# STEEL AUTHORITY OF INDIA LTD. AND ORS. ETC. ETC v. NATIONAL UNION WATER FRONT WORKERS AND ORS, ETC. ETC

- **Citation:** [2001] Supp. 2 S.C.R. 343
- **Court:** Supreme Court of India
- **Decided:** 2001-08-30
- **Case number:** Civil Appeal Nos. 60096010 of 2001
- **Bench:** B.N. Kirpal, Syed Shah Mohammed Quadri, M.B. Shah, Ruma Pal, K.G. Balakrishnan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/steel-authority-of-india-ltd-and-ors-etc-etc-v-national-union-water-front-18148
- **Pages:** 79

## Headnote

Contract Labour (Regulation and Abolition) Act, 1970 :
Sections 1(4) & (5), 2(1) (a) (Before and After 1986 Amendment) 2 (1)
fb) (c) (e) (g) & (i), 7 to 9, JO, 16 to 21 and 23 to 25.
Contract Labour (Regulation and Abolition) Rules, 1971 :
B
c
Rules 21 (2), 25(2) (VJ (a), 72 to 77, 81(3) 82(2) Forms LIL lll, JV. VJ, D
X!L XIV and llv.
'Appropriate Government'-Correct import of expression-Government
Company-Appropriate Government in respect of-Who is-Determination of
appropriate Government-Test laid down for pre-amendment and post- E
amendment period.
"Appropriate Government"-Expression 'Any Industry carried on by or
under the authority of the Central Government'-Scope and meaning of-Test
to determine whether an industry was being carried out under the authority
of Central Government laid down-The fact of being an instrumentality of p
State is not determinative in this regard.
Contract Labour-Central Government-Notification dated December
9, 1976 issued under Section 10(1)-Prohibition of employment of contract
labour under the Notification-Notification held invalid for non-compliance
with requirements o.f Section I 0-Held there was non-application of mind by G
Central Government-Notification quashed prospectively.
Contract labour-Absorption-Issue of a valid Notification prohibiting
contract labour-Effect of-Held provisions of Act neither expressly nor
impliedly provide for automatic absorption of contract labour on issuance of
343
H
344
SUPREME COURT REPORTS [2001 J SUPP. 2 S.C.R.
A a Notification-Position in this regard before and after enactment of the Ac/-
Discussed-Consequences of prohibition Notification issued under Section I 0Discussed.
B
Constitution of India, 1950 : Articles 12, 14, 23, 38, 39, 43A and
Preamble.
State-Duty and obligation to improve the lot of the work force.
Industrial Disputes Act, 1947: Section 2(a)-Scope of-Object of Act.
Interpretation of statute-Duty of Court to give effect to clear and explicit
C language-Rule of literal interpretation-Distinction between public law and
private law-Held not relevant in regard to interpretation of statutesApplicability of Mischief Rule-Principle of liberal construction of beneficial
legislation-Applicability of
Public law-Private law-Distinction between-Held not relevant in
D regard to interpretation of statutes.
Labour law-Principles of contract law-Applicability to labour law.
Words and Phrases :
E
'Authority'-Meaning of-Jn the context a/Section 2(1) (a) of the Contract
F
Labour (Regulation and Abolition) Act, 1970.
In these appeals the following questions arose for consideration :
(i) What is the true and correct import of the expression 'appropriate
Government' as defined in clause (a) of sub-section (I) of Section 2 of the
Contract Labour (Regulation and Abolition) Act, 1970;
(ii) Whether the Notification dated December 9, 1976 issued by the
Central Government under Section IO (I) of the C.L.R.A. Act prohibiting
employment of contract labour in all establishments of the Central
G Government companies is valid and applies to all Central Government
companies; and
(iii) Whether automatic absorption of contract labour, working in the
establishment of the principal employer as regular employees, follows on
issuance of a valid notification under Section 10(1) of the C.L.R.A. Acl,
H prohibiting the contract labour in the concerned establishment.
STEEL AUTHORITY OF INDIA LTD. 11. NA TI ON AL UNION WATER FRONT WORKERS
345
Disposing of the appeals, the Court
A
HELD : 1. Clause (a) of sub-section (1) of Section 2 of the contract
Labour (Regulation and Abolition) Act, 1970 defines the expression
'appropriate Government'. This clause was substituted by the Contract
Labour (Regulation and Abolition) Amendment Act, 1986 with effect from
January 28, 1986. The phrase "any industry carried on by or under the B
authority of the Central Government" is a common factor in both the
unamended as well as the amended. definitions. 1364-E; 366-GJ
2. Before January 28, 1986 the determi

## Text

_Characters 0–39,973 of 203,311. This is a partial read: ask again with offset=39973 for what follows._

STEEL AUTHORITY OF INDIA LTD. AND ORS. ETC. ETC.
A
V.
NATIONAL UNION WATER FRONT WORKERS
AND ORS, ETC. ETC.
AUGUST 30, 2001
[B.N. KIRPAL, SYED SHAH MOHAMMED QUADRI, M.B. SHAH,
RUMA PAL AND K.G. BALAKRISHNAN, JJ.]
Contract Labour (Regulation and Abolition) Act, 1970 :
Sections 1(4) & (5), 2(1) (a) (Before and After 1986 Amendment) 2 (1)
fb) (c) (e) (g) & (i), 7 to 9, JO, 16 to 21 and 23 to 25.
Contract Labour (Regulation and Abolition) Rules, 1971 :
B
c
Rules 21 (2), 25(2) (VJ (a), 72 to 77, 81(3) 82(2) Forms LIL lll, JV. VJ, D
X!L XIV and llv.
'Appropriate Government'-Correct import of expression-Government
Company-Appropriate Government in respect of-Who is-Determination of
appropriate Government-Test laid down for pre-amendment and post- E
amendment period.
"Appropriate Government"-Expression 'Any Industry carried on by or
under the authority of the Central Government'-Scope and meaning of-Test
to determine whether an industry was being carried out under the authority
of Central Government laid down-The fact of being an instrumentality of p
State is not determinative in this regard.
Contract Labour-Central Government-Notification dated December
9, 1976 issued under Section 10(1)-Prohibition of employment of contract
labour under the Notification-Notification held invalid for non-compliance
with requirements o.f Section I 0-Held there was non-application of mind by G
Central Government-Notification quashed prospectively.
Contract labour-Absorption-Issue of a valid Notification prohibiting
contract labour-Effect of-Held provisions of Act neither expressly nor
impliedly provide for automatic absorption of contract labour on issuance of
343
H
344
SUPREME COURT REPORTS [2001 J SUPP. 2 S.C.R.
A a Notification-Position in this regard before and after enactment of the Ac/-
Discussed-Consequences of prohibition Notification issued under Section I 0Discussed.
B
Constitution of India, 1950 : Articles 12, 14, 23, 38, 39, 43A and
Preamble.
State-Duty and obligation to improve the lot of the work force.
Industrial Disputes Act, 1947: Section 2(a)-Scope of-Object of Act.
Interpretation of statute-Duty of Court to give effect to clear and explicit
C language-Rule of literal interpretation-Distinction between public law and
private law-Held not relevant in regard to interpretation of statutesApplicability of Mischief Rule-Principle of liberal construction of beneficial
legislation-Applicability of
Public law-Private law-Distinction between-Held not relevant in
D regard to interpretation of statutes.
Labour law-Principles of contract law-Applicability to labour law.
Words and Phrases :
E
'Authority'-Meaning of-Jn the context a/Section 2(1) (a) of the Contract
F
Labour (Regulation and Abolition) Act, 1970.
In these appeals the following questions arose for consideration :
(i) What is the true and correct import of the expression 'appropriate
Government' as defined in clause (a) of sub-section (I) of Section 2 of the
Contract Labour (Regulation and Abolition) Act, 1970;
(ii) Whether the Notification dated December 9, 1976 issued by the
Central Government under Section IO (I) of the C.L.R.A. Act prohibiting
employment of contract labour in all establishments of the Central
G Government companies is valid and applies to all Central Government
companies; and
(iii) Whether automatic absorption of contract labour, working in the
establishment of the principal employer as regular employees, follows on
issuance of a valid notification under Section 10(1) of the C.L.R.A. Acl,
H prohibiting the contract labour in the concerned establishment.
STEEL AUTHORITY OF INDIA LTD. 11. NA TI ON AL UNION WATER FRONT WORKERS
345
Disposing of the appeals, the Court
A
HELD : 1. Clause (a) of sub-section (1) of Section 2 of the contract
Labour (Regulation and Abolition) Act, 1970 defines the expression
'appropriate Government'. This clause was substituted by the Contract
Labour (Regulation and Abolition) Amendment Act, 1986 with effect from
January 28, 1986. The phrase "any industry carried on by or under the B
authority of the Central Government" is a common factor in both the
unamended as well as the amended. definitions. 1364-E; 366-GJ
2. Before January 28, 1986 the determination of the question whether
Central Government or the State Government is the appi:opriate Government
in relation to an establishment, will depend, in view of the definition of the C
expression "appropriate Government" as it stood in the C.L.R.A. Act, on the
answer to a further question, is the industry under consideration carried on
by or under the authority of the Central Government or does it pertain to
any specified controlled industry; or the establishment of any railway,
cantonment board, major port, mine or oil field or the establishment of D
banking or insurance company ? If the answer is in the affirmative, the
Central Government will be the appropriate Government, otherwise in
relation to any other establishment the Government of the State in which that
other establishment is situated, will be the appropriate Government 1412-E-F]
3. After the said date in view of the new definition of that expression, E
the answer to the question has to be found in clause (a) of Section 2 of the
Industrial Disputes Act; if (i) the concerned Central Government company/
undertaking or any undertaking is included therein eo nomine, or (ii) any
industry is carried on (a) by or under the authority of the Central
Government, or (b) by railway company; or (c) by specified controlled
industry, then the Central Government will be the appropriate Government F
otherwise in relation to any other establishment, the Government of the State
in which that other establishment is situated, will be the appropriate
Government. [412-G-H, 413-A]
4. The key word in the expression 'under the authority of the Central G
Government' is 'authority'. This word is frequently used to express derivative
power; and in this sense, it may be used as meaning instructions, permission,
power delegated by one person to another, the result of the manifestations
by the former to the latter of the former's consent that the latter shall act for
him, authority in this sense has been similarly used as designating or meaning
an agency for the purpose of carrying out a state duty or function : some one H
346
SUPREME COURT REPORTS [2001] SUPP. 2 S.C.R.
A to whom by law a power has been given. It follows that the phrase "any
industry carried on under the authority of the Central Government" implies
an industry which is carried on by virtue of, pursuant to, conferment of, grant
of, or delegation of power or permission by the Central Government to a
Central Government Company or other Government company/undertaking.
B
(368-G, 369-Cj
Concise Oxford Dictionary; Black's Law Dictionary; Corp~ Juris Secundum
p.1290; Words and Phrases p.603, 606, 612 and 613, referred to.
5. The function of the Court is to interpret the statute to ascertain the
C intent of the legislature-Parliament. Where the language of the Statute is clear
and explicit the Court must give effect to it because in that case words of the
Statute unequivocally speak the intention of the legislature. This rule of literal
interpretation has to be adhered to and a provision in the Statute has to be
understood in its ordinary natural sense unless the Court finds that the
provision sought to be interpreted is vague or obscurely worded in which event
D the other principles of interpretation may be called in aid. A plain reading of
the phrase "any industry carried on by or under the authority of Central
Government" under interpretation, shows that it is lucid and clear. There is
no obscurity, no ambiguity and no abstruseness. Therefore, the words used
therein must be construed in their natural ordinary meaning as commonly
E understood. (366-H; 367-A]
F
G
6. For purposes of enforcement of fundamental rights guaranteed in
Part III of the Constitution the question whether a Government Company
or undertaking is 'State' within the meaning of Article 12 is germane. The
word 'State' is defined in Article 12. However, the fact of being instrumentality
of a Central/State Government or being 'State' within the meaning of Article
12 of the Constitution cannot be determinative of the question as to whether
an industry carried on by a Company/corporation or an instrumentality of
the Government is by or under the authority of the Central Government for
the purpose of or within the meaning of the definition of 'appropriate
Government' in the Act. [369-E-F; ~72-D-E]
7. The definition of 'establishment' in the Act takes in its fold purely
private undertakings which cannot be brought within the meaning of Article
12 of the Constitution. In such a case how is 'appropriate Government'
determined for the purposes of C.L.RA. Act or Industrial Disputes Act ? The
criterion is whether an undertaking/instrumentality of Government is carrying
H on an industry under the authority of the Central Government and not
_..,
t-
-~
STEEL AUTHORITY OF INDIA LTD •·. NATIONAL UNION WATER FRONT WORKERS
3 4 7
·whether the undertaking is instrumentality or agency of the Government for A
purposes of Article 12 of the Constitution, be it of Central Government or
State Government. [372-H; 373-A-B]
Sukhdev Singh and Ors. v. Bhagatram Sardar Singh Raghuvanshi and Anr.,
[1975] 3 SCR 619; Ramanna Dayaram Shetty v. The international Airport
Authority of India and Ors., [1979] 3 SCR 1014; Managing Director U.P. B
Warehousing Corporation and Anr. v. Vinay Narayan Vajpayee, [1980) 2 SCR
773; Ajay Hasia etc. v. Khalid Mujib Sehravardi and Ors. etc., [1981] 2 SCR
79; Delhi Transport Corpn. v. D. TC. Mazdoor Congress and Ors., [1991) Suppl.
l SCC 600; Som Prakash Rakhi v. Union of India and Anr., [1981] l SCC 449;
Manmohan Singh Jaitla etc. v. Commr. Union Territory of Chandigarh and Ors. C
etc., (1984] Suppl. SCC 540; P.K. Ramachandra Iyer and Ors. etc. v. Union of
India and Ors. etc., [1984) 2 SCC 141; A.L.Kalra v. Project and Equipment Corpn.
of India Ltd, [1984) 3 SCC 316; Central Inland Water Transport Corpn. Ltd
and Anr. etc. v. Brojo Nath Ganguly and Anr. etc., [1986) 3 SCC 156; C. V. Raman
v. Management of Bank of India and Anr. etc., [1988) 3 SCC 105; Lucknow
Development Authority v. MK. Gupta, [1994] 1 SCC 243; Mis. Star Enterprises D
and Ors. v. City and Industrial Development Corpn. of Maharashtra Ltd and Ors.
[1990[ 3 SCC 280; LIC of India and Anr. v. Consumer Education and Research
Centre and Ors., (1995] 5 SCC 482; G.B. Mahajan and Ors. v. Jalagaon
Municipal Council and Ors., [1991] 3 SCC 91, distinguished.
8. There cannot be any dispute that all the Central Government E
companies in question are not and cannot be equated to Central Government
though they may be 'State' within the meaning of Article 12 of the
Constitution. Being the instrumentality or agency of the Central Government
would not by itself amount to having the authority of the Central Government
to carry on that particular industry. The Central Government will be the , p
"appropriate Government" under the C.L.RA. Act and the 1.D. Act provided
the industry in question is carried on by a Central Government company/an
undertaking under the authority of the Central Government. Such an
authority may be conferred, either by a Statute or by virtue of relationship
of principal and agent or delegation of power. Where the authority, to carry
on any industry for or on behalfofthe Central Government, is conferred on
the Government company/any undertaking by the Statute under which it is
created, no further question arises. Bilt, if it is not so, the question that arises
G
is whether there is any conferment of authority on the Government company/
any undertaking by the Central Government to carry on the industry in
question. This is a question of factand lias to be ascertained on the facts and H
348
SUPREME COURT REPORTS [2001] SUPP. 2 S.C.R.
A in the circumstances of each case. [373-C-G]
Heavy Engineering Mazdoor Union v. State of Bihar and Ors., (1969( I
SCC 765; Mis. Hindustan Aeronautics Ltd v. The Workmen and Ors., [1975) 4
SCC 679; Rashtriya Mill Mazdoor Sangh, Nagpur v. Model Mills, Nagpur and
Anr. [1984) Suppl. SCC 443 and Food Corpn. of India, Bombay and Ors. v.
B Transport and Dock Workers Union and Ors., [1999] 7 SCC 59, referred fo.
Air India Statutory Corpn. and Ors. v. United Labour Union and Ors.,
[1997] 9 sec 377, overruled prospectively.
9. The principle, while discharging public functions and duties the
C Government companies/corporations/societies which are instrumentalities or
agencies of the Government must be subjected to the same limitations in the
field of public law-Constitutional or administrative law-as the Government
itself, does not lead to the inference that they become agents of the Central/
State Government for all purposes so as to bind such Government for all their
acts, liabilities and obligations under various Central and/or State Acts or
D under private law. [372-C)
IO. The contention that in construing the provisions of the C.L.R.A. Act,
the principle of literal interpretation has to be discarded as it represents
common law approach applicable only to private law field and has no
relevance when tested on the anvil of Article 14, and instead the principle of
E public law interpretation should be adopted, cannot be accepted. To accept
that contention would amount to abandoning a straight route and oft treaded
road in an attempt to create a pathway in a wilderness which can only lead
astray. This C~urt has not come across any principles of public law
interpretation as opposed to private law interpretation for interpreting a
F
G
statute either in any authoritative treatise on interpretation of statutes or in
pronouncement of any court. However, there does exist a distinction between
the public law and private law. The divide between the public law and private
law is material in regard to the remedies which could be availed when
enforcing the rights, public or private, but not in regard to interpretation of
the statutes. [376-C, D, GI
O'Reilly v. Mackman, 1983 (2) Appeal Cases 237 held inapplicable.
Lord Woolf, The Second Harry Street Lecture, referred to.
II. The definition of 'establishment' is given in Section 2(e) of the Act.
Reading the definition of 'establishment' the position that emerges is that
H before issuing a notification under Section 10(1) an appropriate Government
I
STEEL AUTHORITY OF INDIA LTD."· NATIONAL UNION WATER FRONT WORKERS
349
is required to : (i) consult the Central Board/State Board; (ii) consider the A
conditions of work and benefits provided for the contract labour and (iii) take
note of the factors such as mentioned in clauses (a) to (d) of sub-section (2) of
Section 10, with reference to any office or department of the Government or
local authority or any place where any industry, trade, business, manufacture
or occupation is carried on. (380-F-G]
12. A glance through the impugned notification, makes it manifest that
with effect from March 1, 1977, it prohibits employment of contract labour
for sweeping, cleaning, dusting and watching of buildings owned or occupied
B
by establishment in respect of which the appropriate Government under the
said Act is the Central Government. This clearly indicates that the Central C
Government had not adverted to any of the essentials, required under Section
10, except the requirement of consultation with the Central Advisory Board.
Consideration of the essential factors has to be in respect of each
establishment, whether individually or collectively, in respect of which
notification under sub-section I of Section 10 is proposed to be issued. The
impugned notification apart from being an omnibus notification does not D
reveal compliance with sub-section (2) of Section 10. This is exfacie contrary.
to the. postulates of Section 10 of the Act. Besides it also exhibits non- .
application of mind by the Central Government. Therefore, the impugned
notification dated December 9, 1976 issued by the Central Government cannot
be sustained. It is quashed prospectively, i.e. from the date of this judgment E
and subject to the clarification that on the basis of this judgment no order
passed or no action taken giving effect to the said notification on or before
the date of this judgment, shall be called in question in any tribunal-court
including a High Court if it has otherwise attained finality and/or it has been
implemented. (381-D-F; 413-E, F]
13. Neither Section 10 of the C.L.R.A. Act nor any other provision in F
the Act, whether expressly or by necessary implication, provides for automatic
absorption of contract labour on issuing a notification by appropriate
Government under sub-section (1) of Section 10, prohibiting employment of
contract labour, in any process, operation or other work in any establishment.
Consequently the principal employer cannot be required to order absorption G
of the contract labour, working in the concerned establishment. (413-G]
14. On issuance of prohibitation notification under Section 10 of the
C.L.R.A. Act prohibiting employment of contract labour or otherwise, in an
industrial dispute brought before it by any contract labour in regard to
conditions of service, the industrial adjudicator will have to consider the H
350
SUPREME COURT REPORTS (2001) SUPP. 2 S.C.R.
A question whether the contractor has been interposed either on the ground of
having undertaken to produce any given result for the establishment or for
supply of contract labour for work of the establishment under a genuine
contract or is a mere ruse/camouflage to evade compliance of various
beneficial legislations so as to deprive the workers of the benefit thereunder.
If the contract is found to be not genuine but a mere camouflage, the so-called
B contract labour will have to be treated as employees of the principal employer
who shall be directed to regularise the services of the contract labour in the
concerned establishment subject to the conditions as may be specified by it
for that purpose in the light of para hereunder. (414-C-E]
.
C
15. If the contract is found to be genuine and prohibition notification
under Section 10(1) of the C.L.R.A. Act in respect of the concerned
establishment has been issued by the appropriate Government, prohibiting
employment of contract labour in any process, operation or other work of
any establishment and where in such process, operation or other work of the
establishment and the principal employer intends to employ regular workman
D he shall give preference to the erstwhile contract labour, if otherwise found
suitable and, if necessary, by relaxing the condition as to maximum age
appropriately taking into consideration the age of the workers at the time of
their initial employment by the contractor and also relaxing the condition as
to academic qualifications other than technical qualifications. [414-F-G]
E
16. The expression "industrial adjudicator" has been used by design
as determination of the questions aforementioned requires inquiry into
disputed questions of facts which cannot conveniently be made by High Courts
in exercise of Jurisdiction: under Article 226 of the Constitution. Therefore,
in such cases the appropriate authority to go into those issues will be industrial
F tribunal/court whose determination will be amenable to judicial review.
[414-H; 415-AJ
17. By definition the term 'contract labour's is a species of workman.
Where a workman is hired in or in connection with the work of an
establishment by the principal employer through a contractor, he merely acts
G as an agent so there will be master and servant relationship between the
principal employer and the workman. But where a workman is hired in or
in connection with the work of an establishment by a contractor either because
he has undertaken to produce a given result for the establishment or because
he supplies workman for any work of the establishment, a question might
arise whether the contractor is a mere camouflage. If the answer is in the
H affirmative, the workman will be in fact an employee of the principal employer
STEEL AUTHORITY OF INDIA LTD. '·NATIONAL UNION WATER FRONT WORKERS
) 51
but if the answer is in the negative, the workman will be a contract labour. A
[391-E, G, H; 392-H]
Hussainbhai Calicut v. The A lath Factory Thozhilali Union, Kozhikode and
Ors., [19781 4 SCC 257 and Indian Petrochemicals Corporation Ltd and Anr.
v. Shramik Sena and Ors., [19991 6, SCC 439, referred to.
18. For interpretation of relevant provisions of the Act reference to
Mischief Rule is apposite.
Craise on Statute Law 6th Edition, by S.G.G. Edgar p. 96, referred to.
B
Re mayfair Property Co. 1898 (2) Ch 28, Heydon's case 1584 (3) Co.Rep. C
7 A, referred to.
19. The C.L.R.A. Act was enacted by the Parliament to deal with the
abuses of contract labour system. The Parliament has adopted twin measures
to curb the abuses of employment of contract labour-the first is to regulate
employment of contract labour suitably and the second is to abolish it in D
certain circumstances. This approach is clearly discernible from the provisions
of the C.L.R.A. Act. (360-EI
20. The consequence of prohibition notification under Section 10(1) of
the C.L.R.A. Act prohibiting employment of contract labour, is neither spelt E
out in Section 10 nor indicated anywhere in the Act. The following
consequences follow on issuing a notification under Section 10(1) of the
C.L.R.A. Act : (1) Contract labour working in the concerned establishment
at the time of issue of notification will cease to function; (ii) the contract of
principal employer with the contractor in regard to the contract labour comes
to an end; (iii) no contract labour can be employed by the principal employer F
in any process, operation or other work in the establishment to which the
notification relates at any time thereafter; (iv) the contract labour is not
rendered unemployed as is generally assumed but continues in the
employment of the contractor as the notification does not sever the relationship
of master and servant between the contractor and the contract labour; (v) G
the contractor can utilise the services of the contract labojir in any other
establishment in respect of which no notification under Section 10(1) has been
issued where all the benefits under the C.L.R.A. Act which were being enjoyed
by it, will be available; (vi) if a contractor intends to retrench his contract
labour he can do so only in conformity with the provisions of the ID Act.
[390-F, G-H; 391-A-C] H
352
SUPREME COURT REPORTS [2001] SUPP. 2 S.C.R.
A
21. The problems and the abuses resulting from engagement of contract
labour had attracted the attention of the Government from time to time. In
1931 the Royal Commission (also known as 'Whitley Commission') submitted
its report mentioning about existence of intermediary named "jobber", and
recommended certain measures to reduce the influence of the 'jobber'.
B Nothing substantial turned on that. In 1946 Rage Committee recognised need
for contract labour yet urged for its abolition where it was possible and
recommended for regulating conditions of service where its continuance was
unavoidable. A careful reading of the recommendation made in 1956 by the
second Planning Commission shows that though it was not unmindful of the
fact that abolition of the contract labour system would result in displacement
C of labour, yet what it thought fit to recommend was alternative employment
and not absorption in the establishment where the contract labour was
working. In 1969, the National Commission submitted its report recording
the finding that the contract labour system should be abolished. In its report
the Commission noticed the fact of introduction of 'The Contract Labour
(Regulation and Abolition) Bill, 1967, in the Parliament, which incorporated
D to a great extent its recommendations. The Bill later became the C.L.R.A.
Act. Inspite of absence of a provision for absorption of contract labour in the
Bill (on issuance of notification under Section 10(1) of the C.L.R.A. Act
prohibiting engagement of contract labour), the National Commission
endorsed that measure. Neither in the main report of the Joint Committee of
E the Parliament on the said Bill nor in the dissent note, there is any reference
to the automatic absorption of the contract labour. [394-E-G; 395-E; 396-D[
22. The Statement of objects and reasons of the Act also does not allude
to the concept of automatic absorption of the contract labour on issuance of
notification for prohibition of the employment of the contract labour. The
F provisions of the Act clearly bespeak treatment of contract labour as
employees of the contractor and not of the principal employer.
G
(396-H; 398-A]
23. The eloquence of the Act in not spelling out the consequence of
abolition of contract labour system appears to be that the Parliament intended
to create a bar on engaging contract labour in the establishment covered by
the prohibition notification by a principal employer so as to leave no option
with him except to employ the workers as regular employees directly. Section
10 is intended to work as a permanent solution to the problem rather than to
provide a one time measure by departmentalizing the existing contract labour
H who may, by a fortuitous circumstance be in a given establishment for a very
-
STEEL AUTHORITY OF INDIA LTD. v. NATIONAL UNION WATER FRONT WORKERS
3 53
short time as on the date of the prohibition notification. It could as well be A
that a contractor and his contract labour who were with an establishment
for a number of years were changed just before the issuance of prohibition
notification. In such a case there could be no justification to prefer the contract
labour engaged on the relevant date over the contract labour employed for
longer period earlier. Therefore, it cannot be received that in Section 10 there B
is any implicit requirement of automatic absorption of contract labour by the
principal employer in the concerned establishment on issuance of notification
by the appropriate Government under Section 10(1) prohibiting employment
of contract labour in a given establishment [398-B, E, F)
The Standard-Vacuum Refining Co. of India Ltd. v. Its Workman and Ors., C
[1960] 3 SCR 466, explained and distinguished.
Vegoils Pvt. Ltd. v. The Workmen, (1971] 2 SCC 724 and Mis. Gammon
India Ltd. and Ors. v. Union of India and Ors., (1974) l SCC 596; R.K. Panda
and Ors. v. Steel Authority of India and Ors., [1994) 5 SCC 304, distinguished.
Dena Nath and Ors. v. National Fertilisers Ltd and Ors., (1992) l SCC D
695, followed.
B.H.E.L. Workers' Association, Hardwar and Ors. etc. v. Union of India
and Ors. etc., [1985] l SCC 630; Mathura Refinery Mazdoor Sangh through its
Secretary v. Indian Oil Corpn. Ltd, Mathura Refinery Project, Mathura and Anr.,
(1991) 2 SCC 176; National Federation of Railway Porters, Vendors and Bearers E
v. Union of India and Ors., [1995) Supp. 3 SCC 152; Association of Chemical
Workers, Bombay v. A.L. Alaspurkar and Ors., [1993) Supp. 3 SCC 248 and
Gujarat Electricity Board, Thermal Power Station, Ukai, Gujarat v. Hind Mazdoor
Sabha and Ors., [1995) 5 SCC 27, referred to.
Air India Statutory Corpn. and Ors. v. United Labour Union and Ors.,
[1997) 9 sec 377, overruled prospectively.
24. The principle that a beneficial legislation needs to be construed
liberally in favour of the class for whose benefit it is intended, does not extend
F
to reading in the provisions of the Act what the legislature has not provided G
whether expressly or by necessary implication, or substituting remedy or
benefits for that provided by the legislature. The intendment of the Act is that
it regulates the conditions of service of the contract labour and authorises in
Section 10(1) prohibition of contract labour system by the appropriate
Government on consideration of factors enumerated in sub-section (2) of
Section IO of the Act among other relevant factors. But, the presence of some H
354
SUPREME COURT REPORTS [2001) SUPP. 2 S.C.R.
A of all those factors, provides no ground for absorption of contract labour on
issuing notification under sub-section (1) of Section IO. Admittedly when the
concept of automatic absorption of contract labour as a consequence of issuing
notification under Section IO(l) by the appropriate Government, is not alluded
to either in Section IO or at any other place in the Act and the consequence
B of violation of Sections 7 and 12 of the Act is explicitly provided in Sections
23 and 25 of the Act, it is not for the High Courts or this Court to read in
some unspecified remedy in Section IO or substitute for penal consequences
specified in Sections 23 and 25 a different sequel, be it absorption of contract
labour in the establishment of principal employer or a lesser or a harsher
punishment. Such an interpretation of the provisions of the statute will be
C far beyond the principle of ironing out the creases and the scope of
interpretative legislation and as such clearly impermissible. [405-B-E)
V.S. T Industries Ltd v. V.S. T Industries Workers' Union and Anr., [2001)
l SCC 298; G.B. Pant University of Agriculture and Technology, Pant Nagar,
Nainital v. State of UP. and Ors., [2000) 7 SCC I09; Union of India and Ors. v.
D Mohammed Aslam and Ors., [2001] l SCC 720 and The Saraspur Mills Co. Ltd
v. Ramanlal Chimanlal and Ors., (1974] 3 SCC 66, distinguished.
25. There is no substance in the submission that a combined reading
of the definition of the terms' contract labour', 'establishment' and 'workman'
would show that a legal relationship between a person employed in an industry
E and the owner of the industry is created irrespective of the fact as to who
brought about such relationship. (410-8]
F
26. The word 'workman' is defined in wide terms. It is generic term
of which contract labour is a species. It is true that a combined reading of
the terms 'establishment' and 'workman' shows that a workman engaged in
an establishment would have direct relationship with the principal employer
as a servant of master. But what is true of a workman could not be correct
· of contract labour. [4IO-C]
27. The contention that a workman, who is not an out-worker, must
G be treated as a regular employee of the principal employer cannot be acceded
to. An out-worker falls within the exclusionary clause of the definition of
'workman'. The word 'out worker' connotes a person who carries out the type
of work, mentioned in sub-clause (C) of clause (i) of Section 2, of the principal
employer with the materials supplied to him by such employer either (i) at
his home or (ii) in some other premises not under the control and management
H of principal employer. A person who is not an out worker but satisfies the
STEEL AUTHORITY OF INDIA LTD. '·NATIONAL UNION WATER FRONT WORKERS
) 55
requirement of the first limb of the definition of 'workman' would by the very A
definition, fall within the meaning of the term 'workman'. Even so, if such a
workman is within the ambit of the contract labour, unless he falls within
the afore-mentiimed classes, he cannot be treated as a regular employee of
the principal employer. [410-E-F]
28. Neither the provisions of the C.L.RA. Act contemplate creation B
of direct relationship of master and servant between the principal employer
and the contract Jabour nor can such relationship be implied from the
provisions of the Act on issuing notification under Section 10(1) of the C.L.RA~
Act, afortiorari much less can such a relationship be found to exist from the
Rules and the Forms made thereunder. [410-H; 411-A]
The Maharashtra Sugar Mills Ltd v. The State of Bombay and Ors., AIR
(1961) SC 313; Shivnandan Sharma v. The Punjab National Bank Ltd, [1965] 1
SCR 1427; Basti Sugar Mills Ltd v. Ram Ujagar and Ors., [1964) 2 SCR 838
and Hussainbhai Calicut v. The Alath Factory Thezhilali Union, Kozhikode and
Ors., [1978] 4 SCC 257, explained and distinguished.
29. The contention that the principles of contract law stricto senso do
not apply to the labour and management is too broad to merit acceptance.
[411-8]
c
D
Western India Automobiles Assn. v. The Industrial Tribunal, Bombay and
Ors., AIR (36) (1949) Federal Court 1 I I; The Bharat Bank Ltd Delhi v. E
Employees of the Bharat Bank Ltd. Delhi and Anr., (1950) SCR 459 and Bharat
Fritz Werner Ltd. etc. etc. v. State ofKarnatakaJ.T., (2001) 2 SC 376, referred
to.
Raj Bahadur Diwan Badri Das v. The Industrial Tribunal, Punjab, (1963]
3 SCR 930 and Uptron India Ltd v. Shammi Bhan and Anr., [1998] 6 SCC 538, F
distinguished.
30. The history of exploitation of labour is as old as the history of
civilization itself. There has been an ongoing struggle by labourers and their
organisations against such exploitation but it continues in one form or the G
other. The Industrial Disputes Act, 1947 is an important legislation in the
direction of attaining fair treatment to labour and industrial peace which are
sine qua non for sustained economic growth of any country. [359-D-E]
Life Insurance Co1poration of India v. D.J. Bahadur and Ors., [19811 l
sec 315, referred to.
H
356
SUPREME COURT REPORTS [2001] SUPP. 2 S.C.R.
A
31. After the advent of the Constitution of India, the State is under
an obligation to improve the lot of the work force. For this purpose
Constitution of India contains various provisions. The Preamble to the
Constitution is the lodestar and guides those who find themselves in a grey
area while dealing with its provisions. In interpreting a beneficial legislation
B enacted to give effect to directive principles of the state policy which is
otherwise constitutionally valid, the consideration of the Court cannot be
divorced from those objectives. In a case of ambiguity in the language of a
beneficial labour legislation, the Courts have to resolve the quandary in favour
of conferment of, rather than denial of, a benefit on the labour by the
legislature but without rewriting and/or doing violence to the provisions of
C the enactment. 1359-H; 360-C-D]
CIVIL APPELLATE JURISDICTION
Civil Appeal Nos. 60096010 of 2001.
From the Judgment and Order dated 3.7.98 of the Calcutta High Court
D in W.P. No. 1773/94 and FMAT No. 1460 of 1994.
WITH
C.A. Nos. 6011, 6012/2001, T.C. No. 1, 5-7, 14, 17 and 18/2000 C.A.
Nos. 719-720/200 I, 5798-99/98, 6013-6022, 6023/200 I, 4188-94, 4195/98,
6024-6025/2001, T.P. (C) No. 169, 284-302/2000. C.A. Nos. 6029, 6030E 6034/2001, T.P. (C) No. 308-337 of 2000 and C.A. No. 14112001.
Harish N. Salve, Solicitor General, K.N. Raval, Additional Solicitor
General, G.L. Sanghi, Ms. Indira Jaisingh, K.K. Venugopal, B. Sen, C. S.
Vaidyanathan, Shanti Bhushan, Ranjit Kumar, Jitendra Sharma, K.K. Singhvi,
Ramesh P. Bhatt, T.R. Andhyarujina, P.S. Nair, Bhaskar P. Gupta, R.
F Venkataramani, Rajinder Sachar, Bhimrao Naik, Nageshwara Rao, Sunil Kr.
Jain, Vijay Hansaria, A.K. Sahi, M.P. Sharma, Manish Kumar, J.K. Bhatia,
K.P.S. Chani, Subra Jyoti Borthakur, Ms. Jaya Tomar, Amitesh Lal, Ms.
Sushma Sharma, K. Rajeev, Ajit Pudussery, Rakesh K. Khanna, Ms. Pallavi
Chaudhary, Ms. Anuradha Joshi, Surya Kant, M.B. Buch, J.K. Bhatia, K.V.
G Sreekumar, Ms. Asha Jain Madan, Mukesh Jain, Sushi! K. Pathak, S. Ravindra
Bhat, Bharat Sangal, Sanjay Ghosh, Ms. Manjula Gupta, Ms. Sangeeta
Panickar, Ms. Nina Gupta, Uday Gupta, Ms. Jaya Shrivastava, Ms. Aripta
Mahajan, Vineet Kumar, Ms. Chama Mookerji, Anupam Mookerji, Pranab
Kumar Mullick, Sanjay Kumar Pathak, Tara Chandra Sharma, Ajay Sharma,
Rajeev Sharma, Pijush K. Roy, Ranjan Mukherjee, D. Mahesh Babu, Ms.
H Meenakshi Vij, K.T. Anandaraman, P.N. Jha, Sanjay Kapur, Ms. Shubhra
STEEL AUTHORITY OF INDIA LTD. '"NA TI ON AL UNION WATER FRONT WORKERS [QUADRI, l.) J 5 7
Kapur, P.H. Parekh, E.R. Kumar, Zulfikar Kumar, S.K. Singhvi, Ms. Asha A
Pathak, Ms. Jane Cox, P.K. Manohar, A.S. Chahil, Ms. S. Janani; Vijayendra
Misra, Binay Kumar Das, Anil Kumar Jha, B.K. Satija, K.M. Patel, Ms.
Sangeeta Kumar, Anil Nauriya, Ms. Hemantika Wahi, Arvind Kumar Sharma,
(NP), S.R. Setia, K.V. Sree Kumar, Suresh S. Pakale, Ajay Majithia, Sanjay
Singhvi, B.N. Singhvi, Yash Pal Dhingra, Anil Sachthey, Ms. Sandhya Rajpal,
Arijit Prasad, Abhijit Sengupta, R.R. Chandrachud, A.N. Singh, Sanjay Parikh, B
Avijit Bhattacherjee, H. Devarajan, Rajiv Nanda, D.S. Mahra, Y.P. Mahajan,
B.V. Bairam Das, Rakesh Shukla, C. Radhakrishna, Praveen Kumar, Ms.
Anita Shenoy, Swapan Banerjee for the appearing parties.
The Judgment of the Court was delivered by
SYED SHAH MOHAMMED QUADRI, J. Leave is granted in the
Special Leave petitions.
In Food Corporation of India. Bombay and Ors. v. Transport and Dock
Workers Union and Ors., 1 a two-Judge Bench of this Court, having noticed
c
the conflict of opinion between different Benches including two three-Judge D
Benches of this Court on the interpretation of the expression "appropriate
Government" in Section 2(1)(a) of the Contract Labour (Regulation and
Abolition) Act, I 970 (for short, 'the CLRA Act') and in Section 2(a) of the
Industrial Disputes Act, 1947 (for short, 'the LO.Act') and having regard to
the importance of the question of automatic absorption of the contract labour E
in the establishment of the principal employer as a consequence of an abolition
notification issued under Section 10( 1) of the CLRA Act, referred these cases
to a larger Bench. The other cases were tagged with the said case as the same
questions arise in them also. That is how these cases have come up before us.
To comprehend the controversy in these cases, it will suffice to refer F
to the facts in Civil Appeal Nos. 6009-10 of 2001@ S.L.P. Nos. 1265712658 of 1998 which are preferred from the judgment and order of the
Calcutta High Court in W.P.No. 1773of1994 and FMAT No.1460of1994
dated July 3, 1998. The appellants, a Central Government Company and its
branch manager, are engaged in the manufacture and sale of various types of
iron and steel materials in its plants located in various States of India. The G
business of the appellants includes import and export of several products and
bye-products through Central Marketing Organisation, a marketing unit of
the appellant, having network of branches in different parts of India. The
work of handling the goods in the stockyards of the appellants, was being
1. [I 999) 1 sec 59.
H
358
SUPREME COURT REPORTS (2001] SUPP. 2 S.C.R.
A entrusted to contractors after calling for tenders in that behalf. The Government
of West Bengal issued notification dated July 15, 1989 under Section 10(1)
of the CLRA Act (referred to in this judgment as 'the prohibition notification')
prohibiting the employment of contract labour in four specified stockyards of
the appellants at Calcutta. On the representation of the appellants, the
B Government of West Bengal kept in abeyance the said notification initially
for a period of six months by notification dated August 28, 1989 and thereafter
extended that period from time to time. It appears that the State Government
did not, however, extend the period beyond August 31, 1994.
The first respondent-Union representing the cause of 353 contract
C labourers filed Writ Petition No. I 0 I 08/89 in the Calcutta High Court seeking
a direction to the appellants to absorb the contract labour in their regular
establishment in view of the prohibition notification of the State Government
dated July 15, 1989 and further praying that the notification dated August 28,
1989, keeping the prohibition notification in abeyance, be quashed. A learned
Single Judge of the High Court allowed the writ petition, set aside the
D notification dated August 28, 1989 and all subsequent notifications extending
the period and directed that the contract labour be absorbed and regularised
from the date of prohibition notification - July 15, 1989 - within six months
from the date of the judgment i.e., April 25, 1994.
The appellants adopted a two-pronged attack strategy.