TMI Blog2015 (3) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1970 nor any provision of the Act either expressly or necessary implication suggest the automatic absorption of contract labour on issuance of the notification by the appropriate government under Section 10(1) of the Act. Lifting the veil is required to be adopted in such case and a definite finding is to be arrived whether those contract labourers are in fact a workman under the establishment of principal employer who is having a submersive control over them. Even the Constitution Bench in case of Steel Authority of India have recognized three classes of the contract labourers. Since all the materials are not available before this Court and by an earlier order the official liquidator was directed to adjudicate the claim of the contract labourers whether they can be brought within the purview of workmen as defined under Section 528 of the Companies Act, this Court feels that the official liquidator should adjudicate afresh after inviting all the interest parties to produce the relevant contracts and thereafter shall arrive at the finding whether the contract is of such nature which after piercing the veil would suggest that there was a direct relationship of employer and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act put the workmen in the category of the secured creditors and to have a pari passu charge with the other secured creditors. Section 529A of the said Act containing a non obstante clause gives primacy to workmen dues and debts of the secured creditors in priority to all other debts to be paid in full unless the assets are insufficient to meet them, otherwise they would be paid in equal proportion. Section 530 of the Act depicts the preferential payments and there is no quarrel that the wages or the salary of an employee who rendered service to the Company along with the accrued holiday remuneration and other statutory benefits. For the purpose of Section 529A and 530, the workmen is defined in Sub section (3) of Section 529 of the Act to mean the employees of the company being the workmen within the definition of the Industrial Disputes Act, 1947. Before proceeding to deal with the argument so advanced and the point raised before this Court, it is axiomatic to quote the aforesaid Sections, which runs thus :- 529. Application of insolvency rules in winding up of insolvent companies.-(1) In the winding up of an insolvent company, the same rules shall p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered to the company and any compensation payable to any workman under any of the provisions of the Industrial Disputes Act, 1947; (ii) all accrued holiday remuneration becoming payable to any workman, or in the case of his death to any other person in his right, on the termination of his employment before, or by the effect of, the winding up order or resolution; (iii) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in Section 14 of the Workmen s Compensation Act, 1923, rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any workman of the company; (iv) all sums due to any workman from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the workmen, maintained by the company; (c) workmen s portion , in relation to the security of any secured creditor of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, or unless the company has, at the commencement of the winding up, under such a contract with insurers as is mentioned in Section 14 of the Workmen s Compensation Act, 1923, rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the said Act in respect of the death or disablement of any employee of the company; (f) all sums due to any employee from a provident fund, a pension fund, a gratuity fund or any other fund for the welfare of the employees, maintained by the company; and (g) the expenses of any investigation held in pursuance of Section 235 or 237, in so far as they are payable by the company. (2) The sum to which priority is to be given under clause (b) of subsection (1), shall not, in the case of any one claimant, exceed [such sum as may be notified by the Central Government in the Official Gazette]: [* * *] (3) Where any compensation under the Workmen s Compensation Act, 1923 (8 of 1923), is a wee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purposes of this section- (a) any remuneration in respect of a period of holiday or of absence from work through sickness or other good cause shall be deemed to be wages in respect of services rendered to the company during that period; (b) the expression accrued holiday remuneration includes, in relation to any person, all sums which by virtue either of his contract of employment or of any enactment (including any order made or direction given under any enactment), are payable on account of the remuneration which would, in the ordinary course, have become payable to him in respect of a period of holiday, had his employment with the company continued until he became entitled to be allowed the holiday; [* * *] [(bb) the expression employee does not include a workman; and] (c) the expression the relevant date means- (i) in the case of a company ordered to be wound up compulsorily, the date of the appointment (or first appointment) of a provisional liquidator, or if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a workman employed as a contract labour in or in connection with an establishment when he is hired from or in connection with such work by or through a contractor with or without the knowledge of the principal employer . The definition of the contract labour suggest that it is not a species of a workman and can be hired in an establishment by the principal employer or by his agent with or without the knowledge of the principal employer or through a contractor or by a contractor with or without the knowledge of principal employer. Clause I of Section 2 of the Contract Labour (Regulation and Abolition) Act, 1970 defines the workman as : (i) workman means any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled or unskilled 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- The express definition of the workmen imbibed within itself two eventualities, firstly, any person employed in or in connection with a work of an establishment to do any skilled, semi skilled or unskilled manual, technical, opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the workmen for regularization of them as employees in the establishment in which they were hitherto working as a contract labour through a contractor. It is further submitted that upon the removal of the contractor, a direct relationship of an employee and the employer between the principal employer and the contract labour is established as held :- .. ..On abolition of contract labour, the intermediary, i.e. contractor, is removed from the field and direct linkage between labour and principal employer is established. Thereby, the principal employer s obligation to absorb them arises. The right of the employee for absorption get ripened and fructified The contractor is an intermediary between the workmen and the principal employer. The moment the contract labour system stands prohibited under Section 10(1), the embargo to continue as a contract labour is put and end to and direct relationship has been provided between the workmen and the principal employer. Thereby, the principal employer directly becomes responsible for taking the services of the workmen hitherto regulated through the contractor It is pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Central Government company/undertaking concerned or any undertaking concerned 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 a railway company; or (c) by a 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) condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 establishment concerned 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 establishment concerned 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. In case of Nitin Kumar Nathalal Joshi Ors -Vs- Oil and atu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, no automatic absorption of the contract labour working in the establishment was ordered; (ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case the contract labour working in the establishment of the principal employer were 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 a canteen in an establishment the principal employer availed the services of a contractor 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. Though automatic absorption is not permissible in view of the said Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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