-
(A) who
is employed mainly in a managerial or administrative capacity;
(B)
who, being employed in a supervisory capacity draws wages exceeding five
hundred rupees per mensem or exercises, either by the nature of the duties
attached to the office or by reason of the powers vested in him, functions
mainly of a managerial nature; or
(C)
who is an out-worker, that is to say, a person to whom any articles and
materials are given out by or on behalf of the principal employer to be made
up, cleaned, washed, altered, ornamented, finished, repaired, adapted or
otherwise processed for sale for the purposes of the trade or business of the
principal employer and the process is to be carried out either in the home of
the out-worker or in some other premises, not being premises under the control
and management of the principal employer.
The
definition is quite lucid. It has two limbs. The first limb indicates the
meaning of the term as any person employed in or in connection with the work of
any establishment to do any skilled, semi-skilled or un-skilled, supervisory,
technical or clerical work for hire or reward. It is immaterial that the terms
of employment are express or implied. The second limb contains three
exclusionary classes –
(A) managerial
or administrative staff;
(B) supervisory
staff drawing salary exceeding Rs.500/-(p.m.) and
(C) an
out worker which implies a person to whom articles and materials are given out
by or on behalf of the principal employer to be made up cleaned, washed,
altered, ornamented, finished, repaired, adapted or otherwise processed for
sale for purposes of the trade or business of the principal employer and the
process is to be carried out either in the home of the out-worker or in some
other place not being the premises under the control and management of the
principal employer.
Now we
shall consider issue A:
Whether
the concept of automatic absorption of contract labour in the establishment of
the principal employer on issuance of abolition notification, is implied in
Section 10 of the CLRA Act.
It
would be useful to notice the historical perspective of the contract labour
system leading to the enactment of the CLRA Act for a proper appreciation of
the issue under examination. The problems and the abuses resulting from
engagement of contract labour had attracted the attention of the Government
from time to time. In the pre-independence era, in 1929 a Royal Commission was
appointed by the then British Government to study and report all the aspects of
labour. Suffice it to mention that in 1931 the Royal Commission ( also known as
Whitley Commission) submitted its report mentioning about existence of
intermediary named jobber and recommended certain measures to reduce the
influence of the jobber. Nothing substantial turned on that. In 1946 Rege
Committee noted that in India contractors would either supply labour
or take on such portions of work as they could handle. The Committee pointed
out, whatever may be the grounds advanced by employers, it is to be feared that
the disadvantages of the system are far more numerous and weightier than the
advantages; though the Rege Committee recognised need for contract labour yet
urged for its abolition where it was possible and recommended for regulating
conditions of service where its continuance was unavoidable. In 1956 the Second
Planning Commission (of which the then Prime Minister Pandit Jawahar Lal Nehru
was the Chairman) observed that in the case of contract labour the major
problems relate to the regulations of working conditions and ensuring them
continuous employment and for that purposes suggested that it was necessary to:
(a) undertake
studies to ascertain the extent and the nature of the problems involved in
different industries:
(b) examine
where contract labour could be progressively eliminated. This should be
undertaken straightway;
(c)
determine cases where responsibility for payment of wages, ensuring proper
conditions of work, etc. could be placed on the principal employer in addition
to the contractor;
(d) secure
gradual abolition of the contract system where the studies show this to be
feasible, care being taken to ensure that the displaced labour is provided with
alternative employment;
(e) secure
for contract labour the conditions and protection enjoyed by other workers
engaged by the principal employer; and
(f) set
up a scheme of decasualisation, wherever feasible.
It is
no doubt true that one of the suggestions referred to above, does speak of care
being taken to ensure that the displaced labour is provided with alternative
employment, but a careful reading of the recommendation shows that the
Committee was not unmindful of the fact that abolition of the contract labour
system would result in displacement of labour, nonetheless what it thought fit
to recommend was alternative employment and not absorption in the establishment
where the contract labour was working.
In
1969, the National Commission of Labour submitted its report recording the
finding that the contract labour system was functioning with advantage to the
employer and disadvantage to the contract labour and recommended that it should
be abolished.
The
Commission also observed that under the various enactments the definition of
worker was enlarged to include contract labour and thus benefits of working
conditions and hours of work admissible to labour directly employed were made
available to the contract labour as well.
Indeed,
the National Commission which was chaired by Justice P.B. Gajendragadkar who
was a party to the judgment of this Court in The Standard Vacuums case (supra)
possibly inspired by that judgment enumerated factors, indicated therein which
would justify dispensing with the contract labour system, in para 29.11 of its
report, which is reproduced hereunder.
29.11
- Judicial awards have discouraged the practice of employment of contract labour,
particularly when the work is
(i) perennial
and must go on from day to day;
(ii) incidental
and necessary for the work of the factory;
(iii) sufficient
to employ a considerable number of wholetime workmen; and
(iv) being
done in most concerns through regular workmen.
These
awards also came out against the system of middlemen.
While
recommending abolition of contract labour altogether, it was emphasised that
such facilities which other regular workers enjoyed, should be made available
to contract labour if for some unavoidable reasons the contract labour had to
stay. In para 29.15 of its report the National Commission of Labour noticed the
fact of introduction of The Contract Labour (Regulation and Abolition) Bill,
1967 (for short the Bill) in the Parliament, which incorporated to a great
extent the said recommendations. The Bill later became the CLRA Act. It is
worth noticing that in spite of absence of a provision for absorption of
contract labour in the Bill (on issuance of notification under Section 10(1) of
the CLRA Act prohibiting engagement of contract labour), the National
Commission endorsed that measure.
We
have given punctilious reading to the report of the Joint Committee of the
Parliament on the said Bill. Neither in the main report nor in the dissent
note, do we find a reference to the automatic absorption of the contract labour.
This may perhaps be for the reason that on abolition of contract labour system
in an establishment, the contract labour nonetheless remains as the workforce
of the contractors who get contracts in various establishments where the
contract labour could be engaged and where they would be extended the same
statutory benefits as they were enjoying before. We noticed that it was clear
to the Joint Committee that by abolition of contract labour, the principal
employer would be compelled to employ permanent workers for all types of work
which would result incurring high cost by him, which implied creation of
employment opportunities on regular basis for the contract labour. This could
as well be yet another reason for not providing automatic absorption.
This
is so far as the recommendations of various commissions and committees leading
to enactment of CLRA Act.
We
have already referred to the Statement of Objects and Reasons of the Act
elsewhere in this judgment which also does not allude to the concept of
automatic absorption of the contract labour on issuance of notification for
prohibition of employment of the contract labour.
Now
turning to the provisions of the Act, the scheme of the Act is to regulate
conditions of workers in contract labour system and to provide for its
abolition by the appropriate Government as provided in Section 10 of the CLRA
Act. In regard to the regulatory measures, Section 7 requires the principal
employer of an establishment to get itself registered under the Act. Section 12
of the Act obliges every contractor to obtain licence under the provisions of
the Act. Section 9 of the Act places an embargo on the principal employer of an
establishment, which is either not registered or registration of which has been
revoked under Section 8, from employing contract labour in the establishment.
Similarly,
Section 12(1) bars a contractor from undertaking or executing any work through
contract labour except under and in accordance with a licence. Sections 23, 24
and 25 of the Act make contravention of the provisions of the Act and other
offences punishable thereunder. With regard to the welfare measures intended
for the contract labour, Section 16 imposes an obligation on the appropriate
Government to make rules to require the contractor to provide canteen for the
use of the contract labour. The contractor is also under an obligation to
provide rest room as postulated under Section 17 of the Act. Section 18 imposes
a duty on every contractor employing contract labour in connection with the
work of an establishemnt to make arrangement for a sufficient supply of
wholesome drinking water for the contract labour at convenient places, a
sufficient number of latrines and urinals of the prescribed type at convenient
and accessible places for the contract labour in the establishment, washing
facilities etc. Section 19 requires the contractor to provide and maintain a
first aid box equipped with prescribed contents at every place where contract labour
is employed by him.
Section
21 specifically says that a contractor shall be responsible for payment of
wages to workers employed by him as contract labour and such wages have to be
paid before the expiry of such period as may be prescribed. The principal
employer is enjoined to have his representative present at the time of payment
of wages.
In the
event of the contractor failing to provide amenities mentioned above, Section
20 imposes an obligation on the principal employer to provide such amenities
and to recover the cost and expenses incurred therefor from the contractor
either by deducting from any amount payable to the contractor or as a debt by
the contractor. So also, Sub-Section (4) of Section 21 says that in the case of
the contractor failing to make payment of wages as prescribed under Section 21,
the principal employer shall be liable to make payment of wages to the contract
labour employed by the contractor and will be entitled to recover the amount so
paid from the contractor by deducting from any amount payable to the contractor
or as a debt by the contractor. These provisions clearly bespeak treatment of
contract labour as employees of the contractor and not of the principal employer.
If we
may say so, the eloquence of the CLRA Act in not spelling out the consequence
of abolition of contract labour system, discerned in the light of various
reports of the Commissions and the Committees and the Statement of Objects and
Reasons of the Act, appears to be that the Parliament intended to create a bar
on engaging contract labour in the establishment covered by the prohibition
notification, by a principal employer so as to leave no option with him except
to employ the workers as regular employees directly. Section 10 is intended to
work as a permanent solution to the problem rather than to provide a one time
measure by departmentalizing the existing contract labour who may, by a
fortuitous circumstance be in a given establishment for a very short time as on
the date of the prohibition notification. It could as well be that a contractor
and his contract labour who were with an establishment for a number of years
were changed just before the issuance of prohibition notification. In such a
case there could be no justification to prefer the contract labour engaged on
the relevant date over the contract labour employed for longer period earlier.
These may be some of the reasons as to why no specific provision is made for
automatic absorption of contract labour in the CLRA Act.
In the
light of the above discussion we are unable to perceive in Section 10 any
implicit requirement of automatic absorption of contract labour by the
principal employer in the concerned establishment on issuance of notification
by the appropriate Government under Section 10(1) prohibiting employment of
contract labour in a given establishment.
Here
we may also take note of the judicial approach in regard to absorption of
contract labour on issuing direction for its abolition, from the cases decided
before the enactment of CLRA Act. In The Standard Vacuums case (supra), the
appellant- company engaged contractor for cleaning and maintenance work at the
refinery and plant belonging to it. The contract labour made a demand for abolition
of contract labour system and for absorption of the contract labour in the
regular service of the company. The dispute was referred to the Tribunal under
the Industrial Disputes Act. The appellant raised an objection to the
competence of the reference, inter alia, on the ground that there can be no
dispute between it and the respondents as they were the workmen of a different
employer namely, the contractor. The Tribunal found against the appellant on
the question of competence of the reference and passed award directing that the
contract labour system should be abolished. On appeal, this Court held that as
the ingredients of Section 2(k) of the Industrial Disputes Act were present,
the dispute between the parties was an industrial dispute and, therefore,
reference was competent. It was further held that the work entrusted to the
contractor was incidental to and necessary for the work of the refinery and was
of perennial nature; it was sufficient to employ a considerable number of
whole-time workmen and that type of work was being done in most concerns
through regular workmen. Therefore, the Tribunals suggestion directing
abolition of contract labour was right and no interference with the award of
the Tribunal was called for. However, it was observed that the date from which
the direction for abolition of contract labour was to be effective, should not
be put into force with retrospective effect and having noted that a few months
remained for the existing contract to come to an end, permitted the existing contract
system to be continued for the rest of the period of the contract. A chary
reading of the above judgment shows that though direction for abolition of
contract labour was approved, no automatic absorption of the contract labour
working as on the date of abolition in the establishment was ordered by this
Court. It is interesting to notice that the conditions pointed out by this
Court, namely,
(i) the
work was incidental and necessary for the work of establishment;
(ii)
was of perennial nature;
(iii)
was sufficient to employ a considerable number of whole time workmen and
(iv) that
type of work was being done in most concerns through regular workmen, have been
incorporated in sub-section 2 of Section 10 of CLRA Act.
Much
emphasis is laid on the judgment of this Court in The Standard Vacuums case
(supra) in support of the contention that the Courts directed absorption of
contract labour as a consequence of prohibition of employment of contract labour.
We have pointed out above that a thoughtful reading of the said judgment would
disclose that no such principle has been laid down therein.
On the
contrary, the Court having affirmed the direction prohibiting employment of
contract labour extended the date from which the prohibition was to take effect
so as to permit the existing contractor to continue for the rest of the period
of the contract. Thus it is clear that before the enactment of the CLRA Act the
industrial adjudicators/courts did direct abolition of contract labour system
but did not order absorption of contract labour by the principal employer on
such abolition of the contract labour system.
Now,
it would be apt to notice the judicial approach after the enactment of the CLRA
Act.
In Vegoilss
case (supra), the question before this Court was: had the Industrial Tribunal
jurisdiction to issue direction to the establishment to abolish contract labour
with effect from the date after coming into force of the CLRA Act? The
appellant- company had engaged contract labour in seeds godown and solvent
extraction plants in its factory. The appellant took the plea that the type of
work was intermittent and sporadic for which the contract labour was both
efficient and economic. On the other hand, the union of the workmen submitted
that the work was continuous and perennial in nature and that in similar
companies the practice was to have permanent workmen; it claimed that the
contract labour system be abolished and the contract labour be absorbed as
regular employees in the concerned establishment of the appellant. The Tribunal
having found that the work for which the contract labour was engaged was
closely connected with the main industry carried on by the appellant and that
the work was also of perennial character, directed abolition of contract labour
system from a date after coming into force of the CLRA Act but rejected the
claim for absorption of contract labour in the establishment of the appellant.
On appeal to this Court, after pointing out the scheme of Section 10 of the
Act, it was held that under the CLRA Act, the jurisdiction to decide about the
abolition of contract labour had to be in accordance with Section 10,
therefore, it would be proper that the question, whether the contract labour in
the appellant industry was to be abolished or not, be left to be dealt with by
the appropriate Government under the Act, if it became necessary. From this
judgment, no support can be drawn for the proposition that absorption of the
contract labour is a concomitant of the abolition notification under Section
10(1) of the Act.
A
Constitution Bench of this Court in M/s Gammon India constitutional validity of the CLRA Act and the Rules made thereunder
in a petition under Article 32 of the Constitution of India. In that case, the
work of construction of a building for the banking company was entrusted to the
petitioners - building contractors - who engaged contract labour for
construction work.
While
upholding the constitutional validity of the CLRA Act and the Rules made thereunder,
this Court summed up the object of the Act and the purpose for enacting Section
10 of the Act as follows :
The
Act was passed to prevent the exploitation of contract labour and also to
introduce better conditions of work. The Act provides for regulation and
abolition of contract labour. The underlying policy of the Act is to abolish
contract labour, wherever possible and practicable, and where it cannot be
abolished altogether, the policy of the Act is that the working conditions of
the contract labour should be so regulated as to ensure payment of wages and
provision of essential amenities. That is why the Act provides for regulated
conditions of work and contemplates progressive abolition to the extent
contemplated by Section 10 of the Act.
Section
10 of the Act deals with abolition while the rest of the Act deals mainly with
regulation. The dominant idea of Section 10 of the Act is to find out whether
contract labour is necessary for the industry, trade, business, manufacture or
occupation which is carried on in the establishment.
There
is nothing in that judgment to conclude that on abolition of contract labour
system under Section 10(1), automatic absorption of contract labour in the
establishment of the principal employer in which they were working at that
time, would follow.
In
Dena Naths case (supra), a two-Judge Bench of this Court considered the
question, whether as a consequence of non- compliance of Sections 7 and 12 of
the CLRA Act by the principal employer and the licensee respectively, the
contract labour employed by the principal employer would become the employees
of the principal employer. Having noticed the observation of the three-Judge
Bench of this Court in The Standard-Vacuums case (supra) and having pointed out
that the guidelines enumerated in sub-section (2) of Section 10 of the Act are
practically based on the guidelines given by the Tribunal in the said case, it
was held that the only consequence was the penal provisions under Sections 23
and 25 as envisaged under the CLRA Act and that merely because the contractor
or the employer had violated any provision of the Act or the Rules, the High
Court in proceedings under Article 226 of the Constitution could not issue any
mandamus for deeming the contract labour as having become the employees of the
principal employer. This Court thus resolved the conflict of opinions on the
said question among various High Courts. It was further held that neither the
Act nor the Rules framed by the Central Government or by any appropriate
Government provided that upon abolition of the contract labour, the labourers
would be directly absorbed by the principal employer.
India and Ors. contract labour was
employed at Rourkela Plant of the Steel Authority of India through contractors
and continued in employment for long periods - between 10 and 20 years - as
contract labourers. It was found that though the respondents were changing the
contractors, yet under the terms of the agreement the incoming contractors were
obliged to retain the contract labour engaged by the outgoing contractors. That
apart, for about eight years the contract labour was continued to be employed
by virtue of the interim order of this Court. It was noticed that in of India
& Ors. etc. , Mathura Refinery Mazdoor Sangh through
Project, Mathura and Anr. and the Dena Naths case
(supra), on the question - whether the contract labourers had become the
employees of the principal employer in course of time or whether the engagement
and employment of labourers through a contractor was a mere camouflage and a
smokescreen - this Court took the view that it was a question of fact and had
to be established by the contract labourers on the basis of the requisite
material in the industrial court or industrial tribunal. However, having regard
to the various interim orders passed by this Court and the time taken in
deciding the case, this Court considered the matter on merits and on the basis
of the offer made by the respondents, which was recorded, issued certain
directions which need not be quoted here.
However,
no order was made directing absorption of contract labour on abolition of
contract labour system.
In
National Federation of Railway Porters, Vendors & Bearers vs. Union of India & Ors. , a two-Judge Bench of this
Court on the basis of findings contained in the report of the Labour Commissioner
that there was no evidence that the labourers were the employees of the Society
(contractor) and that they were contract labourers provided by the Society
under the agreement, treated them as labourers of the Northern Railway as they
had completed 240 days of continuous service in a year, some from 1972, some
from 1980 and some from 1985.
Following
the order of this Court dated April 15, 1991
[Raghavendra Gumashta vs. Union of India (Writ Petition No.277 of 1988)], the
Court directed their absorption in the Railway Service.
It is
obvious that direction to absorb the labourers was given on the premise that
they were not the employees of the contractor (the society) but were of the
Northern Railways.
In Mathura
Refinery Mazdoor Sanghs case (supra), the disputes between the contract labourers
represented by the appellant and the respondents, referred to the industrial
tribunal for adjudication, included the question, whether the contract labourers
were the employees of the respondent corporation. The tribunal answered the
question against the appellant but issued, among others, a direction that the
respondent should give preference to the contract labour in the employment by
waiving the requirement of age and other qualification wherever possible.
It
was, however, clarified by the industrial tribunal that the ameliorative steps
should not be taken to mean that the contract labour had become the direct
employees of the refinery. Against those directions, this Court dismissed the
appeal holding that the suggestions and directions given by the tribunal in the
impugned award, could not be improved upon.
In
Association of Chemical Workers, Bombay vs. A.L. Alaspurkar and Ors. a three-Judge Bench of this Court declined
to go into the correctness of the pronouncement in Dena Naths case (supra) that
automatic absorption does not follow on prohibition of contract labour but
directed the principal employer to consider the contract labour, by giving them
preference, in appointment.
In
Gujarat Electricity Boards case (supra), a two-Judge Bench of this Court has
held that if there is a genuine labour contract between the principal employer
and the contractor, the authority to abolish the contract labour vests in the
appropriate Government and not in any court including industrial adjudicator.
If the
appropriate Government abolishes the contract labour system in respect of an
establishment the industrial adjudicator would, after giving opportunity to the
parties to place material before it, decide whether the workmen be absorbed by
the principal employer, if so, how many of them and on what terms, but if the
appropriate Government declines to abolish the contract labour the industrial
adjudicator has to reject the reference. If, however, the so-called contract is
not genuine but is sham and camouflage to hide the reality, Section 10 would
not apply and the workmen can raise an industrial dispute for relief that they
should be deemed to be the employees of the principal employer. The court or
the industrial adjudicator would have jurisdiction to entertain such a dispute
and grant necessary relief.
While
this was the state of law in regard to the contract labour, the issue of
automatic absorption of the contract labour came up before a Bench of three
learned Judges of this Court in Air Indias case (supra). The Court held :
(1)
though there is no express provision in the CLRA Act for absorption of the
contract labour when engagement of contract labour stood prohibited on
publication of the notification under Section 10(1) of the Act, from that
moment the principal employer cannot continue contract labour and direct
relationship gets established between the workmen and the principal employer;
(2) the
Act did not intend to denude the contract labour of their source of livelihood
and means of development throwing them out from employment; and
(3) in
a proper case the Court as sentinel on the qui vive is required to direct the
appropriate authority to submit a report and if the finding is that the workmen
were engaged in violation of the provisions of the Act or were continued as
contract labour despite prohibition of the contract labour under Section 10(1),
the High Court has a constitutional duty to enforce the law and grant them
appropriate relief of absorption in the employment of the principal employer.
Justice Majmudar, in his concurring judgment, put it on the ground that when on
the fulfillment of the requisite conditions, the contract labour is abolished
under Section 10 (1), the intermediary contractor vanishes and along with him vanishes
the term principal employer and once the intermediary contractor goes the term
principal also goes with it; out of the tripartite contractual scenario only
two parties remain, the beneficiaries of the abolition of the erstwhile
contract labour system, i.e. the workmen on the one hand and the employer on
the other, who is no longer their principal employer but necessarily becomes a
direct employer for erstwhile contract labourers. The learned Judge also held
that in the provision of Section 10 there is implicit legislative intent that
on abolition of contract labour system, the erstwhile contract workmen would
become direct employees of the employer on whose establishment they were
earlier working and were enjoying all the regulatory facilities under Chapter V
in that very establishment. In regard to the judgment in Gujarat Electricity
Boards case (supra), to which he was a party, the learned Judge observed that
he wholly agreed with Justice Ramaswamys view that the scheme envisaged by
Gujarat Electricity Board case was not workable and to that extent the said
judgment could not be given effect to.
For
reasons we have given above, with due respect to the learned Judges, we are
unable to agree with their reasoning or conclusions.
The
principle that a beneficial legislation needs to be construed liberally in favour
of the class for whose benefit it is intended, does not extend to reading in
the provisions of the Act what the legislature has not provided whether
expressly or by necessary implication, or substituting remedy or benefits for
that provided by the legislature. We have already noticed above the intendment
of the CLRA Act that it regulates the conditions of service of the contract labour
and authorizes in Section 10(1) prohibition of contract labour system by the
appropriate Government on consideration of factors enumerated in sub- section
(2) of Section 10 of the Act among other relevant factors.
But,
the presence of some or all those factors, in our view, provide no ground for
absorption of contract labour on issuing notification under sub-section (1) of
Section 10. Admittedly when the concept of automatic absorption of contract labour
as a consequence of issuing notification under Section 10(1) by the appropriate
Government, is not alluded to either in Section 10 or at any other place in the
Act and the consequence of violation of Sections 7 and 12 of the CLRA Act is
explicitly provided in Sections 23 and 25 of the CLRA Act, it is not for the
High Courts or this Court to read in some unspecified remedy in Section 10 or
substitute for penal consequences specified in Sections 23 and 25 a different
sequel, be it absorption of contract labour in the establishment of principal
employer or a lesser or a harsher punishment. Such an interpretation of the provisions
of the statute will be far beyond the principle of ironing out the creases and
the scope of interpretative legislation and as such clearly impermissible. We
have already held above, on consideration of various aspects, that it is
difficult to accept that the Parliament intended absorption of contract labour
on issue of abolition notification under Section 10(1) of CLRA Act.
We
have gone through the decisions of this Court in V.S.T. Industries case
(supra), G. B. Pant Universitys case (supra) and Mohammed Aslams case (supra).
All of them relate to statutory liability to maintain the canteen by the
principal employer in the factory/establishment. That is why in those cases, as
in The Saraspur Mills case (supra), the contract labour working in the canteen
were treated as workers of the principal employer. These cases stand on a
different footing and it is not possible to deduce from them the broad
principle of law that on the contract labour system being abolished under
sub-section (1) of Section 10 of the CLRA Act the contract labour working in
the establishment of the principal employer has to be absorbed as regular
employees of the establishment.
An
analysis of the cases, discussed above, shows that they fall in three classes;
(i)
where contract labour is engaged in or in connection with the work of an
establishment and employment of contract labour is prohibited either because
the Industrial adjudicator/Court ordered abolition of contract labour or
because the appropriate Government issued notification under Section 10(1) of
the CLRA Act, no automatic absorption of the contract labour working in the
establishment was ordered;
(ii) where
the contract was found to be sham and nominal rather a camouflage in which case
the contract labour working in the establishment of the principal employer was
held, in fact and in reality, the employees of the principal employer himself.
Indeed, such cases do not relate to abolition of contract labour but present
instances wherein the Court pierced the veil and declared the correct position
as a fact at the stage after employment of contract labour stood prohibited;
(iii) where
in discharge of a statutory obligation of maintaining canteen in an
establishment the principal employer availed the services of a contractor and
the courts have held that the contract labour would indeed be the employees of
the principal employer.
The
next issue that remains to be dealt with is:
B.
Whether on a contractor engaging contract labour in connection with the work
entrusted to him by a principal employer, the relationship of master and
servant between him (the principal employer) and the contract labour emerges.
Mr. Shanti
Bhushan alone has taken this extreme stand that by virtue of engagement of
contract labour by the contractor in any work of or in connection with the work
of an establishment, the relationship of master and servant is created between
the principal employer and the contract labour. We are afraid, we are unable to
accept this contention of the learned counsel. A careful survey of the cases
relied upon by him shows that they do not support his proposition.
In The
Maharashtra Sugar Millss case (supra), the question that fell for consideration
of this court was whether the contract labour was covered by the definition of
employee under the Bombay Industrial Relations Act, 1946 and, therefore, should
be treated as employees of the appellant-sugar mills. There contractors were
engaged by the appellant for carrying on certain operations in its
establishment. The contractors were to employ contract labour (workers) for
carrying out the work undertaken but they should have the approval of the
appellant, although it was the obligation of the contractors to pay wages to
the workers.
However,
the contract labour engaged by the contractors got the same amenities from the
appellant as were available to its muster roll workers. An industrial dispute
arose in respect of the payment of wages to the contract labour engaged by the
contractors which, along with other disputes, was referred to the Industrial Court by the Government. The reference
was contested, as being not maintainable, by the appellant on the plea that the
contractors workers were not employees within the meaning of the said Act. The
term employee is defined in the said Act to mean any person employed to do any
skilled or unskilled manual or clerical work for hire or reward in any industry
and includes a person employed by a contractor to do any work for him in
execution of a contract with an employer within the meaning of sub-clause (3)
of clause 14. It was on the basis of the definitions of the terms the employer
and the employee, the contract labour engaged by the contractors was held to be
employees of the appellant. The decision in that case cannot be read as holding
that when a contractor engages contract labour in connection with the work of
the principal employer, the relationship of master and servant is created
between the principal employer and the contract labour.
In Shivnandan
Sharmas case (supra), the respondent-Bank entrusted its cash department under a
contract to the treasurers who appointed cashiers, including the appellant -
the head cashier.
The
question before the three-Judge Bench of this Court was:
was
the appellant an employee of the Bank? On the construction of the agreement
entered into between the Bank and the treasurers, it was held that the
treasurers were under the employment of the Bank on a monthly basis for an
indefinite term as they were under the complete control and direction of the
Bank through its manager or other functionaries and, therefore, the appointees
including the appellant (nominees) of the treasurers, were also the employees
of the Bank. This Court laid down, if a master employs a servant and authorises
him to employ a number of persons to do a particular job and to guarantee their
fidelity and efficiency for a cash consideration, the employees thus appointed
by the servant would be equally with the employer, servants of the master.
We do
not think that the principle, quoted above, supports the proposition canvassed
by the learned counsel.
The
decision of the Constitution Bench of this Court in Basti Sugar Mills case
(supra) was given in the context of reference of an industrial dispute under
the Uttar Pradesh Industrial Disputes Act, 1947. The appellant-Sugar Mills
entrusted the work of removal of press mud to a contractor who engaged the
respondents therein (contract labour) in connection with that work. The
services of the respondents were terminated by the contractor and they claimed
that they should be re-instated in the service of the appellant. The
Constitution Bench held, The words of the definition of workmen in Section 2(z)
to mean any person (including an apprentice) employed in any industry to do any
skilled or unskilled, manual, supervisory, technical or clerical work for hire
or reward, whether the terms of employment be express or implied are by
themselves sufficiently wide to bring in persons doing work in an industry
whether the employment was by the management or by the contractor of the
management. Unless however the definition of the word employer included the
management of the industry even when the employment was by the contractor the
workmen employed by the contractor could not get the benefit of the Act since a
dispute between them and the management would not be an industrial dispute
between employer and workmen. It was with a view to remove this difficulty in
the way of workmen employed by contractors that the definition of employer has
been extended by sub-clause (iv) of Section 2(i). The position thus is :
(a) that
the respondents are workmen within the meaning of Section 2(z), being persons
employed in the industry to do manual work for reward, and
(b) they
were employed by a contractor with whom the appellant company had contracted in
the course of conducting the industry for the execution by the said contractor
of the work of removal of press- mud which is ordinarily a part of the
industry.
It
follows therefore from Section 2(z) read with sub-clause (iv) of Section 2(i)
of the Act that they are workmen of the appellant company and the appellant
company is their employer.
It is
evident that the decision in that case also turned on the wide language of
statutory definitions of the terms workmen and employer. So it does not advance
the case pleaded by the learned counsel.
In The
Saraspur Mills case (supra), the question was whether the respondents engaged
for working in the canteen run by the co-operative society for the
appellant-company were the employees of the appellant-Mills. The respondents
initiated proceedings under Section 79 of the Bombay Industrial Relations Act,
1946 for payment of D.A. in terms of the award of the Industrial Court. The appellant contested the claim
on the ground that the respondents were employees of the co-operative society
and not of the appellant. A two-Judge Bench of this Court approached the
question from the point of view of statutory liability of the appellant to run
the canteen in the factory and having construed the language employed in the
definitions of employee and employer in sub-sections (13) and (14),
respectively, of Section 3 of the Act, and the definition of worker contained
in Section 2(i) of the Factories Act and having referred to the Basti Sugar
Mills case (supra), held that even though in pursuance of a statutory liability
the appellant was to run the canteen in the factory, it was run by the
co-operative society as such the workers in the canteen (the respondents) would
be the employees of the appellant. This case falls in class (iii) mentioned
above.
In a
three-Judge Bench decision of this Court in Hussainbhais case (supra), the
petitioner who was manufacturing ropes entrusted the work to the contractors
who engaged their own workers. When, after some time, the workers were not
engaged, they raised an industrial dispute that they were denied employment. On
reference of that dispute by the State Government, they succeeded in obtaining
an award against the petitioner who unsuccessfully challenged the same in the
High Court and then in the Supreme Court. On examining various factors and
applying the effective control test, this court held that though there was no
direct relationship between the petitioner and the respondent yet on lifting
the veil and looking at the conspectus of factors governing employment, the
naked truth, though draped in different perfect paper arrangement, was that the
real employer was the management not the immediate contractor. Speaking for the
Court, Justice Krishna Iyer observed thus :- Myriad devices, half-hidden in
fold after fold of legal form depending on the degree of concealment needed,
the type of industry, the local conditions and the like may be resorted to when
labour legislation casts welfare obligations on the real employer, based on Articles
38, 39, 42, 43, and 43-A of the Constitution. The court must be astute to avoid
the mischief and achieve the purpose of the law and not be misled by the maya
of legal appearances.............
Of
course, if there is total dissociation in fact between the disowning Management
and the aggrieved workmen, the employment is, in substance and in real-life
terms, by another.
The
Managements adventitious connections cannot ripen into real employment.
This
case falls in class (ii) mentioned above.
The
above discussion amply justifies rejection of the contentions of Mr. Shanti Bhushan
by us.
We
find no substance in the next submission of Mr. Shanti Bhushan that a combined
reading of the definition of the terms contract labour, establishment and
workman would show that a legal relationship between a person employed in an
industry and the owner of the industry is created irrespective of the fact as
to who has brought about such relationship.
We
have quoted the definitions of these terms above and elucidated their import.
The word workman is defined in wide terms. It is a generic term of which
contract labour is a species. It is true that a combined reading of the terms
establishment and workman shows that a workman engaged in an establishment
would have direct relationship with the principal employer as a servant of
master. But what is true of a workman could not be correct of contract labour.
The circumstances under which contract labour could be treated as direct
workman of the principal employer have already been pointed out above.
We are
not persuaded to accede to the contention that a workman, who is not an
out-worker, must be treated as a regular employee of the principal employer. It
has been noticed above that an out-worker falls within the exclusionary clause
of the definition of workman. The word out worker connotes a person who carries
out the type of work, mentioned in sub-clause (C) of clause (i) of Section 2,
of the principal employer with the materials supplied to him by such employer
either (i) at his home or (ii) in some other premises not under the control and
management of the principal employer. A person who is not an out worker but
satisfies the requirement of the first limb of the definition of workman would,
by the very definition, fall within the meaning of the term workman. Even so,
if such a workman is within the ambit of the contract labour, unless he falls
within the afore-mentioned classes, he cannot be treated as a regular employee
of the principal employer.
We
have also perused all the Rule and Forms prescribed thereunder. It is clear
that at various stages there is involvement of the principal employer. On
exhaustive consideration of the provisions of the CLRA Act we have held above
that neither they contemplate creation of direct relationship of master and
servant between the principal employer and the contract labour nor can such
relationship be implied from the provisions of the Act on issuing notification
under Section 10(1) of the CLRA Act, a fortiorari much less can such a
relationship be found to exist from the Rules and the Forms made thereunder.
The
leftover contention of Ms. Indira Jaisingh may be dealt with here. The
contention of Ms. Indira Jaisingh that the principles of contract law sticto sensu
do not apply to the labour and management is too broad to merit acceptance.
In Rai
Bahadurs case (supra), the industrial dispute referred to the Industrial
Tribunal was: whether all the employees of the appellant should be allowed 30
days earned leave with full wages for every 11 months service without
discrimination. The appellant framed the rules on July 1, 1956 providing that every workman employed on or before that
date would be entitled to 30 days earned leave with full wages for every 11
months service.
The
contention of the employer was that those who were employed after that date
were not entitled to the same period of leave. It was contended that the
appellant was entitled to fix the terms of employment on which it would employ
the workmen and it was open for the workman to accept or not to accept those
terms so the Tribunal was not justified in interfering with such matter.
A
three-Judge Bench of this Court, by majority, held that the Tribunal was
justified in directing the appellant to provide the same uniform rules as to
earned leave for all its employees that the doctrine of absolute freedom of
contract had to yield to the higher claims for social justice and had to be so
regulated. After referring to Western Indias
case (supra) and The Bharat Banks case (supra), Justice P.B. Gajendragadkar
speaking for the majority observed:
in
order that industrial adjudication should be free from the tyranny of dogmas or
the sub- conscious pressure of pre-conceived notions, it is important that the
temptation to lay down broad principles should be avoided.
Accordingly,
it is not necessary to decide the broad contention whether industrial
adjudication can interfere with the contract between the employers and the
employees.
It is
apparent that the case was decided on the ground that there could be no
discrimination of the employees in regard to their entitlement for earned leave
on the basis of a fixed date and that no general principle was laid down that
the contract laws are inapplicable to labour-management relation.
In the
case of Uptron India (supra), the controversy related to
the termination of the services of the workmen for unauthorised absence. The
Industrial Employment (Standing Orders) Act, 1946 provided that a workman is
liable to automatic termination on the ground of unauthorised absence. It is in
that context that this Court has observed that the general principles of the
Contract Act, 1872 applicable to an agreement between two persons having
capacity to contract, are also applicable to a contract of industrial
employment but relationship so created is partly contractual and partly
non-contractual as the States have already, by legislation, prescribed positive
obligations for the employer towards his workmen, as for example, terms,
conditions and obligations prescribed by the Payment of Wages Act, 1936;
Industrial
Employment (Standing Orders) Act, 1946; Minimum Wages Act, 1948; Payment of
Bonus Act, 1965; Payment of Gratuity Act, 1972 etc. In our view, the law has
been correctly laid down therein. The judgment in that case cannot be read as
laying down a principle of law that the provisions of the Contract Act are not
applicable to relation between the labour and the management.
The
upshot of the above discussion is outlined thus:
(1)
(a) Before January 28, 1986, the determination of the question whether Central
Government or the State Government, is the appropriate Government in relation
to an establishment, will depend, in view of the definition of the expression
appropriate Government as stood in the CLRA Act, on the answer to a further
question, is the industry under consideration carried on by or under the
authority of the Central Government or does it pertain to any specified
controlled industry; or the establishment of any railway, cantonment board,
major port, mine or oilfield or the establishment of banking or insurance
company? If the answer is in the affirmative, the Central Government will be
the appropriate Government; otherwise in relation to any other establishment
the Government of the State in which the establishment was situated, would be
the appropriate Government, (b) After the said date in view of the new
definition of that expression, the answer to the question referred to above,
has to be found in clause (a) of Section 2 of the Industrial Disputes Act; if (i)
the concerned Central Government company/undertaking or any undertaking is
included therein eo nomine, or (ii) any industry is carried on
(a) by
or under the authority of the Central Government, or
(b) by
railway company; or
(c) by
specified controlled industry, then the Central Government will be the
appropriate Government otherwise in relation to any other establishment, the
Government of the State in which that other establishment is situated, will be
the appropriate Government.
(2)
(a) A notification under Section 10(1) of the CLRA Act prohibiting employment
of contract labour in any process, operation or other work in any establishment
has to be issued by the appropriate Government :
(1) after
consulting with the Central Advisory Board or the State Advisory Board, as the
case may be, and;
(2)
having regard to (i) conditions of work and benefits provided for the contract labour
in the establishment in question; and (ii) other relevant factors including
those mentioned in sub-section (2) of Section 10;
(b) inasmuch
as the impugned notification issued by the Central Government on December 9,
1976 does not satisfy the afore-said requirements of Section 10, it is quashed
but we do so prospectively i.e. from the date of this judgment and subject to
the clarification that on the basis of this judgment no order passed or no
action taken giving effect to the said notification on or before the date of
this judgment, shall be called in question in any tribunal or court including a
High Court if it has otherwise attained finality and/or it has been
implemented.
(3)
Neither Section 10 of the CLRA Act nor any other provision in the Act, whether
expressly or by necessary implication, provides for automatic absorption of
contract labour on issuing a notification by appropriate Government under
sub-section (1) of Section 10, prohibiting employment of contract labour, in
any process, operation or other work in any establishment. Consequently the
principal employer cannot be required to order absorption of the contract labour
working in the concerned establishment;
(4) We
over-rule the judgment of this court in Air Indias case (supra) prospectively
and declare that any direction issued by any industrial adjudicator/any court
including High Court, for absorption of contract labour following the judgment
in Air Indias case (supra), shall hold good and that the same shall not be set
aside, altered or modified on the basis of this judgment in cases where such a
direction has been given effect to and it has become final.
(5) On
issuance of prohibition notification under Section 10(1) of the CLRA Act
prohibiting employment of contract labour or otherwise, in an industrial
dispute brought before it by any contract labour in regard to conditions of
service, the industrial adjudicator will have to consider the question whether
the contractor has been interposed either on the ground of having undertaken to
produce any given result for the establishment or for supply of contract labour
for work of the establishment under a genuine contract or is a mere
ruse/camouflage to evade compliance of various beneficial legislations so as to
deprive the workers of the benefit thereunder. If the contract is found to be
not genuine but a mere camouflage, the so-called contract labour will have to
be treated as employees of the principal employer who shall be directed to regularise
the services of the contract labour in the concerned establishment subject to
the conditions as may be specified by it for that purpose in the light of para
6 hereunder.
(6) If
the contract is found to be genuine and prohibition notification under Section
10(1) of the CLRA Act in respect of the concerned establishment has been issued
by the appropriate Government, prohibiting employment of contract labour in any
process, operation or other work of any establishment and where in such
process, operation or other work of the establishment the principal employer
intends to employ regular workmen he shall give preference to the erstwhile
contract labour, if otherwise found suitable and, if necessary, by relaxing the
condition as to maximum age appropriately taking into consideration the age of
the workers at the time of their initial employment by the contractor and also
relaxing the condition as to academic qualifications other than technical
qualifications.
We
have used the expression industrial adjudicator by design as determination of
the questions afore-mentioned requires inquiry into disputed questions of facts
which cannot conveniently be made by High Courts in exercise of jurisdiction
under Article 226 of the Constitution. Therefore, in such cases the appropriate
authority to go into those issues will be industrial tribunal/court whose
determination will be amenable to judicial review.
In the
result :
C.A.Nos.6009-6010
/2001 @S.L.P. (C) Nos. 12657-58/98 The order of the High Court at Calcutta,
under challenge, insofar as it relates to holding that the West Bengal
Government is the appropriate Government within the meaning of the CLRA Act, is
confirmed but the direction that the contract labour shall be absorbed and
treated on par with the regular employees of the appellants, is set aside. The
appeals are accordingly allowed in part.
C.A.No.6011/2001@
SLP(C)No.20926/98 In the impugned order of the High Court of Judicature, Madhya
Pradesh, Bench at Jabalpur in C.P. 143 of 1998 dated October 14,1998, it was held that no contempt of
the High Court was committed. In view of this finding, no interference of this
Court is warranted. The appeal is accordingly dismissed.
T.C.No.1/2000
W.A.No. 80/1998 on the file of the High Court of Judicature at Andhra Pradesh
was transferred to this Court and numbered as TC.1/2000. The writ appeal is
directed against the order of the learned Single Judge dismissing
W.P.No.29865/1998 on 13.11.1997. The petitioner questioned the competence of
the State Government to make reference of the industrial dispute to the Labour Court at Visakhapatnam. It will be open to the Labour Court to decide the question whether the reference was made by
the appropriate Government on the basis of the main judgment. Transferred Case
No.1/2000 ( W.A.80/1998 ) is dismissed accordingly.
T.C.
Nos.5-7/2000 Civil Writ Petition Nos.1329/97, 655/97 and 1453/97 on the file of
the High Court of Delhi were transferred to this Court and numbered as TC. 5/2000,
TC. 6/2000 and TC. 7/2000 respectively. The petitioners therein prayed for a
writ of mandamus directing the respondents to absorb them as regular employees
in the establishment in which they were working at the relevant time. Their
claim is based on the impugned notification dated December 9, 1976 issued by the Central Government. In view of the finding
recorded by us that the notification is illegal and it is not issued by the
appropriate Government under the CLRA Act in relation to the establishment in
question, the petitioners in writ petitions cannot get any relief. However, we
leave it open to the appropriate Government to issue the notification under
Section 10(1) of the CLRA Act in respect of the concerned establishment of the
petitioners. Subject to the above observation the transferred cases are
dismissed.
T.C.Nos.
17/2000 and 18/2000 L.P.A. Nos. 326/97 and 18/98 on the file of the High Court
of Judicature, Madhya Pradesh, Bench at Jabalpur were transferred and numbered
as TC.Nos. 17/2000 and 18/2000. The Letter patent appeals were directed against
the order of a learned Single Judge allowing the writ petitions and directing
absorption of the members of the respondent-union. The claim of the petitioners
was based on a notification issued by the Central Government on 17.3.1993
prohibiting with effect from the date of publication of the notification the
employment of contract labour in the limestone and dolomite mines in the
country, in the works specified in the Schedule to the notification. The points
that arise in these cases are: (i) the validity of the notification and (ii)
the consequential orders that may be passed on issue of the abolition
notification. Having regard to the facts of these cases, we consider it
appropriate to direct that the cases be transferred back to the High Court to
be decided by the High Court in the light of the main judgment. Transferred
cases are disposed of accordingly.
C.A.No.6012/2001@SLP(C)No.9568/2000
This appeal arises from the order of the High Court of Judicature at Jabalpur in LPA No.418/1999 dated 1.5.2000.
The High Court declined to pass any order and dismissed the LPA as this Court
had stayed proceedings in the connected LPA Nos. 326/97 and 18/98 on August 17, 1998. Inasmuch we have now transferred back
those LPAs, we consider it appropriate to transfer this case also back to the
High Court to be heard and decided along with the said cases. The appeal is
accordingly disposed of.
C.A.Nos.
719-720/2001 These appeals arise from the judgment and order of a Division
Bench of the High Court of Judicature at Calcutta in MAT Nos. 1704 and 1705 of 1999 dated August 12, 1999. A learned Single Judge of the High Court directed, inter alia,
absorption of contract labour on the ground that the type of work in which the
contract labour was engaged was prohibited in view of the notification issued
by the Central Government on February 9, 1980
under Section 10(1) of the CLRA Act. The appellants filed the application
against the notification on the ground that the respondents are not covered by
the notification. Be that as it may, the Central Government issued a further
notification on 14.10.1999 which appears to cover the respondents herein. The
Division Bench maintained the directions under appeals with modification in
regard to interim order. In view of the fact that we have over-ruled the
judgment of this Court in Air Indias case (supra) which covered the field when
the order of the High Court was passed, we set aside the order of the High
Court under challenge. Appeals are accordingly allowed.
T.C.No.
14/2000 M.A.T. No.1592/1997 pending before the Division Bench of the High Court
of Calcutta which was filed against the order of a learned Single Judge dated
9.5.1997 in C.O. No.6545(w) of 1996, holding that having regard to the impugned
notification of the Central Government dated December 9, 1976 issued under
Section 10(1) of the CLRA Act prohibiting employment of contract labour, the
appellants are bound to absorb the contract labour as regular employees of the
appellants. In view of the main judgment, the order of the learned Single Judge
cannot be sustained. It is accordingly set aside and the transferred case is
allowed.
C.A.Nos.
5798-99/1998 In these appeals, the Food Corporation of India is the appellant. Having regard to
the un-amended definition of the appropriate Government which was in force till
28.1.1986, the appropriate Government within the meaning of CLRA Act was the
government of the State in which the concerned establishment of FCI was
situated. With effect from 28.1.1986, the amended definition of that expression
under the CLRA Act came into force.
Consequently,
the definition of that expression as given in the Industrial Disputes Act would
apply for purposes of the CLRA Act also. FCI is included within the definition
of appropriate Government in sub-clause (1) of clause (a) of Section 2 of the
Industrial Disputes Act. It follows that for any establishment of FCI for the
purposes of the CLRA Act, the appropriate Government will be the Central
Government.
In
these appeals, prohibition notification was issued on March 26, 1991 under Section 10(1) of the CLRA Act
prohibiting employment of contract labour in the concerned establishment in the
process, operation or work of handling of food grains including loading and
unloading from any means of transport, storing and stocking. The respondents
claimed absorption of contract labour in the concerned establishment of the
appellant. A Division Bench of the High Court of Bombay following the judgment
of this Court in Air Indias case (supra) directed the appellant to absorb the
contract labour engaged in the depots of the appellant in Jalgaon, Srirampur
and Ahmednagar (Khedgaon). Inasmuch we have over-ruled the judgment in Air Indias
case (supra), the appeals deserve to be allowed. We, accordingly, set aside the
judgment of the High Court under challenge and allow these appeals leaving it
open to the contract labour to seek appropriate relief in terms of the main
judgment.
C.A.Nos.6013-22/2001@SLP(C)
Nos. 16122-16131/98 These appeals by FCI from the judgment of a Division Bench
of the Karnataka High Court in W.A. Nos. 345-354/97 dated April 17, 1998 confirming the judgment of a
learned Single Judge passed in W.P. NO.22485/94 and batch dated 22.11.1996.
The
learned Single Judge directed absorption of the contract labour with effect
from 29.1.1996. Inasmuch as the impugned judgment, under challenge, was passed
following the judgment in Air Indias case (supra) which has since been
over-ruled, we set aside the judgment of the High Court and allow these appeals
accordingly, leaving it open to the contract labour to seek appropriate relief
in terms of the main judgment.
C.A.Nos.
4188-94/98 and 4195/98 These appeals arise from a common judgment of the High
Court of Karnataka in W.A.Nos. 228-229, 231, 233-236/97 and 1742/97 dated
17.4.98 are filed by union of workmen and workmen of FCI. The Division Bench
confirmed the judgment of the learned Single Judge directing absorption of
contract labour in the concerned establishment of the appellants w.e.f.
29.1.96. The grievance of the appellants is that they should have been absorbed
with effect from the date of the prohibition notification dated November 1, 1990. Inasmuch as in the connected civil
appeals we have set aside the judgment of Division Bench passed following the
judgment of this Court in Air Indias case (supra) which has since been
over-ruled, the appellants are not entitled to any relief in these appeals.
Accordingly, these appeals are dismissed.
T.P(C)
Nos. 284-302/2000 and 308-337/2000 In these transfer petitions, the petitioners
prayed for transfer of various writ petitions/writ appeals pending in the High
Court of Andhra Pradesh mentioned in para (a) of prayer on the ground that the
question involved in those cases is pending consideration of this Constitution
Bench in SLP (C) Nos. 12657- 58/98. Notice has been ordered in these cases but
the cases are not transferred. Inasmuch as we have already pronounced the
judgment in the above-mentioned cases, we are not inclined to allow these
transfer petitions. The High Court will now proceed to decide those cases in
accordance with the main judgment.
Transfer
petitions are dismissed accordingly.
C.A.No.6029/2001@SLP(C)No.
16346/2000 The order under challenge in this appeal is the judgment of a
Division Bench of the High Court of Bombay in W.P.No.4050/99 dated 2.8.2000. On
the ground that the members of respondent union (employees of ONGC) are covered
by the notification issued by the Central Government on December 9, 1976, the
High Court ordered absorption of the workers employed as contract labour.
Inasmuch as the Central Government became the appropriate Government, for an
establishment of ONGC after the amended definition of the appropriate
Government came into force under the CLRA Act w.e.f. 28.1.1986 whereunder the
definition of the said expression under the Industrial Disputes Act is adopted
in the CLRA Act, therefore, the Central Government will be the appropriate
Government for ONGC w.e.f. 28.1.1986.
It
follows that the notification issued on December 9, 1976 would not cover the
establishments of the appellant. However, as the High Court directed absorption
of the contract labour in the establishments of the appellant following the
judgment of this Court in Air Indias case (supra) and that judgment has since
been over-ruled, both on the question of appropriate Government as well as on
the point of automatic absorption, we set aside the order under challenge and
accordingly allow this appeal.
C.A.Nos.6030-34/2001@SLP(C)Nos.13146-150/2000
These appeals are directed against the order of the High Court of Andhra
Pradesh in W.A. Nos. 1652-1655/99 and 1959/99 dated 22.11.99. The Division
Bench of the High Court took note of the fact that the order of the learned
Single Judge had been given effect to and on the facts declined to condone the
delay of 353 days in filing the writ appeals. In our view, having regard to the
facts and circumstances of the case, no interference with the impugned order,
is warranted. The appeals are, therefore, dismissed.
C.A.Nos.6024-25/2001@SLP(C)Nos.8282-83/2000
These appeals are from the order of the Division Bench of the High Court of
Gujarat in L.P.A.No.118/2000 dated 19.4.2000 which was directed against the
interim order passed by a learned Single Judge. Inasmuch as the writ petitions
are pending before the High Court, we are not inclined to interfere with the
orders impugned in the appeals. We leave it open to the High Court to dispose
of the writ petitions in terms of the main judgment. The appeals are accordingly
dismissed.
T.P.(C)No.
169/2000 In this transfer petition, the petitioner seeks transfer of
S.C.A.No.5192/99 pending in the High Court of Gujarat. Notice has been issued
but the case is not transferred. In view of the fact that we have pronounced the
judgment in the connected cases, we are not inclined to order transfer of the
case from the High Court.
We
leave it open to the High Court to dispose of the said appeal in accordance
with the main judgment of this Court. Transfer petition is dismissed accordingly.
C.A.No.6023/2001@SLP(C)No.19391/99
This appeal arises from the judgment and order dated 19.8.1999 of the High
Court of Patna, Ranchi Bench, Ranchi, in L.P.A.No. 214/99 (R). The Division
Bench declined to interfere with the order of the learned Single Judge
dismissing the writ petition filed by the appellant.
The
case arose out of the award dated October 3, 1996 passed by the Central
Government Industrial Tribunal No.1 directing the appellant to absorb the
contract labour. The Tribunal, on appreciation of the evidence, found that the
contract labourers were not regularised to deprive them from the due wages and
other benefits on par with the regular employees under sham paper work by
virtue of the sham transaction. It was also pointed out that the workmen in
other coal washery were regularised. The claim of the appellant that the washery
was given to the purchaser was not accepted as being a sham transaction to
camouflage the real facts. The learned Single Judge on consideration of the
entire material confirmed the award and the Division Bench declined to
interfere in the LPA. We find no reason to interfere with the order under
challenge. The appeal is, therefore, dismissed with costs.
C.A.No.
141/2001 This appeal arises from the judgment of the High Court of Judicature
at Bombay passed in W.P.No. 2616/99 dated 23.12.99.
The
employment of contract labour in the concerned establishment of the appellant
was prohibited by the notification issued by the Central Government under
Section 10(1) of the CLRA Act on 16.11.99. Following the judgment of this Court
in Air Indias case (supra), the High Court directed the appellant to absorb the
contract labour. Inasmuch as we have over-ruled the judgment of this Court in
Air Indias case (supra), the direction given by the High Court cannot be
sustained. We, however, leave it open to the respondent-union to seek
appropriate relief in terms of the main judgment. The order, under challenge,
is set aside.
The
appeal is accordingly allowed.
In all
these cases except in C.A.6023/2001@SLP(C)No.19391/99, the parties are directed
to bear their own costs.
...................................................J.
(B.N. Kirpal)
...................................................J.
(Syed
Shah Mohammed Quadri) ...................................................J.
(M.B.
Shah) ...................................................J.
(Ruma
Pal) ...................................................J.
(K. G.
Balakrishnan) New Delhi, August 30, 2001 1999 (7) SCC 59 1997 (9) SCC 377 1981
(1) SCC 315 1983 (2) Appeal Cases 237 In this part, unless the context
otherwise requires, the State includes the Government and Parliament of India
and the Government and the Legislature of each of the States and all local or
other authorities within the territory of India or under the control of the
Government of India.
1975
(3) SCR 619 1979 (3) SCR 1014 1980 (2) SCR 773 1981 (2) SCR 79 1991 Suppl. (1)
SCC 600 1981 (1) SCC 449 1984 Suppl. SCC 540 1984 (2) SCC 141 1984 (3) SCC 316
1986 (3) SCC 156 1988 (3) SCC 105 1994 (1) SCC 243 1990 (3) SCC 280 1995 (5)
SCC 482 20 1991 (3) SCC 91 1969 (1) SCC 765 1969 (1) SCC 765 1975 (4) SCC 679
1984 Suppl. SCC 443 1960 (3) SCR 466 AIR 1951 SC 313 1955 (1) SCR 1427 1964 (2)
SCR 838 1974 (3) SCC 66 1978 (4) SCC 257 1995 (5) SCC 27 AIR (36) 1949 Federal
Court 111 1950 SCR 459 1963 (3) SCR 930 1998 (6) SCC 538
36.
J.T. 2001 (2) SC 376 1971 (2) SCC 724
38.
1992 (1) SCC 695 2001 (1) SCC 298 2000 (7) SCC 109 2001 (1) SCC 720 1999 (6)
SCC 439 (6th Edition by S.G.G.Edgar Page 96) (1898 (2) Ch.28, 35,) (1584 (3)
Co. Rep. 7a) The explanation appended to this clause clarifies that the
expressions mine, owner and agent shall have the meanings respectively assigned
to them in clause (j), clause (l) and clause (c) of sub-section (1) of section
2 of the Mines Act, 1952.
1974
(1) SCC 596 1994 (5) SCC 304
49.
1985 (1) SCC 630
50.
1991 (2) SCC 176
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