THE DIRECTOR, STEEL AUTHORITY OF INDIA LIMITED vs. ISPAT KHADAN JANTA MAZDOOR UNION

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(s). 8081­8082 OF 2011 THE DIRECTOR STEEL AUTHORITY OF INDIA LTD. …..Appellant(s) VERSUS ISPAT KHADAN JANTA MAZDOOR UNION …..Respondent(s) WITH CIVIL APPEAL NO(s). 8084 OF 2011 J U D G M E N T Rastogi, J. th 1. These appeals arise from the judgment dated 6  September, 2010 passed by the Division Bench of the High Court of Madhya Pradesh in Writ Petition No. 10963 of 2009 and 12485 of 2009 setting   aside   the   award   passed   by   the   Central   Government Signature Not Verified Digitally signed by SATISH KUMAR YADAV Date: 2019.07.08 16:41:41 IST Reason: th Industrial Tribunal(CGIT), Jabalpur dated 16  September, 2009 answering the reference in the affirmative form and directing the 1 contract labourers who were in the employment of SAIL from th 1993 till 1996(17  March, 1993 to April 1996) to be reinstated, and their cases be considered for regularisation in accordance with Para 125 of the Judgment of this Court in  Steel Authority of   India   Ltd.   and   Others   Vs.   National   Union   Waterfront 1    declining to grant them back wages.    Workers and Others   2. The case involves a chequered history and almost after four rounds of litigation, the matter has reached at a stage where the reference   was   made   by   the   appropriate   Government   under Section 10(1) of the Industrial Disputes Act, 1947 to decide the industrial dispute raised by the Union, namely, Ispat Khadan th Janta Mazdoor Union vide notification dated 27  January, 2003 nd followed with 22  February, 2005.   3. The seminal facts in brief which may be relevant for the present purpose are that the appellant Steel Authority of India Limited (hereinafter being referred to as “SAIL”) is a Government of India undertaking and is a State within the meaning of Article 12 of the Constitution of India and has steel plants in different 1 2001(7) SCC 1 2 parts   of   India.     SAIL   has   one   of   the   captive   lime   stone   and dolomite mines in Kuteshwar in the District of Katni of Madhya Pradesh.  Limestone and Dolomite are necessary ingredients for manufacture of steel.   The SAIL did blasting work as this work th had   been   departmentalised   vide   Notification   dated   15 nd December, 1979 w.e.f. 22  June, 1980.  The contract labour of the contractors at Kuteshwar Lime Stone Mines were doing the same   jobs   as   enumerated   in   schedule   of   the   prohibition th Notification No. S.O. 707 dated 17   March, 1993 issued under Section 10(1) of the Contract Labour(Regulation & Abolition) Act, 1970(hereinafter referred to as “CLRA Act”). 4. It   is   not   disputed   that   the   establishment   of   the appellant(SAIL)   is   the   registered   establishment   in   terms   of Section 7 of the CLRA Act and the contractors through whom the contract labour was engaged were also holding a valid licence under Section 12 of the CLRA Act and the workmen engaged as contract labour by the contractor in the establishment of the appellant(SAIL) were paid their due wages in terms of the tri­ partite agreement entered into from time to time not less than the 3 rates so prescribed by the authority under the Minimum Wages Act, 1948. 5.   The   appropriate   Government   at   a   later   stage   issued   a prohibition notification of employment of contract labour for the establishment wherein their services hired by the appellant SAIL th under Section 10(1) of the CLRA Act dated 17  March, 1993, the extract of which is referred to hereunder:­ “4.   The  Notification  No.S.O.707  dated  17­3­93  was issued   and   published   by   the   Government   of   India whereby   prohibited   with   effect   from   the   date   of publication   of   this   notification,   the   employment   of Contract Labour in the works specified in the following schedule in the Lime Stone and Dolomite Mines in the country namely: SCHEDULE a. Raising   of   minerals   including   breaking sizing sorting of Lime Stone Dolomite and, b. Transportation of limestone and dolomite which includes loading and unloading from trucks,   dumpers,   conveyors   and transportation from mine site to factory.” 6. Pursuant   to   a   prohibition   notification   issued   by   the appropriate Government under Section 10(1) of the CLRA Act, the relationship of contractor and contract labour stands ceased and by legal fiction, contract comes to extinct and the indisputed fact 4 which has come on record is that no fresh agreement, in the interregnum period, was executed and the existing agreement to whom   the   appellant   &   contract   labour   is   a   signatory   was extended from time to time by the competent authority and the contract labour was allowed to continue on the same terms and conditions till their services were terminated by the contractor in the month of April, 1996. 7. Prior   to   the   judgment   of   the   Constitution   Bench   of   this Court ,   the [Steel   Authority   of   India   Ltd.   and   Others(supra)] three   Judge   Bench   of   this   Court   in   Air   India   Statutory Corporation   and   Others  Vs.  United   Labour   Union   and 2   Others     discussed   the   legal   consequence   of   the   prohibition notification   under   Section   10(1)   of   the   CLRA   Act   prohibiting employment of contract labour, it was held that on abolition of contract labour system from any establishment under Section 10 of   the   Act   by   the   appropriate   Government,   the   logical   and legitimate   consequences   were   that   the   erstwhile   regulated contract labourer covered by the sweep of such abolition for the activities   concerned   would   be   entitled   to   be   treated   as   direct 2 1997(9) SCC 377 5 employee   of   the   employer   on   whose   establishment   they   were earlier   working   and   they   would   be   entitled   to   be   treated   as regular employees from the day on which the contract labour system in the establishment for the work which they were doing gets abolished.   8. The effect of the prohibition notification under Section 10(1) of the CLRA Act issued by the appropriate Government at the later stage, came to be examined by the Constitution Bench of this Court in   (supra) Steel Authority of India Ltd. and Others wherein it was held that there is no provision under CLRA Act whether expressly or necessary implication which provides for automatic   absorption   of   contract   labour   on   issuance   of   a notification by the appropriate Government under Section 10(1), prohibiting     employment   of   contract   labour   in   any   process, operation or other work in any other establishment and overruled the judgment in  Air India Statutory Corporation and Others (supra) making it clear that neither Section 10 nor any other provision in the CLRA Act provides for automatic absorption of contact labour on issuance of a notification by the appropriate Government   under   Section   10(1)   of   the   CLRA   Act   and 6 consequently the principal employer is not required by operation of   law   to   absorb   the   contract   labour   working   in   the establishment.   The exposition of law will be discussed at the later stage. 9. It reveals from the record that after the Constitution Bench Judgment of this Court, the matter was agitated by the workers union before the appropriate Government and after failure of the conciliation proceedings, the case of 3404 workmen was referred for   adjudication   by   the   appropriate   Government   vide   its th nd notification   dated   27   January,   2003   followed   with   22 February,   2005   to   the   Central   Government   Industrial Tribunal(CGIT) is reproduced hereunder:­ 1. “The Government of India, Ministry of Labour vide its Notification   No.L­29011/97/2002­IR(M)   dated   27­1­ 2003   has   referred   the   following   dispute   for adjudication by this tribunal:­ “I.   “Whether   the   action   of   the   Mines   Manager, Koteshwar Lime Stone Mines of Steel Authority of India Ltd. in terminating services of 3404 (3380+24­ as per list attached) mine workers in April 1996 who ceased to be contract labour after prohibition of employment of contract labour in Lime Stone Mine vide Notification No.S.O.707 dated 17­3­93 was legal, fair and justified? If not, what relief the concerned workmen or heirs in case of deceased worker are entitled to? 7 II.   Whether   the   action   of   the   Mines   manager, Koteshwar Lime Stone Mines of Steel Authority of India ltd.   in   denying   terminal   benefits   of   gratuity retrenchment compensation and exgratia applicable to VRS seeking employees is fair and justified.  If not, to what relief these workers/heirs are entitled to? III. Whether the action of the management of the Mines Manager,   Koteshwar   Lime   Stone   Mines   of   Steel Authority   of   India   Ltd.   in   disregarding   Clause­8   of Memorandum of Agreement signed between the Steel Authority   of   India,   New   Delhi   and   their   Unions including   HMS   and   employing   workers   through contractors on jobs of permanent and perennial nature in Mines between 5­20 years even without ensuring statutory wages and service conditions was legal, fair and   justified?   If   not,   to   what   relief   concerned workmen/heirs are entitled?” CORRIGENDUM “Whether   the   employment   of   the   workmen mentioned   in   this   Ministry’s   order   of   even number   dated   27­1­2003   through contractors is sham and bogus and whether in effect there is direct employment by the company?  If so, to what relief the workmen concerned are entitled?” 10. The   learned   Tribunal(CGIT),   as   a   fact   finding   authority, taking   note   of   the   pleadings   on   record   framed   the   following issues:­ “I. Whether the reference R/40/03 is maintainable? II. Whether the employment of the workmen through contractors is sham and bogus and whether the said employment is considered to be direct employment by the management? 8 III.Whether   the   action   of   the   Mines   Manager, Kuteshwar Lime Stone Mines of the Steel Authority of India Ltd. in terminating the services of 3404(3380+24) as per list attached mine workers in April 1996 who ceased   to   be   contract   labour   after   prohibition   of employment   of   contract   labour   in   lime   stone   vide Notification No.S.O.707 dated 17­03­93 was legal, fair and justified? IV.Whether the said contact workers/heirs are entitled the   terminal   Benefits   of   gratuity,   retrenchment compensation   and   ex­gratia   applicable   to   VRS   from SAIL? V. Whether Lime Stone Mines violated the provision of Clause­8   of   the   memorandum   of   agreement   signed between the SAIL, New Delhi and their  Unions and employing   workers   through   contractors   on   jobs   of permanent   and   perennial  nature   was  justified,  legal and fair? VI.Whether   the   workmen/heirs   are   entitled   to   the wages to the post in which they were engaged with parity of wages with that of regular employees of the management with all consequential benefits? VII.Any   other   relief,   the   workmen/heirs   are   entitled to?” 11. The parties to the reference were called upon to lay evidence in support of their respective claim and after taking note of the evidence(oral & documentary), the Tribunal recorded the facts in seriatim emerging from the records as under:­ (1) The   evidence   shows   that   the   respective   contractors employed the contract labours for their own and they were the appointing authority. 9 (2) Wage   slips,   wagesheets   and   the   evidence   of   the witnesses   clearly   show   that   the   contractors   were paying wages to the contract labours. (3) Exhibit M/8 filed in R721/05 and the evidence of the witnesses   show   that   the   contractor   dismissed   the employee and also transferred some of the employees from the place of work and had disciplinary authority. (4) The   contract   papers   entered   into   between   the management and the contractors and the evidence of the witnesses clearly show that contractors had full control   and   supervision   over   the   work.     The management had only to see that the labour laws were being   implemented   and   specified   approved   grade   of lime stone was being supplied. (5) The contract papers and the evidence show that the contractors   had   full   control   over   the   skilled   and professional work. (6) It is further clear from the contract papers that the SAIL had right to reject the limestone, if it was not within the specified approved grade as per terms and conditions of the agreement. (7) The contract agreements further show that there was penal clause, if there was any breach of contract. 12. The Tribunal taking note of the evidence including oral and documentary adduced in support of the reference held that the contract between the Management(SAIL) and the contractors was genuine and not sham and bogus and the contract workers were allowed to continue even after the prohibition notification under th Section 10(1) dated 17  March, 1993 under the CLRA Act on the 10 same   terms   and   conditions   and   the   services   of   the   contract labourer were terminated by the Contractor in April, 1996.   13. It may be noted that status of the workers after the issuance th of notification dated 17  March, 1993 has also been examined by the Tribunal and held as follows:­ (1) The   contract   labours   after   notification   cease   to function. (2) The   contract   labours   were   still   working   in   the establishment   from   1993   to   April   1996   under   the umbrella of the contractors who may be called as agent of the Principal employer or were intermediary between the contract labours and the Principal Employer after the publication of notification. (3) The contract between the Principal Employer and the contractors after publication of the notification ceases to exist and became not genuine. (4) The wages were being paid to the contract labour by the   so   called   contractors   in   the   same   way   as   from before. (5) The principal Employer was in need of the workers for the specified works even after the publication of the notification as same workers were continuing in work till April, 1996. (6) There is no evidence on the record to show that the principal   employer   adopted   the   procedure   of regularization   and   had   intended   to   employ   regular workers   as   has   been   directed   by   the   Hon’ble   Apex Court   at   Para   125   sub­para­6   in   the   Constitution Bench Judgment in the case of SAIL versus National Union Water Front Workers (Supra) after the contract was found genuine before the notification. 11 (7) There was no automatic absorption of contract labour on issuing the notification prohibiting the employment of contract labours. (8) Contract   labours   were   found   employees   of   the respective contractors before notification.   14. At the same time, in para 85 of the Award, the Tribunal further held that after issuance of the prohibition notification th dated   17   March,   1993   in   the   instant   case,   the   principal employer(SAIL) was prohibited to employ any contract labour in any process, operation or other work in the establishment and when   the   contract   with   the   contractors   after   prohibition notification became void and not genuine and the extension of the period of contract of the respective contractors which has been allowed to continue in the establishment by operation of law became  ab­initio   void   and   sham   and   bogus.     Para  85   of   the Award is as under:­ “85. It is an established fact that the notification dated   7­3­93   came   to   the   effect   prohibiting   the employment of contract labours from the date of its publication.  As such, in the light of the constitutional bench judgment in SAIL versus National Water Front Workers   Union   &   others   (Supra)   the   contract   of Principal   employer   with   contractor   in   regard   to   the contract labour comes to an end beyond shadow of doubts and the contract with regard to the contract labours subsequently after the notification dated 17­3­ 12 1993 becomes not genuine.   The Principal employer was prohibited to employ any contract labour in any process, operation or other work in the establishment in   any   process,   operation   or   other   work   in   the establishment to which the notification relates at any time thereafter.  It is evident that when the contract of the contractors after notification became itself void and not genuine, the extension of the period of contract of the respective contractors would be ab­initio void and sham   and   bogus.     Thus   it   is   established   that   the contract   of   Principal   employer   with   contractors   in regard to the contract labours became subsequently sham and bogus after the notification No. S.O. 707 dated 17­3­1993 coming into the effect from the date of its publication.”  15. The   Tribunal   finally   held   that   the   employment   of   the contract labourer through contractors was not sham and bogus th before notification dated 17  March, 1993, but after publication of the said notification, by operation of law, the contract through contractors could not be considered to be genuine but became void and sham as the contract labour was allowed to continue in the establishment till April 1996.   It was further observed that the Union is at liberty to take recourse of the penal consequences as mandated under Section 23 to 25 of the CLRA Act.  Rest of the issues framed by the Tribunal(Issue nos. 3,4, 5 & 6) have been consequently   decided   accordingly   under   the   Industrial   Award th dated 16  September, 2009. 13 16. The appellant(SAIL) and the workers Union both filed writ petitions   in   the   High   Court   of   Madhya   Pradesh.     The   Union th assailed the award dated 16   September, 2009.   At the same time,   SAIL   challenged   the   finding   which   was   recorded   in reference to the consequence of the prohibition notification as observed in Para 85 to that extent in the writ petition.  17. The   High   Court   in   its   limited   scope   of   judicial   review examined   the   matter   as   a   Court   of   Appeal   reappreciated   the evidence   threadbare   and   based   on   the   same   set   of evidence(oral/documentary) reversed the finding of fact recorded by the Tribunal and observed that the contract to be sham and bogus and observed as under:­ “41. As   we   have   found   the   contract   to   be   not genuine   but   mere   camouflage   in   the   facts   and circumstances and considering prohibition notification under Section 10(1) of CLRA Act, inevitable conclusion is   that   the   contract   labours   have   to   be   treated   as employees of the principal employer. 42. Considering   the   large   number   of   workers involved in the instant case and the notification issued under Section 10 of CLRA Act, the regular workmen have   to   be   ultimately   employed   by   the   SAIL.     We decline to grant the backwages to the workers in the instant case.  It would not be appropriate to saddle the huge liability of back wages. However, we direct that the SAIL to start the process of regular employment. The workers who were in the employment from 1993 till 1996 are ordered to be reinstated, and their cases 14 be considered for regularization in accordance with the directions issued by the Apex Court in para 125 of Steel Authority of India Ltd. and others vs. National Union Waterfront Workers and others (supra).” th 18. The judgment of the High Court dated 6  September, 2010 is a subject matter of challenge before us in these appeals. 19. Sh. Ranjit Kumar and Sh. Parag P. Tripathi, learned senior counsel for the appellant submit that the CGIT in its award dated th 16  September, 2009 has not only extensively considered the oral and documentary evidence placed on record but also took note of the judgment of the Constitution Bench of this Court in   Steel (supra)   and   being   the Authority   of   India   Ltd.   and   Others appropriate industrial adjudicator, after going into merits and the evidence led by the respective parties to the contract between management SAIL and contractors, arrived to the conclusion that the contract was genuine and not sham and bogus under its th award   dated   16   September,   2009   and   the   finding   of   fact recorded by the Tribunal has attained finality and unless the approach of the Tribunal was wholly perverse in the sense that the Tribunal has acted on no evidence, it was not justified for the High   Court   to   interfere   over   the   award   of   the   industrial 15 adjudicator sitting as a Court of First Appeal to reappreciate the evidence and even if on the basis of the material on record, two views   are   possible   and   one   view   has   been   expressed   by   the Tribunal it was not open for the High Court to substitute its view under the limited scope of judicial review under Sections 226 and 227 of the Constitution of India.  In the given circumstances, the finding of fact which has been reversed by the High Court under its impugned judgment holding the contract is not genuine but a mere camouflage, is legally not sustainable and deserves to be interfered by this Court. 20. Learned   counsel   further   submits   that   normally   the industrial   adjudicator   is   the   final   Court   of   facts   and   on   its extensive discussion based on the material available on record, it was held that there is no employer and employee relationship between the appellant and respondent workmen and, therefore, the question of compliance of Section 25(n) of the Act does not arise and it was the contractor who had terminated their services in April 1996 and it was the contractor who had full control and supervision over the work of the labourers.  It has also concluded after examining the witness and appraisal of the documentary 16 evidence on record that the wage slips and identity cards were issued to them  by  the  respective  contractors  and  it were  the contractors who paid wages to the contract labour and few of the witnesses have also supported payment through contractors. 21. Thus,   the   conclusion   which   has   been   arrived   at   by   the Tribunal that the contractors were exercising exclusive control over the contract labours and tools and equipment were supplied by the contractors as per the terms of the contract and payment was made by respective contractors to the contract labourers and not by the principal employer and it was the contractors who terminated the services of the contract labourers because they proceeded on illegal strike in April 1996 and all the agreements between the management and the contractors entered into are of th prior   to   the   notification   dated   17   March,   1993   prohibiting employment   of   contract   labour   and   subsequently   it   was   only extended by the competent authority from time to time until the services   of   the   contract   labour   were   terminated,   holding disciplinary powers against the contract labour being supported by the cogent evidence on record was not open for the High Court 17 to sit as a Court of Appeal and reappraised the evidence under its impugned judgment. 22. Learned counsel placed reliance on the judgment of this Court in  Dena Nath and Others Vs. National Fertilisers Ltd. 3   and Others    and submits that mere violation of the prohibition notification under Section 10(1) of the CLRA Act would not entail absorption   of   the   contract   labour   and   at   the   best   could   be considered as further continuation to be illegal resulting in penal consequences envisaged under Section 23 to 25 of the Act. 23. Per contra, Sh. Colin Gonsalves, learned senior counsel for the respondent, on the other hand, while supporting the finding recorded by the High Court in the impugned judgment further submits that the Tribunal has committed a manifest error in not appreciating the documentary/oral evidence on record and thus on reappraisal of the evidence, the High Court was convinced that the finding of fact recorded by the Tribunal under its award th dated   16   September,   2009,   being   perverse,   based   on   no evidence, has rightly interfered and recorded a finding that the 3 1992(1) SCC 695 18 contract was sham and bogus and in consequence thereof in terms   of   the   Constitution   Bench   judgment   of   this   Court,   the workmen became employee of the principal employer (SAIL) in the instant case and entitled for the wages payable to the regular employee   of   the   appellant   SAIL   and   be   considered   for regularisation of service.  24. Learned   counsel  further   submits   that   the   employees   are entitled for the back wages which has been wrongly denied by the High   Court   without   any   justiciable   reasons   and   as   they   are contesting   their   claim   immediately   after   their   services   were terminated, the delay in fact has caused because of  3­4 rounds of litigation and was also due to the fact that earlier it was held by this Court in  Air India Statutory Corporation and Others   (supra) that immediately on the issuance of a prohibition case notification under Section 10(1) of the CLRA Act, the contract labour   become   entitled   for   automatic   absorption   in   the establishment wherein he was working prior to passing of the notification under Section 10(1) of the CLRA Act, which has been although overruled by the Constitution Bench of this Court in 19 Steel Authority of India Ltd. and Others (supra) at a later point of  time   but   at   least   there   are   no   latches   on   the   part   of   the employees and they are entitled for wages for the period they have worked and discharged their duties in the establishment of SAIL and denial of their actual wages by the High Court in the impugned judgment is legally not sustainable. 25. Learned counsel further submits that High Court has taken note of various tests for determining nature of contract which has been laid down from time to time by the judicial pronouncements i.e.   supervision   and   control,   effective   and   absolute   control, disciplinary action, payment of wages etc., the primary tests as the determining factor in arriving to a conclusion as to whether any contract entered in contradistinction  to the tests laid down, if   any,   between   the   contractor   and   the   contract   labour   that indeed is sham and bogus. The High Court on appraisal of the evidence recorded its satisfaction on all the tests cumulatively and rightly held that the contract between the contract labour and the contractor was sham and bogus and once the finding has been recorded under the impugned judgment, the consequence is restoring   the   relationship   of   the   principal   employer   and   of 20 contract labour as an employer and employee and this makes the respondent  entitled   for   their   regularisation   of   service   and   the difference of salary which has been paid to their counterparts who were regular in employment of the appellant establishment which indeed could not have been denied to the respondent.  In the given facts and circumstances, no error has been committed by the High Court in the impugned judgment which may call for any interference.  26. Learned   counsel   for   the   respondent   contended   that   the judgment in  Dena Nath and Others  (supra) is not applicable for the reason that it was of much prior to the Constitution Bench Judgment of this Court and it has no application for the further reason that it was a case where the effect of failure of compliance of Section 7 and 12 of the CLRA Act was a question and there was no such prohibition notification under Section 10(1) of the CLRA Act which came into consideration.  Thus, what has been expressed by this Court may not be of any assistance to the appellant.    21 27. We   have   considered   the   rival   submissions   made   by   the parties and with their assistance perused the materials available on record.  28. Before we proceed to examine the question raised in the instant appeals any further, it may be apposite to take note of the indisputed facts which has come on record and take a note of the facts recorded by the High Court in the impugned judgment.   29. It is not disputed that the appellant SAIL is a Government of India undertaking and a State within the meaning of Article 12 of the Constitution of India and has its steel plants in the different parts   of   India.     SAIL   has   one   of   the   captive   lime   stone   and dolomite mines in Kuteshwar in the District of Katni of Madhya Pradesh.  Limestone and Dolomite are necessary ingredients for manufacture of steel.   The SAIL did blasting work as this work th had been departmentalised by Notification dated 15  December, nd 1979 w.e.f. 22   June, 1980 and various tripartite agreements were executed between the principal employer(SAIL), contractor and contract labour and from time to time wages to which the contract labour was entitled for in terms of tripartite agreement 22 which indisputedly was higher in comparison to the minimum wages notified by the appropriate Government from time to time under the Minimum Wages Act, 1948 was paid to each of the contract   labour   who   had   worked   in   the   establishment   of   the appellant.    30. It is also not disputed that the contract labour which is represented   through   union   had   worked   in   the   schedule   work which has been prohibited by the appropriate Government under its notification issued under Section 10(1) of the CLRA Act, dated th 17   March, 1993 and there is no challenge to the prohibition th notification   dated   17   March,   1993   at   least   in   the   instant proceedings.  31. After 3­4 rounds of litigation, a reference was made by the Government   of   India,   Ministry   of   Labour   vide   its   notification th nd dated   27   January,   2003   followed   by   22   February,   2005 wherein respective claims with supporting oral and documentary evidence were placed by the contesting parties. CGIT under its th award   dated   16   September,   2009   recorded   a   finding   of   fact holding that the contract was not sham and bogus and if, at all, 23 there was any violation in continuation of the contract labour th after issuance of the prohibition notification dated 17   March, 1973   that   entail   penal     consequences   as   referred   to   under Sections 23 to 25 of the CLRA Act and further held that the respondent   workmen   were   not   entitled   for   reinstatement   and th answered the reference accordingly under its award dated 16 September,   2009.   The   finding   of   fact   in   return   came   to   be overturned   by   the   High   Court   in   its   limited   scope   of   judicial review under Article 226 & 227 of the Constitution of India under th the impugned judgment dated 6  September, 2010. 32. Before we may advert to examine the question in the instant appeals any further, it will be apposite to take note of the legal effect of the prohibition notification issued by the appropriate Government in exercise of power under Section 10(1) of the CLRA Act and its exposition by the Constitution Bench of this Court in  (supra) overruling the Steel Authority of India Ltd. and Others judgment   in   Air   India   Statutory   Corporation   and   Others (supra). The legal consequence of Section 10(1) of the CLRA Act, has been noticed in paragraph 68, 88, 105 and 125 as follows:­ 24

25

26 authorizes   in   Section   10(1)   prohibition   of   contract labour   system   by   the   appropriate   Government   on consideration of factors enumerated in sub­section (2) of Section 10 of the Act among other relevant factors. But, the presence of some or all those factors, in our view,   provides   no   ground   for   absorption   of   contract labour on issuing notification under sub­section (1) of Section 10. Admittedly, when the concept of automatic absorption   of   contract   labour   as   a   consequence   of issuing   notification   under   Section   10(1)   by   the appropriate   Government,   is   not   alluded   to   either   in Section 10 or at any other place in the Act and the consequence of violation of Sections 7 and 12 of the CLRA Act is explicitly provided in Sections 23 and 25 of the CLRA Act, it is not for the High Courts or this Court to read in some unspecified remedy in Section 10 or substitute for penal consequences specified in Sections 23 and 25 a different sequel, be it absorption of   contract   labour   in   the   establishment   of   principal employer or a lesser or a harsher punishment. Such an interpretation of the provisions of the statute will be far beyond the principle of ironing out the creases and the scope of interpretative legislation and as such, clearly impermissible.   We   have   already   held   above,   on consideration of various aspects, that it is difficult to accept that Parliament intended absorption of contract labour on issue of abolition notification under Section 10(1) of the CLRA Act. 125. The upshot of the above discussion is outlined thus :   (1)( a )   Before   28­1­1986,   the   determination   of   the question whether the Central Government or the State Government is the appropriate Government in relation to   an   establishment,   will   depend,   in   view   of   the definition of the expression “appropriate Government” as stood in the CLRA Act, on the answer to a further question, is the industry under consideration carried on   by   or   under   the   authority   of   the   Central Government   or   does   it   pertain   to   any   specified controlled   industry,   or   the   establishment   of   any railway, cantonment board, major port, mine or oilfield or   the   establishment   of   banking   or   insurance company?   If   the   answer   is   in   the   affirmative,   the Central   Government   will   be   the   appropriate Government;   otherwise   in   relation   to   any   other establishment the Government of the State in which 27 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 ) conditions of work and benefits provided for the contract labour in the establishment in question, and (ii) other relevant factors including those mentioned in sub­section (2) of Section 10; ( b ) Inasmuch as the impugned notification issued by the Central Government on 9­12­1976 does not satisfy the aforesaid requirements of Section 10, it is quashed but we do so prospectively i.e. from the date of this judgment and subject to the clarification that on the basis of this judgment no order passed or no action taken giving effect to the said notification on or before 28

29 (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.”   33. The exposition of the judgment of the Constitution Bench of this  Court made it clear that neither Section 10 nor any other provision in the CLRA Act provides for automatic absorption of contract   labour   on   issuing   a   notification   by   the   appropriate Government   under   Section   10(1)   of   the   CLRA   Act,   and consequently the principal employer is not required or is under legal obligation by operation of law to absorb the contract labour working in the establishment. 34. This court in   Steel Authority of India Ltd. and Others (supra)   further   held   that   on   a   issuance   of   notification   under Section   10(1)   of   the   CLRA   Act,   prohibiting   employment   of contract labour in any process, operation or other work, if an 30 industrial dispute is raised by any contract labour in regard to condition of service, it is for the industrial adjudicator to consider whether the contractor has been interposed either on the ground of   having   undertaken   to   produce   any   given   result   for   the establishment or for supply of contract labour for work of the establishment   under   a   genuine   contract,   or   as   a   mere ruse/camouflage   to   evade   compliance   with   various   beneficial legislations so as to deprive the workers of statutory benefits.  If the contract is found to be sham, nominal or camouflage, then the so­called labour will have to be treated as direct employee of the   principal   employer   and   the   industrial   adjudicator   should direct the principal employer to regularise their services in the establishment subject to such conditions as it may specify for that purpose in the facts and circumstances of the case. 35. On the other hand, if the contract is found to be genuine and   a   prohibition   notification   has   been   issued   under   Section 10(1)   of   the   CLRA   Act,   in   respect   of   the   establishment,   the principal employer intending to employ regular workmen for the process, operation or other work of the establishment in regard to which the prohibition notification has been issued, it shall give 31 preference to the  erstwhile  contract  labour if otherwise found suitable, if necessary by giving relaxation of age as it appears to be in fulfilment of the mandate of Section 25(H) of the Industrial Disputes Act, 1947. 36. It may be noted that the learned counsel for the respondent has placed reliance on the judgments of this Court in   Silver Jubilee Tailoring House and Others  Vs.  Chief Inspector of 4 ;     Shops   and   Establishments   and   Another   Hussainbhai, Calicut Vs. Alath Factory Thezhilali Union, Kozhikode and 5 ;     Others   Indian   Petrochemicals   Corporation   Ltd.   and 6 Another Vs. Shramik Sena     and Others      and these cases have been considered by the Constitution Bench of this Court in  Steel Authority of India Ltd. and Others (supra) of which a detailed reference has been made by us. 37. Tests which are to be applied to find out whether the person is   an   employee   or   an   independent   contractor   in   finding   out whether the contract labour agreement is sham, nominal or a 4 1974(3) SCC 498 5 1978(4) SCC 257 6 1999(6) SCC 439 32 mere   camouflage   has   been   examined   by   this   Court   in International Airport Authority of India  Vs.  International 7   by   the   two­judge   Air   Cargo   Workers’   Union   and   Another   Bench of this Court.  The relevant paras are as under:­   The tests that are applied to find out whether a “38. person is an employee or an independent contractor may not automatically apply in finding out whether the contract labour agreement is a sham, nominal and is a mere camouflage. For example, if the contract is for supply of labour, necessarily, the labour supplied by the   contractor   will   work   under   the   directions, supervision and control of the principal employer but that would not make the worker a direct employee of the   principal   employer,   if   the   salary   is   paid   by   a contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lies with the contractor. 39.  The principal employer only controls and directs the work to be done by a contract labour, when such labour is assigned/allotted/sent to him. But it is the contractor   as   employer,   who   chooses   whether   the worker   is   to   be   assigned/allotted   to   the   principal employer or used otherwise. In short, worker being the employee of the contractor, the ultimate supervision and   control   lies   with   the   contractor   as   he   decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/sends the worker to work under the principal   employer,   the   worker   works   under   the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor.” 38. These are the broad tests which have been laid down by this Court in examining the nature and control of the employer and 7 2009 (13) SCC 374 33 whether the agreement pursuant to which contract labour has been   engaged   through   contractor   can   be   said   to   be   sham, nominal and camouflage.  39. It was not disputed in the instant case that the contract labourer who were working under a tripartite agreement were allowed   to   continue   under   the   self­same   agreement   executed th prior to the prohibition notification dated 17  March, 1993 and extended from time to time by the competent authority even after issuance of the prohibition notification and the services of the contract   workers   were   terminated   by   the   contractor   through whom they were engaged after they proceeded on strike in April, 1996.  th 40. The Tribunal in its award dated 16  September, 2009 has recorded   a   finding   of   fact   based   on   oral   and   documentary evidence placed by the respective parties on record in reference to the fact whether the contract was sham and bogus which was a primary   cause   of   adjudication   and   it   was   observed   that   the contractors employed the contract labour on their own and they were the appointing authority. Witnesses Mangal and Kodulal 34 (contract labourer) were examined and in their cross­examination they have stated that before the issuance of notification dated th 17   March,   1993,   they   were   workers   of   the   contractor   and payment was made to them by the contractors, wage slips also show that the wages were being paid by the contractors. Other witnesses also in cross­examination have supported that half of the PF amount of the workers were deposited by their respective contractors.     Exh.   W/39   to   W/54   submitted   by   the   contract labours are the photocopies of the identity cards, pay slips, PF slips etc. These pay slips and identity cards do not show that all th 3079   workers   were   working   after   the   notification   dated   17 March, 1993 without break because number of these documents are of prior to the notification. It further observed that all the agreements between the management and the contractors are th entered   into   prior   to   the   notification   dated   17   March,   1993 prohibiting   employment   of   contract   labour   and   only   extended thereafter from time to time. It goes to show that there was no fresh contract thereafter ever entered between the parties. Exh. M/8 filed in R­721/05 and the evidence of the witnesses shows that the contractor had terminated the services of the contract labour   in   April   1996   and   transferred   some   of   the   contract 35 labourers   from   the   place   of   work   and   was   the   disciplinary authority.   41. It was further observed that the contractors had full control over the skilled and professional work and the SAIL had right to reject the limestone, if it was not within the specified approved grade as per terms and conditions of the agreement and after extensive   appreciation   of   the   oral/documentary   evidence   on record, CGIT recorded a finding of fact holding that the contract was not sham and bogus at least up to the date of issuance of the th prohibition   notification   dated   17   March,   1993.   Although   in paragraph 85 of the award the Tribunal has recorded a finding th that   after   the   issuance   of   prohibition   notification   dated   17 March, 1993 by operation of law, it became sham and bogus but in our considered view, such a finding recorded in para 85 of the th Award dated 16  September, 2009 is not sustainable in law for the   simple   reason   that   mere   issuance   of   the   prohibition notification   under   CLRA   Act   will   not   make   the contract/agreement to be  void ab initio  or bad in law and if the employees   are   allowed   to   continue   in   terms   of   the   earlier agreement after the prohibition notification under CLRA Act has 36 come into force, it may be illegal and continuance of service in the absence of any contract which stands extinguished by virtue of prohibition notification has to face the penal consequences as embedded under the scheme of CLRA Act.    42. The High Court has taken note of the various provisions of Mines Creche Rules, 1966, Maternity Benefits Act, Mines Act, 1952   and   Metalliferous   Mines   Regulations,   1961   and   other statutory measures which are applicable over the establishment of the appellant including various welfare schemes which provide safety and security of the workers. To say so, every establishment is under obligation to implement the mandate of law but that could   not   be   a   determining   factor/denominator   to   test   the contract agreement entered between the parties in arriving to a conclusion   that   such   an   agreement   is   sham,   nominal   or camouflage as held by the High Court in its impugned judgment.    43. The High Court appears to be primarily persuaded with the issuance of a prohibition notification under Section 10(1) of the CLRA   Act   as   one   of   the   salient   factor   to   indicate   that   the committee   constituted   under   the   Act,   after   examining   various 37 factors including perennial nature of work, under the CLRA Act has recommended for abolition of contract labour and accepted by   the   Central   Government   coupled   with   the   continuation   of employment of contract labour after issuance of the prohibition notification under Section 10(1) of the CLRA Act in holding that the action of the establishment was opposed to the public policy principles enshrined under Section 23 of the Indian Contract Act and taking work from the contract labour was in violation of the th statutory notification dated 17  March, 1993 and that appears to be the reason which persuaded to hold that the finding recorded by the Tribunal that contractors had full control and supervision over the work in view of the functioning of the scheme of mines was   unsustainable,   instead   holding   the   total   control   and supervision was that of management of the appellant and the contract was sham and bogus and also the fact that in all the agreements executed between the parties, there was a provision of abolition of contract labour in the matter of work of a perennial in nature and certain other conditions of agreement in recording its satisfaction that the contract was sham and bogus. 38 44. In our considered view, the finding recorded by the High Court under the impugned judgment is not sustainable for the reason that effect of the prohibition notification under Section 10(1) of CLRA Act has been settled by the Constitution Bench of this Court in   (supra) Steel Authority of India Ltd. and Others and this Court has made it clear that neither Section 10 nor any provision in the CLRA Act provides for automatic absorption of contract  labour   on  issuance   of  prohibition  notification  by   the appropriate Government under Section 10(1) of the CLRA Act and the Tribunal in the first place being the fact finding authority has extensively examined the documentary and oral evidence which came on record and also the relationship of principal employer, contractor and contract labour and the fact that their services were   terminated   by   the   contractor   after   the   contract   labour proceeded on a strike in April 1996.  45. The   Tribunal   also   considered   various   other   factors   in extenso regarding the wage slips, identity cards and the nature of work being discharged by the contract labour subsequent to the th prohibition   notification   dated   17   March,   1993   and   other documentary evidence which came on record and recorded the 39 finding in return that the contract between the contractor and the employee was not sham and bogus and the workmen were not   entitled   for   their   absorption   in   service   of   the   principal employer. 46. To test it further, apart from the statutory compliance which every principal establishment is under an obligation to comply with, its non­compliance or breach may at best entail in penal consequences which is always for the safety and security of the employee/workmen which has been hired for discharge of the nature of job in a particular establishment.  The exposition of law has been further considered in  International Airport Authority of India case (supra) where the contract was to supply of labour and necessary labour was supplied by the contractor who worked under  the  directions,  supervision and   control of  the   principal employer,   that   in   itself   will   not   in   any   manner   construe   the contract entered between the contractor and contract labour to be sham and bogus per se. 47. Thus, in our considered view, if the scheme of the CLRA Act and   other   legislative   enactments   which   the   principal 40 establishment has to comply with under the mandate of law and taking note of the oral and documentary evidence which came on record, the finding which has been recorded by the CGIT under th its award dated 16  September, 2009 in absence of the finding of fact recorded being perverse or being of no evidence and even if there are two views which could possibly be arrived at, the view expressed   by   the   Tribunal   ordinarily   was   not   open   to   be interfered   with   by   the   High   Court   under   its   limited   scope   of judicial review under Article 226/227 of the Constitution of India and this exposition has been settled by this Court in its various judicial precedents.  48. It is true that judgment in  Dena Nath and Others  (supra) is in reference to failure of compliance of Section 7 and 12 and not in reference to Section 10(1) of the CLRA Act but if we look into the scheme of CLRA Act which is a complete code in itself, non­compliance or violation or breach of the provisions of the CLRA Act, it result into penal consequences as has been referred to in Sections 23 to 25 of the Act and there is no provision which would entail any other consequence other than provided under Section 23 to 25 of the Act.  41 49. In our considered view, the Tribunal under its award dated th 16  September, 2009 has rightly arrived to the conclusion that the contract was not sham and bogus and there shall be no automatic   absorption   of   contract   labour   on   issuance   of   a prohibition notification under the CLRA Act and the High Court of Madhya Pradesh has committed a manifest error in reversing the finding of fact in return under its impugned judgment dated th 6  September, 2010 which, in our view, is not sustainable and deserves to be set aside. 50. The appeals are accordingly disposed of and the impugned th judgment of the High Court dated 6  September, 2010 is hereby set aside.  The respondent is at liberty to avail remedy for alleged breach   of   the   provisions   of   the   CLRA   Act,   if   so   advised,   in accordance with law.  No costs. 51. Pending application(s), if any, also stand disposed of. …………………………………J. (A.M. KHANWILKAR) …………………………………J. (AJAY RASTOGI) New Delhi July 05, 2019 42 43