CONTRACT LABOURERS CLAIM FOR REGULARISATION, INDUSTRIAL ADJUDICATION, JUDICIAL REVIEW UNDER ARTICLES 226 AND 136 OF THE CONSTITUTION OF INDIA

ARUNDHATI SAMANTARAY

Dr.D.Y.Patil College Of Law ,Mumbai University.

PRELUDE : Esteemed Readers,during the course of my internship, I had the opportunity to come across very interesting cases.I have already published my project on Payment of Gratuity Act,1972 in Indian Factories and Labour Reports,a very reputed fortnight journal on labour legislation published from Allahabad.

While doing my project on Contract Labour (Regulation and Abolition) Act,1970 I came across very typical cases.I noticed 2 cases which were dealt by the Assistant Labour Commissioner (Central),Hazaribagh.The case are as follows :

(i) Nago Mahato and 145 others : This industrial dispute was raised by Bihar Colliery Kamgar Union against Central Coalfields Ltd,Kedla Coal Washery demanding regularisation of 146 contract workers.The Union says that since the workers have been working for years together in Kedla Washery of CCL they should be regularised as permanent workers of Central Coalfields Ltd.The reference on this industrial dispute has been declined by the central Government and the Union has challenged the decision of central government in the Hon'ble high Court of Jharkhand.

(ii) Mukesh Kumar and 51 others : This industrial dispute has been raised by the same union demanding regularisation of 52 contract workers in Central Coalfields Ltd.The Union claims that all the workers have been working in Kedla washery since 1997-98.The Union submitted xerox copies of the Identity Cards.When the Identity cards were examined it was revealed that only 4 persons (contract workers) were above 18 years of age, one worker was not born in 1997 and the rest 47 workers were minors in 1997 who, in no case, can be permitted to work in a Central Public Sector Undertaking.This dispute has also not been referred to Central Government Industrial Tribunal-cum-Labour Court, Dhanbad for adjudication. But interestingly the Union has challenged the decision in the Hon'ble High Court of Jharkhand.

By interacting with the officers of the office of the Deputy Chief Labour Commissioner (Central), I came to know that it has been the habit of the workers as well as the trade unions to claim regularisation of the services of the contract workers in the establishments of the Principal Employers though as on today there is no law to that effect.

The disputes on contract labour give birth to the following questions :

(i) Whether the contract labourers can demand/claim regularisation of services in the Principal Employers' establishments ?

(ii) If the contract workers continues in the establishments of the  Prinipal Employers for years together under various (let me say different contractors), can such workers claim regularisation in the establishment of Principal Employers ? What is the position of law in this regard ?

(iii) If the Principal Employer provide some support/infrastructure to the contract for smooth operation of the contract work/job/operation, can it be a ground for the contract workers to claim regularisation of services in the establishment of the Principal Employer ?

(iv) Can a writ court under Article 226 and the Hon'ble Supreme Court, under Article 136 of the Constitution of India, re-appreciate the evidences abduced before the Labour Court and order abolition of contract labour and also direct absorption of contract workers in the establishments of the Principal Employers ?

I have surveyed quite a good number of decisions of the Hon'ble Supreme Court and various High Courts.The main article-cum-project is under preparation as I am in the process of surveying some more decisions.In connection with the above four questions, I intend to discuss the following case-law of the Hon'ble Supreme Court, which, I think, will be of interest to the esteemed readers :

THE CASE-LAW:

HARI SHANKAR SHARMA AND OTHERS

vrs

M/S ARTIFICIAL LIMBS MANUFACTURING CORPORATION OF INDIA

[AIR 2002 SC 226 : 2002 (1) AWC 21 (SC) : 2002 Cri LJ 94 : 2002 (92) FLR14 : 2002 (1) JCR 282 (SC) : JT 2001(9) SC6 50 : 2002 Lab IC 131 : 2002-I-LLJ-237 : 2001 (8) SCALE 282 : (2002) 1 SCC 337]

DoJ : 26 NOVEMBER, 2001

FACTS OF THE CASE :

      In this case the respondent No.1,M/s Artificial Limbs Manufacturing Corporation of India 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.

INDUSTRIAL DISPUTE RAISED BY CONTRACT WORKERS:

      According to the appellants (contract workers working in the canteen), 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  respondent No. 1. The dispute was referred by the State Government to the Labour Court.

ADJUDICATION BY 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 (the contractor).

WRIT PETITION TO THE HIGH COURT :

      Having felt aggrieved by 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.

SPECIAL LEAVE PETITION TO THE SUPREME COURT :

      Having felt aggrieved by the judgment and order of the High Court, the contract workers of the canteen approached the Hon'ble Supreme Court by filing a special leave petition, which, on grant of special leave, became Appeal (Civil) No.7731 of 1997.

Contentions advanced by the Appellants:

      Before the Hon'ble Apex Court, the  counsel for the appellants submitted as follows:

(i) that the High Court had wholly misdirected itself.

(ii) 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.

(iii) that the respondent No.1 was bound by Section 46 of the Factories Act, 1948 to set up the canteen.

(iv) 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.

(v) 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.1's establishment and therefore the appellants who were employed in such canteen were the employees of the respondent No.1.

(vi) that 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.

(vii) that the above (vi) , 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.1's employees.

Counter-submissions on behalf of ALIMCO,the Respondent no.1:

      The counsel for the respondent No.1 submitted as follows:

(i) 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.1's employees.

(ii)  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.

(iii) that furthermore, 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.

(iv)  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.

APPRECIATION OF RIVAL SUBMISSIONS :

      On appreciating the rival submissions, the Hon'ble Supreme Court stated that 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. The following reasonings were given by the Hon'ble supreme Court :

(1) The respondent No. 1 had 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.

(2) 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 was  pointed out to the Hon'ble Court  by the appellants, which provides for the mode in which the 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.

REFERENCE TO PARIMAL CHANDRA RAHA'S CASE:

      The Hon'ble Apex Court stated that the observations in Parimal Chandra Raha's 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. vrs. 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. vrs. State of Karnatka, 2001 (4) SCC 498, 504).

REFERENCE TO THE TERMS OF THE AGREEMENT:

       The Hon'ble Court stated that 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 the  attention of the Hon'ble Court was drawn to the agreement between the contractor and the respondent No.1. From a scrutiny of the agreement, it was observed 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 contractor's. It was also the contractor's 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 that 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.

ON COMPENSATING THE CONTRACTOR :

      The Hon'ble Supreme Court stated that it is true that under clause 33, the respondent No. 1 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 neutralising the price hike of the raw material.

On this point the Hon'ble Court stated, 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:

       Referring to clause 43 of the agreement whereby the contractor was given the discretion to employ the workers already working in the canteen (like the appellants), the Hon'ble Court stated that  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 vrs. Steel Authority of India Ltd. (1994) 5 SCC 304:

WHAT DOES THE CLAUSE OF CONTINUANCE OF CONTRACT WORKERS UNDER VARIOUS CONTRACTORS MEAN ?

      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 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.

REFERENCE TO ADJUDICATION OF THE INDUSTRIAL DISPUTE BEFORE THE LABOUR COURT :

      Referring to the adjudication proceedings before the Labour Court, the Hon'ble Apex Court stated that 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. 1's 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.

THE CONCUSION:

      Coming to the conclusion, it was stated by the Apex Court that 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, the Hon'ble Apex Court further told, 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 the Apex Court  proposes to do so under Article 136.

THE VERDICT :

The Appeal filed by the contract workers was dismissed.

No order as to costs.