# [1961] 3 S.C.R. 342

- **Citation:** [1961] 3 S.C.R. 342
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, K. c. DAS GUPTA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1961-3-s-c-r-342-2001
- **Pages:** 9

## Headnote

Industrial Disptde-System of contract labour-Abolition by
Industrial Court-]t<risdiction-lf violative of employer's fundamental rig/zt to carry on business-Bombay J.nd,.strial Relations
Act, r947(II of r947). ss. 3(r8), 42(2), 73A, Item (2) Sch. II, Item
(6) Sch. III-Constitution of India, Art. r9(r)(g).
A dispute having arisen between the eppellant-employer and
its workmen regarding the employment of contract labour in the
appellant's mills, the union representing the workmen which is
the respondent in the present case after serving notice on the
appellant under s. 42(2) of the Bombay Industrial Relations Act
made reference to the Industrial Court under s. 73A of the Act
demanding the abolition of the system of employing contractors'
labour and the permanent increment of employees in the respective departments. The contention of the appellant, inter alia,
was that the Industrial Court had no jurisdiction to decide the
dispute which was within the exclusive jurisdiction of a Labour
Court under item (6) of Sch. III of the Act, and that any awerrl
directing the abolition of contract labour would contravene the
appellant's fundamental right to carry on business under Art.
r9(r)(g) of the Constitution. The Industrial Court decided that
the .Industrial Court would have jurisdiction as the matter was
covered by item (2) of Sch. II of the Act.and that there was no
contravention of the fundamental rights of the appellants. On
appeal the Labour Appellate Tribunal, held, that the Industrial
Court had jurisdiction to decide the matter although it was not
covered by item (2) of Sch. II of the Act. As regards the question of contravention of the fundamental right it heJcl that the
question whether the restriction imposed was reasonable depended upon the facts of each case and the matter was outside the
powers of a court of appeal.
Eventually it set aside the entire
award on the merits. On appeal 'by the appellant by special
leave,
Held, that the Industrial Court had jurisdiction to deal with
the matter.
•
Whatever might be the ambit of the word "employment"
used in item (6) of Sch. Ill, if a matter was covered by Sch. II
it could only be referred to the Industrial Court under s. 73A. A
question relating to the abolition o[ contract Jabour inevitably
raised a dispute relating to matters contained in items (2), (9) and
(Io) of Sch. II, namely, permanent increase in the number of
3 S.C.R. SUPREME COURT REPORTS
343
persons employed, the employees' wages, hours of work and rest
intervals and could, therefore, be referred only to an Industrial
Court.
Godavari Sugar
Mills Ltd.
The power given to the Industrial Court which was a quasiv.
judicial tribunal to decide whether contract labour should be Kepargaon Taluk
abolished or not would not make the. definition of "industrial Sakhar Kamga•
tnatter" in so far as it referred to the mode of employment an .'·inbha
Sakarwaa
unreasonable restriction on the fundamt'ntal right of the em-
'
ployer _to carry on his trade and as such there was no contravtntion of his fundamental right by providing in s. 3(18) that an
"industrial matter" included also the mode of employment of
the .employees.
CIVIL APPELLATE JumsDIC'l'ION:
Civil Appeal No.
352 of 1958.
Appeal by special leave from the judgment and
order dated July 27, 1956, of the Labour Appellate
Tribunal of India, Bombay, in Appeal (Born.) No. 72
of 1956.
G. S. Pathal~, J. B. Dadachanji, S. N. 'Andley and
Ranieshwar Nath, for the appellant.
D. S. Nargoulkar and K. R. Choudhitri, for the
respondent No. 1.
B. P. Maheshwari, for the Interveners.
1960. December 16. The Judgment of the Court
was delivered by
WANCHOO, J.-This is an appeal by special leave in
Wanchoo ].
an industrial matter. The appellant owns two sugar
mills. There was a dispute betwe(ln the appellant
and its workmen with respect to the employment of
contract labour in . the two mills. Consequently, a
notice of change under s. 42 (2) of the Bombay Industrial Relations Act, No. XI of 1947, (herein

## Text

Der: ember 16:
342
SUPREME COURT REPORTS
GODAV ARI SUGAR MILLS LTD.
v.
[1961]
KEPARGAON TALUKA SAKHAR KAMGAR
SABHA, SAKARWADI
(P. B. GAJENDRAGADKAR, K. N. WANCHOO and
K. c. DAS GUPTA, JJ.)
Industrial Disptde-System of contract labour-Abolition by
Industrial Court-]t<risdiction-lf violative of employer's fundamental rig/zt to carry on business-Bombay J.nd,.strial Relations
Act, r947(II of r947). ss. 3(r8), 42(2), 73A, Item (2) Sch. II, Item
(6) Sch. III-Constitution of India, Art. r9(r)(g).
A dispute having arisen between the eppellant-employer and
its workmen regarding the employment of contract labour in the
appellant's mills, the union representing the workmen which is
the respondent in the present case after serving notice on the
appellant under s. 42(2) of the Bombay Industrial Relations Act
made reference to the Industrial Court under s. 73A of the Act
demanding the abolition of the system of employing contractors'
labour and the permanent increment of employees in the respective departments. The contention of the appellant, inter alia,
was that the Industrial Court had no jurisdiction to decide the
dispute which was within the exclusive jurisdiction of a Labour
Court under item (6) of Sch. III of the Act, and that any awerrl
directing the abolition of contract labour would contravene the
appellant's fundamental right to carry on business under Art.
r9(r)(g) of the Constitution. The Industrial Court decided that
the .Industrial Court would have jurisdiction as the matter was
covered by item (2) of Sch. II of the Act.and that there was no
contravention of the fundamental rights of the appellants. On
appeal the Labour Appellate Tribunal, held, that the Industrial
Court had jurisdiction to decide the matter although it was not
covered by item (2) of Sch. II of the Act. As regards the question of contravention of the fundamental right it heJcl that the
question whether the restriction imposed was reasonable depended upon the facts of each case and the matter was outside the
powers of a court of appeal.
Eventually it set aside the entire
award on the merits. On appeal 'by the appellant by special
leave,
Held, that the Industrial Court had jurisdiction to deal with
the matter.
•
Whatever might be the ambit of the word "employment"
used in item (6) of Sch. Ill, if a matter was covered by Sch. II
it could only be referred to the Industrial Court under s. 73A. A
question relating to the abolition o[ contract Jabour inevitably
raised a dispute relating to matters contained in items (2), (9) and
(Io) of Sch. II, namely, permanent increase in the number of
3 S.C.R. SUPREME COURT REPORTS
343
persons employed, the employees' wages, hours of work and rest
intervals and could, therefore, be referred only to an Industrial
Court.
Godavari Sugar
Mills Ltd.
The power given to the Industrial Court which was a quasiv.
judicial tribunal to decide whether contract labour should be Kepargaon Taluk
abolished or not would not make the. definition of "industrial Sakhar Kamga•
tnatter" in so far as it referred to the mode of employment an .'·inbha
Sakarwaa
unreasonable restriction on the fundamt'ntal right of the em-
'
ployer _to carry on his trade and as such there was no contravtntion of his fundamental right by providing in s. 3(18) that an
"industrial matter" included also the mode of employment of
the .employees.
CIVIL APPELLATE JumsDIC'l'ION:
Civil Appeal No.
352 of 1958.
Appeal by special leave from the judgment and
order dated July 27, 1956, of the Labour Appellate
Tribunal of India, Bombay, in Appeal (Born.) No. 72
of 1956.
G. S. Pathal~, J. B. Dadachanji, S. N. 'Andley and
Ranieshwar Nath, for the appellant.
D. S. Nargoulkar and K. R. Choudhitri, for the
respondent No. 1.
B. P. Maheshwari, for the Interveners.
1960. December 16. The Judgment of the Court
was delivered by
WANCHOO, J.-This is an appeal by special leave in
Wanchoo ].
an industrial matter. The appellant owns two sugar
mills. There was a dispute betwe(ln the appellant
and its workmen with respect to the employment of
contract labour in . the two mills. Consequently, a
notice of change under s. 42 (2) of the Bombay Industrial Relations Act, No. XI of 1947, (hereinafter called
the Act) was given to the appellant by the union representing the workmen. Thereafter the union, which
is the respondent in the present appeal, made two
references to the industrial court, one with respect to
each ·mill, nndor s. 73A of the Act, and the main
demand in the references was that "the system of employing contractors' labour should be abolished and
the strength of the employees of the respective departments should be permanently increased sufficiently
344
. SUPREME COURT REPORTS
[1961]
i96o
and accordingly". The appellant raised two main
G d -.
5
contentions before the industrial court, namely, (i) that
0
;~~:· Lt;.c~r the industrial court had no jurisdiction to decide the
v.
dispute as the matter was covered by item (6) of Sch.
·r<.pargaon Taluka III of the Act, which is within the exclusive jurisdioSakhar K•mgar. tion of a labour court; and (ii) that any award directSabha, Sakarwad• ing abolition of contract labour would contravene the
Wanchoo 1.
fundamental right of the appellant to carry on business under Art. 19(l)(g) of the Constitution.
The industrial court decided both the points against
the appellant; on the question of jurisdiction it held
that the matter was covered by item (2) of Sch. II of
the Act and therefore the industrial court would have.
jurisdiction, and on the second point it held that there
was no contravention of the fundamental right conferred on the appellant under Art. 19(1)(g). It may
be mentioned ~hat the second point arose on the stand
taken by the appellant thatthe workmen of the contractors were not the workmen of the appellant. The
industrial court then dealt with the merits of the case
and passed certain orders, with which we are however
not concerned in the present appeal.
It may be mentioned that there were cases relating
to a number of other sugar mills raising the same
points, which were decided at the same time by the
industrial court. In consequence, there were a number of appeals to the Labour Appellate Tribunal by
the mills and 6ne by one of the unions (though not by
the respondent-union). All these appeals were heard
together by the appellate tribunal, where also the
same two points relating to jurisdiction and contravention of the fundamental right guaranteed by Art.
19( 1 )(g) were raised. The Appellate Tribunal did not
agree with the industrial court that the references
were covered by item (2) of Sch. II to the Act. It,
however, held that the word "employment" in item (6)
of Sch. III to the Act had to be given a restricted
meaning. It pointed out that the three ·Schedules
did not exhaust the comprehensive provisions of
s. 42(2) and the subject-matter of dispute, namely, the
abolition of contract labour was a question of far.
reaching and important change which could not have
_,
3 S.C.R. · SUPREME COURT REPORTS
345
been intended to be dealt with in a summary way by
1960
a labour court, which is the lowest in the hierarchy of
-
courts est1J.blished under the Act. It therefore held God••.ari Sugar
that the industrial court had jurisdiction to decide the
Mills Ltd.
matter. On the question of contravention of the Keparga:~ Taluka
fundamental right, the appell11>te tribunal took the Sakhar Kamg••
view that the question whethP,r the restriction impos- Sabha, Sakarwadi
ed was reasonable depended upon the facts of each
--
case and therefore was a matter outside its power as a
Wanchoo f.
court of appeal. It then considered the merits of the
matter and came to the conclusion that the approach
of the industrial court to the questions raised before
it was not correct and therefore it found it difficult to
support the award. Eventually it set aside the award
and remanded the matter for early hearing in the
light of the observations made by it. Further, it
decided that in the interest of justice the entire award
should be set aside, even though there was no appeal
before it by the unions in most of the cases.
The
appellant then came to this Court and was granted
special leave; a.nd that is how the matter has come up
before us.
Mr. Pathak ou behalf of the appellant has raised
the same two points before us.
We shall first deal
with the question of jurisdiction. Reliance in this
connection is placed on item(6) of Sch. III of the Act,
which is in these terms:-
"Employment including-
(i) reinstatement and recruitment;
(ii) unemployment of persorts previously employed in the industry concerned."
It is not in dispute that matters contained in Sch. III
are within the jurisdiction of a labour court and an industrial court has no jurisdiction to decide any matter
in a reference under s. 73A of the Act which is within
the jurisdiction 0£ a labour court. Mr. Pathak contends that item (6) of Sch. III speaks of "employment" and includes in it two matters which might
otherwise not have been thought to be included iu it.
Therefore, according to him, employment as used in
item (6) is wider than the two matters included in it
44
346
SUPREME COURT REPORTS
[1961]
~
and the questioh whether contract labour should be
Godavari sugar employed or not would be a matter of employment
.Uills Ltd.
within the meaning of that word in item (6) of Sch.
•·
III. 'Ve do not think it necessary for purposes of this
Hepargaon_ Taluka appeal to consider what \Vould be the ambit of employssbahkhar5I•k•mgadr. ment as used in item (6) of Sch. III. The scheme of
•
a,
a aiwa 1th A t h.
h t
d
71
d
' '
_
e c s ows t a un er ss.
an 72 the Jurisdiction
wanchoo ].
of a labour court and an industrial court is concurrent
with respect to any matters which the State Government may deem fit to refer to them; but under s. 73A
reference by a registered union which is a representative of employees and which is also an approved union,
caq only be made to an industrial court, subject to the
proviso that no such dispute can be referred to an
industrial court where under the provisions of the Act
it is 'required to be referred to the labour court for its
decision. Sec. 78 of the Act provides for jurisdiction of
labour courts and matters specified in Sch. II are not
within their ordinary jurisdiction. Therefore, when
a registered union wishes to refer any matter which
is contained in Sch. II of the Act such reference can
be made by it only to the industrial court. It follows
in consequence that whatever may be the ambit of
the word "employment" used in item (6) of Sch. III,
if any matter is covered by Sch. II it can only be
referred to the industrial court under s .. 73A.
Now
the question whether contract labour should be abo;
lished (on the assumption that contract labour is not
in the employ of the mills) immediately raises ques-
. tions relating to permanent increase. in the number
of persons employed, their. wages including the period
and mode of payment, hours of work and rest intervals, which are items (2), (9) and (10) of Sch. II.
Therefore, a question relating to abolition of contract
labour is so inextricably mixed up with the question
of permanent increase in the number of persons employed,' their wages, hours. of work and rest intervals
that any dispute relating to contract labour would
inevitably raise questions covered by Sch. II. Therefore, a disp_ute relating to contract labour if it is to be
referred under s. 73A by a registered union can only
be referred to an industrial court as it immediately
'
'
' ·,
3 S.C.R. SUPREME COURT REPORTS
347
raises matters contained in items (2), (9) and (10) of
i96o
~ch. II. Mr. Patha~ urges'h?wever that mat~ers relat- Godov;;-Sugar
mg to permanent mcrease m the number of persons
Mill.< Ltd.
employed due to the abolition of contract labour, their
v.
wages, hours of work and rest intervals wen~ not I<epargaon Taluka
really disputed at all by the appellant. It 'appears Sakhar .Ka>ngar.
that in the written-statements of the appellant, these Sabha, Sakarw•d•
points were not raised; but the decision of the appelwa,,choo ].
late tribunal shows that one of the contentions raised
before it by the sugar-mills was that the workmen
concerned were not employees of the sugar mills.
Therefore, as soon as this contention is raised a dispute as to permanent incrnase in the number of persons employed, their wages, hours of work and rest
intervals would immediately arise. It must therefore
be held that a question relating to the abolition of
conti:act labour inevitably raises a dispute with respect
to these three items contained in Sch. II. In the circumstances we are of opinion that the industrial court
had jurisdiction to deal with the matter. In particular, we may point out that in their petitions the
unions had raised at least the question as to the permanent increase in the number of persons employed
and that would immediately bring in item (2) of Sch.
II. It is true that the question of permanent increase
in the number of persons employed, their wages,
hours of work and rest intervals would only arise if
contract labour is to be abolished; but in our opinion
these are matters so inextricably mixed up with the
question relating to abolition of contract labour that
they must be held to be in dispute as soon as the dispute is niised about the abolition of contract labour,
(assuming always that the employer does not accept
contract labour as part 0f its labour force).
The
contention about jurisdiction must therefore be rejected.
This brings . us to the second contention raised by
l\Ir. Pathak. He bases his argument in this behalf on
s. 3( 18), which defines an " industrial matter" as
meaning any matter relating to employment, work,
wagPs, hours of work, privileges, rights or duties of
employers or employees, or the mode, terms and
348
SUPREME COURT REPORTS
[1961]
r960
conditions of employment. Mr. Pathak urges that the
G d -. s
definition of "industrial matter" contravenes the
o a11a1s
ugar f
d
1 • h
t d
d
A
9(
Mills Ltd.
un amenta rig t guaran ee
un er
rt. 1 l)(g),
v.
when it provides that the mode of employment is also
Kepargaon Taluka included within it. Reference is also made to s. 3(17)
Sakh•r Kamgar. which defines an "industrial dispute" as any dispute
Sabha, Sakarwad• or difference which is connected with any industrial
wanchoo J.
matter. Mr. Pathak therefore urges that reading
the two definitions together the industrial court is
given the power to decide disputes as to the mode of
employment and that contravenes the fundamental
right guaranteed under Art. 19(l)(g), for it enables an
industrial court to adjudicate on the mode of employment and thus interfere with the right of the employer to carry on hiR t.rade as he likes subject to reasonable restrictions. Now assuming that the mode of
employment used in s. 3(18) includes such questions
as abolition of contract labour, the question would
still be whether a provision which enables an industrial court to adjudicate on the question whether contract labour should or should not be aboli.,heLI is an
unreasonable restriction on the employer's right to
carry on his trade. We c:inn•.:·~ see how the fact that
power is given to tho industrial court, which is a
quasi-judicial trihuw1l to decide whether contract
labour shculd be abolished or not wonld m'1ke the
definitio;• ,. ;_· "industrial matter" in so far as it refers
to t.he m·_ · · of employment, an unrc,1sonab]e restriction on the fundamental right of tho employer to
carry on 1.rade. The matter being entrusted to a quasijudioial tribunal would be decided after giving both
parties full opportunity of presenting their case aud
after considering whether in the circumstances of a
particular case the restriction on the mode of employment is a reasonable restriction or not. The tribunal
would always go into the reasonableness of the matter ttnd if it comes to the conclusion that the mode of
employment desired by labour is not reasonable it
will not allow it; it is only when it comes to the conclusion that the mode uf employment desired by
labour in a particular case is a reasonable restriction
. l
3 -S.C.R. SUPREME COURT REPORTS
349
that it will insist on that parT.icular mode of employ-
'9~'
ment bein0rr used. Take, for example, the case of con- G d
. 5
I b
·
If
Th
'b
I 'II I
·
0 avari
"gar
tract a our 1tse .
e tn una w1
iave to go mto
Mills Ltd:
the facts of each case. If it comes to the conclusion
v.
that on the facts the employment of contract labour Kepa.gaon Taluka
is reasonable and thus doing away with it wonld be Sakh"' Kamg«
an unreasonable restriction on the right of the emplo- Sabha, Sakarwadi
yer to carry on trade, it will permit contract labour to
w.,:;h~o 1.
be carried on. On the other hand if it comes to the
conclusion that employment of contract labonr is unreasonable in the circumstances of the case before it
it will hold that it should be abolished, the reason being that it.s abolition would be a reasonable restriction
in the circumstances. Therefore the decision whether
the mode of employment in a particular case is a reasonable restriction or unreasonable one is in the hands
of a quasi-judicial tribunal. In the circumstances it
cannot be said that by providing in s. 3(18) that an
"industrial matter" includes also the mode of employment, there is any contra.vention of the fundamental
right oft.he employer to carry on trade. If the argumeBt on behalf of the appellant were to be accepted
it wou Id mean that. judicittl and quasi-judicial decisions could be unreasonable restrictions on fundamentn,l rights and this the Constitution does uot envisage at all.
\Ve are therefore of opinion that this
contention n,lso fails.
Finally, Mr. Pat.hak draws our atteniion to ss. 3(13)
and 3(14) of the Act and submits that the appellant
never said that contract labour employed in its mills
was not in its employment. Sec. 3(13) defines the
word "employee" and includes in it any person employed by a contractor to do any work for him in the
execution of a contract wit.h an employer within the
meaning of sub-cl. (e) of cl. (14). Sec. 3(14) defines
the word "employer" in an inclusive manner and includes "where the owner of any undertaking in the
course of or for the purpose of conducting the underta.king contracts with any person for the execution by
or under the contractor of the whole or any part of any
work which is ordinarily part of the undertaking, the
owner of the undertaking". It is urged that in view
350
SUPREME COURT REPORTS
[1961]
'960
of these definitions, the employees of the contractors
Godavari St1gar are the employees of the mills and the mills are the
Mills Ltd.
employers of these employees of the contractors.
v.
Therefore, Mr. Pathak urges that there is no necessity
Kepargaon Taluka of abolishing contract labour and that the industrial
Sakhar Kamgar. court may, if it so chooses, give the same wages and
Sabha, Sakarwad• hours of work and rest intervals and other terms and
wanchoo 1.
conditions of employment to the employees of the
contractors as are provided for comparable direct employees of the appellant and in such circumstances it
would not be necessary to abolish the contract system
so long as the employees of contractors are to be in
the same position as the direct employees of the
appellant as to their terms and conditionA of service.
This was not however the manner in which the case
was contested before the industrial court or the appellate tribunal. All that we need therefore say is that
when the matter goes back before the industrial court
as directed by the appellate tribunal, tho industrial
court may take this submission of the appellant into
account and may consider whether it is necessary to
abolish the contract system, provided the appellant is
able to assure the industrial court that employees of
tha contractors who are deemed to be its employees
within the meaning of s. 3(13) and s. 3(14) would have
the full benefit of the same terms and conditions of
service as its comparable direct employees.
.
The appeal fails and is hereby dismissed with
costs.
Appeal dismissed.
i ..