# BALWANT RAI SALUJA &ANR. ETC. ETC v. AIR INDIALTD. &ORS - **Citation:** [2014] 14 S.C.R. 1512 - **Court:** Supreme Court of India - **Decided:** 2014-08-25 - **Case number:** Civil Appeal Nos. 10264-10266 of 2013 - **Bench:** H. L. Dattu, R. K. Agrawal, Arlin Mishra - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/balwant-rai-saluja-anr-etc-etc-v-air-indialtd-ors-29705 - **Pages:** 52 ## Headnote Facfories Act, 1948- S. 46- Deihl Factory Rules, 1950 - rr. 65-70-A Company (principal establishment) required C to run a canteen in compliance of s. 46-.,. Canteen employees employed by the contractorcompany-Whetherthe workmen engaged in the statutory canteen through the contractor could be treated as employees of the principal establishment - Held: The contractor company is a separate legal entity and D its primary objects have not direct relation with the principal establishment - The principal company established also does not have effective and absolute control over the workmen of the canteen - The contractor company is not a $ham or camouflage created by the principal establishment - E Therefore, the workmen of the statutory canteen would be workmen of the principal establis~ment only for the purpose of 1948 Act, and not for all other purposes - Hence the workers cannot claim regularization in their employment from the principal establishment- LabourLaws. F Precedence - Precedent value of a decision - Extent of- Held: Binding nature of a decision would extend to only observations on points raised and decided - The observation on a legal point which arose in a manner not requiring any decision, has to ·be considered merely as an obiter dictum G · - In order to have binding effect, a decisio(J ne.ed n·ot be rendered by a Full Court or Constitution Bench of Supreme Court-A pronouncement by a Division Bench is binding on 1512 BALWANTRAI SALUJA&ANR. ETC. ETC. v.AIRINDIA 1513 LTD.&ORS. · a Division Bench or a smaller number of Judges - A Constitution of India, 1950-Art. 141. Doctrines/Principles: Doctrine of piercing the corporate veil - Applicability of- Discussed. s Answering the referred question and dismissing the appeals, the Court · HELD: 1.1. The workmen of a statutory canteeh would be the workmen of the establishment for the C purpose of the Factories Act, 1948 only and not for all other purposes. The statutory obligation created under _Section 46 of the Act, 1948, although establishes certain· liability of the principal employer towards the. workers employed in the given canteen facility, this must be 0 restricted only to the Act, 1948 and it does not govern the rights of employees with reference to appointment, seniority, promotion, dismissal, disciplinary actions, retirement benefits;·etc., which hare the subject matter of various other legislations, policies, etc. Therefore, it cannot be said that the employees of the statutory E Canteen ipso-facto become the employees of the principal employer. [Para 38][1540-B-F] Indian Petrochemicals Corpn. Ltd. v. Shramik Sena (1999) 6 sec 439:1999 (1) Suppl. SCR 47; Hari Shankar Sharma v. Artificial Limbs Mfg. Corpn. (2002) 1 SCC 337; Reserve Bank of India v. Workmen (1996) 3 SCC 267: 1996 (2) SCR 1176; Haldia Refinery Canteen Employees Union v. Indian Oil Corpn. Ltd. (2005) 5 SCC 51: 2005 (3) SCR 972; Indian Overseas Bank v. · 1.0.B. Staff Canteen Workers' Union &Anr. (2000) . 4 SCC 245 : 2000 (2) SCR 1212; Barat Fritz Werner Ltd. v. State of Karnataka 2001 (4) SCC . 498 : 2001 (1) SCR 835 - relied on. F G H 1514 A B c SUPREME COURT REPORTS [2014]14 S.C.R. Saraspur Mills Co. Ltd. v. Raman/al Chiman/a/ (1974) 3 sec 66:1973 (3) scR 967; Hussainbhai v. Alath Factory Thezhila/i Union (1978) 4 sec 257: 1978 (3) SCR 1073; M.M.R. Khan v. Union of India 1990 Supp SCC 191distinguished. ' Parimal Chandra Raha v. UC 1995 Supp (2) SCC 611 : 1995 (3) SCR 34; Workmen v. Coates of ·· India Ltd. (2004) 3 SCC 547; · Basti Sugar Mills Ltd. v. Ram Ujagar and Ors. (1964) 2 SCR 838; Ahmedabad Mfg. and Calico Printing Co. Ltd., . v. Their Workmen (1953) II LLJ 647 - referred . · to. 1.2 .. The said workers, to be called the employees 0 of the factory for all ·purposes, they would need to satisfy the test of employer-employee relationship and · it must be shown"tfiat the employer exercises absolute and effective control over the said workers. [Para 87][1563-A-B] . , . I . . E . t.3. To. ascertain ## Text _Characters 0–39,817 of 97,159. This is a partial read: ask again with offset=39817 for what follows._ [2014] 14 S.C.R. 1512 A BALWANT RAI SALUJA &ANR. ETC. ETC. v. AIR INDIALTD. &ORS. (Civil Appeal Nos. 10264-10266 of 2013) I AUGUST 25, 2014 B [H. L. DATTU, R. K. AGRAWAL AND ARLIN MISHRA, JJ.] Facfories Act, 1948- S. 46- Deihl Factory Rules, 1950 - rr. 65-70-A Company (principal establishment) required C to run a canteen in compliance of s. 46-.,. Canteen employees employed by the contractorcompany-Whetherthe workmen engaged in the statutory canteen through the contractor could be treated as employees of the principal establishment - Held: The contractor company is a separate legal entity and D its primary objects have not direct relation with the principal establishment - The principal company established also does not have effective and absolute control over the workmen of the canteen - The contractor company is not a $ham or camouflage created by the principal establishment - E Therefore, the workmen of the statutory canteen would be workmen of the principal establis~ment only for the purpose of 1948 Act, and not for all other purposes - Hence the workers cannot claim regularization in their employment from the principal establishment- LabourLaws. F Precedence - Precedent value of a decision - Extent of- Held: Binding nature of a decision would extend to only observations on points raised and decided - The observation on a legal point which arose in a manner not requiring any decision, has to ·be considered merely as an obiter dictum G · - In order to have binding effect, a decisio(J ne.ed n·ot be rendered by a Full Court or Constitution Bench of Supreme Court-A pronouncement by a Division Bench is binding on 1512 BALWANTRAI SALUJA&ANR. ETC. ETC. v.AIRINDIA 1513 LTD.&ORS. · a Division Bench or a smaller number of Judges - A Constitution of India, 1950-Art. 141. Doctrines/Principles: Doctrine of piercing the corporate veil - Applicability of- Discussed. s Answering the referred question and dismissing the appeals, the Court · HELD: 1.1. The workmen of a statutory canteeh would be the workmen of the establishment for the C purpose of the Factories Act, 1948 only and not for all other purposes. The statutory obligation created under _Section 46 of the Act, 1948, although establishes certain· liability of the principal employer towards the. workers employed in the given canteen facility, this must be 0 restricted only to the Act, 1948 and it does not govern the rights of employees with reference to appointment, seniority, promotion, dismissal, disciplinary actions, retirement benefits;·etc., which hare the subject matter of various other legislations, policies, etc. Therefore, it cannot be said that the employees of the statutory E Canteen ipso-facto become the employees of the principal employer. [Para 38][1540-B-F] Indian Petrochemicals Corpn. Ltd. v. Shramik Sena (1999) 6 sec 439:1999 (1) Suppl. SCR 47; Hari Shankar Sharma v. Artificial Limbs Mfg. Corpn. (2002) 1 SCC 337; Reserve Bank of India v. Workmen (1996) 3 SCC 267: 1996 (2) SCR 1176; Haldia Refinery Canteen Employees Union v. Indian Oil Corpn. Ltd. (2005) 5 SCC 51: 2005 (3) SCR 972; Indian Overseas Bank v. · 1.0.B. Staff Canteen Workers' Union &Anr. (2000) . 4 SCC 245 : 2000 (2) SCR 1212; Barat Fritz Werner Ltd. v. State of Karnataka 2001 (4) SCC . 498 : 2001 (1) SCR 835 - relied on. F G H 1514 A B c SUPREME COURT REPORTS [2014]14 S.C.R. Saraspur Mills Co. Ltd. v. Raman/al Chiman/a/ (1974) 3 sec 66:1973 (3) scR 967; Hussainbhai v. Alath Factory Thezhila/i Union (1978) 4 sec 257: 1978 (3) SCR 1073; M.M.R. Khan v. Union of India 1990 Supp SCC 191distinguished. ' Parimal Chandra Raha v. UC 1995 Supp (2) SCC 611 : 1995 (3) SCR 34; Workmen v. Coates of ·· India Ltd. (2004) 3 SCC 547; · Basti Sugar Mills Ltd. v. Ram Ujagar and Ors. (1964) 2 SCR 838; Ahmedabad Mfg. and Calico Printing Co. Ltd., . v. Their Workmen (1953) II LLJ 647 - referred . · to. 1.2 .. The said workers, to be called the employees 0 of the factory for all ·purposes, they would need to satisfy the test of employer-employee relationship and · it must be shown"tfiat the employer exercises absolute and effective control over the said workers. [Para 87][1563-A-B] . , . I . . E . t.3. To. ascertain whether the workers of the Contractor can be treated as the employees of the . . I factory or company on whose premises they run the said statutory canteen, this Court must apply the test of complete administrative control. Furthermore, it would F be necessary to show that there exists an employeremployee relationship between the factory and - the, . workmen working in the canteen. the relevant factors to be taken into consideration to establish an employer-employee relationship would include, inter. G alia, (i) 'who appoints the workers; (ii) who pays the salary/remuneration; (iii) who has the authority to dismiss; (iv) who can take disciplinary action; (v) whether there is continuity of service;· and (vi) extent of control and supervision. [Paras 49 and H 61][1546-8-C; 1552-C-D] ' BALWANT RAI SALUJA&ANR. ETC. ETC. v.AIR INDIA LTD.&ORS .. Dhrangadhra Chemical Works Ltd. v. State of Saurashtra AIR 1957 SC 274 Ram Singh v. Union Territory, Chandigarh (2004) 1 SCC 126: 2003 (5) Suppl. SCR 357; Bengal Nagpur Cotton Mills v. Bharat Lat (2011) 1 SCC 635; National· Aluminium Co. Ltd. v. Ananta Kishore Rout & Ors. (2014) 6 sec 756 - relied on. International Airport _Authority of India v. International Air Cargo Workers' Union (2009) 13 SCC 374: 2009 (8) SCR 1; Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State of T.N. (2004) 3 sec 514 - referred to. Ready Mix Concrete (South East) Ltd v. Minister of Pensions and National/nsurance (1968) 2 QB 1515 A B c 497; Short v. J. and W. Henderson Ltd. (1946) 0 62 TLR 427; JGE v. The Trustees of Portsmouth Roman Catholic Diocesan Trust [2012) EWCA · Civ 938 - referred to. 1.4. The doctrine of piercing the veil allows the Court to disregard the separate legal personality of a E company and impose liability upon the persons exercising real control over the said company. However, this ·principle has been and should be applied in a restrictive manner, that is, only in scenarios wherein it is evident that the company was a mere camouflage F or sham deliberately created by the. persons exercising control over the said company for the purpose of · avoiding liability. The intent of piercing the veil must be · · such that would seek to remedy a wrong done by the persons controlling.the company. The application would G thus depend upon the peculiar facts and circumstances of each case. [Para 71)(1556-G-H-; 1557-A-B] Life Insurance Corporation of India v. Escorts Ltd. & Ors. (1986) 1 SCC 264: (1985) 1 Suppl. SCR 909 - relied on. · H 1516 SUPREME COURT REPORTS [2014] 14 S.C.R. A B c ·Vodafone International Holdings BV v. Union of. India (2012) 6 sec 613:2012 (1) SCR 573 - referred to. · United States v. Bestfoods [141 L Ed 2d 43: 524 US 51 (1998) Salomon v. A Salomon & Co Ltd. [1897) AC 22; Bel} Hashem v. Ali Shayif [2008] EWHC 2380 (Fam) Lord Neuberger in Prest v. Petrodel Resources Limited and others [2013) UKSC 34 ~referred to. ' 1.5. For piercing the veil of incorporation, mere ownership and control is not a sufficient ground. It . should be established that the control and impropriety by the Air India resulted in depriving the Appellantsworkmen of their legal rights. [Para 80][1560-B-C] D 1.6. The doctrine of piercing the veil cannot be applied in the given factual scenario of the present case. Respondent No. 2, despite being a wholly owned subsidiary of the Respondent No. 1 they both are distinct legal entities. The management of business of E Respondent No. 2 is under its own Board of Directors. The issue relating to the appointment of the Board of . Directors of Respondent No. 2 by respondent No.1 . would be a consequence of statutory obligations of a wholly owned subsidiary· under the Act, 1956. F [Para 79][1559-G-H; 1560-A] . . 1. 7. It is evident from the Memorandum of Association and Articles of Associatio.n of respondent No.2 {the subsidiary company) that the primary objects of respondent No. 2 have no direct relation with G respondent No.1. It is only one of the many incidental or ancillary objects of the HCI that make a direct reference to assisting respondent No.1. Respondent No. 2 has several primary objects, which include the running of hotels, motels, etc., in addition to establishing .. ;_ H BALWANT RAI SALUJA&ANR. ETC. ETC. v.AIR INDIA 1 S17 LTD.&ORS. shops, kitchens, canteens and refreshment rooms: A Respondent No.1 only finds mention under ancillary objects of Respondent No. 2. It cannot be said that the Memorandum of Association of respondent No.2 provides that it functions only for respondent No.1. Nor can it be said that. the fundamental activity of B Respondent No. 2 is to run and operate the said statutory canteen for respondent No.1. [Para 77][1558G-H; 1559-A-B] 1.8 In the present case, respondent No.2 is a separate legal entity incorporated under the Companies C Act, 1956 and is carrying out the activity of operating and running of the given canteen. The Articles of Association of respondent No.2 in no way give control of running: the said canteen to respondent No.1. The functions of appointment, dismissal, disciplinary action, D etc. of the canteen staff, are retained with respondent No.2. Thus, the exercise of control by respondent No.1 clearly indicated that the said respondent No. 2 is not a sham or camouflage created by respondent No. 1 to avoid certain statutory liabilities. [Para 82][1560-H; E 1561-A-C] 1.9. The . mere fact that respondent No,·1 has a certain degree of control over respondent No.2 does not mean that the employees working in the canteen are F the employees of respondent No.1. It exercises control that is in the nature of supervision. The said supervision or control would appear to be merely to ensure due maintenance of standards and quality in the said canteen. [Para 84][1561-H; 1562-A-C] G 1.10. Therefore, the appellants-workmen could not be said to be under the effective and absolute control of respondent No.1. Issues regarding appointment of the said workmen, their dismissal, payment of their salaries, etc. are within the control of respondent No.2. H 151a . SUPREME COURT REPORTS [2014) 14 S.C.R. A It cannot be then said that the appellants are the workmen of respondent No.1 and therefore are entitled to regularization of their services. There is no parity in the nature of work, mode of appointment, experience, qualifications, etc., between the regular employees of B respondent No.1 and the workers of the given canteen. [Paras 85 and 86][1561-H; 1562-A-C] 2.1. The binding nature of a deCision would extend to only observations on points raised and 'decided by the Court.and neither on aspects which it has not decided C nor had occasion to express its .opinion upon. The observation made in a prior decision on a legal question which arose in a manner not requiring any decision and which was to an extent unnecessary, ought to be considered merely as an obiter dictum. A ratio of the D judgment or the principle upon which the question before the Court is decided· must be considered as binding to be applied as an appropriate precedent. [Para 25][1532-G-H; 1533-A-B] E F State of Punjab v. Baladev Singh (1999) 6 SCC 172: 1999 (3) SCR 977 - followed. The Commissioner of Income Tax v. Sun Engineering Works (P) Ltd., (1992) 4 SCC 363: (1992) (1) Suppl. SCR 732; Punjab Land Development and Reclamation Corporation Ltd., Chandigarh v. Presiding Officer, Labour Court, Chandigarh and Ors. (1990) 3 SCC 682 : 1990 (3) SCR 111 ~relied on. 2.2. The pronouncement of law by a Djvision G Bench of the Supreme Court is binding on a Division Bench of the same or a smaller number of Judges and in order that such decision is binding, .it is not necessary that it should be a decision ·rendered by a Full Court or a Constitution Bench of the· Supreme Court. H [Para 30][1535-A-B] BALWANT RAI SALUJA&ANR. ETC. ETC. v.AIR INDIA 1519 LTD.&ORS. Union of India v. Raghubir Singh 178 ITR 548 A (SC) - followed. Steel Authority of India Ltd. v. National Union Waterfront Workers (2001) 7 SCC 1 : 2001 (2) Suppl. SCR 343 - distinguished. B CASE LAW REFERENCE ~995 (3) SCR 34 referred to Para 11 2001 (2) Suppl. SCR 343 distinguished Para 12 (2014) 6 sec 756 relied on Para 15 c 1996 (9) Suppl. SCR 579 distinguished Para 21 1992 (1) Suppl. SCR 732 relied on Para 21' · 1990 (3) SCR 111 relied on Para 22 1901AC495 relied on Para 23 D (1968) .2 SCR 154 relied on Para 23 1999 (3) SCR 977 followed Para 24 1999 (1) Suppl. SCR 47 relied on Para 29 E (2002) 1 sec 337 relied on Para 30 2005 (3) SCR 972 relied on Para 30 178 ITR 548 (SC) followed Para 30 1996 (2) SCR 1176 relied on Para 31 F 2000 (2) SCR 1212 relied on Para 31 2001 (1) SCR 835 relied on Para 33 2006 (1) SCR 93 relied on Para 33 (2004) 3 sec 547 referred to Para 34 G 1973 (3) SCR 967 distinguished Para 40 (1964) 2 SCR 838 referred to Para 40 H 1520 SUPREME COURT REPORTS ' [2014) 14 S.C.R. A (1953) II LlJ 647 referred to Para 40 1978 (3) SCR 1073 distinguished Para 42 1990 Supp sec 191 distinguished Para 44 (1968) 2 QB 497 · referred to . Para 50 B . (1946) 62 TLR 427 referred to Para 52 (2012] EWCA Civ 938 referred to Para 53 AIR 1957 SC 274 relied on Para 54 c 2003 (5) Suppl. SCR 357 relied on Para 55 (2011) 1 sec 635 relied on Para 56 2009 (8) SCR 1 referred to Para 57 (2004) 3 sec 514 referred to · Para 59 · D 2012 (1) SCR 573 referred to Para 64 524 us 51 (1998) referred to Para 65 (1897] AC 22 referred to Para 66 . (2008] EWHC 2380 (Fam) referred to Para 68 E (2013] UKSC 34 referred to Para 69., (1985) 1 Suppl. SCR 909 relied on Para 70 CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. F 10264-10266 of 2013. ~ ,., From the judgment and order dated 02.05.2011 in LPA No. 388/2010, LPA No. 390/2010, LPA No. 391/2010 of the High Court of Delhi at New Delhi. • Jayant Bhushan, Sr.Adv., Praveen K. Singh, Sanjeev Kr. G Choudhary, Santosh Kumar Pandey, Ms. Swastika Kumari Navlendu Kumar Mishra and Aniruddha P. Mayee, Advs., for the Appellants. H BALWANT RAI SALUJA&ANR. ETC. ETC. v.AIR INDIA 1521 LTD.&ORS. Chander Uday Singh, Sr. Adv., Praveen Jain, Tavinder A Sidhu, SumitGupta, Mrs. Gunjan S. Jain (For M/s. M.V. Kini & Associates), Ms. Sangeeta Bharti, KrishanuAdhikary, Shalin Arthwan, Rishi K.S. Gautam and Ms. Ruchi Kohli, Advs., for the Respondents. The Judgment of the Court was delivered by H. L. DATTU, J. 1. In view of the difference of opinion by two learned Judges, and by referral order dated 13.11 .2013 B of this Court, these Civil Appeals are placed before-us for our consideration and decision. The question before this c bench is JNhether the workmen engaged in statutory canteens, through a contractor, could be treated as employees of the principal establishment. 2. At the outset, it requires· to be noticed that the learned Judges differed in their opinion regarding the liability · D of the principal employer running statutory.canteens and further regarding the status of the workmen engaged thereof. The learned Judges differed on. the aspect of supervision and control which was exercised by the Air India Ltd. (for short, ''the Air India")- respondent No. 1, and the Hotel Corporations E of India Ltd. (for short, "the HCl")-respondent No. 2, over the said workmen employed in these canteens. The learned Judges also had varying interpretations regarding the status of the HCI as a sham and camouflage subsidiary by the Air India created mainly to deprive the legitimate statutory and F fundamental rights of the ~onc~rned workmen and the necessity to pierce the veil to ascertain their relation with the principal employer. · 3. The Two Judge bench has expressed contrasting opinions on the prevalence of an employer-employee G relationship between the principal employer and the workers in the said canteen facility, based on, inter aiia,-iss.1,1es surrounding the economic dependence of the subsidiary role in management and maintenance of the· canteen premises, H 1522 SUPREME COURT REPORTS [2014] 14 S.C.R. A representation of workers, modes of appointment and termination as well as resolving disciplinary issues among workmen. The Bench also differed on the issue pertaining to whether such workmen should be treated as employees of the principal employer only for the purposes of the Factories · B Act, 1948 (forshort, "theAct, 1948")orforotherpurposesas well. FACTS: 4. The present set of appeals came before a two-Judge c Bench of this Court against a judgment and order dated 02.05.2011 of a Division Bench of the High Courtaf Delhi in LPA Nos. 388, 390 and 391 of 2010. The present dispute finds origin in an industrial dispute which arose between the Appellants-workmen herein of the statutory canteen and D Respondent No. 1- herein. The said industrial dispute was referred by the Central Governmein.t, by its order dated 23.10.1996 to the Central Government Industrial Tribunal cum Labour Court (for short "the CGIT"). The question referred was whether the workmen as employed by Respondent No. 3.- E herein, to provide canteen services at the establishment of Respondent No. 1-herein, could be treated as deemed· employees of the said Respondent No. · 1. Vide order dated 05.05.2004, the CGIT held' that the workmen .were employees of the Respondent No .. 1-Air India itnd therefore ' F their claim was justified. Furthermore, the termination of services of the workmen during the pend ency of the dispute was held to be illegal. 5. By judgment and order dated 08.04.2010, the learned Single Judge of the High Court of Delhi set aside and G quashed the CGIT's award and held that the said workmen would not be entitled to be treated as or deemed to be the employees of the Air India. The Division Bench of the High Court of Delhi vide impugned order dated 02.04.2011 found no error in the ord~r passed by the learned Single Judge of H BALWANT RAI SALUJA&ANR. ETC. ETC. v.AIR INDIA 1523 LTD. &ORS. [H. L. DATTU, J.] the High Court. The appeal was dismissed by the Division A . Bench confirming the order of the learned Single Judge who observed that the responsibility to run the canteen was absolutely with the H.Cl and that the Air India and the HCI shared an entirely contractual relationship. Therefore, the claim of the appellants to be treated as employees of the Air India B and to be regularized was rejected by the learned Single Judge. 6. In the present set of appeals, the appellants are workers who claim to be the deemed employees of the management of Air India on the grounds, inter alia, that C they work in a canteen established on the premises of the respondent No. 1-Air India and that too, for the benefit of the employees of the said respondent. It is urged that since the canteen is •maintained as a consequence of a statutory obligation under Section 46 of the Act, 1948, and that since D by virtue of notification dated 21.01.1991, Rules 65-70 of the Delhi Factory Rules, 1950 (for short, "the Rules, 1950") have become applicable to the respondent No. 1, the said workers ·-( . . should be held to be the employees of the management of the corporation, on which such statutory obligation is placed, E that is, Air India. 7. Respondent No. 1 is a company incorporated under the Companies Act, 1956 and is owned by the Government of India. The primary object oflhe said respondent is to F provide international air transport/travel services. It has Ground Services Department at Indira Gandhi International Airport, Delhi. The Labour Department vide its notification dated 20.01.1991 under sub-rule (1) of Rule 65 of the Rules, 1950, has enlisted the said M/s. Air India Ground Services G Department, thereby making Rules 65 to 70, of the Rules, 1950 applicable to the same. 8. Respondent No. 2-HCI is also a company incorporated under the Companies Act, 1956 arid is a H 1524 SUPREME COURT REPORTS [2014] 14 S.C.R. A separate legal entity from the Air India. As per the Memorandum of Association of Respondent No. 2, the same is a wholly-owned subsidiary of theAir India. The main objects of the said respondent, inter alia, are to establish refreshment B C> rooms, canteens, etc. forthe sale of food, beverages, etc. , 9. Respondent No. 2 has various units and Respondent No. 3, being Chefair Flight Catering (for short, "the Chefair''), provides flight catering services to various airlines, including Air India. It is this Chefair unit of HCI that operates and runs the canteen. It requires to be noticed that the appellantsworkmen are engaged on a casual or temporary basis by the' respondent Nos. 2 and 3 to render canteen services on the premises of respondent No.1 -Air India. ·ISSUE: D ., 10. The main issue for consideration before. this Court in the present reference is "whether workers, engaged on a casual or temporary basis by a contractor (HCI) to operate and run a statutory canteen, under the provisions of the Act, 1948, on the premises of a factory- Air India, can be said to E · be the workmen of the said factory or corporation". ' SUBMISSIONS: 11. Shri Jayant Bhushan, learned Senior Counsel forthe appellants-workmen has two alternative submissions; firstly, F · that in the event of a statutory requirement to provide for a canteen or any other facility, the employees of the said facility would automatically become employees of the principal employer, irrespective of the existence of any intermediary that may have been employed to run that facility. Secondly, G the test of sufficient control by the principal employer over the operation of the· canteen and consequently over the appellants-workmen, should prevail. Therefore, the Court should pierce the veil and take note of the. fact that the contractor was a mere camouflage, and the principal employer H was in real control of the canteen and its workmen. Reference BALWANTRAI SALUJA&ANR. ETC. ETC. v.AIRINDIA - 1525 LTD. & ORS. [H. L. DATTU, J.] is made to the following cases in support of his submissionsA SaraspurMills Co. Ltd. v. Raman/al Chimanlal, (1974) 3 SCC 66; Hussainbhai v. Alath Factory Thezhilali Union, - (1978) 4 SCC 257; M.M.R. Khan v. Union of India, 1990 Supp SCC 191; and Parimal Chandra Raha v. UC, 1995 supp (2) sec 611. B 12. Shri Jayant Bhushan also submits that the Issue raised -in these appeals is squarely covered by the observations made by the Constitution Bench in the case of Steel Authority of India Ltd. v. National Union Waterfront Workers, (2001) 1sec1. c 13. While supporting the judgment in the Steel Authority of India's case (supra), Shri C.U. Singh, learned Senior Counsel for Respondent No. 1-Air India would contend that the issue that came up for consideration before the 0 Constitution Bench is entirely different and, therefore, the said decision has no bearing on the facts and the question of - law raised in the present set of appeals. 14. Shri C.U. Singh would then refer to the various case laws cited by the learned counsel for the appellants to show E - that they are not only distinguishable on facts, but are inapplicable to the facts of the present case. He would also refer to the three-Judge Bench decision of this Court in the case of Indian Petrochemicals Corpn. Ltd. v. Shramik Sena, (1999) 6 SCC 439, and then would submit that the proposition F - of law enunciated in the Indian Petrochemicals case (supra) is followed by this Court in Hari Shankar Sharma v. Artificial Limbs Mfg. Corpn., (2002) 1 -sec 337; Workmen v. Coates of India Ltd., (2004) 3 SCC 547; Haldia Refinery Canteen -Employees Union v. Indian Oil Corpn. Ltd., (2005) 5 SCC G 51; and Karnataka v. KGSD Canteen Employees' Welfare Assn., (2606) 1 sec 567. - _ 15. In so far as the second submission of the learned counsel forthe appellants is concerned, Shri C.U. Singh would H 1526 SUPREME COURT REPORTS (2014] 14 S.C.R. A submit that it is not the test of sufficient control, but the test of effective and absolute control which would be relevant, and that if.the said test, in the given facts is applied, the appellants would fail to establish the employer and employee relationship. In aid of his submissions, he refers to Bengal. B Nagpur Cotton Mills v. Bharat Lal, (2011) 1 SCC 635; International Airport Authority of India v. International Air Cargo Workers' Union, (2009) 13 SCC 374; and National Aluminium Co. Ltd. v. Anania Ki shore Rout & Ors., (2014) 6 sec 756. C RELEVANT PROVISIONS: 16. To appreciate the point of view of the parties to the present lis, it is necessary to notice the relevant provisions. 17. Section 46 of the Act, 1948 statutorily places an D obligation on the occupier of a factory to provide and maintain a canteen in the factory where more than two hundred and fifty workers are employed. There is nothing in the said provision which provides for the mode in which the factory must set up a canteen. It appears to be left to the discretion E of the concerned factory to either discharge the said obligation of setting up a canteen either by way of direct involvement or through a contractor or any other third party. The provision reads as under: F G H "46. Canteens.-(1) The State Government may make rules requiring that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. (2) Without prejudice in the generality of the foregoing power, such rules may provide for - (a) the date by which such canteen shall be provided; (b) the standard in respect of construction, accommodation, furniture and other equipment of the canteen; BALWANT RAI SALUJA&ANR. ETC. ETC. v.AIR INDIA 1527 LTD. & ORS. [H. L. DATTU, J.] (c) the foodstuffs to be served therein and the charges A which may be made therefor; (d) the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen; ( dd) the items of expenditure in the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer; B (e) the delegation to Chief Inspector subject to such conditions as may be prescribed, of the power to make C rules under clause (c)." 18. By virtue of Notification No .. 27(12)89-CIF/Lab/ 464 dated 21.01.1991, rules 65 to 70 of the Rules, 1950 were made applicable to Mis. Air India Ground Services Department. The rules impose obligations upon the occupier D of the factory as regards providing for and maintaining the said canteen. 19. Rules 65 to 70 of the Rules, 1950 are in furtherance of the duty prescribed on the State Government to run statutory E canteens as per Section 46 of the Act, 1948. Rule 65, inter alia, provides for an official notification and approval of the occupier canteen facility as well as additional gutdelines regarding the construction,· accommodation, hygiene, ventilation, sanitation and other maintenance works. Rule 66 F prescribes for setting up a dining hall, with adequate space and furniture along with reservation of dining space for women employees. Rule 67 enumerates the requisite equipment such as utensils, furniture, uniforms for the canteen staff and other equipment to be purchased and maintained in a G hygienic manner. Rule 68 prescribes that the prices to be charged on foodstuffs and other items will be on a non-profit basis, as approved by the Canteen Managing Committee. Rule 69 illustrates the procedure for handling the auditing of accounts, under the supervision of the Canteen Managing H . 1528 SUPREME COURT REPORTS [2014] 14 S.C.R. A Committee as well as Inspector of Factories. Lastly, Rule 70 enumerates the consultative role of the Managing Committee regarding, inter alia, the quality and quantity of foodstuffs served, arrangement of menus, duration for meals, etc. It also prescribes that such a Committee must have equal B representation of persons nominated by the occupier and elected members by the workers of the factory. The Manager is entrusted with determining and supervising the procedure for conducting such elections and dissolving the Committee at the expiry of its two year statutory term. C DISCUSSION : .20. Before we deal with the issue that arises for consideration, it would be necessary to consider the applicability of the Constitution Bench decision in the Steel 0 Authority of India case (supra). Learned counsel refers to paragraphs 106 and 107 qf the said judgment to contend that the observations made therein is the expression of the Court on the question of law and since it is the decision of the. Constitution Bench, the same would be binding on this Court. E To appreciate the submission, of the learned counsel, we notice the aforesaid paragraphs: "106. We have gone through the decisions of this Court in VST Industries case (2001) 1 SCC 298, GB. Pant University case (2000) 7 SCC 109 and M. Aslam F case (2001) 1 SCC 720. All of them relate to statutory liability to maintain the canteen by the principal employer in the factory/establishment. That is why in those cases, as in SaraspurMillscase(1974)3SCC 66 the contract labour working in the canteen were G treated as workers of the principal employer. These cases stand on a different footing and it is not possible to deduce from them the broad principle of law that on the contract labour system being abolished under subsection (1) of Section 10 of the CLRAAct the contract H BALWANT RAI SALUJA&ANR. ETC. ETC. v. AIR !NOIA 1529 · LTD. & ORS. [H. L. DATTU, J.] labour working in the establishment of the principal A employer have to be absorbed as regular employees of the establishment . " 107. An analysis of the cases, discussed above, shows that they fall in three classes: (i) where contract labour is engaged in or in connection with the work of an B establishment and employment of contract labour is prohibited either because the industrial adjudicator/ court ordered abolition of contract labourer because the appropriate Government issued notification under Section 10(1) of the CLRAAct, no automatic absorption C of the contract labour working in the establishment was ordered; (ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case the contract labour working in the establishment of the principal employer were held, in fact and in reality, the D employees of the principal employer himself. Indeed, such cases do not relate to abolition.of contract labour but presentinstances wherein the Court pierced the veil and declared the correct position as a fact at the stage • after employmentof contract labour stood prohibited; E· (iii) where in discharge of a statutory obligation