2001 (8) TMI 1334 - SC - Indian Laws

Interpretation of the expression appropriate Government in Section 2(1)(a) of the Contract Labour (Regulation and Abolition) Act 1970 (the CLRA Act) and in Section 2(a) of the Industrial Disputes Act 1947 (the I.D. Act) - automatic absorption of the contract labour in the establishment of the principal employer - Prohibition of the contract labour - Validity of the notification issued under Section 10(1) of the CLRA Act and applicability to all Central Government companies - HELD THAT - 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 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 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. 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; 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. 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; 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. 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. 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.

Summary

Issues Involved:
1. Definition of "appropriate Government" u/s 2(1)(a) of the CLRA Act.
2. Validity of the Central Government notification dated December 9, 1976, u/s 10(1) of the CLRA Act.
3. Automatic absorption of contract labour upon issuance of a prohibition notification u/s 10(1) of the CLRA Act.

Summary:

Issue 1: Definition of "appropriate Government" u/s 2(1)(a) of the CLRA Act
The court examined the true and correct import of the expression "appropriate Government" as defined in the CLRA Act. The court held that before January 28, 1986, the determination of the appropriate Government depended on whether the industry was carried out by or under the authority of the Central Government or pertained to specified controlled industries. After January 28, 1986, the definition aligned with the Industrial Disputes Act, making the Central Government the appropriate Government for Central Government undertakings. The court concluded that the Central Government is the appropriate Government for Central Government companies/undertakings if the industry is carried out under its authority.

Issue 2: Validity of the Central Government notification dated December 9, 1976, u/s 10(1) of the CLRA Act
The court scrutinized the notification issued by the Central Government on December 9, 1976, prohibiting employment of contract labour for specific tasks. It held that the notification did not comply with the requirements of Section 10 of the CLRA Act, which necessitates consultation with the Central Advisory Board and consideration of specific factors. Consequently, the notification was quashed prospectively from the date of the judgment.

Issue 3: Automatic absorption of contract labour upon issuance of a prohibition notification u/s 10(1) of the CLRA Act
The court examined whether automatic absorption of contract labour is implied in Section 10 of the CLRA Act. It concluded that neither Section 10 nor any other provision in the Act provides for automatic absorption of contract labour upon the issuance of a prohibition notification. The principal employer cannot be mandated to absorb contract labour as regular employees. The court overruled the judgment in Air India's case prospectively and declared that any direction for absorption following that judgment shall hold good if it has attained finality and been implemented. The court also outlined that if a contract is found to be genuine and a prohibition notification has been issued, the principal employer should give preference to the erstwhile contract labour in regular employment, subject to suitability and necessary relaxations.

Conclusion:
The court provided a detailed interpretation of the term "appropriate Government," invalidated the Central Government's notification from 1976 due to procedural non-compliance, and clarified that the CLRA Act does not imply automatic absorption of contract labour upon prohibition of their employment. The court's decision impacts various appeals and transferred cases, directing them to be resolved in light of this judgment.