# Assam oil Co v. Its TV 0rk1nen Gajendragadkar } . April 6

- **Citation:** [1960] 3 S.C.R. 466
- **Court:** Supreme Court of India
- **Decided:** 1958-09-05
- **Case number:** Civil Appeal No. 130 of 1959
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, K. c. DAS GUPTA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/assam-oil-co-v-its-tv-0rk1nen-gajendragadkar-april-6-1721
- **Pages:** 11

## Headnote

Industrial Dispute-Abolition of contract system of labourDispute raised by regular workmen of company-Reference to Tribunal, if competent-Industrial Dispu.tes Act, r947 (r4 of r947),
SS. 2 (k), IO.
A dispute was raised by the respondents, the workmen of the
appeJlant company, with respect to contract labour employed by
it for cleaning maintenance work at the refinery including premises and plant belonging to it. They made a demand for abolition of the contract system and for absorbing the workmen
employed through the contractors into the regular service of the
company.
The matter was referred to the Tribunal under s. IO
of the Industrial Disputes Act, 1947· The company objected to
the reference on the grounds (1) that it was incompetent inasmuch
as there was no dispute between it and the respondents and it
was not open to them to raise a dispute with respect to the workmen of some other employer, viz., the contractor, and (2) in any
case, it was for the company to decide what was the best method
of carrying on its business and the Tribunal could not interfere
with that function of the management.
The Tribunal held that
the reference was competent and on the merits it was of opinion
that the work which was being done through the contractor was
necessary for the company to be done daily, that doing this work
through annual contracts resulted in the deprivation of security
of service and other benefits, privileges, leave, etc., of the.workmen of the contractor and that therefore the contract system with
respect to this work should be abolished:
Held, (1) that the dispute in the present case was an
industrial dispute within the meaning of s. 2(k) of the Industrial
Disputes Act, 1947, as interpreted in Workmen of Dimakuchi
Tea Estate v. The Management of Dimakuchi Tea Estate, [1958),
\..
..
3 S.C.R.
SUPREME COURT REPO~TS
467
S.C.R. n56, because (i) the respondents had a community of
r960
interest with the workmen of the contractor, (ii) they had also
· a substantial interest in the subject-matter of the dispute in Standard Vacuum
the sense that the class to which they belonged, namely, workRefining Co. of
m~n, was substantially affected thereby, and (iii) the company
India Ltd.
could give relief in the matter.
·
v.
The reference was, accordingly, competent.
Its Wo1kmen
(2) that the direction given by the Tribunal that the contract
system should be abolished was just in the circumstances of the
case and should not be interfered with.
D. Macropollo and Co. (P) Ltd. v. D. Macropollo and Co. (P)
Ltd. Employees' Union, A.LR. 1958 S.C. 1012, distinguished.
C1v1i.

## Text

Assam oil Co.
v.
Its TV 0rk1nen
Gajendragadkar } .
April 6.
466
SUPREME COURT REPORTS
[1960J
be set aside. We would accordingly set aside the order
of reinstatement and direct that the appellant should
pay to Miss Scott Rs. 12,500 as compensation. The
order in respect of bonus has n!it been challenged and
is confirmed. There will be no order as to costs.
Appeal partly allowed.
•THE STANDARD.VACUUM REFINING CO.
OF INDIA LTD.
v.
ITS WORKMEN AND OTHERS.
(P. B. GAJENDRAGADKAR, K. N. WANCHOO and
K. c. DAS GUPTA, JJ.)
Industrial Dispute-Abolition of contract system of labourDispute raised by regular workmen of company-Reference to Tribunal, if competent-Industrial Dispu.tes Act, r947 (r4 of r947),
SS. 2 (k), IO.
A dispute was raised by the respondents, the workmen of the
appeJlant company, with respect to contract labour employed by
it for cleaning maintenance work at the refinery including premises and plant belonging to it. They made a demand for abolition of the contract system and for absorbing the workmen
employed through the contractors into the regular service of the
company.
The matter was referred to the Tribunal under s. IO
of the Industrial Disputes Act, 1947· The company objected to
the reference on the grounds (1) that it was incompetent inasmuch
as there was no dispute between it and the respondents and it
was not open to them to raise a dispute with respect to the workmen of some other employer, viz., the contractor, and (2) in any
case, it was for the company to decide what was the best method
of carrying on its business and the Tribunal could not interfere
with that function of the management.
The Tribunal held that
the reference was competent and on the merits it was of opinion
that the work which was being done through the contractor was
necessary for the company to be done daily, that doing this work
through annual contracts resulted in the deprivation of security
of service and other benefits, privileges, leave, etc., of the.workmen of the contractor and that therefore the contract system with
respect to this work should be abolished:
Held, (1) that the dispute in the present case was an
industrial dispute within the meaning of s. 2(k) of the Industrial
Disputes Act, 1947, as interpreted in Workmen of Dimakuchi
Tea Estate v. The Management of Dimakuchi Tea Estate, [1958),
\..
..
3 S.C.R.
SUPREME COURT REPO~TS
467
S.C.R. n56, because (i) the respondents had a community of
r960
interest with the workmen of the contractor, (ii) they had also
· a substantial interest in the subject-matter of the dispute in Standard Vacuum
the sense that the class to which they belonged, namely, workRefining Co. of
m~n, was substantially affected thereby, and (iii) the company
India Ltd.
could give relief in the matter.
·
v.
The reference was, accordingly, competent.
Its Wo1kmen
(2) that the direction given by the Tribunal that the contract
system should be abolished was just in the circumstances of the
case and should not be interfered with.
D. Macropollo and Co. (P) Ltd. v. D. Macropollo and Co. (P)
Ltd. Employees' Union, A.LR. 1958 S.C. 1012, distinguished.
C1v1i.
APPELLATE JURISDICTION:
Civil Appeal
No. 130 of 1959.
Appeal by special .leave ·Jfrom the Award dated
September 5, 1958, of the Industrial Tribunal, Bombay,
in Reference (I.T.) No. 187 of 1958.
0. K. Daphtary, Solicitor-General of India, G. B. Pai
and Sardar Bahadur, for the appellants.
H. R. Gokhale, S. B. Naik and K. R. Ohaudhury, for
respondent No. 1.
1960. April 6.
The Judgment of the Court was
delivered by
W ANCHOO, J.-This is an appeal by special leave in
Wanchoo J.
an industrial matter. The appellant is The Standard
Vacuum Refining Company of India Limited (hereinafter called the company).
A dispute was raised by
the workmen of the company (hereinafter called the
respondents) with respect to contract labour employed
by the company for cleaning maintenance of the ,
refinery, (plant and premises) belonging to the company. The system in force in the company is that
this work is given to contractors for a period of one
year from October 1 to September 30.
At the time
when the reference was made the contract was with
Ramji Gordhan and Company for the period from
October 1, 1957, to September 30, 1958.
On April 27,
1957, the respondents made a demand for abolition of
the contract system that prevailed in the company
and for a)Jsorbing the workmen employed through the
contractors into the regular service of the company
with retrospective effect from the date of their employment in the company through the . contractors.
The case of the respondents was that the contractor
used to change sometimes from year to year with the
468
SU~REME COURT REPORTS
[1960]
'960
result that the workmen employed by the previous
S
d -d
v
contractor were thrown out of employment.
As an
tan "' - acuum .
.
'd th t
.
O
b
l
Refining co. of mstance, rt was sar
a prev10us to cto er , 1957,
India Ltd.
the contract was with Gowri Construction Company.
v.
That company employed 67 workmen to do the work.
11, Wo•kmen
But when the contract was given to Ramji Gordhan
and Company, all these 67 workmen were thrown out
Wanchoo ].
of employment, though 40 of them were subsequently
re-employed as fresh employees by Ramji Gordhan
and Company. The result of the system therefore was
that there was no security of service to the workmen
who were in effect doing the work of the company.
Besides the contractors were paying much less to the
workmen than the amount paid by the company to
its unskilled regular workmen. Further, the workmen
of the contractors were not entitled to other benefits
and amenities such as provident fund, gratuity, bonus,
privilege leave, medical facilities and subsidised food
and housing. to which the regular workmen of the
company were entitled. The work was of a permanent
nature, but the contract system was introduced to
deny the workmen the rights and benefits which the
company gave to its own workmen.
The dispute was taken to the conciliation officer.
When conciliation failed, the Government of Bombay
made the following reference on May 13, 1958.
"The contract system for cleaning the premises
and plant should be abolished and workers working
in the refinery through the Ramji Gordhan and Company should be treatec! as workers of the Standard
Vacuum Refining Company of India Limited, Bombay, and wage-scales, conditions of service, etc.,
that are applicable to the workers of the refinery be
made applicable to them.
Past service of these
workers should be counted and they should be
treated as continuously in the service of the
Stanvac refinery from the date of their entertainment."
The company resisted the claim and raised two main
con.tentions. In the first place it was contended that
the reference under s. 10 of the Industrial Disputes
Act, No. 14 of 1947 (hereinafter called the Act), was
incompetent. In the second place it w!\os <)9ntended
-
•
· ..
-
...
3 S.C.R. SUPREME COURT REPORTS
. 469
that the work done by the contractor's workmen was
z960
not germane to the manufacturing process and was Standa-;;;acuum
therefore entrusted to the contractor. If the workmen Refini11g co. of
of the contractor were not satisfied with the conditions
India Ltd.
of service, they could take up the matter with the
v.
·contractor and the company had nothing to do with
Its Workmen
it. As to the difference between the wages and beneWanchoo 1.
fits and amenities of the regular workmen of the company and the contractor's workmen, it was said that
the work of the two sets of workmen was very different
and that in any case this was a matter between the
contractor and its workmen. The contractor was an
independent employer and it was incorrect to say that
the real employer was the company. It ;was for the
company to decide what was the best method of carrying on its business and the industrial tribunal should
not interfere with that function of the management.
The tribunal held that the reference was competent.
On the merits it was of opinion that the work which
was being done through the contractor was necessary
for the company and had to be done daily, though it
was not a part of the manufacturing process. It
further held that doing of this work through annual
contracts resulted in the deprivation of security of
service and other benefits, privileges, leave, etc., for the
workmen of the contractor. Therefore considering the
nature of the case it was of opinion that this was a
proper case where a direction should be given to the
company to abolish the contract system with respect
to this work. In the result the company was directed
with effect from November 1, 1958, to discontinue the
practice of getting this work done through contractors
and to have it done through workmen engaged by
itself. The other part of the demand, namely, that
all the workmen of the contractor should be taken
over by the company and their past servicls should be
counted and that they should be given the same wagescale and conditions of service, etc., which were applicable to the regular workmen of the company was· •
rejected. The company was further directed fo engage
regular workmen for this work and_ in so doing it was
to give preference to the workmen employed by Ramji
tlo
470~
SUPREME COURT REPORTR
[1960]
r95o
Gordhan and Company. Wage-scale and other bene51
d -d
v
fits to be given to these workmen were left to the
an a1 -
acuum
.
.
Refining co. of company to be determmed by 1t.
India Ltd.
Learned Solicitor-General a.ppearingfor the company
v.
raised two contentions before us, namely, (i) is this
Its Workmen
dispute an industrial dispute and therefore tho ref<,rence was competent? and (ii) is the tribunal justified
Wanchoo ].
•
in interfering with the management function as to
how it should get its work done ?
Re. (i):
The contention under this head is that there is no
dispute between the company and the respondents and
that it was not open to the respondents to r'1.ise a
dispute with respect to the workmen of some other
employer (in this case, Ramji Gordhan and Company).
Reliance in thil'l connection was placed on the definition of "industrial dispute " in s. 2 (k) of the Act and
the judgment of this Court in Workmen of Dimakuchi
Tea Estate v. The Management of Dimakuchi Tea
Estate (1 ).
The definition of " industrial dispute " m
s. 2 (k) requires three things-
(i) There should be a dispute or difference;
(ii) The dispute or difference should be between
employers and employers, or between employers and
workmen or between workmen and workmen ;
(iii) The dispute or difference must be connected
with the employment or non-employment or the
terms of employment or with the conditions of
labour, of any person.
The first part thus refers to the fact um of a real and
substantial dispute, the second part to the parties to
the dispute and the tiiird to the subject-matter of the
dispute. The contention of the learned SolicitorGeneral is two-fold in this connection, namely, (i) that
there is no real or substantial dispute between the
company and the respondents, and (ii) that the subjectmatter of the dispute is such that it cannot come within the terms of the definition in s. 2 (k) .
The first submission can be disposed of shortly.
There is undoubtedy a real and substantial dispute
between the company and t.he respondents on the
question of the employment of contract-labour for thrPl [tgsSJ S.C.R. 11s6.
-
-
-
.3 S.C.R. SUPHE.ME COURT REPUR'l'S
471
...
work of the company. The fact that the respondents
r960
who have raised this dispute are not employed on 5
d -v
.
.
.
h l
tan ardacuunt
contract basis will not make the dispute any t e ess, Refining co. of
a real or substantial dispute between them and the
India Ltd.
company as to the manner in which the work of the
v.
company should be carried on.
The dispute in this
Its Workmen
case is that the company should employ ,workmen
d
l
d
h
.
.
Wanchoo ].
irect y an not t rough contractors in carrymg on its
work and this dispute is undoubtedly real and substan.
tial even though the regular workmen (i.e., the respondents) who have raised it are not employed on contract labour. In Dimakuchi case (1) to which reference
has been made, the dispute was relating to an employee of the tea estate who was not a workman.
It was nevertheless held that this was a real and
substantial dispute bet~een the workmen and the
company.
How the work should be carried on is
certainly a matter of some importance to the workmen
and in the circumstances it cannot be said that this
is not a real and substantial dispute between the cqmpany and its workmen. Thus out of the three ingre~
dients of s. 2(k) the first is satisfied ; the second also is
satisfied because the dispute is between the company
al}d the respondents; it is the third ingredient which
really calls for determination in the light of the decision in Dimakuchi case {1 ).
Section 2(k), as it is worded, would allow workmen
of a particular employer to raise a dispute connected
with the employment or non-employment, or the terms
of employment or with the. conditions of labour of any
person. It was this aspect of the matter which was
considered in Dimakuchi case {1) and it was held that
the words " any person " used in s. 2(k) would not
justify the workmen of a particular employer io raise
a dispute about any one in the world, though the
words " any person " in that provision may not be
equated with the words "any workman". The test
therefore to be applied in determining the scope of the
words "any person " in s. 2(k) was stated in the
following words at pp. 1174-75 :-
·
" If, therefore, the dispute is a collective dispute;
the party raising the dispute must have either a
direct interest in the _subject-matter of dispute or a
(1) (~9~8) S,C,:!l,, u,;6.
•
Statidard· Vacuum
Refining Co. of
India Ltd.
v.
/Is Workmen
Wanchoo ].
472
SUPREME COURT REPORTS
[1960]
substantial interest therein in the sense that the
class to which the aggrieved party belongs is substantially affected thereby. It is the community of
interest of the class as a whole-class of employers or
class of workmen-which furnishes the real nexus between the dispute and the parties to the dispute. We
see no insuperable difficulty in the practical application of this test. In a case where the party to a dispute
is composed of aggrieved workmen themselves and
the subject-matter of the dispute relates to them or
any of them, they clearly have a direct interest in
the dispute.
Where, however, the party to the
dispute also composed of workmen espouse the cause
of another person whose employment or non-employment, etc., may prejudicially affect their interest, the
workmen have a substantia,l interest in the subjectmatter of dispute. In both such cases the dispute is
an industrial dispute."
We have therefore to see whether the respondents
who have raised this dispute have a direct interest in
the subject-matter of the dispute or a substantial
interest therein in the sense that the class to which
the respondents belong is substantially affected thereby
and whether there is community of interest between
the respondents and those whose cause they have
espoused.
There can be no doubt that there is community of interest in this case between the respondents and the workmen of Ramji Gordhan and
Company. They belong to the same class and they do
the work of the same employer and it is possible for
the company to give the relief which the respondents
are claiming. The respondents have in our opinion
also a substantial interest in the subject-matter of the
dispute, namely, the abolition of the contract system
in doing work of this kind. The learned SolicitorGeneral particularly emphasised that there was no
question of the interest of the respondents being
prejudicially affected by the employment or nonemployment or the terms of service or conditions of
labour of the workmen of Ramji Gordhan and Company and placed reliance on the words "may prejudicially affect their interest" appearing in the observations quoted abuve.
We may, however, mention that
-
,.
I
-
r
--
-
3 S.C.R. SUPREME COURT REPORTS
476
the test laid down is that the workmen espousing the
r960
cause should have a substantial interest in the subject- st . d d v
f h d.
d .
l
h
"ll
an ar - acuwn
matter o t e ispute, an it was on y w en 1 ustratRefining co. of
ing the practical application of the test that this Court
India Ltd.
used the words "may prejudicially affect".their interest".
v.
Besides it is contended by Mr. Gokhale for the responIts Workmen
dents that even if preJ"udicial effect on the interest of
Wanchoo /.
the workmen espousing the cause is necessary, this is a
case where the respondents' interest may be prejudicially affected in future in case the contract system of
work is allowed to prevail in this branch of the work
of the company.
He submits that if the company can
carry on this part of the work by contract system it
may introcfuce the _same system in other branches of its
work which are now being done by it.s regular workmen.
We do not think it necessary tcr go into this
aspect of the matter as we have already indicated that
prejudicial effect is only one of the illustrations of the
practical application 6f the test laid down in Dimakuchi
case (1), viz., substantial interest in the sense that the
class to which the aggrieved party belongs is substantially affected thereby. It seems to us therefore that
the respondents have a community of interest with
the workmen of Ramji Gordhan and Company who
are in effect working for the same employer .. They
have also a substantial interest in the subject-matter
of the dispute in the sense that the class to which they
belong (namely, workmen) is substantia.lly affected
thereby. Finally the company can give relief in the
matter. we are therefore of opinion that all the
ingredients of s. 2(k) as interpreted in Dimakuchi case(1 )
are present in this case and the dispute between
the parties is an industrial dispute and the reference
was competent.
- Re. (ii) :
We now come to the question whether the tribunal
was justified in giving the direction for the abolition of
the contract system in the manner in which it has done
so. In dealing with this question it may be relevant to
bear in mind that industrial adjudication generally does
not encourage the employment of contract labour in
modern times. As has been observed by tlrn Royal Com.
mission on Labour "whatever the merits of the system
(I) [1958] S,C.R, n56,
474
l:iUPHEME OUUH:l' H,El'UBTl:i
LHH:iUJ
z960
in primitive times, it is now desirable, if the ma.nage-
-
ment is to discharge completely the complex responSiandard-Vacuum "b"l'
J 'd
· b 1
d b
't
h t
h
Refining Co. of
SI I 1ty a1
upon it y aw an
y eqm y, t a
t e
India Ltd.
manager should have full control over the selection,
v
hours of work and payment of the workers". The same
Its Workmen
opinion has been expressed by several Labour Enquiry
Committees appointed in different States. We agree that
lVanchoo ].
h
d
· d b
k
·
w enever a ispute is raise
y wor men m regard to
the employment of contract labour by any employer it
would be necessary for the tribunal to examine the
merits of the dispute a part from the general consideration that contract labour should not be encouraged, and
that in a given case the decision should rest not merely
on theoretical or abstract objections to contract labour
but also on the terms and conditions on which contract
labour is employed and the grievance made by the
employees in respect thereof.
As in other matters
of industrial adjudication so in the case of contract
labour theoretical or academic considerations may be
relevant but their importance should not be overestimated.' Let us then consider the contract labour
system in the present case.
The contract in . this case related to four matters.
But the reference is confined to one only, viz., cleaning
maintenance work at the refinery including premises
and plant and we shall deal with that only.
lcio far as
this work is concerned, it is incidental to the manufacturing process and is necessary for it and of a
perennial nature which must be done every day., Such
work is generally done by workmen in the regular
employ of the employer and there should be no difficulty in having regular workmen for this kind of
work. The matter would be different if the work was
of intermittent or temporary .nature or was so little
that it would not be possible to employ full-time
workmen for the purpose.
Under the circumstances
the order of the tribunal appears to be just and there
are no good reasons for interfering with it.
Our attention in this connection was drawn to
D. 111acropollo And Go. (P) Ltd. v. D. Macropollo And
Go. (P) Ltd. Ernployees' Union(') and it was urged that
the tribunal should not have interfered with the
\I) A.LR. 1958 S.C. IOIZ.
-
,
-
-
•
_,
.3 S.C.R.
SUPREME COURT REPORTS
475
management's manner of h~ving its work done in the
I960 · ·
most economical and convenient way that it thought Standa-:;-:;,acuum
proper. It was pointed out that this was not a case Refi'ningCo. of
where the contract system was a camouflage and the
India ua.
workmen of the contractor were really the workmen of
v.
the company. It may be accept~d that the contractor· Its Workmen
in the present case is an independent person and the
wa:;;;,0 f.
system is genuine and there is no question of the
·
·
company carrying on this work itself and camouflaging it as if it was done through contractors in order
to pay less to the workmen. But the fact that the
contract in this case is a bona fide contract would not
necessarily mean that it should not be touched by the
industrial tribunals. If the contract had been mala
fide and a cloak for suppressing the fact that the workmen were really the workmen of the company, the tribunal would have been justified in ordering the company
t'o take over the entire body of workmen and treat it
as its own workmen. But because the contract in this
case was bona fide the tribunal has not ordered the·
company to take over the entire body of workmen.
It has left to it to decide for itself how; many workmen it should employ and on what .terms and has
merely directed that when selection is. being made
preference should be given to the workmen employed
by the present contractor. In Macropollo case (1), this
Court held that the reorganisation had been adopted
by the employer for reasons of economy and convenience a.nd was bona fide.
In that case the main.
business of the concern was the selling agency of
variou@ cigarette manufacturing concerns. Before 1946
the concern used to employ distributors for the
purpose and these distributors used to employ salesmen. In 1946 there were communal riots in Calcutta
and therefore the concern took over the salesmen in its
direct employment in ortler to reorganise them on
communal basis in the then prevailing circumstances.
In 1954 the concern decided to close down its own
outdoor sales department and revert to the distributor system. It was in that context that certain
workmen had to be retrenched, and this Court held
that the reorganisation scheme adopted in 1954 for
:reasons of economy and convenience was bona fide
(1) ./\.I.l~. 19ss s.<;:. 1oia.
·
. 476
SUPREME COURT REPORTS
[1960]
z96o
and
if it resulted
in retrenchment that was
51
d -:;-;:;
inevitable. These facts would show that in that
;~;;n; ·c":."0/"' case there was reorganisation of the business result.
India Ltd.
ing in retrenchment. In the present case no such
v.
thing arises and the only question for decision is
Its Wa>kmen
whether the work which is perennial and must go
on from day to day and which is incidental and
Wanchoo ].
April 7.
necessary for the work of the refinery and which is
sufficient to employ a considerable number of wholetime workmen and which is being done in most
concerns through regular workmen should be allowed
to be done by contractors. Considering the nature of
the work and the conditions of service in the present
case we are of opinion that the tribunal's decision is
right and no interference is called for, except that the
date .should now be changed, for such a direction cannot be put into force with retrospective effect from
November l, 1958. It appears that a few months
remain before the present contract will come to an
end. We think that for these few months the present
system may continue.
W' e therefore dismiss the
appeal with this modification that the order of the
tribunal will be carried into effect from such date on
which the present contract in force in the company
comes to an end. The respondents will get their costs
from the company.
Appeal dismissed subject to modification..
MADHYA PR.ADESH MINERAL INDUSTR.Y
ASSOCIATION
v.
TFIE REGIONAL LABOUR COMMISSIONER
JABALPUR AND OTHERS
(P. B. GAJENDRAGADKAR, K. N. w ANCHOO
and K. C. DAS GUP'l'A, JJ.)
Minimum Wages, Fixation of-Notification by State Government prescribing minimum rates for stone-breaking or stone-crushing
in mines-Validity-Minimum Wages Act, r948 (II of r948),
ss. 5 (2), 27, Sch., Part I item 8.
The Madhya Pradesh Government issued a notification under
s. 5 (2) of the Minimu!Il Wa~cs Act, 1948 (rr of 1948), prcscribin(j
-
-