# '· AIR INDIA STATUTORY CORPORATION v. UNITED LABOUR UNION AND ORS

- **Citation:** [1996] Supp. 9 S.C.R. 579
- **Court:** Supreme Court of India
- **Decided:** 1996-12-06
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/air-india-statutory-corporation-v-united-labour-union-and-ors-15109
- **Pages:** 84

## Headnote

'·
AIR INDIA STATUTORY CORPORATION
A
v.
UNITED LABOUR UNION AND ORS.
DECEMBER 6, 1996
[K. RAMASWAMY, B.L. HANSARIA AND S.B. MAJMUDAR, Jl]
B
Contract Labour (Regulation and Abolition) Act, 1970:
Sections 2(1)(a) (As it stood before and after Amendment Act 14 of
1986), 2( 1)(b }, 8, 9, 10, 12, 14, and 16 to 19, 20, 21, 23 to 25.
C
Contract Labour (Regulation and Abolition) Central Rules, 1971
Rules 18(3), 21 to 25, 75, 77 and 78.
''Appropriate Government''-Meaning of-Establishment pertaining to
an industry carried on by Central Government-i'linciples for determinatiori D
of appropriate Government laid down-Appellant initially a statutory
autho1ity later reconstituted as a Company-fl eld Central Government was
appropriate Government before and after 1986 Amendment.
Contract Labour-Abolition of-Effect-Held on abolition Contractor
stands removed from Regulation under the Act, and direct relationship of E
employer and employee is created between employer and
workmen-Employee is obliged to absorb the workmen-On employer's
failure to do so, High Court can give directions under Article 226-0bject of
the Act explained.;
Industrial Disputes Act, 1947: Section 10.
Reference-Contract Labour-Abo/itiOn of-Employer is obliged to absorb the workers-In such a case reference of dispute for absorption is not
necessary.
Constitution of India, 1950 :
Articles 14 and 21-Right to work-Not a fundamental light-But after
en1ploynient a person 1nust be dealt with assuring hini equality.
F
G
Article 38-Preamble--Social Justice-Relevance of for workmen.
H
579
580
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A
Article 226-High Courf--Power to issue directions for absorption
of-Contract Labour-Upheld.
Judicial Review-Basic structure of Constitution-High Court has constitutional duty to enforce law by appropriate directions.
B
Public Law-Private /aw-Distinction between Constitution-interpretation of-Principles for.
Words and Phrases :
C
Regulation-Meaning of-Contract Labour (Regulation and Abolition)
Act, 1970.
The appellant Corporation, initially a statutory authority, was subsequently reconstituted as a Company under the Companies Act, 1956. It
engaged, as contract labour, the respondent union's members, for sweepD ing, clearing, dusting and watching of the buildings owned and occupied
by it. Subsequent to the coming into force of the Contract Labour (Regulation and Abolition) Act, 1970 the appellant obtained a certificate of
Registration from Regional Labour Commissioner (Central) under the
Act. Thereafter by a notification dated December 9, 1976 the Central
Government prohibited employment of contact labour for sweeping, cleanE ing, dusting and watching of buildings owned or occupied by the establishments in respect of which the appropriate Government under the Act
was the Central . Government. By a letter dated January 20, 1972, the
Regional Labour Commissioner (Central), Bombay informed the appel·
lant that the State Government was the appropriate Government under
F
the Act. Therefore, by proceedings dated May 22, 1973 the Regional Labour
Commissioner (Central) bad revoked the registration. By Amendment Act
46 of 1982, the Industrial Disputes Act, 1947 was made applicable to the
appellant and was brought on statute book specifying the appellant as one
of the industries in relation to which the Central Government is the
appropriate Government and the appellant has been carrying on its busiG ness "by or under its authority" with effect from August 21, 1982. The Act
was amended bringing within its ambit the Central Government as appropriate Government by Amendment Act 14 of 1986 with effect from
January 28, 1986. Since the appellant did not abolish the contract system
and failed to e,nforce the notification of the Government of India dated
H December 9, 1976, the respondents filed writ petition for directions to the
' -
' ' J
AIR INDIASTATUTORY CORPN. v. UNION LABOUR UNION
581
B
appellant to enforce forthwith the notification abolishing the contract A
labou

## Text

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'·
AIR INDIA STATUTORY CORPORATION
A
v.
UNITED LABOUR UNION AND ORS.
DECEMBER 6, 1996
[K. RAMASWAMY, B.L. HANSARIA AND S.B. MAJMUDAR, Jl]
B
Contract Labour (Regulation and Abolition) Act, 1970:
Sections 2(1)(a) (As it stood before and after Amendment Act 14 of
1986), 2( 1)(b }, 8, 9, 10, 12, 14, and 16 to 19, 20, 21, 23 to 25.
C
Contract Labour (Regulation and Abolition) Central Rules, 1971
Rules 18(3), 21 to 25, 75, 77 and 78.
''Appropriate Government''-Meaning of-Establishment pertaining to
an industry carried on by Central Government-i'linciples for determinatiori D
of appropriate Government laid down-Appellant initially a statutory
autho1ity later reconstituted as a Company-fl eld Central Government was
appropriate Government before and after 1986 Amendment.
Contract Labour-Abolition of-Effect-Held on abolition Contractor
stands removed from Regulation under the Act, and direct relationship of E
employer and employee is created between employer and
workmen-Employee is obliged to absorb the workmen-On employer's
failure to do so, High Court can give directions under Article 226-0bject of
the Act explained.;
Industrial Disputes Act, 1947: Section 10.
Reference-Contract Labour-Abo/itiOn of-Employer is obliged to absorb the workers-In such a case reference of dispute for absorption is not
necessary.
Constitution of India, 1950 :
Articles 14 and 21-Right to work-Not a fundamental light-But after
en1ploynient a person 1nust be dealt with assuring hini equality.
F
G
Article 38-Preamble--Social Justice-Relevance of for workmen.
H
579
580
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A
Article 226-High Courf--Power to issue directions for absorption
of-Contract Labour-Upheld.
Judicial Review-Basic structure of Constitution-High Court has constitutional duty to enforce law by appropriate directions.
B
Public Law-Private /aw-Distinction between Constitution-interpretation of-Principles for.
Words and Phrases :
C
Regulation-Meaning of-Contract Labour (Regulation and Abolition)
Act, 1970.
The appellant Corporation, initially a statutory authority, was subsequently reconstituted as a Company under the Companies Act, 1956. It
engaged, as contract labour, the respondent union's members, for sweepD ing, clearing, dusting and watching of the buildings owned and occupied
by it. Subsequent to the coming into force of the Contract Labour (Regulation and Abolition) Act, 1970 the appellant obtained a certificate of
Registration from Regional Labour Commissioner (Central) under the
Act. Thereafter by a notification dated December 9, 1976 the Central
Government prohibited employment of contact labour for sweeping, cleanE ing, dusting and watching of buildings owned or occupied by the establishments in respect of which the appropriate Government under the Act
was the Central . Government. By a letter dated January 20, 1972, the
Regional Labour Commissioner (Central), Bombay informed the appel·
lant that the State Government was the appropriate Government under
F
the Act. Therefore, by proceedings dated May 22, 1973 the Regional Labour
Commissioner (Central) bad revoked the registration. By Amendment Act
46 of 1982, the Industrial Disputes Act, 1947 was made applicable to the
appellant and was brought on statute book specifying the appellant as one
of the industries in relation to which the Central Government is the
appropriate Government and the appellant has been carrying on its busiG ness "by or under its authority" with effect from August 21, 1982. The Act
was amended bringing within its ambit the Central Government as appropriate Government by Amendment Act 14 of 1986 with effect from
January 28, 1986. Since the appellant did not abolish the contract system
and failed to e,nforce the notification of the Government of India dated
H December 9, 1976, the respondents filed writ petition for directions to the
' -
' ' J
AIR INDIASTATUTORY CORPN. v. UNION LABOUR UNION
581
B
appellant to enforce forthwith the notification abolishing the contract A
labour system in the aforesaid services and to absorb all the employees
doing cleaning, sweeping, dusting, washing and watching of the buildings
owned or occupied by the appellant-establishment, with effect from the
respective dates of their joining as contract Labour in the appellant's
establishment with all consequential rights/benefits, monetary or otherwise. The writ petition was allowed by a single Judge on November 16, 1989
directing that all contract workers be regularised as employees of the
appellant from the date of filing of the writ petition. Preceding thereto, on
November 15, 1989, the Government of India referred to the Central
Advisory Board known as Mobile Committee under Section 10(1), which
recommended to the Central Government not to abolish the contract C
labour system in the aforesaid setvices .. The Division Bench dismissed the
appeal. Similar was the fate of othejRp~~als.
In appeals to this Court, on the questions :
1. What is the meaning of the word "appropriate Government under D
Section 2(1) (a) of the Act?
2. Whether the view taken in Heavy Engineering case is correct in law?
3. Whether on abolition the contract labour- are entitled to be absorbed; if so, from what date?
4. Whether the High Court under Article 226 has power to direct
their absorption; if so, from what date?
E
5. Whether it is necessary to make a reference under Section 10 of F
the ID Act for adjudication of dispute qna absorption of the contract
labour?
6. Whether the view taken by this Court in Dena Nath and Gujarat
State Electricity Board's case is correct in law?
Disposing the appeals, this Court
HELD : Per Ramaswamy, !.
G
1. The appropriate Government is the Central Government from the
inception of the Act. The notification published under Section 10 on H
582
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A December 9, 1976, therefore, was in exercise of its power as appropriate
Government. So it is valid in law. [603-G]
2. Before the Central or State Advisory Board advises the appropriate Government under Section 10(1) on the issue whether or not to
B abolish the contract labour system, it has before it all the relevant factual
material and the appropriate Government after the receipt and consideration of the recommendations and the material and then taken decision. It
is not right to contend that the relevant factors for abolition of the contract
labonr system in the establishment or the appellant was not before the
Central Advisory Board before its recommendation to abolish the contract
C Jabonr system in the establishment of the appellant. Tue minutes of the
Board and the material furnished indicate that the work in all the establishments inclnding those of the appellants, is of perennial nature satisfying all the tests engrafted in Section 10(2) of the Act. Accordingly, on
finding the work to be of perennial nature, it had recommended and the
D Central Government had considered and accepted the recommendation
to abolish the contract Jabour system in the aforesaid services. Having
abolished it, the Central Government was denuded of its power under
Section 10(1) to again appoint insofar as the above services of the Mobile
Committee to go once over into the self-same question and the recommendations of the latter not to abolish the contract Jabour system in the above
E services and the acceptance thereof by the Central Government are without
any legal base, and, therefore, non est. [619-G-H; 620-A·B]
3. Constitutional issues require interpretation broadly not by play
of words or without the acceptance of the line of their growth. Preamble
F
of the Constitution, as its integral part, is designed to realise socio
economic justice to all people including workmen, harmoniously blending
the details epumerated in the Fundamental Rights and the Directive
Principles. The Contract Labour (Regulation and Abolition) Act, 1970 is
a social welfare measure to further the general interest of the community
of workmen as opposed to the particular interest of the individual
G entrepreneur. It seeks to achieve a public purpose, i.e. regnlated conditions of contract Jabour and to abolish it when it is found to be of perennial
nature etc. Tue individual interest can, therefore, no longer stem the
forward Rowing tide and must, of necessity, give way to the broader pnblic
purpose of establishing social and economic democracy in which every
H workmen realises socio-economic justice assured in the Preamble, Articles
-
AIR INDIA STATUTORY CORPN. v. UNION LABOUR UNION
583
14, 15 and 21 and the Directive Principles of the Constitution. (608-A-D]
A
4. Courts are sentinal in the qui vive of the rights of the people, in
particular, the poor. The judicial function of a Court, therefore, in interpreting the Constitution and the provisions of the Act, requires to build
up continuity of socio-economic empowerment to the poor to sustain B
equality of opportunity and status and the law should constantly meet the
needs and aspiration of the society in establishing the egalitarian social
order. Therefore, the concept engrafted in the statute require interpretation from that perspective, without doing violence to the language. Such
an interpretation would elongate the spirit and purpose of the Constitution and make the aforesaid rights to the workmen a reality lest estab· C
lishment of an egalitarian social order would be frustrated and
Constitutional goal defeated. (609-D-F]
His Holiness Kesavananda Bharati Sripadagalavaru v. State of Kera/a,
(1973] Supp. SCR 1; S.R. Bommai v. Union of India, [1994] 3 SCC 1; D
Minerva Mills Ltd. & Ors. v. Union & Ors., [198Jl 1 SCR 206 = AIR (1980)
SC 1789; Francis Coralie Mullin v. The Administrator, Union Tenitory of
Delhi & Ors., AIR (1981) SC 746; Olga Tellis v. Bombay Municipal Corporation, AIR (1986) SC 180; Delhi Transport Corporation v. D. T.C. Mazdoor
Congress, AIR (1991) SC 101; State of Maharashtra v. Chandrabhan, AIR
(1983) SC 803; Consumer Education and Research Centre and Ors. v. Union E
of India, [1995] 3 SCC 42 = [1995] 1 SCALE 354; D.S. Nakara & Ors. v.
Union of India, [1983] 2 SCR 165; State of Kamataka v. Shri Ranganath
Reddy & Anr., (1978] 1 SCR 641; Sanjeev Coke Manufacturing Co. v. Bharat
Cooking Coal Ltd. & Anr., (1983] 1 SCR 1000; LIC of India & Anr. v.
Consumer Education & Research Centre & Ors., [1995] 5 SCC 482; MurlidF
har Dayandeo Kesekar v. Vishwanath Pandu Barde & Anr., (1995] Supp. 2
SCC 549; R. Chandevarappa & Ors. v. State of Kamataka and Ors., [1995]
6 SCC 309; Peerless General Finance and Investment Co. Ltd. & Anr. v.
Reserve Bank of India, (1992] 2 SCC 343; D.K Yadav v. !.M.A. Industries
Ltd., [1993] 3 SCC 259; Da/mia Cement (Bharat) Ltd. & Anr. v. Union of
India & Ors. Etc., JT (1996) 4 SC 555; Bandhu Mukti Morcha v. Union of G
India, [1984] 3 SCC 161; C.E.S.C. Ltd. & Ors. v. S.C. Bose & Ors., [1992]
1 SCC 441; P.G. Gupta v. State of Gujarat & Ors., (1995] Supp. 2 SCC 182;
Mis. Shantisar Builders v. Narayan Khim/a/ Totame, [1990] 1 SCC 520;
Chameli Singh & Ors. v. State of U.P. & Anr. [1996] 2 SCC 549 and D.K V.
Prasad Rao & Ors. v. The Government of Andhra Pradesh represented by its H
584
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A Secretary, Home Department Secretariat Buildings, Andhra Pradesh
Hyderabad & Anr., (1983) 2 AWR 344 = AIR (1984) AP, referred to.
B
c
Munn v. The People of Illinois, 94 US 115; Horatio, J. Olcott v. County
Board of Supervisors of Fond Du Lac County, 21 L. Ed. 382; John 0.
Graham, Commissioner, Depa1tment of Public Welfare, State of Arizona v.
Cannen Richardson Etc., 29 L. Ed. 2nd 534; Grace Marsh v. State of
Alabama, 90 L. Ed. 265; Republic Ayiation Corporation v. National Labour
Relations Board, 324 US 793 = 89 L. Ed. 1372; Georgia & Banking Co. v.
James M; Smith, 128 US 377 = 32 L. Ed.174 and Gennan Aliance Insurance
Co. v. IKL L~ws, 58 L. Ed. 1011 = 233 US 387, referred to.
Justice K.K. Mathew,. "Right to Equality and Property under the India
Constitution pp. 47-48; St: Thomas Acquinas "Selected Political Writing"
'
(1948 Ed.) 169; Dean Rosco Pound ''An Introduction to Philosophy of Law"
(1954 Edn.) page 125; M. Cohen, "Property and Sovereignty" (13 Cornell Law
Quarterly page 8; Edward Kent "Property, Power and Authority"; Herald
D Laski, "Congress Socialist" dated April 11, 1936; Mahatma Gandhiji,
"Socialism of My Concept; Pandit Jawahar Lal Nehru ''Independence and
After That" (Collection of Speeches 1946-49) Publication Division, Government of India 1949 Edn. page 28; Agnes Heller, "Beyond Justice" page 180,
referred to.
E
F
5. It is axiomatic, whether or not industry is controlled by Government or public Corporations by statutory form or administrative clutch
or private agents, juristic persons, Corporation whole or Corporation sole,
their constitution, control and working would also be subject to the same
constitutional limitations in the trinity, viz., Preamble, the Fundamental
Rights and the Directive Pri.nciples. They throw open an element of public
interest in its workings. They share the burden and shoulder constitutional
obligations to provide facilities and opportunities enjoined in the Directive
Principles, the Permeable and the fundamental rights enshrined in the
Constitution. The word 'control', therefore, requires to be interpreted in
G the changing commercial scenario broadly in keeping with the aforesaid
constitutional goals and perspectives. From this the following principles
would emerge :
(a) The Constitution of the Corporation or instrumentality or agency
or Corporation aggregate or Corporation sole is not of sole material
H relevance to decide whether it is by or under the control of the appropriate
AIR INDIASTATUTORY CORPN. v. UNION LABOUR UNION
585
Government under the Act.
(b) If it is a statutory Corporation, it is au instrumentality or agency
of the State. Ifit is a company owned wholly or partially by a share capital,
floated from public exchequer, it gives indicia that it is controlled by or
under the authority of the appropriate Government.
(c) In commercial activities carried on by a Corporation established
by or under the control of the appropriate Government having protection
under Articles 14 and 19(2), it is an instrumentality or agency of the State.
(d) The State is a service Corporation. It acts through its instrumentalities, agencies or persons - natural or juridical.
(e) The governing power, wherever located, most be subject to the
fundamental constitutional limitations and abide by the principles laid
down in the Directive Principles.
(0 The framework of service regulations made in the appropriate
rules or regulations should be consistent with and subject to the same
public law principles and limitations.
A
B
c
D
(g) Through the instrumentality, agency or persons conduct comE
mercial activities according to business principles and are separately
accountable nuder their appropriate bye-laws or Memorandum of Association, they become the arm of the Government.
(h) The existence of deep and pervasive Sl&te control depends upon
the facts and circumstances in a given situation 'and in the altered situaF
tion it is not the sole criterion to decide whether the agency or instrumentality or persons is by or under the control of the appropriate Government.
(i) Functions of an instrumentality, agency or person are of public G
importance following public interest element.
(j) The instrumentality, agency or person most have an element of
authority or ability to affect the relations with its employee or public by
virtue of power vested in it by law, memorandum of association or by~-laws
or articles of association.
H
586
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A
(k) The instrumentality, agency or person renders an element of
B
public service and is accountable to health and strength of the workers,
men and women, adequate means of livelihood, the security for payment of
living wages, reasonable conditions of work, decent standard of life and
opportunity to enjoy full leisure and social and cultural activities to the
workmen.
(I) Every action of the public authority, agency or instrumentality or
the person acting on public interest or any act that gives rise to public
element should be guided by public interest in exercise of public power or
action hedged with public element and is open to challenge. It must meet
C the test of reasonableness, fairness and justness.
D
(m) If the exercise of the power is arbitrary, unjust and unfair, the
public authority, instrumentality, agency or the person acting in public
interest, though in the field of private law, is not free to prescribe any
unconstitutional conditions or limitations in their actions.
(617-A-H; 618-A-H]
Hindustan Aeronautics Ltd. v. The Workmen & Ors., (1975) 4 SCC 679;
Rashtriya Mill Mazdoor Sangh v. Model Mills, Nagpur & Anr., (1984) Supp.
SCC 443; Food Corporation of India Workers Union v. Food Corporation of
E India & Ors., [1985) 2 SCC 294; Sukhdev Singh & Ors. v. Bhagatram Sardar
Singh & Anr., (1975) 3 SCR 619; R.D. Shetty v. Airport Authority & Ors.,
(1979) 3SCR1014; Managing Director, UP. Warehousing Corporation &Anr.
v. f.N. Vajpayee, (1980) 2 SCR 773; Ajay Hasia Etc. v. Khalid Mujib Sehravardi & Ors. Etc., (1981) 2 SCR 79; Rajasthan State Electricity Board, Jaipur
v. Mohan Lal & Ors., (1967) 3 SCR 377; Praga Tools Corporation v. C.V. ·
F !manual, (1969) 3 SCR 773; Delhi Transport Corporation v. D. T.C. Mazdoor
Corporation, AIR (1991) SC 101; Som Prakash Rekhi v. Union of India &
Ors., (1981) 2 SCR 111; Manmohan Singh Jaitla v. Commissioner, Union
Tenitory of Chandigarh & Ors., (1984) Supp. SCC 540; P.K. Ramachandra
Iyer & Ors. v. Union of India & Ors., [1984) 2 SCC 141; A.L. Katra v. Project
G and Equipment Corpn. of India Ltd., (1984) 3 SCC 316; Central Inland Water
Transport Corporation Ltd. & Anr. v. Brojonath Ganguly & Anr., (1986) 3
SCC 156;LucknowDevelopmentAuthorityv.M.K Gupta, (1994) 1 SCC243;
Star Enterprises & Ors. v. C.I.D. C. of Maharashtra Ltd., (1990) 3 SCC 280;
LIC of India &Anr. v. Consumer Education & Research Centre & Ors., (1995)
5 SCC 482; G.B. Mahajan & Ors. v.Jalgaon Municipal Council & Ors., (1991)
H 3 SCC 91; Shrisht Dhawan (Smt.) v. M/s. Shaw Brothers, (1992) 1 SCC 534;
,
AIR INDIA STATUTORY CORPN. v. UNION IABOUR UNION
587
Khwaja v. Secretary of State for the Home Department & Ors., (1983) 1 All. A
E.R. 765 and M/s. Gammon India Ltd. & Ors. v. Union of India & Ors.,
[1974] 1 sec 596, referred to.
6. The two Judge Bench in Heavy Engineering casr narrowly interpreted the words 'Appropriate Government' on the Common Law Principles which no longer bear any relevance when it is tested on Article 14.
[619-C]
Heavy Engineering Mazdoor Union v. The State of Bihar & Ors., [1969]
3 SCR 995, overruled.
7. In a socialist democracy governed by the rule of law, private
property, right of the citizen for development and his right to employment
and his entitlement for employment to the labour, would all harmoneously
B
c
be blended to serve larger social interest and public purpose. All essential
facilities and opportnnities to the poor people are fundamental means to
development, to live with minimum comforts, food, shelter, clothing and D
health. Due to economic constraint, though right to work was not declared
as a fundamental right, right to work of workman, lower class, middle class
and poor people is the means to development and source to earn
livelihood. Though, right to employment cannot, as a right be claimed but
after the appointment to a post or an office, be it under the State, its E
agency, instrumentality, juristic person or plivate entrepreneur it is re ..
quired to be dealt with as per public element and to act in public interest
assuring equality, which is a genus of Article 14 and all other concomitant
rights emanating therefrom are species to make their right to life and
dignity of person real and meaningful. [639-C; 637-F-H]
8. So long as the contract labour system continues, the principal
employer is enjoined to ensure payment of wages to the contract labour and
F
to provide all other amenities envisaged under the Act and the Rules
including provisions for food, potable water, health and safety and failure
thereofvisits with penal consequences. The Act contains various provisions G
in this regard. All of them are fundamental human rights to the workmen
and are facets of rights to life guaranteed under Article 21. When the
principal employer is enjoined to ensure those rights and payment of wages
while the contract labour system is under regulation, the question arises
whether after abolition of the contract labour system the workmen should
be left in a lurch denuding them of the me~ns of livelihood and the enjoy- H
588
SUPREME COURT REPORTS [1996) SUPP. 9 S.C.R.
A ment of the basis fundamental rights provided while the contract Iabonr
system is regulated under the Act. The scheme of the Act gives indication
that on the abolition of the contract labour system by publication of the
notification in the Official Gazette, the necessary concomitant is that the
whole time workmen are required for carrying on the process, operation or
B
c
other work being done in the industry, trade, business, manufacture, or
occupation in that establishment. When the condition of the work which is
of perennial nature etc., as envisaged in sub-section (2) of Section 10, thus
are satisfied, the continuance of contract labour stands prohibited and
abolished. The concomitant result would be that source of regular employment becomes open. [646-B-E; G-H; 647-A-B]
9. It is true that there is no express provision in the Act declaring
the contract labour working in the establishment of the principal employer
in the particular service to be the direct employees of the principal
employer. The phrase "matters connected therewith" in the Preamble wonld
fnrnish the consequence of abolition of contract labour. In this behalf, the
D Gujarat Electricity Board case, attempted, by interpretation, to fill in the gap
but it also fall short or full play and got beset with insurmonntable difficulties in its working which were not brought to the attention of the Bench. The
object of the Act is to regulate the contract labour so long as the contract
labour is not perennial. The Iabonr is required to be paid the prescribed
E wages and are provided with other welfare benefits envisaged under the Act
direct sμpervision of the principal employer. The violation visits with penal
consequences. Similarly, when the appropriate Government finds that the
employment is of perennial nature etc. contract system stands abolished,
thereby, it intended that if the workmen were performing the dnties of the
post which were fonnd to be of perennial nature on par with regular service,
F
they also require to be regularised. The Act did not intend to dennde them
of their source of livelihood and means of development, throwing them out
from employment. An Act is a socio-economic welfare legislation. Right to
socio-economic justice and empowerment are constitutional rights. Right
to means of livelihood is also constitutional right. Right to facilities and
G opportunities are only part of and means to right to development. Without
employment or appointment, the workmen will be denuded of their means
oflivelihood and resultant right to life, leaving them in·the lurch since prior
to abolition, they had the work and thereby earned livelihood. [647-B-G]
Gujarat Electricity Board v. Hind Mazdoor Sabha & Ors., (1995) 5 SCC
H 27, partly overruled.
-
AIR INDIA STATUTORY CORPN. v. UNION LABOUR UNION
589
10. The Division Bench in Dena Nath's case has taken too narrow a A
view on technical consideration without keeping at the back of the mind
the constitutional animations and the spirit of the provisions and the
object which the Act seeks to achieve. The operation of the Act is stru<·
tured on an inbuilt procedure leaving no escape route. Abolition of contract labour system ensures right to the workmen for regularisation of B
them as employees in the establishment in which they were hitherto work·
.ing as contract labour through the contractor. The contractor stands
removed from the regulation under the Act and direct relationship of
"employer and employee" is created between the principal employer and
workmen. [647-G·H; 648-A·B]
Dena Nath and Ors. v. National Fertilizers and Ors., (1992] 1 SCC 695,
overruled.
c
11. The object of the Act is to prevent exploitation of labonr. The
object, thereby, is to ensure continuity of work to the workmen in strict D
compliance of law. The conditions of the labour are not left at the whim
and fancy of the principal employer. He is bound under the Act to regulate
and ensure payment of the full wages, and also to provide all the amenities
enjoined under the Act and the rules made thereunder. On abolition of
contract labour, the intermediary i.e. contractor, is removed from the field
and direct linkage between labour and principal employer is established. E
Thereby, the principal employer's obligation to absorb them arises. The
right of the employee for absorption gets ripened and fructified. If the
interpretation in Dena Nath's case is given acceptance, it would be an open
field for the principal employer to freely flout the provisions of the Act and
engage workmen in defiance of the Act and adopt the principle of hire and F
lire making it possible to exploit the appalling conditions in which the
workmen are placed. The contractor is an intermediary between the
workmen and the principal employer. The moment the contract labour
system stands prohibited under Section 10(1), the embargo to continue as
a contract labour is put an end to and direct relationship has been
provided between the workmen and the principal employer. Thereby, the G
principal employer directly becomes responsible for taking the services of
the workmen hitherto regulated through the contractor. [648-B·H; 649·A]
Dena Nath and Ors. v. National Fertilizers Ltd. and Ors., [1992] 1 SCC
695, overruled.
H
590
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A
The Standard-Vacuum Refining Co. of India v. Its Workmen & Ors.,
[1960] 3 SCR 466; Security Guanis Board for Gmater Bombay and Thane
District v. Security & Personnel Service Pvt. Ltd. & Ors., [1987] 3 SCC 413;
I
Sankar Mukhe1jee & Ors. v. Union of India & Ors., AIR (1990) SC 532;
National Federation of Railway Porters, Vendors & Bearers v. Union of India
B & Ors., [1995] 3 SCC 152; Anadi Mukta v. V.R. Rudani, [1989] 2 SCC 691;
Unni Krishnan v. State of A.P., [1993] 1 SCC 645 and Comptroller &Auditor
General of India v. K.S. Jagannathan, [1986] 2 SCC 679, referred to.
12. The legal right of an individual may be founded upon a contract
or a statute or an instrument having the force of law. For public law
C remedy enforceable nnder Article 226 of the Constitution, the action of
the authority need to fall in the realm of public law - be it a legislative
act of the State, an executive act of the State or an instrumentality or
a person or authority imbued with public law element. The question
requires to be determined in each case. However, it may not be possible
D to generalise the nature of the action which would come either nnder
public law remedy or private law field nor is it desirable to give
exhaustive list of such actions. [650-C·Dl
13. The public law remedy given by Article 226 of the Constitntion
E is to issne not only the prerogative writs provided there but also any
order or direction to enforce any of the fundamental rights and "for any
other purpose'. The distinction between public law and private law
remedy by judicial adjudication gradually marginalised and became
obliterated. [649.E-F]
F
LL C. v. Escourts Ltd. & Ors. [1986] 1 SCC 264; M. C. Mehta & Ors.
v. Union of India & Ors., [1987] 1 SCC 395; Calcutta Gas Co. Ltd. v. State
of West Bengal, AIR (1961) SC 1044; Mulchand v. State of M.P., AIR (1968)
SC 1218; State of West Bengal v. V.K. Manda! & Ors., AIR (1962) SC 779;
New Marine Coal Co. Ltd. v. Union of India, [1964] 2 SCR 859; Gujarat
G State Financial CDlporation v. Lotus Hotel, [1983] 3 SCC 370; Mahabir Auto
Store v. Indian Oil Corporation, [1990] 3 SCC 752; Shreelekha Vidyarthi v.
State of U.P., [1991] 1 .>CC 212; Gillie v. West Noifolk and Wisbech Area
Health Authority, (1986) AC 112; Dr. Roy v. Kensinstone and Chelsea Family
Practioners Committee, (1992) IAC 624 and R.K. Panda & Ors. v. Steel
H Authority of India & Ors., [1994] 5 SCC 304, referred to.
AIR INDIASTATIJTORY CORPN. v. UNION LABOUR UNION
591
14. The founding fathers placed no limitation or fetters to the power A
of the High Court under Article 226 of the Constitution except self-imposed
limitation. The arm of the Court is long enough to reach injustice wherever
it is found. The Court as sentinal in the qui vive is to mete out justice in
I
given facts. On finding that either the workmen were engaged in violation
of the provisions of the Act or were continued as contract labour, despite B
prohibition of the contract labour under Section 10(1), the High Court has,
by judicial review as the basic structure, constitutional duty to enforce the
law by appropriate directions. It would, therefore, be necessary that instead of leaving the workmen in the lurch, the Court would properly mould
the relief and grant the same in accordance with law. Though there is no
express provision in the Act for absorption of the employees whose con- c
tract labour system stood abolished by publication of the notification
under Section 10(1) of the Act, in a proper case, Conrt as sentinal in the
qui vive is required to direct the appropriate anthority to act in accordance
with law and submit a report to the Court and based thereon proper relief
should be granted. [649-C-E; 654-C-D]
D
Indira Gandhi v. Raj Narayan, AIR (1975) SC 2299 and S.R. Bommai
v. Union of India, [1994] 3 SCC 1, referred to.
15. All the workmen in the respective services working on contract E
labour are required to be absorbed in the establishment of the appellant.
Though there exists no specific scale of pay to be paid as regular
employees, it is for the establishment to take such steps as are necessary
to prescribe scale of pay like class 'D' employee. There is no irnjJediment
in the way of the appellants to absorb them in the last grade, namely, grade
IV employees on regular basis. It is seen that the criteria to abolish the F
contract labour system is the duration of the work, the number of
employees working on the job etc. That would be the indicia to absorb the
emp.loyees on regular basis in the respective services in the establishment.
Therefore, the date of engagement will be the criteria to determine their
inter se seniority. In case, there would be any need for retrenchment of any G
excess staff, necessarily, the principle of "last come, first go" should be
applied subject to his re-appointment as and when the vacancy arises. The
--
award proceedings as suggested in Gujarat Electricity Board case are beset
with several incongruities and obstacles in the way of the contract labour
for immediate absorption. Since the contract labour gets into the service
of the principal employer, the Union of the existing employees may not H
592
SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A
espouse their cause for reference under Section 10 of the ID Act. The
workmen on abolition of contract labour system have no right to seek
reference under Section 10 of the ID Act. Moreover, the workmen immediately are kept out of job to endlessly keep waiting for award and thereafter resulting in fnrther litigation and delay in enforcement. The
B management would always keep them at bay for absorption. It would be
difficult for them to work out their right. Moreover, it is a tardy and
time-consuming process and years would role by. Without wages, they
cannot keep fighting the litigation endlessly. The right and remedy would
be a teasing illusion and would be rendered otiose and practically compell·
ing the workman at the mercy of the principal employer. Considered from
C this pragmatic perspective, the remedy carved out in Gujarat Electricity
Board case would be unsatisfactory. In the judgments nnder appeal, High
Court has directed to absorb the services of the workmen from the date of
the judgment. The respondent-Union did not challenge it. Therefore, the
benefit to the employees of the respondent-Union from the date of the
D abolition of the contract labour system cannot be granted. The direction
issned by the fligh Court to regularise their services with effect from the
respective dates of judgments of the High Court with all consequential
benefits is therefore upheld. [654-G-H; 665-A·H]
Gujarat Electricity Board v. Hind Mazdoor Sabha & Ors., (1995] 5
E sec 21, partly overruled.
Per Majmudar, !. (Concurring)
1. On abolition of contract lab.our system from any establishment
under Section 10 of the Act by the appropriate Government the logical and
F
legitimate consequences thereof will be that the erstwhile regulated con·
tract labour covered by the sweep of such abolition for the concerned
activities would be entitled to be treated as direct employees of the
employer on whose establishment they were earlier working and they would
be entitled to be treated as regular employees at least from the day on
G which the contract labour system in the establishment for the work which
they were doing gets abolished. (662-A·B]
2. Under the Contract Labour (Regulation and Abolition) Act, 1970
twin methodology had been adopted by the legislature. In the first instance,
it sought to regulate contract labour employed in any establishment
H wherein snch labour was not of a perennial nature but had to be regulated
-
ll
11
AIR JNDIASTATIJTORY CORPN. v. UNION LABOUR UNION
593
so that the right to life available to workmen as per Article 21 would not be A
rendered illusory. Various welfare measures have been provided by the Act
in connection with such regulations. The contract workers \tho are engaged
by the contractor for the benefit of the principal employer are brought
within the beneficial sweep of Chapter V of the Act. This is one facet of the
Act. The other object of the Act is to abolish the contract labour system. In B
cases where the contract labour is employed on a writ which is of perennial
natnre; that is to say, it is of sufficient duration having regard to the nature
of industry, trade, business, manufacture or occupation that is carried on
in the establishment of the principal employer. (666-E-G; 667-C-D)
3. The qnestion is whether after abolition of contract labour system, C
the contract labourers who were earlier having regulatory protections
would be rendered persona non grata and would be thrown out from the
establishment and told off the gates. Then in such a case the remedy of
abolition of contract labour would be worse than the disease and it has to
be held that the legislature while trying to improve the lot of erstwhile D
contract labourers who are doing work of perennial nature for the principal employer and are doing work which is otherwise to be done by regular
workmen had really left them in the lurch by making them lose all the
facilities available to contract labour ou the establishment as per Chapter
V and desired them to wash their hands off the establishment and get out
and face starvation. It is axiomatic that if they continued to be contract E
labourers their wages would have been guaranteed under Section 21 of the
Act with an obligation oii the principal employer to pay them if the
contractor fails to discharge his obligation in connection with payment of
wages. (658-A-D)
4. Wages are the livelihood of workman and his large number of
departments. If on abolition of contract labour system, contract labour
itself is to be abolished, it would cause economic ruin and economic death
F
to contract labourer and his dependentB for amelioration of whose lot,
order under Section 10 is to be passed. If it is held that on abolition of
contract labour system, the erstwhile contract labourers are to be thrown G
out of the establishment lock, stock and barrel, it would amount to
throwing the baby out with the bath water. That obviously cannot be the
scope, ambit and purport of Section 10 of the Act. (658-D-F]
5. When the contract workers carry out the work of the principal H
594
SUPREME COURT REPORTS [1996) SUPP. 9 S.C.R.
A employer which is of a perennial nature and if provisions of Section 10
gets attracted and such contract labour system in the establishment gets
abolished on fulfilment of the conditions requisite for that purpose, it is
obvious that the intermediary contractor vanishes and along with him
vanishes the term 'principal employer'. Unless there is a contractor agent
B there is no principal. Once the contractor intermediary goes the term
'principal' also goes with it: Then remains ont of this tripartite contractual
scenario only two parties the beneficiaries of the abolition of the erstwhile
contract labour system i.e. the workmen on the one band and the employer
on the other who is no longer the principal employer but necessarily
becomes a direct employer for these erstwhile contract labourers. Implicit
C in the provision of Section 10 is the legislative intent that on ab.iliiion of
contract labour system, the erstwhile contract-workmen would become
direct employees of the employer on whose establishment they were earlier
working and were enjoying all the regulatory facilities on that very establishment under Chapter V prior to the abolition of such contract labour
D system. [658-G-H; 659-A-D]
6. Though the legislature has expressly not mentioned the consequences of such abolition, but the very scheme and ambit of Section 10 of
the Act clearly indicate the inherent legislative intent of making the
erstwhile contract labourers direct employees of the employer on abolition
E of the intermediary contractor. The very condition engrafted in Section
10(2) (d) shows that while abolishing contract labour from the given estab·
lishment, one of the relevant consideration for the appropriate Government is to ascertain whether it is sufficient to appoint considerable number
of whole time workmen. Even otherwise there is an inbuilt safety valve in
F Section 21 of the Act which enjoins the principal employer to make
payment of wages to the given number of contract workmen whom be has
permitted to be brought for the work of the establishment if the contractor
. fails to make payment to them. It is, therefore, obvious that the principal
employer as a worldly businessman in his practical commercial wisdom
would not allow contractor to bring larger number of contract labour
G which may be in excess of the requirement of the principal employer. On
the contrary, the principal employer would see to it that the contractor
brings only those number of workmen who are required to discharge their
duties to carry out the work of the principal employer on his establishment
through, of course, the agency of the contractor. In fact the scheme of the
H Act and regulations framed there-under clearly indicate that even the
AIR INDIA ST A TUIDRY CORPN. v. UNION l.ABOUR UNION
595
number of the workmen required for the given contract work is to be A
specified in the licence given to the contractor. Consequently, the aforesaid
apprehension projected on behalf of the principal employer is more imagi·
nary than real.