# STATION UKAI, GUJARAT v. HIND MAZDOOR SABHA AND ORS. ETC

- **Citation:** [1995] Supp. 1 S.C.R. 173
- **Court:** Supreme Court of India
- **Decided:** 1995-05-09
- **Case number:** Civil Appeal No. 5497 of 1995
- **Bench:** P.B.Sawant, S.B. Majmudar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/station-ukai-gujarat-v-hind-mazdoor-sabha-and-ors-etc-13362
- **Pages:** 62

## Headnote

Contract Labour (Regulation and Abolition) Act, 1970: Sections 7, 10,
12, 14 and 23.
Contract Labour (Regulation and Abolition) Rules, 1971 : Rules, 17,
18, 20, 21, 25 and 27.
B
c
Contract Labour-Authority to abolish-Held exclusively vests in appropriate Government under Section JO-Such powers can be exercised only
when there i; a genuine contract-In case of sham contract workers can raise D
industrial dispute-For ascertaining genuineness of contract Court can investigate factors mentioned in section 10(2)(a) to (d).
Contract Labour-Contractoi-Non-production of registration certificate and licence-Effect of
Abolition of contract labour-Absorption of ex-contractors'
employees-Direct employees of principal employer can raise industrial dispute for-Industrial adjudicator can direct absorption of workmen of erstwhile
contractors.
Constitution of India, 1950: Articles 38, 39, 41, 43 and 47.
Contract Labour-Engaging of in public sectoi-Deprecation ofRecommendation for discontinuance of.
E
F
The appellant-Board had deployed through various contractors 1500
skilled and unskilled manual labourers, besides its direct workmen, for G
carrying on its work or generation and distribution or electricity at its
Thermal Power Plant, Ukai in Gujarat. Respondent • Union initiated legal
proceedings seeking (i) reinstatement or some or the workers alleged to
have been illegally terminated and (ii) for enforcement or labour laws on
the ground that the contractors were flouting the labour laws. Some or the H
173
174
SUPREME COURT REPORTS (1995] SUPP. 1 S.C.R.
A disputes were settled with the help of Court Commissioner. As to the
remaining disputes viz. those relating to the revision of wages of workmen,
their rights and privileges under different statutes as well as the claim of
workers that they were employees of the appellant-Board, it was agreed
between the parties that the same should be referred for adjudication by
B a joint reference under section 10(2) of the Industrial Disputes Act, 1947.
Accordingly, a joint application was made to the Assistant Commissioner
of Labour under section 10(2) requesting him that these disputes be
referred for adjudication to the Industrial Tribunal and consequently the
reference from which the present proceedings arise was made. The reference application was duly signed by the present appellant-Board, all the
C contractors involved in the dispute and by the then Surat Labour Union
which had both direct as well as contract labourers, as its members. The
respondent-Union is the successor of the said Surat Labour Union. The
Tribunal rejected the preliminary point raised by the contractors that it
had no jurisdiction to entertain the demand raised for abolition of conD tract labour. Further after recording evidence and hearing the parties the
Tribunal came to the conclusion that the workmen concerned in the
reference are not the workmen of contractors and directed that they should
be deemed to be the workmen of the Board. The Tribunal, came to the
conclusion that (i) contractors had no licence under the Contract Labour
(Regulation and Abolition) Act, 1970 as no such original certificates were
E brought on record; (ii) the work was being done on the premises of the
Board itself as the coal was being used for the purposes of the Board, viz.,
generation of electricity; (iii) the workmen were broadly under the control
of the Board; (iv) there was overall supervision of the work by the officers
of the Board; (v) the work was of a continuous nature and (vi) the work
F was an integral part of the overall work to be executed for the purposes of
the generation of electricity and that it had to be performed within
specified time limits as part of the integrated process. Against the decision
of the Tribunal, the Electricity Board preferred a writ petition before the
High Court which was dismissed.
G
In the connected appeal the High Court held that the workmen
concerned do not become the direct employees of the enterprises mere

## Text

_Characters 0–39,860 of 160,329. This is a partial read: ask again with offset=39860 for what follows._

-
GUJARAT ELECTRICITY BOARD, THERMAL POWER
A
STATION UKAI, GUJARAT
v.
HIND MAZDOOR SABHA AND ORS. ETC.
MAY 9, 1995
(P.B.SAWANT AND S.B. MAJMUDAR, JJ.]
Contract Labour (Regulation and Abolition) Act, 1970: Sections 7, 10,
12, 14 and 23.
Contract Labour (Regulation and Abolition) Rules, 1971 : Rules, 17,
18, 20, 21, 25 and 27.
B
c
Contract Labour-Authority to abolish-Held exclusively vests in appropriate Government under Section JO-Such powers can be exercised only
when there i; a genuine contract-In case of sham contract workers can raise D
industrial dispute-For ascertaining genuineness of contract Court can investigate factors mentioned in section 10(2)(a) to (d).
Contract Labour-Contractoi-Non-production of registration certificate and licence-Effect of
Abolition of contract labour-Absorption of ex-contractors'
employees-Direct employees of principal employer can raise industrial dispute for-Industrial adjudicator can direct absorption of workmen of erstwhile
contractors.
Constitution of India, 1950: Articles 38, 39, 41, 43 and 47.
Contract Labour-Engaging of in public sectoi-Deprecation ofRecommendation for discontinuance of.
E
F
The appellant-Board had deployed through various contractors 1500
skilled and unskilled manual labourers, besides its direct workmen, for G
carrying on its work or generation and distribution or electricity at its
Thermal Power Plant, Ukai in Gujarat. Respondent • Union initiated legal
proceedings seeking (i) reinstatement or some or the workers alleged to
have been illegally terminated and (ii) for enforcement or labour laws on
the ground that the contractors were flouting the labour laws. Some or the H
173
174
SUPREME COURT REPORTS (1995] SUPP. 1 S.C.R.
A disputes were settled with the help of Court Commissioner. As to the
remaining disputes viz. those relating to the revision of wages of workmen,
their rights and privileges under different statutes as well as the claim of
workers that they were employees of the appellant-Board, it was agreed
between the parties that the same should be referred for adjudication by
B a joint reference under section 10(2) of the Industrial Disputes Act, 1947.
Accordingly, a joint application was made to the Assistant Commissioner
of Labour under section 10(2) requesting him that these disputes be
referred for adjudication to the Industrial Tribunal and consequently the
reference from which the present proceedings arise was made. The reference application was duly signed by the present appellant-Board, all the
C contractors involved in the dispute and by the then Surat Labour Union
which had both direct as well as contract labourers, as its members. The
respondent-Union is the successor of the said Surat Labour Union. The
Tribunal rejected the preliminary point raised by the contractors that it
had no jurisdiction to entertain the demand raised for abolition of conD tract labour. Further after recording evidence and hearing the parties the
Tribunal came to the conclusion that the workmen concerned in the
reference are not the workmen of contractors and directed that they should
be deemed to be the workmen of the Board. The Tribunal, came to the
conclusion that (i) contractors had no licence under the Contract Labour
(Regulation and Abolition) Act, 1970 as no such original certificates were
E brought on record; (ii) the work was being done on the premises of the
Board itself as the coal was being used for the purposes of the Board, viz.,
generation of electricity; (iii) the workmen were broadly under the control
of the Board; (iv) there was overall supervision of the work by the officers
of the Board; (v) the work was of a continuous nature and (vi) the work
F was an integral part of the overall work to be executed for the purposes of
the generation of electricity and that it had to be performed within
specified time limits as part of the integrated process. Against the decision
of the Tribunal, the Electricity Board preferred a writ petition before the
High Court which was dismissed.
G
In the connected appeal the High Court held that the workmen
concerned do not become the direct employees of the enterprises merely
because there are no registration certificates and licence with the undertakings and the concerned contractors respectively.
H
In the other connected appeal the Labour Court has given relief of
-
-
GUJ. ELEC1RICITY BOARD v. HIND MAZDOOR SABHA
175
reinstatement with back wages to the workmen. However, it recorded no A
finding whether the industrial dispute was raised by the direct employees of
the appellant-Society and whether the labour contract was genuine or not.
Relief was granted to the workmen only on the basis that the registration
certificate and the licences under the Act were not produced by the Society
and the contractors concerned respectively. Therefore it was directed that B
the workers should be deemed to be the employees or the Society.
In appeals to this Court on the questions; (i) whether an industrial
dispute can be raised for abolition of the contract labour system in view
of the provisions of the Act; (ii) if so, who can raise such dispute?; (iii)
whether the Industrial Tribunal or the appropriate Government has the C
power to abolish the contract labour system; and (iv) in case the contract
labour system is abolished, what is the status of the erstwhile workmen of
the contractors?
Disposing the appeals, this Court
HELD : 1. After the coming into operation of the Contract Labour
(Regulation and Aboli\ion) Act, 1970, the authority to abolish the contract
labour is vested exclusively in the appropriate Government which has to
take its decision in the matter in accordance with the provisions of Section
D
10 of the Act. No Court including the industrial adjudicator bas jurisdicE
tion to do so. However, the authority to abolish the contract labour under
this Section come into play only where there exists a genuine contract.
[204-G, H; 219-E]
2. If the contract is sham or not genuine, the workmen of the so called
contractor can raise an industrial dispute for declaring that they were F
always the employees of the principal employer and for claiming the appropriate service conditions. When such dispute is raised, it is not a dispute for abolition of the labour contract and hence the provisions of Section
10 will not bar either the raising or the adjudication of the dispute. When
such dispute is raised, the industrial adjudicator has to decide whether the G
contract is sham or genuine. It is only if the adjudicator comes to the
conclusion that the contract is sham, that he wiil have jurisdiction to
adjudicate the dispute. If, however, he comes to the conclusion that the
contract is genuine, he may refer the workmen to the appropriate Government for abolition of the contract labour under section 10 and keep the
dispute pending. However, he can do so if the dispute is espoused by the H
176
SUPREME COURT REPORTS (1995] SUPP. 1 S.C.R.
A direct workmen of the principal employer. If the workmen of the principal
employer have not espoused the dispute, the adjudicator, after coming to
the conclusion that the contract is genuine, has to reject the reference, the
dispute being not an industrial dispute within the meaning of Section 2(k)
of the Industrial Disputes Act. He will not be competent to give any relief
to the workmen of the erstwhile contractor even if the labour contract is
B abolished by the appropriate Government under Section 10 of the Act.
[219-G-H, 220-A-B-C)
3. If the labour contract is genuine a composite industrial dispute
can still be raised for abolition of the contract labour and their absorption.
C However, the dispute will have to be raised invariably by the direct
employees of the principal employer. The industrial adjudicator, after
receipt of the reference of such dispute will have first to direct the workmen
to approach the appropriate Government for abolition of the contract
labour under Section 10 and keep the reference pending. If pursuant to
such reference, the contract labour is abolished by the appropriate
D Government, the industrial adjudicator will have to give opportunity to the
parties to place the necessary material before him to decide whether the
workmen of the erstwhile contractor should be directed to be absorbed by
the principal employer, how many of them and on what terms. If, however,
the contract labour is not abolished, the industrial adjudicator has to
E reject the reference. [220-D-F)
Vegoils Pvt. Ltd. v. The workmen, [1972) 1 SCR 673;8.H.E.L. Workers'
Association Hardwar & Ors. Etc. Etc. v. Union of India & Ors. Etc. Etc.,
[1985) 2 SCR 611;Catering Cleaners of Southern Railway Etc. v. Union of
India & Ors. Etc., [1987) 2 SCR 164; Standard Vacuum Refining Co. of India
F Ltd. v. Its Workmen & Ors., [1960) 3 SCR 466; Dena Nath & Ors. v. National
Fenilisers Ltd. & Ors., [1992) 1 SCC 695; Hussainbhai, Calicut v. The Alath
Factory 77wzhilali Union, Kozhikode & Ors., [1978) 4 SCC 257; R.K Panda
& Ors. v. Steel Authority of India Ltd., [1994) 5 SCC 304;Akbar Khan Alam
Khan & Anr. v. 771e Union of India & Ors., [1962) 1 SCR 779; Mohd. Ayub
Khan v. Commissioner of Police, Madras and Anr. [1965] 2 SCR 884; State
G of U.P. v. Abdul Rashid & Ors., [1984) Supp. SCC 347; Bhagwati Prasad
Dixit 'Ghorewala' v. Rajeev Gandhi, [1986) 4 SCC 78; Workmen of
Dimakuchi Tea Estate v. The Managemelll of Dimakuchi Tea Estate, [1958)
SCR 1156; The Workmen of Best & Crompton Industries Ltd. v. The Management of Best & Crompton Engineering Ltd., Madras & Ors., (1985) 1 LW 492
H and Food Corporation of India Loading and Unloading Workers Union v.
GUJ. ELECTRICITY BOARD v. HIND MAZDOOR SABHA
177
Food Corporation of India, [1987) 1 LW 407, referred to.
A
4. It is also not correct to say that to arrive at the finding as to whether
.
I
the labour contracts are genuine or not, the Court or the industrial adjudicator cannot investigate the factors mentioned in Section 2(a) to (d) of
Section 10(2) of the Act. The explanation to section 10(2) makes the decision B
of the appropriate Government final only on the question whether the
process or operation of the work in question is of a perennial nature or not,
and that too when a dispute arises with regard to the same. If no such
question arises, the finding recorded by the Court or the Tribunal in that
behalf is not ineffective or invalid. Further, in all such cases, the Tribunal
is called upon to record a finding on the factors in question nor for abolishC
ing the contract but to find out whether the contract is sham or otherwise.
The contract may be genuine even where all the said factors are present.
What is prohibited by Section 10 is the abolition of the contract except by
the appropriate Government, after taking into consideration the said factors, and not the recording of the finding on the basis of the said factors, D
that the contract is sham or bogus. [224-E-G]
5. It is true that the Tribunal has not in so many words recorded a
finding that the contract was sham or bogus or a camouflage to conceal
the real facts and on its finding that the Board and the contractors had
not produced valid proof of the registration certificate and the licences for
the relevant period has held that the workmen should be deemed to be the
employees of the Boar!!, However, the decision of the Tribunal has to be
read as a wb~e,-'ffiu~ read, the decision makes it clear that the Tribunal
has based its conclusion both on the ground that the workmen were in fact
engaged by the appellant-Board and not by the contractors who were
merely intermediaries set up by the Board and also on the ground that
there was no valid proof of the registration certificate and the licences in
E
F
the possession of the Board and the contractors respectively. There is a
factual finding recorded by the Tribunal that the labour contracts in
question were not genuine and the decision of the Tribunal is based on this
ground as well. [224-A-D]
G
6. Even after the contract labour system is abolished the direct
employees of the principal employer can raise an industrial dispute for
absorption of the ex-contractor's workmen and the adjudicator on the
material placed before him can decide as to who and how many of the H
178
SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.
A workmen should be absorbed and on what terms. [220-G]
7. In the instant case, facts show two things, viz. the direct employees
of the Board has espoused the cause of the contract labourers, and the
appellant-Board had also accepted the fact that the dispute in question
was raised and supported also by the said employees. No objection was
B taken before the Tribunal or the High Court either to the order of reference
or to the adjudication of the dispute by the Tribunal that the dispute was
not espoused by the direct employees of the appellant-Board. This also
shows the fact that the dispute was espoused by the direct employees of
the Board was accepted by the Board and never question~d till this date.
C Apart from the fact, therefore, that the Board had signed the joint application for reference and therefore it cannot in an appeal by special leave
under Article 136 of the Constitution for the first time raise the question
which is a mixed question of law and fact, even on facts as they stand, it
will have to be held that the dispute was in fact espoused by the direct
D employees of the appellant-Board. [221-D-F)
8. It is obvious from a reading of clause (1) of the Order of Reference
that what in fact was referred for adjudication was the determination of'
the status of the workmen, viz., whether though engaged by the contractors,
they were legally the workmen of the appellant-Board. In other words,
E implicit in the said clause is the assertion of the workmen that they are in
law the workmen of the appellant-Board and not of the contractors, and
they wanted the Tribunal to decide their exact legal status. This is also
clear from the statement of claim filed by the workmen in support of their
demand. It is, therefore, not correct to say that the present reference was
F for abolition of the contract. The reference on the other hand, was for a
declaration that the workmen were in fact and in law the employees of the
appellant-Board and that they should be given the service conditions as
are available to the direct employees of the Board. [222-B-C, 223-A]
9. The answer to the question as to what would be the status of the
G erstwhile workmen of the contractor, once the contract labour system is
abolished is that where an industrial dispute is raised, the status of the
workmen will be as determined by the industrial adjudicator. If the con·
tract labour system is abolished while the industrial adjudication is pend·
ing or is kept pending on the concerned dispute, the adjudicator can give
H direction in that behalf in the pending dispute. If, however, no industrial
GUJ. ELECTRICITY BOARD v. HIND MAZDOOR SABHA
179
dispute is pending for determination of the issue, nothing prevents an A
industrial dispute being raised for the purpose. (212-H, 213-A]
10. There is nothing in the Act which has either expressly or impliedly taken away the raising of an industrial dispute to absorb the excontractor's workmen in the principal establishment when the dispute has
been espoused by the direct workmen or the jurisdiction of the Tribunal
to give a direction for the purpose, of course, on such terms as it deems
fit in the circumstances of each case. [231-G]
B
11. It is no doubt true that neither Section 10 nor any other provision
thereof provides for determination of the status of the workmen of the C
erstwhile contractor once the appropriate Government abolishes the contract labour. In fact, on the abolition of the contract, the workmen are in
a worse condition since they can neither be employed by the contractor nor
is there any obligation cast on the principal employer to engage them in
his establishment. This is a vital lacuna in the Act. Although the Act has
been placed on the statute book with all benevolent intentions, and D
elaborate provisions are made to prevent the abuse of the contract labour
system as is evident from the Statement of Objects and Reasons and the
provisions of the Act, the legislature has not provided any relief for the
concerned workmen after the contract is abolished. The legislature could
have provided in the Act itself for a reference of the dispute with regard E
to the absorption of the workmen of the erstwhile contractor to the
industrial adjudicator after the appropriate Government has abolished
the contract labour. That would also have obviated the need to sponsor
the dispute by the direct workmen of the principal employer. That can still
be done by a suitable amendment of the Act. [210-G-H, 211-A, 212-F-G]
F
12. The legislature probably did not consider it advisable to make a
provision for automatic absorption of the erstwhile contract labour in the
principal establishment on the abolition of the contract labour, fearing that
such provision would amount to forcing the contract labour on the principal employer and making a contract between them. The industrial ad- G
judicator however is not inhibited by such considerations. He has the
jurisdiction to change the contractual relationship and also make new
contracts between the employer and the employees under the Industrial
Disputes Act. It is for this reason that in all cases where the contract labour
is abolished, the industrial adjudicator, depending upon the facts of the
case will have the authority to direct the principal employer to absorb such H.
180
SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.
A of the workmen of' the erstwhile contractor and on such terms as he may
determine on the basis of the relevant material before him. It is not correct
to say that the Act is a complete Code by itself and, therefore, the industrial
Tribunal has no jurisdiction to give a direction to the principal employer
to absorb the workmen in question. [212-D-F]
B
Indian General Navigation and Railway Co. Ltd. & Anr. v. Their
Workmen, [1966] 1 LW 735; Krishan Kurup v. General Manager, Gujarat
Refinery, [1986] 4 SCC 375 and Gumiail Singh & Ors., v. State of Punjab &
Ors., [1991] 1 SCC 189, referred to.
C
Sanghi Jeevaraj Ghwar Chand & Ors. v. Secretary, Madras Chillies,
Grains, Kirana Merchants Workers' Union and Anr., [1969] 1 SCR 366,
distinguished.
13. In the connected appeal the decision of the High Court that the
workmen concerned do not become the direct employees of the respondentD enterprises merely because there are no registration certificates and licences with the respondent undertakings and the concerned contractors
respectively is upheld. The remedy of the workmen is to raise a proper
industrial dispute for appropriate reliefs. [232-H, 233-A-B]
E
D.S. Nakara & Ors. v. Union of India, [1983] 1 SCC 305;Delhi
Transport Corporation v. DTC Mazdoor Congress, [1991] Suppl. 1 SCC 600
and The State of Haryana v. Piara Singh, [1992) 2 SCC 118, held inap·
plicable.
14. In the other connected appeal, the award of the Labour Court and
F the decision of the High Court are set aside. The workers are free to raise a
fresh proper industrial dispute and claim appropriate relief. [233-F]
15. It is a matter of regret that even the undertakings in the public
sector have been indulging in unfair labour practice by engaging contract
G labour when workmen can be employed directly even according to the tests
laid down by Section 10(2) of the Act. The only ostentsible purpose in
engaging the contract labour instead of the direct employees is the
monetary advantage by reducing the expenditure. Apart from the fact that
it is an unfair labour practice, it is also an economically short-sighted and
unsound policy, both from the point of view of the undertaking concerned
H and the country as a whole. The economic growth is not to be measured only
GUJ. ELECTRICITY BOARD v. HIND MAZDOOR SABHA
181
in terms of production and profits. It has to be gauged primarily in terms A
of employment and earnings of the people. Man has to be the focal point of
development. The attitude adopted by the undertakings is inconsistent with
the need to reduce unemployment and the Government policy declared from
time to time, to give jobs to the unemployed. This is apart from the mandate
of the directive principles contained in Articles 38, 39, 41, 42, 43 and 47 of B
our Constitution. Accordingly, it is recommended that: [234-B-C]
(a) All undertakings which are employing the contract labour system
in any process, operation or work which satisfies the factors mentioned in
clauses (a) to (d) of Section 10(2) of the Act, should on their own,
discontinue the contract labour and absorb as many of the labour as is C
feasible as their direct employees; [234-D]
(b) both the Central and the State Government should appoint a
Committee to investigate the establishments in which the contract labour
is engaged and where ou the basis of criteria laid down in clauses (a) to
(d) of Section 10(2) of the Act, the contract labour system can be abolished D
and direct employment can be given to the contract labour. The appropriate Government on its own should take initiative to abolish the
labour contracts in the establishments concerned by following the procedure laid down under the Act; [234-E-F]
(c) The Central Government should amend the Act by incorporating E
a suitable provision refer to the industrial adjudicator the question of the
direct employment of the workers of the ex-contractor in the principal
establishment, when the appropriate Government abolishes the contract
labour. [234-G]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5497 of
1995 Etc. Etc.
From the Judgment and Order dated 15.12.90 of the Gujarat High
Court in S.C.A. No. 2119 of 1988.
K.K. Venugopal, N.B. Shetye, Govind Mukhoty, K. Madhava Reddy,
G.B. Pai, B.V. Desai, P. Patnaik, Ms. Malini Poduval, K.K. Rai, A.O. Sikri,
N.R. Sahni, Ms. Neelam Kalsi, Vimal Dave, M. Panicker, D. Pillai, P.K.
Pillai and Uma Nath Singh for the appearing parties.
The Judgment of the Court was delivered by .
F
G
H
182
SUPREME COURT REPORTS [1995] SUPP.1 S.C.R.
A
SAWANT, J. Leave granted in all the petitions.
These four groups of appeals raise common questions of law relating
to the abolition of contract system of labour. Civil appeals C.A. No. 5497
& 5504/95 arising out of SLP (c) Nos. 2613 of 1991 and 13520 of 1991 are
filed by the managements, viz., Gujarat Electricity Board and M/s. Bihar
B State Cooperative Milk Producers' Federation Ltd. respectively, while civil
appeals 5498-02/95, 5503/95 arising out of SLP (c) Nos. 9310-14 of 1991
and 9315 of 1991 are filed by the employees' unions, ·viz., Delhi Office~
and Establishment Employees' Union and New Delhi General Mazdoor
Union respectively, both against the same management, viz., Standing
C Conference of Public Enterprises [SCOPE] & Anr.
2. For the sake of convenience, we will first deal with the facts in
Civil Appeal 5497/95 arising out of SLP [CJ No. 2613 of 1991 and the
questions of law as they arise therefrom.
D C.A. 5497/95@
SLP (CJ No. 2613 of 1991.
3. The appellant-Board runs a Thermal Power Station at Ukai in
Gujarat where it generates and distributes electricity to the consumers. At
the relevant time besides the direct workmen, the Board deployed through
E various contractors 1500 skilled and unskilled manual labourers to carry on
the work of loading and unloading of coal and for feeding the same in the
hoppers and for doing the cleaning and other allied activities in its power
station. It appears that these workmen hailed from the adivasi area and
many of them had lost their land on account of the construction of the
Thermal Power Project of the Board with the result that the employment
F in the power station was the only means of livelihood left for them. The
contractors, according to the respondent-Union, exploited these workmen
by flouting labour laws. Ultimately, the workmen organised themselves into
a trade union. But on that count they were victimised and on 16th November, 1981, the services of a thousand of these workmen were abruptly
G terminated. The Union, therefore, filed a writ petition in the High Court
praying for direction to reinstate the workmen and for implementing and
enforcing the Factories Act, the Employees' Provident Fund Act, the
Payment of Wages Act and other labour enactments. The High Court by
its order of 16th December, 1981 appointed one Shri Israni as a Court
Commissioner to make detailed enquiries regarding the allegations made
H in the writ petition and also to try to resolve the dispute between the
GUJ.ELECTRICTIYBOARDv. HINDMAZDOORSABHA[SAWANT,J.)
183
parties. The Commissioner held talks with the concerned parties and also A
associated the officers of the Labour Department of the Government with
the said talks. It was agreed by the between the parties, viz., the Board and
the contractors on the one hand and the workmen on the other, that all
the workmen whose names and numbers were mutually agreed to, be
allowed to enter the power station for work from 4th January, 1982 and
that a settlement under .Section 2[p] of the Industrial Disputes Act, 1947 B
[for short the 'ID Act'] be duly executed in that behalf. It was further
agreed that the remaining disputes between the parties, viz., those relating
to the revision of wages of the workmen, their rights and privileges arising
out of the Factories Act, Employees' Provident Fund Act, Maternity
Benefits Act and the Workmen's Compensation Act as well as the disputes C
with regard to the workmen's contention that they were the employees of
the Board be referred for adjudication by a joint reference under Section
10(2) of the ID Act. Accordingly, a joint application was made to the
A_ssistant Commissioner of Labour under Section 10[2] of the ID Act
requesting .him that the disputes mentioned therein be referred for adjudication to the Industrial Tribunal and consequently the reference from D
which the present proceedings arise was made. The terms of the reference
were as follow :
"(1) Whether the workers whose services are engaged by the contractors, but who are working in the Thermal Power Station of Gujarat
Electricity Board at Ukai, can legally claim to be the employees of the E
G.E.B.? (2) If yes, whether such employees can claim the following rights
which the other employees of Gujarat Electricity Board are already enjoying? (a) weekly off, (b) sick leave, (c) C.L., (d) Earned or Privilege Leave,
( e) maternity Leave & other benefits to female employees, (f) Gratuity, (g)
Provident Fund, (h) Bonus and (i) Wage scales, etc., (3) If they are not F
held to be the employees of Gujarat Electricity Board, what are their rights
in respect of the matters mentioned in [2] above, against their respective
employers? ( 4) Whether such employees prove that during the year 1979,
1980 and 1981, they or any of them were made to work overtime. If yes,
what would be due to them on that account and from who? (5) Whether
such employees are entitled to revision of their present wages? If yes., what G
should be their revised wages and from which date ? ( 6) Whether the said
employees prove that so far as their services are concerned, there have
been breaches of any of the provisions of the Factories Act, Employees
Provident Fund Act, Maternity Benefits and Workmen's Compensation
Act. If yes, what relief can be legally given to them in that respect and from
which date?"
H
184
SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.
A
4. Before the Tribunal, the Union filed the statement of claim as well
as an application for interim relief. Both the Board and the contractors
submitted their reply to the application for interim relief. The Tribunal
gave its award being Award Part I dated 30th April, 1982 giving interim
relief whereby the Board was directed to pay wages to the workmen at the
B rate of Rs. 9.40 per day from 1st April, 1982 till the disposal of the main
reference. Under the said Award, the Board was directed to give to the
workmen leave with wages and weekly off in accordance with the provisions
of the Factories Act, and maternity benefits as per the provisions of the
Maternity Benefits Act.
C
To the main reference, written statements were filed both by the
Board and the contractors. The Board also filed application stating therein
that in the meanwhile some of the contractors who were engaged and who
were parties to the reference were no longer working with it and that new
contractors were engaged in their place. The Tribunal joined the new
D contractors as parties to the dispute. Likewise, the Union also made an
application for joining some of the contractors as parties and they were
joined as parties to the reference. Some contractors filed applications of
decision on the preliminary point raised in their written statement that
since demand nos. 1 and 2 in the reference amounted to a demand for
abolition of contract labour system, the Tribunal had no jurisdiction to
E entertain the said demand and that the said point should be heard first.
This application was rejected by the Tribunal.
After recording evidence and hearing the parties, the Tribunal by its
award came to the conclusion that quite a number of skilled and unskilled
F employees were employed in the Thermal Power Station for unloading of
coal wagons, breaking of coal, feeding them in hoppers, stacking, cleaning
each work, fabrication jobs etc., that the labourers were the local adivasis
and they were not given any leave or other facilities before 1982 except the
wages which were very meagre, that workmen were doing all types of
unskilled jobs which they were asked to do and that they were rotated in
G different jobs. Further, while the contractors had changes, the workmen
continued to work and the workmen were working for periods ranging from
5 to 8 years. The contractors had not maintained any records and were not
providing any facilities whatsoever. The contractors had no licence under
the Contract Labour [Regulation and Abolition] Act, 1970 [hereinafter
H referred to as the 'Act'] and that no relevant original certificate of registra-
GUJ. ELECTRICITY BOARD v. HIND MAZDOOR SABHA [SAWANf, J.)
185
tion or licence had been brought on record. The registration certificate and A
four licences produced by the Board were ignored by the Tribunal on the
ground that they were only copies and nothing had been produced in
support of their authenticity. The Tribunal also held that even otherwise,
these documents were not relevant since the registration certificate
produce pertained to the contractors who were not concerned in the B
present case while the licences produced were for a period subsequent to
the date of the reference. The Tribunal relied on the decisions of the High
Courts of Madras and Karnataka, viz., The Workmen of Best & Cromption
Industries Ltd. v. The Management of Best & Cromption Engineering Ltd.,
Madras & Ors., (1985) 1 LLJ 492 and Food Corporation of India Loading
and Unloading Workers' Union v. Food Corporation of India, (1987) 1 LLJ C
407 respectively and held that the workmen concerned in the reference
could not be the workmen of the contractors. The Tribunal then proceeded
to analyse the position of each of the seven contractors involved in the
reference, and held, on the basis of the evidence concerning the said
contractors and the workmen working under them, that the workmen of all D
the seven contractors should be deemed to be the workmen of the Board.
The Tribunal also gave consequential direction for payment of arrears of
wages to the workmen by adjusting the advances which were given to them
by the interim directions of the Tribunal. Against the said award of the
Tribunal, the Board preferred a writ petition before the High Court.
E
The High Court by its decision under challenge before us, held,
among other things, that there was no demand for abolition of contract
labour system as contended by the Board and hence the preliminary
objection raised by the Board that the Tribunal had no jurisdiction to
consider the question of the abolition of contract labour system in view of F
the provisions of the Act, had no merit in it. The High Court held that the
Tribunal was called upon to decide as to whether the workers who- were
engaged for working in the Thermal Power Station were employees of the
Board or of the contractors. Hence the Tribunal was required to examine
the reality behind the facade after piercing the veil. The High Court also G
held, negativing the contention to the contrary, that the Tribunal had not
based its finding on the sole ground that there were no valid licences for
certain periods for certain contractors issued under the provisions of the
Act. The Tribunal had decided the question on overall consideration of the
facts and circumstances and on the grounds apart from the absence of valid
licences. One of the factors taken into consideration by the Tribunal was H
186
SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.
A the continuous nature of work.
5. Before us the main contention advanced on behalf of the appellant-Board is that after the coming into force of the Act, it is only the
appropriate Government which can abolish the contract labour system
B after consulting the Central Board or the State Board, as the case may be
and no other authority including the industrial adjudicator has jurisdiction
either to entertain such dispute or to direct its abolition. It is also contended on behalf of the Board that in any case neither the appropriate
Government nor the industrial adjudicator has the power to direct that the
workmen of the erstwhile contractor should be deemed to be the workmen
C of the principal employer and such a direction is contrary to the provisions
of the Act. The Central Government or the industrial adjudicator as the
case may be, can only direct the abolition of the contact labour system as
per the provisions of the Act but the Act does not permit either of them
to declare the erstwhile workmen of the contractor to be the employees of
D the principal employer. It is also contended that if the contract is genuine
as evidenced by the registration certificate granted to the principal
employer and the licence issued to the contractor, then it would have to
be held that the workmen concerned are in effect the workmen of the
contractor and not the workmen of the principal employer and hence no
dispute can be raised under the ID Act by such workmen for any relief
E since it is only the workmen present or past who can raise such a dispute
under the ID Act for relief against their employer. On the other hand, it
is contended on behalf of the workmen that the Act does not prevent or
prohibit the raising of a dispute under the ID Act for abolition of the
contract labour system. Where the contract is genuine, the workmen of the
F
principal employer can raise the dispute for abolition of the contract labour
system. Where it is not genuine, the workmen of the so called contractors
themselves can raise a dispute for a declaration that they are in fact the
employees of the principal employer. In either case, on the basis of the
well-known factors laid down by the judicial decisions to establish the
relationship of the employer and the employee between the parties, the
G Tribunal or the Court, as the case may be, will have jurisdiction to declare
the contract labourers as the direct employees of the principal employer
and grant consequential reliefs.
6. In view of the aforesaid contentions, the questions that fall for
H consideration in this appeal, which are common to all the appeals are, as
..
GUJ. ELECTRICITY BOARD v. HIND MAZDOOR SABHA [SA WANT, J.]
187
follows:
A
[a] Whether an industrial dispute can be raised for abolition of the
contract labour system in view of the provisions of the Act?
[b] If so, who can raise such dispute?
[c] Whether the Industrial Tribunal or the appropriate Government
has the power to abolish the contract labour system? and
[ d] In case the contract labour system is abolished, what is the status
of the erstwhile workmen of the contractors?
6. We may first refer to the relevant provisions of the Act.
The Statement of Objects and Reasons accompanying the Bill'
provided as under:
B
c
'The system of employment of contract labour lends itself to D
various abuses. The question of its abolition has been under the
consideration of Government for a long time. In the second Five
Year Plan, the Planning Commission made certain recommendations, namely, undertaking of studies to ascertain the extent of the
problem of contract labour, progressive abolition of the system and E
improvement of service conditions of contract labour where the
abolition was not possible. The matter was discussed at various
meetings of Tripartite Committees at which the State Governments
were also represented and general consensus of opinion was that
the system should be abolished wherever possible or practicable
and that in cases where this system could not be abolished alF
together, the working conditions of contract labour should be
regulated so as to ensure payment of wages and provision of
essential amenities.
2. The proposed Bill aims at abolition of contract labour in respect G
of such categories as may be notified by appropriate Government
in the light of certain criteria that have been laid down, and at
regulating the service conditions of contract labour where abolition
is not possible. The Bill provides for the setting up of Advisory
Boards of a tripartite character, representing va'fious interests, to
advice Central and State Governments in administering the legis' H
A
B
188
SUPREME COURT REPORTS [1995) SUPP. 1 S.C.R.
lation and registration of establishments and contractors. Under
the Scheme of the Bill, the provision and maintenance of certain
basic welfare amenities for contract labour, like drinking water and
first-aid facilities, and in certain cases rest-rooms and canteens,
have been made obligatory. Provisions have also been made to
guard against details in the matter of wage payment."
As the preamble of the Act points out, the Act has been placed on
the statute book for two purposes, viz., (i) to regulate the employment of
contract labour and (ii) to provide for its abolition in certain circumstances
and for matters connected therewith. It is thus clear that the Act does
C contemplate the total abolition of contact labour but its abolition only in
certain circumstances and to regulate the employment of contract labour
in certain establishments. The object as well as the provisions of the Act
also show that the Parliament while realising the need for abolishing the
contract labour system in certain circumstances also felt the need to
D
continue it in other circumstances by properly regulating the same. The
Act came into force on and from 5th September, 1970. It applies to [a]
every establishment in which 20 or more workmen are employed or were
employed as contract labour on any day of the preceding 12 months and
[b] to every contractor who employs or employed on any day of the .
preceding 12 months 20 or more workmen. Liberty is given to the apE propriate Government to apply the provisions of the Act to any establishment employing such number of workmen less than 20 as may be
specified in the notification. The provisions of sub-section [5] of Section 1
of the Act make it clear [a] that the Act will not apply to establishments
in which work only of an intermittent or casual nature is performed and
F [b] if question arises whether work performed in an establishment is of an
intermittent nature, the appropriate Government shall decide that question
after consultation with the Central Advisory Board or the State Advisory
Board as the case may be and that "its decision shall be final".