# BALWANT RAI SALUJA & ANR. ETC. ETC v. AIR INDIA LTD. & ORS

- **Citation:** [2013] 16 S.C.R. 706
- **Court:** Supreme Court of India
- **Decided:** 2013-11-13
- **Case number:** Civil Appeal Nos.10264-66 of 2013
- **Bench:** Chandramauli Kr. Prasad, V. Gopala Gowda
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/balwant-rai-saluja-anr-etc-etc-v-air-india-ltd-ors-29011
- **Pages:** 82

## Headnote

Industrial Disputes Act, 1947 - ss.2(k), 2(ra), 2(s), 25T
C and 25U - Vth Schedule, Entry No.10 - Factories Act, 1948
-
Delhi Factories Rules of 1950 -
Contract Labour
(Regulations and Abolition) Act, 1970 - Industrial Disputes
Act, 1947 - Whether the concerned workmen of Chefair, a unit
of Hotel Corporation of India (HCI) with which Air India had
D entered into a contract to provide canteen services at its
establishment, were entitled to be treated as being regular
employees of Air India - And whether e.1gaging the contract
workmen in the canteen situated in the premises of Air India
through HCI amounted to sham and camouflage by Air India
E to deprive the legitimate statutory and fundamental rights of
the concerned workmen as provided under the provisions of
the Industrial Disputes Act and the Constitution - Difference
of opinion between Hon'ble Judges of the Division Bench -
Matter referred to Hon'ble the Chief Justice of India for placing
F the same before an appropriate Bench.
Dispute arose as to whether the concerned workmen
of Chefair, a unit of Hotel Corporation of India (HCI) with
which Air India had entered into a contract to provide
canteen services at its establishment, were entitled to be
G treated as being regular employees of Air India.
The appellants contended before this Court that the
obligation to provide for the Canteen was with Air India
and, therefore, the workmen were entitled to be treated
H
706
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
707
as their employees and Air India their employer; that Air A
India had a large role to play in the operation and
management of the Canteen and, in the circumstances,
once the veil of the contract was lifted, the control of Air
India was writ large over the Corporation. It was
contended that the Corporation was a wholly owned
B
subsidiary of Air India which controlled the composition
of the Board of Directors and ·appointed and removed
Directors in consultation with the Government of India;
and notwithstanding that the general management of the
Corporation was vested in its Managing Director, Air India c
was conferred with the power to issue directions or
instructions as it thought fit in regard to the financeS- and
the conduct of the business and affairs of the
Corporation and, hence, the workmen employed by the
Corporation were, in fact, the employees of Air India.
0
The appellants further submitted that the
Corporation may be a separate legal entity but Air India's
control over the affairs of the Canteen made it the
principal employer. The appellants also submitted that the
workmen were engaged in the Canteen provided by Air
E
India in compliance of Rule 65(2) of the Rules framed by
the Union Territory of Delhi in exercise of powers under
Section 46 of the Factories Act; that the workmen of a
statutory canteen have to be treated as employees of
such establishment whose obligation is to provide for the
F
Canteen; and since in the case in hand, the obligation to
provide for the Canteen was with Air India, therefore, the
workmen were entitled to be treated as their employees
and Air India their employer.
G
Referring the matter to Hon'ble the Chief Justice of
India for placing the same before an appropriate Bench,
the Court
Per Chandramauli Kr. Prasad. J.
H
708
SUPREME COURT REPORTS
[2013] 16 S.C.R.
A
HELD:1. It is well settled that the Court can lift the veil,
look to the conspectus of factors governin~ employment,
discern the naked truth though concealed intelligently.
The Court has to be astute in piercing the veil to avoid
the mischief and achieve the purpose of law. It cannot be
B swayed by legal appearance. The court's duty is to find
out whether contract between the principal employer and
. the contractor ::: i::h~m. nominal or merely a camouflage
to deny employment benefits to the workmen. [Para 14]
[726-D-F]
c
2. The Hotel Corporation of India (HCI) is a
Government Corporation incorporated under the
Companies Act. It is a legal entity altogether different fr

## Text

_Characters 0–39,988 of 166,490. This is a partial read: ask again with offset=39988 for what follows._

A
B
[2013] 16 S.C.R. 706
BALWANT RAI SALUJA & ANR. ETC. ETC.
v.
AIR INDIA LTD. & ORS.
(Civil Appeal Nos.10264-66 of 2013)
NOVEMBER 13, 2013
[CHANDRAMAULI KR. PRASAD AND
V. GOPALA GOWDA, JJ.]
Industrial Disputes Act, 1947 - ss.2(k), 2(ra), 2(s), 25T
C and 25U - Vth Schedule, Entry No.10 - Factories Act, 1948
-
Delhi Factories Rules of 1950 -
Contract Labour
(Regulations and Abolition) Act, 1970 - Industrial Disputes
Act, 1947 - Whether the concerned workmen of Chefair, a unit
of Hotel Corporation of India (HCI) with which Air India had
D entered into a contract to provide canteen services at its
establishment, were entitled to be treated as being regular
employees of Air India - And whether e.1gaging the contract
workmen in the canteen situated in the premises of Air India
through HCI amounted to sham and camouflage by Air India
E to deprive the legitimate statutory and fundamental rights of
the concerned workmen as provided under the provisions of
the Industrial Disputes Act and the Constitution - Difference
of opinion between Hon'ble Judges of the Division Bench -
Matter referred to Hon'ble the Chief Justice of India for placing
F the same before an appropriate Bench.
Dispute arose as to whether the concerned workmen
of Chefair, a unit of Hotel Corporation of India (HCI) with
which Air India had entered into a contract to provide
canteen services at its establishment, were entitled to be
G treated as being regular employees of Air India.
The appellants contended before this Court that the
obligation to provide for the Canteen was with Air India
and, therefore, the workmen were entitled to be treated
H
706
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
707
as their employees and Air India their employer; that Air A
India had a large role to play in the operation and
management of the Canteen and, in the circumstances,
once the veil of the contract was lifted, the control of Air
India was writ large over the Corporation. It was
contended that the Corporation was a wholly owned
B
subsidiary of Air India which controlled the composition
of the Board of Directors and ·appointed and removed
Directors in consultation with the Government of India;
and notwithstanding that the general management of the
Corporation was vested in its Managing Director, Air India c
was conferred with the power to issue directions or
instructions as it thought fit in regard to the financeS- and
the conduct of the business and affairs of the
Corporation and, hence, the workmen employed by the
Corporation were, in fact, the employees of Air India.
0
The appellants further submitted that the
Corporation may be a separate legal entity but Air India's
control over the affairs of the Canteen made it the
principal employer. The appellants also submitted that the
workmen were engaged in the Canteen provided by Air
E
India in compliance of Rule 65(2) of the Rules framed by
the Union Territory of Delhi in exercise of powers under
Section 46 of the Factories Act; that the workmen of a
statutory canteen have to be treated as employees of
such establishment whose obligation is to provide for the
F
Canteen; and since in the case in hand, the obligation to
provide for the Canteen was with Air India, therefore, the
workmen were entitled to be treated as their employees
and Air India their employer.
G
Referring the matter to Hon'ble the Chief Justice of
India for placing the same before an appropriate Bench,
the Court
Per Chandramauli Kr. Prasad. J.
H
708
SUPREME COURT REPORTS
[2013] 16 S.C.R.
A
HELD:1. It is well settled that the Court can lift the veil,
look to the conspectus of factors governin~ employment,
discern the naked truth though concealed intelligently.
The Court has to be astute in piercing the veil to avoid
the mischief and achieve the purpose of law. It cannot be
B swayed by legal appearance. The court's duty is to find
out whether contract between the principal employer and
. the contractor ::: i::h~m. nominal or merely a camouflage
to deny employment benefits to the workmen. [Para 14]
[726-D-F]
c
2. The Hotel Corporation of India (HCI) is a
Government Corporation incorporated under the
Companies Act. It is a legal entity altogether different from
its shareholders. The fact that Air India or its nominee are
the shareholders of the Corporation and in the
D management of business and finances, it is subject to the
directions issued by Air India in terms of the
Memorandum of Association and Articles of Association
shall not merge the Corporation's identity jn
shareholders. The Corporation is a separate legal entity,
E not subservient to Air India but a servant to its
Memorandum of Association and Articles of Association.
[Para 17] [729-E-G]
3. Few of the well recognized tests to find out the real
F relationship are whether the principal employer: (i) pays I
the salary to the workmen instead of the contractor, (ii) I
controls and supervises the work ·of the employees, (iii) I
has role in' selection and appointment of the employees,
and (iv) acts as a disciplinary authority over the conduct
G and discipline of the employees. 'Air India does not fulfill
the test laid down so as to treat it as the principal
employer. [Para 19] [730-C-E]
4. It is not the case of the Workmen that it is Air India
which pays their emoluments instead of the Corporation.
H Air India. has neither any role in selection and appointment
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
709
of the workmen nor it controls and supervises their work.
A
It is further not their case that Air India is their disciplinary
authority over their conduct and discipline. Air India, by
giving subsidy at a specified rate or for that matter
purchasing few articles for the Canteen on its behalf and
further bringing to the notice of the Corporation the
B
complaint in regard to the functioning of the Canteen, will
not make ·it the principal employer. The Corporation is a
Government company like Air India and the workmen in
no way will be prejudiced if they continue to be the
employees of the Corporation. There does not ·seem to c
be any mala fide or oblique motive in Air India entering
into a contract with Chef Air, a unit of the Corporation for
operating its Canteen. Certainly, it is not to defeat the
rights of the workmen. [Para 23] [732-0-H]
5. The obligation to provide Canteen is by itself not D
decisive to determine the status of workmen employed
in the Canteen. As an absolute proposition of law it
cannot be said that "whenever in discharge of statutory
mandate a canteen is set up or other facilities provided
by the establishment, the employees of the canteen or
E
such other facility become the employees of that
establishment". Having tested the case of the workmen
on the touchstone of the principles laid down by this
Court, it is found that they do not satisfy those tests so
as to hold that Air India is the principal employer. [Paras
F
26, 27 and 29] [734-F; 735-B-C; 736-G]
Heavy Engineering Mazdoor Union v. State of Bihar
(1969) 1 SCC 765: 1970 (1) SCR 995; Steel Authority of
India Ltd. v. National Union; Waterfront Workers (2001) 7 SCC
G
1: 2001 (2) Suppl. SCR 343; Haldia Refinery Canteen
Employees Union and Others v. Indian Oil Corporation Ltd.
& Ors. (2005) 5 SCC 51: 2005 (3) SCR 972; International
Airport Authority of India v. International Air Cargo Workers'
Union (2009) 13 SCC 37 4: 2009 (8) SCR 1; General H
710
SUPREME COURT REPORTS
[2013] 16 S.C.R.
A Manager, (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon
v. Bharat Lal (2011) 1 SGB 635; M. M.R. Khan v. Union of
India 1990 S,upp SCC 191: 1990 SCR 687; Workmen of the
Canteen of Coates of India Ltd. v. Coates of India Ltd. & Ors.
(2004) 3 SCC 547 and Hari Shankar Sharma v. Artificial
B Limbs Manufacturing Corpn. (2002) 1 SCC 337 - referred
to.
Per V. Gopala Gowda. J. (dissenting)
HELD:1. Air India, in spite of being the statutory
C corporation did not consider it necessary to come to the
court with clean hands but on the other hand, it has
suppressed relevant material fact regarding the number
of employees/workmen working in its establishment. The
wholly owned subsidiary corporation- HCI has adopted
D unfair labour practice as defined under Section 2(ra) of
the Industrial Disputes Act, 1947 at serial No. 10 entry in
the Vth Schedule under the heading of the Unfair Labour
Practices practiced by the employer, by keeping workers
in employment in the canteen for 40 days at a time and
E thereafter employing them on contract basis after a break
though the nature of work to be performed by them in the
canteen have been perennial in nature, for the reason
that they were required to provide and maintain the
statutory canteen in the factory premises to cater the
F food stuff to its employees/ workmen. Therefore, they
have committed a statutory offence punishable under the
provision of Section 25U of the l.D. Act for employing the
concerned workmen on contract basis with a break in
their service which constitutes u'nfair labour practice and
G is prohibited under Section 25T of the l.D. Act either by
the employer or the workmen under the above Schedule
to the l.D. Act. The concerned workmen have been
discharging the permanent nature of work in different
capacities working cQhtinuously ranging from 3 years to
H 20 years with an artificial break after 40 days of
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
711
employment by the employer with an oblique motive to
A
deprive them of their legitimate statutory right of
regull'lrizing them as permanent workmen in the statutory
canteen which is being run by the Air India in its factory
premises through HCI from its Chefair unit. [Para 15] [753A-H; 754-A]
B
2. In public sector undertaking like Airways, there are
different types of situations·. One of them is the.statutory
canteen which must ·be provided by such Industrial
establishment which is a factory in terms of the definition
C
of the Factories Act, since manufacturing activities are
involved. 1.n the instant case the Air India falls under the
category of factory where the occupier is defined under
Section 2(n) of the Factories Act and therefore, it is duty
bound to provide a canteen to its employees/ workmen
which is known as the statutory canteen. It is the D
statutory obligation on the part of Air India to provide a
statutory canteen under the provisions of Factories Act
and Rules and therefore, it is one more strong
circumstance in favour of the concerned workmen for
regularization in their services as permanent workmen by
E
the Air India. The most important legal aspect of the case
which is required to be considered is that the law
stipulates statutory obligation on the part of Air India to
provide and maintain statutory canteen to cater the food
stuff to its employees/ workmen as per notification
F
referred to supra. Therefore, the canteen facility to be
provided to the employees/ workmen cannot be
withdrawn by the owner of the establishment, namely,
the principal employer. Therefore, the necessary corollary
to this condition is the fact that in such a situation the
G
nature of employment involved in the canteen in question.
is perennial in nature. The need for workers to run the
canteen by the Management of Air India is permanent.
The vacancies of various posts in the canteen are
permanent in nature. [Para 21] [760-D-H; 761-A]
H
I
712
SUPREME COURT REPORTS
[2013] 16 S.C.R.
A
3. From the review of case law on this aspect, two
kinds of situations arise, one in which the contractor is
changed but not the workers employed. The other
situation is where the contractor is changed and along
with him the workers a!so get the boot. The effect of this
B situation appears that the workers have been temporary.
In reality they are kept temporary in order to perpetuate
'unfair labour practice by the employer, which is not
permissible in view of Section 25T of the l.D. Act read with
entry at Serial No. 10 in the Vth Schedule of the l.D. Act
c regarding unfair labour practices on the part of the
employer. In the case in hand, Air India is the principal
employer and Chefair - an unit under HCI is the
contractor. The CGIT has rightly arrived at the finding that
Chefair is the·unit of HCI which renews the contract of
0 canteen workers every forty days. Unfortunately, the said
workers, have been continued as contract workers in the
canteen though they have completed 240 days of
continuous service in a year as defined under Section
258 of the l.D. Act which action of the Air India is unfair
E labour practice and is prohibited under Section 25T of the
l.D. Act. In spite of statutory prohibition of employing the
concerned workmen in the canteen on contract basis in
permanent nature of work, the Chefair - a unit of HCI and
Air India have indulged in unfair labour practices as
defined under Section 2(ra) read with Section 25T and the
F Vth Schedule of the l.D. Act, with a deliberate intention
_to deprive the statutory rights of the concerned workmen
which is a glaring patent illegality committed by them for
which they are liable to be punished under Section 25U
of the l.D. Act read with the Rules. [Para 22) [761-B-H;
G 762-A-B]
4. If the case pleaded by Air India and HCI is
accepted, it amounts to giving a reward to Air India, who
is the principal employer. It also amounts to holding that
H the concerned workmen are contract employees of the
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
713
contractor·and they are not put in the continuous service
A
which amounts to conferring reward upon the HCI and
AIR India who have committed illegality. The concerned
workmen who are working in the canteen at the relevant
time have been working in the vacancies which are
permanent in nature. Therefore, they are required to be
B
regularized by the pri·ncipal employer as .permanent
workmen and they are also entitled to the consequential
benefits since they have rendered their services for more
than 3 to 20 years continuously saving the artificial
breaks imposed on them by the employer from time to c
time to deprive them from regularization as permanent
employees of the establishment. [Para 23] [762-C-F]
5. Further, it is clear from the Delhi Factories Rules
of ·1950 and the Notification of 1991 issued by Lt.
Governor of the Union Territory of Delhi that Air India is
D
the occupier l)nder Section 2(n) of the Factories Act and
it must provide and maintain a statutory canteen for its
employees/ workmen. The vacancies in various posts that
exist for canteen workers are permanent in nature but the
Management of HCI on behalf of Air India has continued
E
them as contract workers for a long period with a break
after 40 days, which is an unfair labour practice on their
part though it is prohibited under Section 25T of the l.D.
Act. The temporary rotation of concerned workers in the
vacancies of the canteen by the HCI, which is an
F
instrumentality of the State is to countenance a situation
where two statutory entities of the above nature collude
together to.perpetuate 'unfair labour practices' as defined
under Section 2(ra) which is enumerated at serial no. 10
under the heading of 'unfair labour practice' on the part G
of the employer in the Vth Schedule to the l.D. Act.
Therefore, this Court is bound to ensure the
implementation of all relevant laws, especially those
enacted by the Legislature to fulfill the constitutional
obligations under the Directive Principles of State Policy
H
714
SUPRfi:ME COURT REPORTS
[2013] 16 S.C.R.
A and bring this unholy alliance between Air India and HCI
to an end by declaring the canteen workers as
employees of the principal employer. [Para 24] [762-G-H;
763-A-D]
8
6.The High Court unjustly refused the claim of the
canteen workmen by accepting the untenable arguments
advanced on behalf of the Air India that the canteen run
through HCI from Chefair is not the statutory canteen and
Air India is not the principal employer. This conclusion
is not only erroneous but is also contrary to the law laid
C down by this Court. [Para 28] [766-G-H]
7. The presence of a statutory obligation on the part
of Air India to run a canteen must always be seen as one
more strong circumstance to determine the wider
o question of regularization of the concerned workmen
involved in this case. [Para 29] [767-A-B]
8. In all statutory canteens, the nature of employment,
of vacancies, is indeed of a permanent nature and those
who deploy the workmen on contract basis to discharge
E statutory duties of an employer amounts to unfair labour
practice. In the nature of rotational hire and fire, policy
adopted by the employer must not be rewarded for the
illegalities perpetuated by them. This is more so when the
principal employer is a statutory corporation coupled with
F the fact that the contractor also is one such entity and
the two should not be allowed to continue "their unfair
labour practices to employ the workmen on contract
basis in the canteen to discharge the statutory duty by
the occupier to provide and maintain a statutory canteen
G for its employees/workmen in its factory. Both Air India
and HCI have colluded with each other to perpetuate
unfair labour practices by engaging the concerned
workmen in the statutory canteen of the principal
employer- Air India. [Para 29] [767-D-G]
H
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
715
9. Classically jurists like Salmond and others while
A
developing the jurisprudence relating to Torts have laid
down the test to determine the relationships between
'master and servant'. In such situations the predominant
test deployed was the test of control and supervision.
Post constitutional jurisprudence in India must no longer
B
be allowing pr~ctice of the traditional master and servant
relationship but should be facilitating employer-employee
relationships mediated by constitutional jurisprudence
which is relevant to the area of labour law jurisprudence
in our country in the interest of maintaining industrial c
peace and harmony which is in larger public interest.
[Para 30] [767-H; 768-A-B]
10. The practice by Air India constitutes unfair labour
practice. Therefore, the findings and reasons recorded by
CGIT on the points of dispute in relation to the concerned
D
employees declaring that the concerned contract workers
of the canteen are deemed employees of Air India is a
ri·ght decision. Further, setting aside the termination
orders passed against some of the concerned workmen
is also justified for the reason that the services of the
concerned workmen in the above cases were terminated
during pendency of the industrial disputes before CGIT
regarding absorption of the concerned workmen as
permanent employees, without obtaining approval from
the CGIT as required under Section 33(2)(b) of the l.D. Act.
Apart from the above reason, the termination of services
E
F
of the workmen involved in the above industrial dispute
cases· is unsustainable in law for the reason that they
have not complied with the mandatory provisions of
Section 25F, clauses (a) and (~) of the l.D. Act and have
G
not obtained the permission from the Central
Government as required under Section 25N of Chapter
VB-of-the l.D. Act. Therefore, the orders of termination
passed against the concerned workmen are void ab initio
in law and the same are liable to be set aside. CGIT has
H
716
SUPREME COURT REPORTS
[2013) 16 S.C.R.
A rightly passed an. award in favour of all the workmen in
all the Industrial Disputes on the file of CGIT. The same
cannot be termed either as erroneous or error in law.
[Para 49] [783-H; 784-C-H; 785-A]
8
11. The findings and reasons recorded on the
contentious points by both the single Judge and the
Division Bench of the Delhi High Court in the impugned
judgment that no better service conditions than the
Management of HCI would be provided to the canteen
workers except to get free air tickets which apparently
C some employees of Air India are entitled to, is untenable
in law. [Para 50] [785-B-C]
12. Further, the Management of Air India is directed
to absorb all the concerned workmen as permanent
D workmen on its rolls from the date of their appointment
and grant all the consequential benefits such as salary
for which they are entitled for after computing properly,
taking into consideration the pay scale and periodical
wage revision that has taken place and are applicable to
E the respective posts of the concerned workmen as per
the notification issued by the Lt. Governor, Union Territory
of Delhi and on the basis of similar notifications
applicable for them. Similarly, the Industrial Dispute case
involving the workmen whose services were terminated
F during the pendency of petition before CGIT, must also
be treated as permanent workmen at par with the
concerned workmen involved in the instant case. The
award for their reinstatement to their posts shall be
passed with all consequential benefits with full back
G wages. [Paras 53 and 54] [787-C-G]
M.M.R. Khan & Ors. v. Union of India & Ors. 1990 (Supp)
SCC 191 : 1990 SCR 687; Parimal Chandra Raha & Ors. v.
Life Insurance Corporation of India and Ors. 1995 suppl. (2)
SCC 611: 1995 (3) SCR 34, Basti Sugar Mills Ltd. v. Ram
H Ujagar & Ors. AIR 1964 SC 355: 1964 SCR 838; Union of
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 717
India & Ors. v. M. Aslam & Ors. (2001) 1 SCC 720: 2001 (1)
A
SCR 62; Salomon v. Salomon & Co. Ltd. 1897 AC 22; Indian
Petrochemicals Corporation Ltd. & Anr. v. Shramik Sena &
Ors. (1999) 6 SCC 439:1999 (1) Suppl. SCR 47; Steel
Authority of India Ltd. & Ors. v. National Union Waterfront
Workers & Ors. (2001) 7 SCC.1: 2001 (2) Suppl. SCR 343;
B
International Airport Authority of India v. International Air
Cargo Workers' Union & Anr. (2009) 13 SCC 374: 2009 (8)
SCR 1; Hari Shanker Sharma and Ors. y. Artificial Limbs
Manufacturing Corporation and Ors. (2002) 1 SCC 337; State
of UP. & Ors. v. Renusagar Power Co. & Ors. (1988) 4 SCC
C
59: 1988 (1) Suppl. SCR 627; Delhi Development Authority
v. Skippe( Construction Co. (P.) Ltd. & Anr. (1996) 4 SCC
622: 1996 (2) Suppl. SCR 295; Kapila Hingorani v. State of
Bihar (2003) 6 SCC 1: 2003 (1) Suppl. SCR 175; Workmen
of Ni/giri Coop. Mkt. Society Ltd. v. State of Tamil Nadu & Ors.
0
(2004) 3 SCC 514: 2004 (2) SCR 159, Haldia Refinery
Canteen Employees Union & Ors. v. Indian Oil Corporation
& Ors. (2005) 5 SCC 51: 2005 (3) SCR 972; Dena Nath &
Ors. v. National Fertilisers & Ors. (1992) 1 SCC 695: 1991
(2) Suppl. SCR 401; Hussainbhai, Calicut v. Alath Factory
Thezhila/i Union, Kozhikode and· Ors. (1978) 4 SCC 257:
E
1978 (3) SCR 1073; Kanpur Suraksha Karamchari Union v.
Union of India & Ors. (1988) 4 SCC 478: 1988 (2) Suppl.
SCR 590; Hussainbhai Calicut, M.M.R. Khan, Parimal
Chandra Raha Harjinder Singh v. Punjab State Warehousing
Corporation (2010) 3 SCC 192: 2010 (1) SCR 5~1;
F
Kesvananda Bharati v. State of Kera/a (1973) 4 SCC- 225:
1973 (0) Suppl. SCR 1 and Secretary, HSEB v. Suresh &
Ors. (1999) 3 SCC 601: 1999 (2) SCR 238 - referred to.
Case Law Reference :
In the judgment of Chandramauli Kr. Prasad:
1970 (1) SCR 995
referred to
2001 (2) Suppl. SCR 343 referred to
Para 15
Para 16
G
H
718
SUPREME COURT REPORTS
[2013] 16 S.C.R.
A
2005 (3) SCR 972
referred to
Para 20
2009 (8) SCR 1
referred to
Para 21
(2011) 1 sec 635
referred to
Para 22
B
1990 SCR 687
referred to
Para 24
(2004) 3 sec 547
referred to
Para 26
(2002) 1 sec 337
referred to
Para 27
c
In the judgment of V. Gopala Gowda, J.:
1990 SCR 687
referred to
Para 2
1995 (3) SCR 34
referred to
Para 7
1964 SCR 838
referred to
Para 7
D
2001 (1) SCR 62
referred to
Para 7
1897 AC 22
referred to
Para 7
1999 (1) Suppl. SCR 47
referred to
Para 7
E
2001 (2) Suppl. SCR 343 referred to
Para 7
2009 (8) SCR 1
referred to
Para 7
(2002) 1 sec 337
referred to
Para 7
F
1988 (1) Suppl. SCR 627 referred to
Para 8
1996 (2) Suppl. SCR 295 referred to
Para 8
2003 (1) Suppl. SCR 175 referred to
Para 8
2004 (2) SCR 159
referred to
Para 10
G
2005. (3) SCR 972
referred to
Para 10
1991 (2) Suppl. SCR 401
referred to
Para 11
1978 (3) SCR 1073
referred to
Para 16
H
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
719
1988 (2) Suppl. SCR 590- referred to
Para 17
2010 (1) SCR 591
referred to
Para 32
1973 (0) Suppl. SCR 1
referred to
Para 32
1999 (2) SCR 238
referred to
Para 41
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
10264-10266 of 2013
B
From the Judgment and Order dated 02.05.2011 of the
High Court of Delhi at New Delhi in ·LPA No. 388, 390 & 391 c
of 201 O
Jayant Bhushan, Praveen Kumar Singh, Sanjeev
Choudhary, Pallav Mogia, Anirudhha P. Mayee for the
Appellants.
Chander Uday Singh, Sangeeta Bharti, Anukul Raj, .
Shewta Mishra, Ruchi Kohli, Vidushi Chokhani, T. S. Sidhu"
Praveen Jain, Pallavi Mohan, Ganesh Karnath, Sumit Gupta,
Ashish Suman, Vikas Soni (for M/s. M. V. Kini & Associates),
for the Respondent.
The Judgments and Order of the Court were delivered by
'
'
D
E
CHANDRAMAULI KR. PRASAD, J. 1. Leave granted.
2. Air India Limited was conktituted under the Air
F
· Corporations Act, 1953. By virtue of Section 3 of the Air
Corporations (Transfer of Undertakings and Repeal) Act, 1994,
Air India has vested in Indian Airlines Limited. It has Ground
Services Department at Indira Gandhi International Airport,
Delhi. Respondent No. 2 is Hotel Corporation of India, which
G
is a Government Company incorporated under the Companies
Act. The authorized share capital of the Hotel Corporation of
India, hereinafter referred to as the Corporation, is Rupees 10
. crores, divided into 10 lakhs equity shares of Rs. 100/- each.
The Corporation is a wholly owned subsidiary of Air India and
H
720
SUPREME COURT REPORTS
[2013] 16 S.C.R.
A its entire share capital is held by Air India and its nominee.
Excepting 6 shares, 4,99,994 shares have been subscribed by
Air India and rest by its nominees. Air India controls the
composition of the Board of Directors and appoints Directors
in consultation with the Government of India. The power to
B remove the Directors from office before the expiry of the term
is vested with Air India, in consultation with the Government of
India, so also the power to fill up the vacancies caused by
death, resignation, retirement or otherwise. General
management of the Corporation is vested in the hands of the
c Managing Director. Notwithstanding that, Air India is conferred
with the power to issue such directions or instructions as it may
think fit in regard to the finances and the conduct of the business
and affairs of the Corporation. Duty has been cast upon the
Corporation to comply with and give effect to such directions
D and instructions. The main objects for which the Corporation
is incorporated are large and include carrying the business of
hotels, motels, restaurants, cafes, kitchens, refreshment rooms,
canteens and depots etc. in general and its incidental and
ancillary objects are establishment of catering and opening
hotels, which would tend to promote or assist in Air India's
E business as an international air carrier. Respondent No. 3, Chef
Air Flight Catering, hereinafter referred to as 'Chef Air', is one
of the units of the Corporation.
3. Section 46 of the Factories Act, inter alia, confers power
F on the State Government to make rules requiring a specified
factory where more than 250 workers are ordinarily employed,
to provide and maintain a.canteen for the use of the workers.
In exercise of the aforesaid power, Rules 65 to 71 have been
incorporated in the Delhi Factory Rules, 1950, hereinafter
G referred to as 'the Rules:. Rule 65(1) was to come into force in
respect of ar:iy class or description of factories on such dates
as the Chief Commissioner may by notification in the Official
Gazette appoint. Rule 65(2) of the Rules, inter alia,
contemplates that the occupier of every factory notified by the
H Chief Commissioner, where more than 250 workers are
BALWANT RAI ,SALUJA v. AIR INDIA LTD. & ORS.· 721
[CHANDRAMAULI KR. PRASAD, J.]
ordinarily employed, shall provide in or near the factory an
A
adequate canteen in accordance with the standard prescribed
in those Rules. In pursuance of the provisions of sub-rule (1) of
Rule 65 of the Rules, the Lieutenant-Governor of the Union
Territory of Delhi, by notification in the Official Gazette, dated
21st of January, 1991, directed that Rules 65 to 70 of the Rules
B
shall apply to the factories specified in the said Rules with effect
from the date of publication of the notification in the Official
Gazette. It included M/s. Air India Ground Services Department,
Indira Gandhi International Airport, Delhi (Engineering Unit).
4. The workmen working in Air India Ground Services c
Department Canteen, hereinafter referred to as 'the Canteen',
raised an industrial dispute and the competent Government
made a reference to the Central Government Industrial Tribun~I
as to whether the demand of the workmen employed by Chef
Air to provide canteen service to be treated as deemed
D
employees of the management of Air India is justified and, if
so, what relief the workmen are entitled to? The workmen laid
their claim and, according to them, they were employed by Air
India on casual basis in the Canteen and their employment was
through Chef Air, which is a unit of the Corporation. According
E
to the workmen, the Corporation has entered into a contract with
Air India to run and maintain the canteen and for that purpose,
they were initially appointed for a period of 40 days and said
period used to be extended from time to time and in this way
each of them had completed service for 240 days in a year.
F
According to the workmen, they were called for interview on.
several occasions but had not been selected and on the
contrary, persons junior to them have been regularized. The
workmen have further alleged that Air India had entered into a
contract with the Corporation to deny the workmen their
G
legitimate right by circumventing the various provisions of the
Contract Labour (Regulation and Abolition) Act, 1970.
According to them, they were performing duties of a permanent
and perennial nature required by Air India but were being paid
wages less than the regular employees. Case of the workmen
H
722
SUPREME COURT REPORTS
(2013] 16 S.C.R.
A further is that issuance of letters of appointment for 40 days with
artificial break in service is an unfair labour practice and on the
aforesaid grounds they sought regularization of the services
with back wages in Air India.
8
5. Air India resisted the claim of the workmen, inter alia,
stating that they were not their employees and relationship of
employer and employee does not exist between them.
According to them, Chef Air is a unit of the Corporation
engaged in various businesses including establishing and
C running of canteens. According to Air India, the Canteen is
being run and maintained by the Corporation on the basis of a
fixed subsidy per employee provided by them. It is a specific
assertion of Air India that they have no control over the
workmen and that their conditions of service are governed by
the Rules and Regulations of the Corporation. Air India has
D admitted that the infrastructure of the Canteen was provided by
them but its management is in the hands of the Corporation.
Air India has further pointed out that letters of appointment, token
numbers, ESI cards etc. , .ave been issued to the workmen by
the Cprporation and, hence, the prayer for regularizing their
E services by Air India is misconceived. Air India has denied that
the Canteen in question is a statutory canteen and was
employing more than 250 workers.
6. On the basis of the materials placed on record, the
F Central Government Industrial Tribunal, hereinafter referred to
as·"the Tribunal", came to the conclusion that the Corporation
is 100% subsidiary of Air India and the Canteen in question is
a statutory Canteen established for the welfare of more than
2,000 workers. The Tr,ibunal also came to the conclusion that
G the Canteen is established within the premises of Air India and
the Corporation carries on its business under the control and
administration of Air lndi~. According to the Tribunal, the running
of the Canteen by the Corporation in respect of the statutory
duty of Air India cannot be said to be its independent act.
H Accordingly, the Tribunal observed that hiring of employees for
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
723
[CHANDRAMAULI KR. PRASAD, J.]
running the statutory canteen by the Corporation is a
A
camouflage and the workmen employed in the Canteen are
deemed employees of Air India. Thus, the Tribunal held the
demand of the workers to be justified and finding that the
workmen have been terminated from their services during the
pendency of the dispute held that the termination is illegal· and,
B
accordingly, set aside the termination of their employment and
directed reinstatement with 50% back wages.
7. Assailing the aforesaid award af the Tribunal, Air India
preferred writ petition before the High Court.
8. The learned Single Judge held that Air India is the sole
holder of the shares of the Corporation but it is a separate legal
entity which is independent of its shareholders. The authority
c
to issue ,directions does not merge the identity of the
Corporation with the shareholder. The learned Single Judge
D
accordingly held as follows:
" ...... Thus, in my view the mere fact of HCI being a 100%
subsidiary of Air India and the aforesaid peculiar Articles
of Association would not be decisive of whether the
employees aforesaid of HCI and working in the canteen
· of Air India are to be treated as employees of Air India or
not."
9. As regards the grievance of the workmen that Air India
had devised to employ the workmen through a unit of the
Corporation to defeat their rights, the learned Single Judge
observed as follows:
"19. One thing which emerges is that in the present case,
E
F
no motive to-defeat any rights of the employees, in Air India
G
entering into a contract with Chef Air (a unit of HCI) for
operating its canteen, even if it be a statutory canteen have
been established. It was not as if by employing workmen
in HCI instead of in Air India, the workmen were being
made employees of a weaker entity against whom they
H
724
SUPREME COURT REPORTS
[2013] 16 S.C.R.
A
can claim no rights. After all HCI is also a Government of
India company as Air India is."
10. The learned Single Judge further came to the
conclusion that the Corporation was not incorporated for the
8 sole purpOSJ:! of operating the Canteen for Air India but was set
up as a legal entity to carry on business in diverse fields.
According to the learned Single Judge, Air India engaged the
Corporation which has expertise in the field to run and operate
the Canteen and that will not make the workmen employees of
Air India. The learned Single Judge ultimately held as follows:
c
D
E
F
G
"23. HCI in the present case is seen as one such expert.
It has been providing flight catering services to Air India
and other airlines besides carrying on other allied
businesses. As aforesaid, HCI was not incorporated
merely to run the canteen of Air India so as to keep the
employees of the said canteen, managed through the
medium of HCI, at arm's length from Air India. HCI is a
business entity in its own right and no mala fides have
been established in Air India entrusting the operation and
management of the canteen aforesaid to HCI. As
aforesaid, in spite of repeated asking, no prejudice is
shown to have been caused to the workmen in them being
the employees of the HCI instead of Air India. Of my own
I can only gauge that may be as employees of Air India
they may be entitled to a free flight once in a while and
which they may not be entitled to as an employee of HCI.
However, that is hardly determinative of the matter in
controversy: Again it is not as if Air India is attaining to
offload its canteen employees to an entity which is sick or
near the stage of being closed down. HCI is informed to
be a running concern."
11. Accordingly, it set aside the award passed by the
Tribunal.
H
12. The workmen, aggrieved by the same, preferred an
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS.
725
[CHANDRAMAULI KR. PRASAD, J.].
appeal before .the Division Bench of the High Court. The
A
Division Bench framed the following question for its
consideration:
"11. The core issue that emanates for consideration is
whether in the obtaining factual matrix it can be held that
B
the employees of the canteen established by Air India in
its premises and run by the HCI be treated as regular
employees of Air India. Before we advert to the factual
canvas, we think it appropriate to refer to the citations in
the field, cull out the principles and analyse whether they
C
are applicable to the material brought on record."
13. The Division Bench of the High Court analysed the
facts, referred to the various decisions of this Court and
ultimately came to the conclusion. that the Corporation is a
separate entity and not a part of Air India as found by the
D
Tribunal. It endorsed the finding of the learned Single Judge that
merely because the Articles of Association confer power on Air
India to issue such directions or instructions as it may think fit
in regard to conduct of the business and affairs of the
Corporation and make it obligatory for the Corporation to carry
E
on the direction of Air India, would not merge the identity of the
shareholders with the Corporation. The Division Bench
ultimately affirmed the decision of the learned Single Judge
and, while doing so, observed as follows:
"20. On the basis of the aforesaid enunciation of law, the
factual matrix is required to be tested. As is manifest, there
is no material on record to show that the respondent - Air
India had any role in the appointment of the employees in
F
the canteen. No administrative or disciplinary action could
be taken by the respondent against the canteen workers.
G
The respondent had itself not undertaken the obligation to
run the canteen but had only provided facility so that its
employees could avail the canteen facilities. It is not a case
where the employees of the canteen were enlisted under
a welfare fund scheme, provident fund scheme and
H
726
SUPREME COURT REPORTS
[2013] 16 S.C.R.
A
medical sqheme of the respondent - management. The
responsibility to run the canteen was absolutely with the
HCI and it was totally a contractual relationship between
the two. Air India had no say in the selection or other affairs
of the canteen workers."
B
14. Mr. Jayant Bhushan, Senior Advocate appearing on
behalf of the <:;:;:>Pll;:ints submits that the obligation to provide
for the Canteen is with Air India and, therefore, the workmen
are entitled to be treated as their employees and Air India their
C employer. It is further contended that Air India has a large role
to play in the operation and management of the Canteen and,
in the circumstances, the veil of the contract has to be lifted and
this Court is competent to do so to arrive at the truth. In support
of the submission reliance has been placed on a large number
of decisions of this Court. I do not have the slightest hesitation
D in accepting this broad submission of Mr. Bhushan and, hence,
I deem it unnecessary to refer to all those decisions. It is well
settled that the court can lift the veil, look to the conspectus of
factors governing employment, discern the naked truth though
concealed intelligently. The court has to be astute in piercing
E the veil to avoid the mischief and achieve the purpose of law.
F
It cannot be swayed by legal appearance. The court's duty is
to find out whether contract between the principal employer and
the contractor is sham, nominal or merely a camouflage to deny
employment benefits to the workmen.
15. Once the veil is pierced, the control of Air India is writ
large over the Corporation, submits Mr. Bhushan. He points out
that the Corporation is a wholly owned subsidiary of Air India
which controls the composition of the Board of Directors and
G appoints and removes Directors in consultation with the
Government of India.