TMI Blog2001 (8) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... ract 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In as much 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 un-amended 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Lords in OReilly Vs. Mackman . In that case the appellant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case of dismissal of the 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. In Ajay Hasia etc. Vs. Khalid Mujib Sehravardi Ors. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovt. 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral 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. In M/s. Hindustan Aeronautics Ltd. Vs. The Workmen 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 maintena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract 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 Case No.7 of 2000 (Delhi Multi Storey Bldg. Emp. Union Vs. 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. Vs. ITS Workmen and Ors. , no recommendation was made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rive support from judgments of this court in the following cases: The Maharashtra Sugar Mills Ltd. Vs. The State of Bombay Ors. , Shivnandan Sharma Vs. The Punjab National Bank Ltd. , Basti Sugar Mills Ltd. Vs. Ram Ujagar Ors. , The Saraspur Mills Co. Ltd. Vs. Ramanlal Chimanlal Ors. and Hussainbhai, Calicut Vs. The Alath Factory Thezhilali Union, Kozhikode and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abha Ors. case has given very weighty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .etc. Vs. State of Karnataka ; the 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 Vs. The Workmen , Dena Nath Ors. Vs. National Fertilisers 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciples 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bolition 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/court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Ors. etc. Vs. Union of India Ors. etc. , Mathura Refinery Mazdoor Sangh through its Secretary Vs. Indian Oil Corpn. Ltd., Mathura Refinery 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 repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose 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 rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted; (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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, tech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 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 employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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