Full Judgment Text
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CASE NO.:
Appeal (civil) 7731 of 1997
PETITIONER:
HARI SHANKAR SHARMA & ORS.
Vs.
RESPONDENT:
M/S ARTIFICIAL LIMBS MANUFACTURING CORPN. & ORS.
DATE OF JUDGMENT: 26/11/2001
BENCH:
S. Rajendra Babu & Ruma Pal
JUDGMENT:
RUMA PAL, J.
The respondent No. 1 is a Government of India
undertaking. It was incorporated under the Companies Act,
1956 on 30th November 1972. One of the main objects for
which the respondent No. 1 was established was to promote,
encourage and develop the availability, use, supply and
distribution at reasonable cost in the country of artificial
limbs to needy persons particularly disabled defence
personnel. For this purpose the respondent No. 1 set up a
factory where more than 700 persons are employed. The
respondent No. 1 also set up a canteen for its employees.
From time to time agreements were entered into between the
respondent No. 1 and different contractors by which the
contractor agreed to prepare and serve food stuffs and other
refreshments at the canteen. At the relevant time the
concerned contractor was Aditya Shukla, the respondent
No.2 herein.
According to the appellants, they were employed by
several of the contractors and had been serving in the canteen
for several years. During the pendency of the contract with
the respondent No.2, the appellants raised an industrial
dispute claiming to be regular workmen of the respondent
No. 1. The dispute was referred by the State Government to
the Labour Court. The Labour Court considered the evidence,
both oral and documentary, and by an award dated 10th May
1996, came to the conclusion that the appellants were not the
employees of respondent No. 1 but were employees of
respondent No. 2. Being aggrieved with the award, the
appellants filed a writ petition before the High Court at
Allahabad. The High Court was of the view that the
appellants claim was primarily for abolition of contract
labour in canteens and consequent absorption of the contract
labourers as employees of the principal employer, in this case
the respondent No. 1. The High Court rejected the
submission and dismissed the writ petition.
Before us learned counsel for the appellant submitted
that the High Court had wholly misdirected itself. According
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to the appellants, the issue was not whether the Labour Court
could have directed abolition of contract labour but the issue
was whether the Labour Court was bound, on the basis of the
decision of this Court in Parimal Chandra Raha and
others v. Life Insurance Corporation of India and Others
1995 Supp (2) SCC 611, to hold that the appellants were in
fact regular employees of the respondent No.1. It was
submitted that the respondent No.1 was bound by Section 46
of the Factories Act, 1948 to set up the canteen. It was also
submitted that the State Government had by notification
specified the factory of the respondent No.1 under the
provisions of Section 46(1) of the Factories Act. It was
contended that since the respondent No.1 was statutorily
obliged to provide and maintain a canteen for the use of its
employees, the canteen was part of the respondent No.1s
establishment and therefore the appellants who were
employed in such canteen were the employees of the
respondent No.1. It is the appellants case that the various
terms in the contract between the contractor and the
respondent No.1 clearly showed that the appellants were
under the direct supervision and control of respondent No.1.
This, together with the fact that the appellants had continued
to be employed in the canteen despite several changes of
contractors, showed that the appellants were in fact the
respondent No.1s employees.
Learned counsel for the respondent No.1 submitted that
the appellants had never challenged the contract between the
respondent No.1 and the contractor as being a sham
document to camouflage the fact that the appellants were
really the respondent No.1s employees. It was contended
that in the absence of such a challenge, there was no scope
for the appellants to claim to be regular employees of the
respondent no.1. Furthermore, according to the respondent
No.1, the Labour Court had duly considered the terms of the
contract and the oral and documentary evidence adduced
including the evidence of the contractor himself, and had
come to a categorical finding that the appellants were not the
employees of the respondent No.1. Finally, it was submitted
that in any event the facts on record clearly showed that the
appellants were the employees of the contractor and that the
respondent No.1 exercised no control over the appointment,
continuation or dismissal from service of the appellants.
The submission of the appellants that because the
canteen had been set up pursuant to a statutory obligation
under Section 46 of the Factories Act therefore the
employees in the canteen were the employees of respondent
No.1, is unacceptable. First, the respondent No. 1 has
disputed that Section 46 of the Factories Act at all applies to
it. Indeed, the High Court has noted that this was never the
case of the appellants either before the Labour Court or the
High Court. Second, assuming that Section 46 of the
Factories Act was applicable to the respondent No. 1, it
cannot be said as an absolute proposition of law that
whenever in discharge of a statutory mandate, a canteen is set
up or other facility provided by an establishment, the
employees of the canteen or such other facility become the
employees of that establishment. It would depend on how the
obligation is discharged by the establishment. It may be
carried out wholly or substantially by the establishment itself
or the burden may be delegated to an independent contractor.
There is nothing in Section 46 of the Factories Act, nor has
any provision of any other statute been pointed out to us by
the appellants, which provides for the mode in which the
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specified establishment must set up a canteen. Where it is
left to the discretion of the concerned establishment to
discharge its obligation of setting up a canteen either by way
of direct recruitment or by employment of a contractor, it
cannot be postulated that in the latter event, the persons
working in the canteen would be the employees of the
establishment. Therefore, even assuming that the respondent
No. 1 is a specified industry within the meaning of Section
46 of the Factories Act, 1946, this by itself would not lead to
the inevitable conclusion that the employees in the canteen
are the employees of respondent No. 1.
The observations in Parimal Chandra Rahas 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 Corporation Ltd. vs.
Shramik Sena and Others (1999) 6 SCC 439 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. (See also Barat Fritz
Werner Ltd. V. State of Karnatka 2001 (4) SCC 498, 504)
It may be, and has been often so found, that the
employees of a contractor are de facto employees of the
establishment despite the existence of a written agreement
between the contractor and the establishment. To this end our
attention was drawn to the agreement between the contractor
and the respondent No.1. From a scrutiny of the agreement, it
is clear that although the respondent No.1 had agreed to
provide the contractor with the basic infrastructure, the actual
running of the canteen was the responsibility of the
contractor alone. For example, the respondent No.1 was to
give the furnishings, dining tables, chairs, curtains, water
coolers etc., but the contractor was liable to indemnify the
respondent No.1 for any loss or damage caused to these items
due to any act of omission or commission by the contractor
or his employees. The cost of repairing and maintaining all
the equipment was also the contractors. It was also the
contractors obligation to provide the raw-material and
ensure that such raw- material was free from adulteration,
contamination and was wholesome and fit for human
consumption.
Under Clause 21, the contractor was obliged to provide
all the facilities available to the workers under various labour
laws applicable to the respondent No. 1. The Contractor was
also required to abide by all the provision of labour laws as
applicable from time to time and was liable for financial
obligations under various labour laws as amended from time
to time. In case the contractor contravened any provisions of
those laws and the respondent No. 1 suffered any damage,
loss or harm due to any act of commission or omission of the
contractor, the contractor was bound to indemnify the
respondent No. 1. Similarly, clause 31 of the agreement
provided The Contractor shall be responsible for discharge
of legal liabilities towards his employees and also for
observing all Laws and Government Rules relating to
Labour viz. EPF Act, ESI Act, Payment of Wages Act,
Minimum Wages Act and health in so far as they relate to the
canteen.
It is true that under clause 33, the respondent No. 1
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agreed to pay to the contractor service charges of
Rs.73,372.48 per month upto 700 employees with the
following break up:
a) Rs.30,895.48 Salary and other
statutory expenses
b) Rs.42,477.00 for neutrilising
the price hike of the raw
material.
but this may have only ensured that the margin of profit of the
contractor was reasonable and fixed on relevant considerations.
Besides the agreement must be construed in the background of
the rules framed by the State Government under Section 46 (2) of
the Factories Act, 1948. Under Section 46 (2) itself State
Government is empowered to lay down inter-alia : the standard
in respect of construction, accommodation , furniture and
other equipment of the canteen; and the foodstuffs to be
served therein and the charges which may be made therefor.
Merely because there is compliance with the rules by the
respondent No.1 (assuming that the rules applied) by providing
the equipment and for the rate at which the foodstuffs would be
sold at the canteen by the contractor would not necessarily mean
that the employer was running the canteen through the agency of
the contractor. There must be something more.
Directly relevant to the crux of the matter is clause
43 of the agreement whereby the contractor was given
the discretion to employ the workers already working in the
canteen (like the appellants) but it was made clear that the
contractor could take action against the canteen workers. It is
noteworthy that the respondent No. 1 had no say as to who should
be employed by the contractor nor the method of recruitment to be
followed by the contractor. There was no obligation on the
contractor to employ the persons who had served under earlier
contractors. Even if the agreement had contained a condition that
the contractor must retain the old employees, it would not
necessarily mean that those employees were the employees of the
establishment. As was said in R.K. Panda v. Steel Authority of
India Ltd. (1994) 5 SCC 304:
Such a clause in the contract
which is benevolently inserted in
the contract to protect the
continuance of the source of
livelihood of the contract labour
cannot by itself give rise to a right
to regularisation in the
employment of the principal
employer. Whether the contract
labourers have become the
employees of the principal
employer in course of time and
whether the engagement and
employment of labourers through
a contractor is a mere camouflage
and a smokescreen, as has been
urged in this case, is a question of
fact and has to be established by
the contract labourers on the basis
of the requisite material. It is not
possible for the High Court or this
court, while exercising writ
jurisdiction or jurisdiction under
Article 136 to decide such
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questions, only on the basis of the
affidavits.
The issue is, therefore, primarily and ultimately one of
fact to be determined by a fact finding tribunal . In the case
before us, the terms of the agreement are inconclusive.
Before the Labour Court the contractor stated in cross-
examination that he used to supervise and control his
employees and pay their salaries. Even the witnesses for the
appellants stated that their salaries were paid by the
contractor. The appellants witnesses also said that the
respondent No. 2 brought the raw material. The respondent
No. 1s witnesses said that the respondent No. 1 had no hand
in the selection of the employees of the canteen. The
prescribed procedure for appointing employees of the
respondent No. 1 was not applied to them. The respondent
No. 1 did not record their attendance nor paid them their
salaries. The Labour Court also noted that the appellants
witnesses were unable to identify or name any officer of the
respondent No. 1 who they claimed supervised their work.
The Labour Court found that the appellants were unable to
prove that the respondent No. 1 exercised any control or
supervision over the employees of the contractor. After a
detailed analysis of the evidence, the Labour Court
concluded that the appellants were not the employees of
respondent No. 1. The finding cannot be termed to be
perverse. Given this, it would have been inappropriate for
the High Court under Article 226 to re-appreciate the
evidence and come to a different factual conclusion. The
High court did not do that nor do we propose to do so under
Article 136.
We accordingly dismiss the appeal but without any
order as to costs.
J.
(S. Rajendra Babu)
J.
(Ruma Pal)
November 26, 2001
See: Indian Petrochemicals Corporation Ltd. vs. Shramik Sena and Others 1999 (6) SCC 439
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