TMI Blog2014 (8) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... ure due maintenance of standards and quality in the said canteen. The appellants-workmen could not be said to be under the effective and absolute control of Air India. The Air India merely has control of supervision over the working of the given statutory canteen. Issues regarding appointment of the said workmen, their dismissal, payment of their salaries, etc. are within the control of the HCI. It cannot be then said that the appellants are the workmen of Air India and therefore are entitled to regularization of their services. It would be pertinent to mention, at this stage, that there is no parity in the nature of work, mode of appointment, experience, qualifications, etc., between the regular employees of the Air India and the workers of the given canteen. Therefore, the appellants-workmen cannot be placed at the same footing as the Air India’s regular employees, and thereby claim the same benefits as bestowed upon the latter. It would also be gainsaid to note the fact that the appellants-herein made no claim or prayer against either of the other respondents, that is, the HCI or the Chefair. Thus the workers engaged by a contractor to work in the statutory canteen of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (for short, the Act, 1948 ) or for other purposes as well. FACTS : 4. The present set of appeals came before a two Judge Bench of this Court against a judgment and order dated 02.05.2011 of a Division Bench of the High Court of Delhi in LPA Nos. 388, 390 and 391 of 2010. The present dispute finds origin in an industrial dispute which arose between the Appellants-workmen herein of the statutory canteen and Respondent No. 1-herein. The said industrial dispute was referred by the Central Government, by its order dated 23.10.1996 to the Central Government Industrial Tribunal cum Labour Court (for short the CGIT ). The question referred was whether the workmen as employed by Respondent No. 3-herein, to provide canteen services at the establishment of Respondent No. 1-herein, could be treated as deemed employees of the said Respondent No. 1. Vide order dated 05.05.2004, the CGIT held that the workmen were employees of the Respondent No.1-Air India and therefore their claim was justified. Furthermore, the termination of services of the workmen during the pendency of the dispute was held to be illegal. 5. By judgment and order dated 08.04.2010, the learned Single Judge of the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish refreshment rooms, canteens, etc. for the sale of food, beverages, etc. 9. Respondent No. 2 has various units and Respondent No. 3, being Chefair Flight Catering (for short, the Chefair ), provides flight catering services to various airlines, including Air India. It is this Chefair unit of HCI that operates and runs the canteen. It requires to be noticed that the appellants-workmen are engaged on a casual or temporary basis by the respondent Nos. 2 and 3 to render canteen services on the premises of respondent No.1 - Air India. ISSUE : 10. The main issue for consideration before this Court in the present reference is whether workers, engaged on a casual or temporary basis by a contractor (HCI) to operate and run a statutory canteen, under the provisions of the Act, 1948, on the premises of a factory Air India, can be said to be the workmen of the said factory or corporation . SUBMISSIONS : 11. Shri Jayant Bhushan, learned Senior Counsel for the appellants-workmen has two alternative submissions; firstly, that in the event of a statutory requirement to provide for a canteen or any other facility, the employees of the said facility would automatically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t control, but the test of effective and absolute control which would be relevant, and that if the said test, in the given facts is applied, the appellants would fail to establish the employer and employee relationship. In aid of his submissions, he refers to Bengal Nagpur Cotton Mills v. Bharat Lal, (2011) 1 SCC 635; International Airport Authority of India v. International Air Cargo Workers Union, (2009) 13 SCC 374; and National Aluminium Co. Ltd. v. Ananta Kishore Rout Ors., (2014) 6 SCC 756. RELEVANT PROVISIONS : 16. To appreciate the point of view of the parties to the present lis, it is necessary to notice the relevant provisions. 17. Section 46 of the Act, 1948 statutorily places an obligation on the occupier of a factory to provide and maintain a canteen in the factory where more than two hundred and fifty workers are employed. There is nothing in the said provision which provides for the mode in which the factory must set up a canteen. It appears to be left to the discretion of the concerned factory to either discharge the said obligation of setting up a canteen either by way of direct involvement or through a contractor or any other third party. The provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Inspector of Factories. Lastly, Rule 70 enumerates the consultative role of the Managing Committee regarding, inter alia, the quality and quantity of foodstuffs served, arrangement of menus, duration for meals, etc. It also prescribes that such a Committee must have equal representation of persons nominated by the occupier and elected members by the workers of the factory. The Manager is entrusted with determining and supervising the procedure for conducting such elections and dissolving the Committee at the expiry of its two year statutory term. DISCUSSION : 20. Before we deal with the issue that arises for consideration, it would be necessary to consider the applicability of the Constitution Bench decision in the Steel Authority of India case (supra). Learned counsel refers to paragraphs 106 and 107 of the said judgment to contend that the observations made therein is the expression of the Court on the question of law and since it is the decision of the Constitution Bench, the same would be binding on this Court. To appreciate the submission of the learned counsel, we notice the aforesaid paragraphs: 106. We have gone through the decisions of this Court in VST Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Labour (Regulation and Abolition) Act, 1970 and in Section 2(a) of the Industrial Disputes Act, 1947 and the other issue was 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 Contract Labour (Regulation and Abolition) Act. The Court while over-ruling the judgment in Air India Statutory Corporation vs. United Labour Union (1997) 9 SCC 377, prospectively, held that neither Section 10 of the Contract Labour (Regulation and Abolition) Act nor any other provision in the Act, whether expressly or by necessary implication, provides for automatic absorption of contract labour on issue of notification under the said section, prohibiting contract labour and consequently the principal employer is not required to absorb the contract labour working in the concerned establishment. In the aforesaid decision, firstly, the issue whether contract labourers working in statutory canteen(s) would fall within the meaning of expression workmen under the Act, 1948 and therefore they are employees of the principal employer and secondly, whether the principal employer to fulfil its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upton s case fell with-in the precedent established by the one or the other case, said: (AC p. 658) what constitutes binding precedent is the ratio decidendi of a case, and this is almost always to be ascertained by an analysis of the material facts of the case -that is, generally, those facts which the tribunal whose decision is in question itself holds, expressly or implicitly, to be material. 23. It is stated therein that a judicial decision is the abstraction of the principle from the facts and arguments of the case. It was further observed in the Punjab Land Development case (supra), that: 53. Lord Halsbury s dicta in Quinn v. Leatham, 1901 AC 495: (AC p. 506) every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. This Court held in State of Orissa v. Sudhansu Sekhar Misra (1968) 2 SCR 154, that a decision is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides for the improvement of working conditions within the factory premises. Section 2 of the Act, 1948 is the interpretation clause. Apart from others, it provides the definition of worker under Section 2(l) of the Act, 1948, to mean a person employed, directly or through any other agency, whether for wages or not, in any manufacturing or cleaning process. Section 46 of the Act, 1948 requires the establishment of canteens in factories employing more than two hundred and fifty workers. The State Government have been given power under the Section to make Rules requiring that such canteens to be provided in the factory under Sub Section (2), the items for which rules are to be framed have been specified. The Sub Section also contemplates the delegation by the State Government the power to the Chief Inspector to make rules in respect of the food to be served in such canteens and their charges. In exercise of rules making power, the Delhi State has framed and notified the Rules, 1950, in which rules 65 to 70 are incorporated to give effect to the purpose of Section 46 of the Act, 1948. 28. The question before us is when the company is admittedly required to run the canteen in compli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of the Act, 1948. Therefore, it has to be held that the workmen of a statutory canteen would be the workmen of the establishment for the purpose of the Act, 1948 only and not for all other purposes. To arrive at this conclusion, the Court has followed the view expressed by this Court in M.M.R Khan s case (supra) and Reserve Bank of India v. Workmen, (1996) 3 SCC 267. 32. The proposition of law in the Indian Petrochemicals case (supra) has been reiterated in the Hari Shankar Sharma s case (supra). This Court stated that: 6. The observations in Parimal Chandra Raha case relied on by the appellants which might have supported the submission of the appellants have been explained by a larger Bench in Indian Petrochemicals Corpn. Ltd. v. Shramik Sena where it was held, after considering the provisions of the Factories Act and the previous decisions on the issue, that the workmen of a statutory canteen would be the workmen of the establishment only for the purpose of the Factories Act and not for all other purposes unless it was otherwise proved that the establishment exercised complete administrative control over the employees serving in the canteen. 33. The aforesaid princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to regularize them as such. This Court then made a detailed reference to the Parimal Chandra Raha case (supra), the MMR Khan case (supra) and the Indian Petrochemicals case (supra). The Court then extensively referred to the terms and conditions of the contract between the canteen contractor and the respondent to ascertain whether there was any control of the respondent company therein over the workers in the canteen, and if so what was the nature of the said control. It wasobserved as follows: 14. No doubt, the respondent management does exercise effective control over the contractor on certain matters in regard to the running of the canteen but such control is being exercised to ensure that the canteen is run in an efficient manner and to provide wholesome and healthy food to the workmen of the establishment. This, however, does not mean that the employees working in the canteen have become the employees of the management. 15. A free hand has been given to the contractor with regard to the engagement of the employees working in the canteen. There is no clause in the agreement stipulating that the canteen contractor unlike in the case of Indian Petrochemicals Corpn. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eck over the quality of service provided to its employees. It has nothing to do with either the appointment or taking disciplinary action or dismissal or removal from service of the workmen working in the canteen. Only because the management exercises such control does not mean that the employees working in the canteen are the employees of the management. Such supervisory control is being exercised by the management to ensure that the workers employed are well qualified and capable of rendering proper service to the employees of the management. 37. The last case that we intend to refer on this point is that of KGSD Canteen case (supra), wherein this Court was required to answer the question as to whether the employees of the canteen are employees of the State or whether their services should be directed to be regularized or not. However, in the said case, the State had no statutory compulsion to run and maintain any canteen for its employees. This Court made reference to numerous cases on this issue, inter alia, the Saraspur Mills case (supra), the Parimal Chandra Raha case (supra), the MMR Khan case (supra), the Indian Petrochemicals case (supra), the Constitution Bench decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany s employees and to discharge its legal obligation. The appellant-company had resisted the claim by contending that the workmen had never been employed by it but by the co-operative society which was its licensee. This Court after referring to the amended definition of employee and employer in Section 3(13) and 3(14) of Bombay Industrial Relation Act, 1946 and the definition of `Worker under the Act, 1948, and also referring to earlier decision in Basti Sugar Mills Ltd. v. Ram Ujagar and Ors., (1964) 2 SCR 838, held that since under Act, 1948, it was the duty of the appellant-company to run and maintain the canteen for use of its employees, the ratio of the decision in Ahmedabad Mfg. and Calico Printing Co. Ltd., v. Their Workmen (1953) II LLJ 647 would be fully applicable in which the very sameprovision of the Act, 1948 were considered and confirmed the finding of the Industrial Court. 41. It would be relevant to note that the primary reasoning of the Court in the Saraspur Mills case (supra) to hold that the workers of the canteen run by a cooperative society to be the employees of the appellant company therein, was in view of the amended definition of employer and em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be extended all service benefits which are available to the said railway employees. The Court was concerned, in the said case, with three types of canteens:- (i) Statutory Canteens; (ii) Non-Statutory, Recognized Canteens; and (iii) Non-Statutory, Non-Recognized Canteens. As regards statutory canteens, the Court noticed that under Section 46 of the Act, 1948, the occupier of a factory was not only obliged to provide for and maintain a canteen where more than 250 workers are employed, but was also obliged to abide by the rules which the concerned Government may make, including the rules for constitution of a managing committee for running the canteen and for representation of the workers in the management of the canteen. In other words, the whole working and functioning of the canteen has to conform to the statutory rules made in that behalf. 45. It would be relevant to notice the facts noted by this Court in the MMR Khan s case (supra). This Court had made an explicit reference to the relevant provisions of the Railway Establishment Manual and the Administrative Instructions on Departmental Canteens in Offices and Industrial Establishments of the Government as issued by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view expressed in MMR Khan case (supra). We further observe that the reasoning of the Court, as noticed hereinabove, was based on the Railway Establishment Rules and the relevant Administrative instructions issued by the Government of India. By virtue of the aforesaid Rules and Administrative instructions, it was made mandatory that the complete administrative control of the canteen be given to the Railway Administration. Such mandatory obligations are not present in the instant case. In light of the same, the given case cannot be said to be a precedent on the general proposition as regards the status of employees of a statutory canteen established under the Act, 1948. 47. We have already referred to the decision of this Court in Parimal Chandra Raha case (supra), and, therefore, we are not referring to the said decision once over again. However, we add that in the Parimal Chandra Raha case (supra), this Court made a general observation that under the provisions of the Act, 1948, it is statutorily obligatory on the employer to provide and maintain a canteen for the use of his employees. As a consequence, the Court stated that, the canteen would become a part of the principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract are consistent with its being a contract of service. 51. In the Ready Mix Concrete case (supra), McKenna J. further elaborated upon the above-quoted conditions. As regards the first, he stated that there must be wages or remuneration; else there is no consideration and therefore no contract of any kind. As regards the second condition, he stated that control would include the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. Furthermore, to establish a master-servant relationship, such control must be existent in a sufficient degree. 52. McKenna J. further referred to Lord Thankerton's four indicia of a contract of service said in Short v. J. and W. Henderson Ltd. (1946) 62 TLR 427. The J. and W. Henderson case (supra) at p.429, observes as follows: (a) The master's power of selection of his servant; (b) the payment of wages or other remuneration; (c) the master's right to control the method of doing the work; and (d) the master's right of suspension or dismissal. 53. A recent decision by the Queen s Bench, in JGE v. The Trustees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from and independent of it. The other factors which may be relevant are - who has the power to select and dismiss, to pay remuneration, deduct insurance contributions, organize the work, supply tools and materials and what are the mutual obligations between them. (See Industrial Law, 3rd Edn., by I.T. Smith and J.C. Wood, at pp. 8 to 10.) 56. In the case of Bengal Nagpur Cotton Mills case (supra), this Court observed that: 9. In this case, the industrial adjudicator has granted relief to the first respondent in view of its finding that he should be deemed to be a direct employee of the appellant. The question for consideration is whether the said finding was justified. 10. It is now well settled that if the industrial adjudicator finds that the contract between the principal employer and the contractor to be a sham, nominal or merely a camouflage to deny employment benefits to the employee and that there was in fact a direct employment, it can grant relief to the employee by holding that the workman is the direct employee of the principal employer. Two of the well-recognized tests to find out whether the contract labourers are the direct employees of the principal emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that the proper approach would be to ascertain whether there was complete control and supervision by the appellanttherein. In this regard, reference was made to the case of Dhrangadhra Chemical Works case (supra) wherein this Court had observed that: 14. The principle which emerges from these authorities is that the prima facie test for the determination of the relationship between master and servant is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do but also the manner in which he shall do his work, or to borrow the words of Lord Uthwatt at p.23 in Mersey Docks and Harbour Board v. Coggins Griffith (Liverpool) Ltd., (1952) SCR 696 The proper test is whether or not the hirer had authority to control the manner of execution of the act in question . 59. The NALCO case (supra) further made reference to the case of Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State of T.N., (2004) 3 SCC 514, wherein this Court had observed as follows: 37. The control test and the organization test, therefore, are not the only factors which can be said to be decisive. Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability regarding the appellants herein would fall upon the Air India, not the HCI. In this regard, it would be pertinent to elaborate upon the concept of a subsidiary company and the principle of lifting the corporate veil. 63. The Companies Act in India and all over the world have statutorily recognized subsidiary company as a separate legal entity. Section 2(47) of the Companies Act, 1956 (for short the Act, 1956 ) defines subsidiary company or subsidiary , to mean a subsidiary company within the meaning of Section 4 of the Act, 1956. For the purpose of the Act, 1956, a company shall be, subject to the provisions of sub-section (3) of Section 4, of the Act, 1956, deemed to be subsidiary of another. Clause (1) of Section 4 of the Act, 1956 further imposes certain preconditions for a company to be a subsidiary of another. The other such company must exercise control over the composition of the Board of Directors of the subsidiary company, and have a controlling interest of over 50% of the equity shares and voting rights of the given subsidiary company. 64. In a concurring judgment by K.S.P. Radhakrishnan, J., in the case of Vodafone International Holdings BV v. Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibute the acts of the company to those who are allegedly in direct control of its operation. The starting point of this doctrine was discussed in the celebrated case of Salomon v. A Salomon Co Ltd., [1897] AC 22. Lord Halsbury LC (paragraphs 31 33), negating the applicability of this doctrine to the facts of the case, stated that: a company must be treated like any other independent person with its rights and liabilities legally appropriate to itself whatever may have been the ideas or schemes of those who brought it into existence. 67. Most of the cases subsequent to the Salomon case (supra), attributed the doctrine of piercing the veil to the fact that the company was a sham or a fa ade . However, there was yet to be any clarity on applicability of the said doctrine. 68. In recent times, the law has been crystallized around the six principles formulated by Munby J. in Ben Hashem v. Ali Shayif, [2008] EWHC 2380 (Fam). The six principles, as found at paragraphs 159 164 of the case are as follows- (i) ownership and control of a company were not enough to justify piercing the corporate veil; (ii) the Court cannot pierce the corporate veil, even in the absence of thir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc. 71. Thus, on relying upon the aforesaid decisions, the doctrine of piercing the veil allows the Court to disregard the separate legal personality of a company and impose liability upon the persons exercising real control over the said company. However, this principle has been and should be applied in a restrictive manner, that is, only in scenarios wherein it is evident that the company was a mere camouflage or sham deliberately created by the persons exercising control over the said company for the purpose of avoiding liability. The intent of piercing the veil must be such that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) To establish shops, kitchens, refreshment rooms, canteens and depots for the sale of various food and beverages. 76. The objects incidental or ancillary to the main objects include, inter alia: (5) To carry on any business by means of operating hotels etc. or other activity which would tend to promote or assist Air-India s business as an international air carrier. 77. It can be noticed from the above, that the primary objects of the HCI have no direct relation with the Air India. It is only one of the many incidental or ancillary objects of the HCI that make a direct reference to assisting Air India. The argument that the HCI runs the canteen solely for Air India s purpose and benefit could not succeed in this light. The HCI has several primary objects, which include the running of hotels, motels, etc., in addition to establishing shops, kitchens, canteens and refreshment rooms. The Air India only finds mention under HCI s ancillary objects. It cannot be said that the Memorandum of Association of the HCI provides that HCI functions only for Air India. Nor can it be said that the fundamental activity of the HCI is to run and operate the said statutory canteen for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voided any obligation which the workmen may be legally entitled to. Further, on perusal of the Memorandum of Association and Articles of Association of the HCI, it cannot be said that the Air India intended to create HCI as a mere fa ade for the purpose of avoiding liability towards the Appellants-workmen herein. 81. Therefore, the only consideration before this Court is the nature of control that the Air India may have over the HCI, and whether such control may be called effective and absolute control. Such control over the HCI would be required to be established to show that the appellants-workmen were in fact the employees of the Air India. 82. It may be noticed again that the NALCO case (supra) dealt with a similar issue. In that case, the Court had observed that the day-to-day functioning of the school as setup by the appellant therein was not under NALCO, but under a managing committee therein. Further, the said Managing Committee was a separate and distinct legal entity from NALCO, and was solely responsible for recruitment, disciplinary action, termination, etc. of its staff. The Court therefore had held that the respondents therein could not be said to be employed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, monetary or otherwise. The said supervision or control would appear to be merely to ensure due maintenance of standards and quality in the said canteen. 85. Therefore, in our considered view and in light of the above, the appellants-workmen could not be said to be under the effective and absolute control of Air India. The Air India merely has control of supervision over the working of the given statutory canteen. Issues regarding appointment of the said workmen, their dismissal, payment of their salaries, etc. are within the control of the HCI. It cannot be then said that the appellants are the workmen of Air India and therefore are entitled to regularization of their services. 86. It would be pertinent to mention, at this stage, that there is no parity in the nature of work, mode of appointment, experience, qualifications, etc., between the regular employees of the Air India and the workers of the given canteen. Therefore, the appellants-workmen cannot be placed at the same footing as the Air India s regular employees, and thereby claim the same benefits as bestowed upon the latter. It would also be gainsaid to note the fact that the appellants-herein made no claim or p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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