# [1978] 3 S.C.R. 1073

- **Citation:** [1978] 3 S.C.R. 1073
- **Court:** Supreme Court of India
- **Decided:** 1978
- **Bench:** V. R. Krishna Iyer, D. A. Desai, 0. Chinnappa Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1978-3-s-c-r-1073-7459
- **Pages:** 3

## Headnote

Employee in labour law, concept of-Whether includes a person hired by
an independent labour contractor for creating l'inculum ;uris.
The petitioner a factory owner, manufacturing ropes had entered into agreements with intermediate contractors who had hired the
respondent union'11
·work.men. Jn an industrial dispute raised by the respondent union the petitioner
contended that no direct employer-employee vinculu1n iuris existed between
,,him and the workmen. However, the Tribunal gave an award in favour of the
_..,rorkn1e11 which was affirmed by both the single Judge as \\'ell as a Division
Bench of the Kera1a High Court.
Dismissing the special leave the Court,
HELD : 1. Where a 1Norker or a group of 'A'orkers labour to produce goods
or services and these goods or services are for the business of another, that
other is in fact the employer. He has economic control over the workers' subsistence, skill, and continued employment. If be, for any reason, chokes off the
worker is, virtually, laid off.
The presence of intermediate contractors
with
'A1hom alone the workers have immediate or direct relationship ex-contractu is
of no consequence when, on lifting the veil or looking at the conspectus of
factors governing employment, Courts discern the naked truth, though draped in
different perfect paper arrangement. that the real employer is the management,
not the in1mediate contractor.
[1075 C-D]
If the livelihood of th,e workmen substantialy depends on labour rendered to
produce goods and services for the benefit and satisfaction of an enterprise, the
absence of direct relationship or the presence of dubious intermediaries or the
make-believe trappings of Qetachment from the Management cannot snap the
real-life bond.
The story may vary but the inference defies ingenuity.
The
liability cannot be shaken off.
Of course, if there is total dissociation in fact
between the disowning management and the aggrieved workmen, the employment is, in substance and in real-life terms, by another.
The Management's
adventitious conn.ections cannot ripea into real employment.
[1075 E-F-G]
2. The source and strength of the industrial branch of Third World Jorisprudence is socia_l justice proclaimed in the Preamble to the
Constitution.
The Court must be astute to ,avoid the mischief and achieve the purpose of the
law and not be misled by th6 maya of legal appearance when myriad devices
are resorted to when labour legislation casts welfare obligations on the real
employer based on Articles 38, 39, 42, 43 and 43A of the Constitution. The
contention of the petitioner as to the
non-existence of the
vinculum juris
between the respondent and himself is if at all impeccable only in laissez faire
economics 'red in tooth and claw' and under the Contract Act rooted in English
common Jaw as the human gap of a century yawns between this strict doctrine
and the industrial jurisprudence of today. [1074 G-H, 1075 D·E]
CIVIL
APPELLATE
JURISDICTION:
(Civil) No. 1853 of 1978. ·
Special Leave
Petition
From the Judgment and Order dated 30-6-.1977 of the Kerala
High Court in Writ Appeal No. 142/77.
A
B
c
D·
E
F
G
H
A
8
c
D
E
F
G
H
1074
S\ll'J(EME COURT REPORTS
[1978] 3 s.c.R.
N. Sudhakaran for the Petitioner.
The Order of the Court was delivered by
KRISHNA IYER, J.-The petitioner before us in this special leave
petition is a factory owner manufacturing ropes.
A
number
of
workmen were engaged to make ropes from within the factory, but
those workmen, according to the petitioner, were hired by contractors who had executed agreements with the petitioner to get such
work done.
Therefore, the petitioner contended that the workmen
were not his workmen but the contractors' workmen.
The industrial
award, made on a reference by the State Government, was attacked
on this ground.
The learned single Judge of the High Court, in an
elaborate judgment, rightly held that the petitioner was the employer
and the members of the respondent-Union were employees under the
petitioner.
A division Ben

## Text

HUSSAINBHAI, CALICUT
)'.
ALATH FACTORY THOZHILALI UNION,
KOZHIKODE AND ORS.
July, 28, 1978
1073
[V. R. KRISHNA IYER, D. A. DESAI AND 0. CHINNAPPA REDDY, JJ.]
Employee in labour law, concept of-Whether includes a person hired by
an independent labour contractor for creating l'inculum ;uris.
The petitioner a factory owner, manufacturing ropes had entered into agreements with intermediate contractors who had hired the
respondent union'11
·work.men. Jn an industrial dispute raised by the respondent union the petitioner
contended that no direct employer-employee vinculu1n iuris existed between
,,him and the workmen. However, the Tribunal gave an award in favour of the
_..,rorkn1e11 which was affirmed by both the single Judge as \\'ell as a Division
Bench of the Kera1a High Court.
Dismissing the special leave the Court,
HELD : 1. Where a 1Norker or a group of 'A'orkers labour to produce goods
or services and these goods or services are for the business of another, that
other is in fact the employer. He has economic control over the workers' subsistence, skill, and continued employment. If be, for any reason, chokes off the
worker is, virtually, laid off.
The presence of intermediate contractors
with
'A1hom alone the workers have immediate or direct relationship ex-contractu is
of no consequence when, on lifting the veil or looking at the conspectus of
factors governing employment, Courts discern the naked truth, though draped in
different perfect paper arrangement. that the real employer is the management,
not the in1mediate contractor.
[1075 C-D]
If the livelihood of th,e workmen substantialy depends on labour rendered to
produce goods and services for the benefit and satisfaction of an enterprise, the
absence of direct relationship or the presence of dubious intermediaries or the
make-believe trappings of Qetachment from the Management cannot snap the
real-life bond.
The story may vary but the inference defies ingenuity.
The
liability cannot be shaken off.
Of course, if there is total dissociation in fact
between the disowning management and the aggrieved workmen, the employment is, in substance and in real-life terms, by another.
The Management's
adventitious conn.ections cannot ripea into real employment.
[1075 E-F-G]
2. The source and strength of the industrial branch of Third World Jorisprudence is socia_l justice proclaimed in the Preamble to the
Constitution.
The Court must be astute to ,avoid the mischief and achieve the purpose of the
law and not be misled by th6 maya of legal appearance when myriad devices
are resorted to when labour legislation casts welfare obligations on the real
employer based on Articles 38, 39, 42, 43 and 43A of the Constitution. The
contention of the petitioner as to the
non-existence of the
vinculum juris
between the respondent and himself is if at all impeccable only in laissez faire
economics 'red in tooth and claw' and under the Contract Act rooted in English
common Jaw as the human gap of a century yawns between this strict doctrine
and the industrial jurisprudence of today. [1074 G-H, 1075 D·E]
CIVIL
APPELLATE
JURISDICTION:
(Civil) No. 1853 of 1978. ·
Special Leave
Petition
From the Judgment and Order dated 30-6-.1977 of the Kerala
High Court in Writ Appeal No. 142/77.
A
B
c
D·
E
F
G
H
A
8
c
D
E
F
G
H
1074
S\ll'J(EME COURT REPORTS
[1978] 3 s.c.R.
N. Sudhakaran for the Petitioner.
The Order of the Court was delivered by
KRISHNA IYER, J.-The petitioner before us in this special leave
petition is a factory owner manufacturing ropes.
A
number
of
workmen were engaged to make ropes from within the factory, but
those workmen, according to the petitioner, were hired by contractors who had executed agreements with the petitioner to get such
work done.
Therefore, the petitioner contended that the workmen
were not his workmen but the contractors' workmen.
The industrial
award, made on a reference by the State Government, was attacked
on this ground.
The learned single Judge of the High Court, in an
elaborate judgment, rightly held that the petitioner was the employer
and the members of the respondent-Union were employees under the
petitioner.
A division Bench upheld this stand and the petitioner
has sought special leave from th.is Court.
It is not in dispute that 29 workmen were denied employment
which led to the reference.
It is not in dispute that the work done
by these workmen was an integral part of the industry concerned;
that the raw material was supplied by the Management; that the
factory premises belonged to the Management; that the equipment
used also belonged to the Management and that the finished product
was taken by the Management for its own trade.
The workmen
were broadly under the control of the Management and defective
articles were directed to be rectified by the Management. This concatonation of circumstances is conclusive of the question.
Nevertheless, this issue is being raised time and again and So we proceed to
pass a speaking order.
We should have thought that even cases
where this impressive array of factors were not present, would have
persuaded an industrial court to the conclusion that the economic
reality was employer-employee relationship and, therefore, the industrial law was compulsively applicable.
Even so, let us look at
the issue afresh.
Who is an employee, in Labour Law? That is the short, diehard question raised here but covered by
this
Court's
earlier
decisions.
Like the High Court, we give short shift to the contention that the petitioner had entered into
agreements
with
intermediate contractors who had hired the respondent-Union's workmen
and so no direct employer-employee vinculum juris existed
between
the petitioner and the workmen.
This argument is impeccable in laissez faire economics
'red in
tooth and claw' and under the Contract Act rooted in English Common Law. But the human gap of a century yawns between this strict
doctrine and industrial jurisprudence. The source and strength of the
industrial branch of Third World Jurisprudence is social justice proclaimed in the Preamble to the Constitution. This Court in Ganesh
Beedi's case 1974 (l)LLJ 367 has raised on British and American
rulings to hold that mere contracts are not decisive and the complex of
f
·. >nuss~INBHAI v. UNION'S WORKMEN (Krish!'E_]Yer,_J.).__1075
., ·..,,
considerations relevant to the relationship is different .. Indian Justice,
beyond Atlantic liberalism, has a rule of law which runs to the aid of
·the rule of life. And life, in conditions o( poverty aplenty, is livelihood and livelihooc! is work with wages.
Raw societal realities, not
fine-spun legal niceties, not :ompetitive market economics but comA
•
plex protective principles, shape the law when the weaker, working
class sector needs succour for livelihood through labour. The conceptual ·confusion between the classical law of contracts
and
the
special branch of law sensitive to exploitative situations accounts for
the submission that the High Court is in error in its holding against
the petitioner.
The true test may, with brevity, be indicated once again.
Where
a worker or group of workers labours to produce goods or services
and these goods or services are for the business of another,
that
other is, in fact, the employer. He has economic· control over the
workers' subsistence, skill, and continued employment.
If he, for
any reason, chokes off, the worker is, virtually, ·laid .off.
The
presence of intermediate contractors with whom alone the workers
have immediate or direct relationship ex· contractu is· of no consequence when, on lifting the veil or looking at the conspectus
cf
factors governing employment, we discern the naked truth, though
draped in different perfect paper arrangement. that the real employer is the Management, not the immediate contractor. Myriad devices,
half-hidden in fold after fold of legal form depending on the degree
of concealment needed, the type of
industry, the local
conditions
and the like, may be resorted to when labour legislation casts welfare
obligations on the real employer, based on Articles 3 8, 39, 42, 43
and 43-A of the Constitution.
The court mnst be astute to avoid
mischief and achieve the. purpose of the law and not be misled by
·the ma ya of legal appearances.
B
c
D
E
If the livelihood of the workmen substantially depends on labour
rendered to produce goods and services for the benefits and satisfaction of an enterprise, the absence of direct relationship or the
presence cf dubious intermediaries or the make-believe trappings of
F
detachment from the Management cannot snap the .real-life bond.
The story may vary but
the inference defies .ingenuity.
The liability cannot be shaken off.
Of course, if there is total dissociation in fact between the disowning management and the aggrieved . workmen, the employment
is, in substance and in
real-life terms, by another.
The Management's adventitious connections cannot ripen into real employrnent.
G
Herc, on the ·facts, the conclusion is correct and leave _must be
refused.
S.R.
Petitio11 dismissed.
329SCIJ78