# WORKMEN OF THE FOOD CORPORATION OF INDIA v. M/S. FOOD CORPORATION OF INDIA

- **Citation:** [1985] 2 S.C.R. 1065
- **Court:** Supreme Court of India
- **Decided:** 1985-02-28
- **Bench:** D.A. Desai, V. Balakrishna Eradi, V. Khalid
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/workmen-of-the-food-corporation-of-india-v-m-s-food-corporation-of-india-8793
- **Pages:** 20

## Headnote

Industrial Disputes Act, 1947, sec. 9A-Contract System abofishedlntroduction of direct payment system ejfectof-Whetker reintrodiiction of contract
system amounts to discharge, termination of service or retrenchment <Jf workmenB
Whether notice u/s. 9A is a condition precedent to such change-Effect of non~
C
issuance of such notice.
There were 464 workmen designated as handling Mazdoors for hand ..
ling foodgrains at Siliguri Depot set up by the respondedt"'Food Corporation
of India in West Bengal.
Prior to January 2, 1973, the work of handling
foodgrains at the said depot was entrusted by the respondent to a contractor
who used to engage workmen and the workmen received their salaries or
wages or remuneration from the contractor as determined by the contractor
or as agreed between the Contractor and the workmen.
The respondent
introduced direct payment system with effect from January 2, 1973 pur·
suant to an agreement arrived at between the parties and the intermediary
contractor disappeared from the picture.
The method adopted was that
the bills for the piece rate wag.es payable to handling Mazdoors were
prepared by the Depot staff.
The work rendered by each workmen had to
be entered into
a muster roll
register.
The
rCspondeot-Corpora ..
tion
distributed
the
wages
calculated on
piece
rate
to
each
workman through Sardars/Mondals
and each workman
was required
to be a party to the acquittance roll to be retained by the respondent.
The Sardars/Mondals used to accept payment and sign bills on behalf of
the aforesaid workmen.
The respondent changed this method of direct
payment with effect from March 10, 1975 superseding the direct payment
system and reintroducing contractor system and that too without giving
any notice of change to the Workmen's Union-appellant herein as contemp·
lated by section 9(A) of the Industrial Disputes Act 1947 (l.D. Act, for
short).
Consequently the respondent
discontinued employment of the
aforesaid 464 workmen and brought in the in' ermediary contractor and
treated the workmen as the workmen employed by the contractor.
The
appellant~Uoion raised an industrial dispute as to whether the disconti.
nuance of employment of 464 workers of their Silliguri Depot w.e.f. 21st
July 1974 by the respondent is lawful and justified and the same was
referred to the tribunal which negatived the claim of the appe\lant .. union
and held that the discontinuance of contractor system in the year 1973 and
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1066
SUPREME COURT REPORTS
(1985] 2 s.c.a.
A
introduction a direct payment system did not bring about any change in the
status of the workmen and therefore they never became the workmen of
the respondent.Corporation.
As a corrollary, it further held that reintroduction of the contractor system in 1975 did not constitute discontinuance
of the services of the affected workmen.
Hence this appeal by special
leave.
B
The appellant-Union contended (il that even though the workmen
were initially engaged by the contractor when the work of handling food·
grains brought to Silliguri Depot was entrusted to a contractor, but subsequently at least from April 1973, the intermediary contractor was removed
and they became the workmen directly employed by the Corporation and
were therefore_, the workmen of the respondent; and unless their services
were legally terminated, they cannot be discontinued from service of the
Corporation and some other master imposed upon them.
(ii) that apart
from being an unfair labour practice, the changeover was illegal and vindic··
tive and malicious in character and that the respondent was legaHy bound
to give a notice of the said change to the Union as contemplated u/s. 9A
of the I.D. Act.
On the other hand, the respondent·Corporation argued
(i) that even when the so called direct payment system was introduced after
removing the contractor, it was basically a spill over of the old contract
system save and except that the contractor was replaci::d by Sardars/Mondals
to whom total payment on piece r

## Text

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1065
WORKMEN OF THE FOOD CORPORATION OF INDIA
A
v.
M/S. FOOD CORPORATION OF INDIA
February 28, 1985.
(D.A. DESAI, V. BALAKRISHNA ERADI AND V. KHALID. JJ.]
Industrial Disputes Act, 1947, sec. 9A-Contract System abofishedlntroduction of direct payment system ejfectof-Whetker reintrodiiction of contract
system amounts to discharge, termination of service or retrenchment <Jf workmenB
Whether notice u/s. 9A is a condition precedent to such change-Effect of non~
C
issuance of such notice.
There were 464 workmen designated as handling Mazdoors for hand ..
ling foodgrains at Siliguri Depot set up by the respondedt"'Food Corporation
of India in West Bengal.
Prior to January 2, 1973, the work of handling
foodgrains at the said depot was entrusted by the respondent to a contractor
who used to engage workmen and the workmen received their salaries or
wages or remuneration from the contractor as determined by the contractor
or as agreed between the Contractor and the workmen.
The respondent
introduced direct payment system with effect from January 2, 1973 pur·
suant to an agreement arrived at between the parties and the intermediary
contractor disappeared from the picture.
The method adopted was that
the bills for the piece rate wag.es payable to handling Mazdoors were
prepared by the Depot staff.
The work rendered by each workmen had to
be entered into
a muster roll
register.
The
rCspondeot-Corpora ..
tion
distributed
the
wages
calculated on
piece
rate
to
each
workman through Sardars/Mondals
and each workman
was required
to be a party to the acquittance roll to be retained by the respondent.
The Sardars/Mondals used to accept payment and sign bills on behalf of
the aforesaid workmen.
The respondent changed this method of direct
payment with effect from March 10, 1975 superseding the direct payment
system and reintroducing contractor system and that too without giving
any notice of change to the Workmen's Union-appellant herein as contemp·
lated by section 9(A) of the Industrial Disputes Act 1947 (l.D. Act, for
short).
Consequently the respondent
discontinued employment of the
aforesaid 464 workmen and brought in the in' ermediary contractor and
treated the workmen as the workmen employed by the contractor.
The
appellant~Uoion raised an industrial dispute as to whether the disconti.
nuance of employment of 464 workers of their Silliguri Depot w.e.f. 21st
July 1974 by the respondent is lawful and justified and the same was
referred to the tribunal which negatived the claim of the appe\lant .. union
and held that the discontinuance of contractor system in the year 1973 and
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SUPREME COURT REPORTS
(1985] 2 s.c.a.
A
introduction a direct payment system did not bring about any change in the
status of the workmen and therefore they never became the workmen of
the respondent.Corporation.
As a corrollary, it further held that reintroduction of the contractor system in 1975 did not constitute discontinuance
of the services of the affected workmen.
Hence this appeal by special
leave.
B
The appellant-Union contended (il that even though the workmen
were initially engaged by the contractor when the work of handling food·
grains brought to Silliguri Depot was entrusted to a contractor, but subsequently at least from April 1973, the intermediary contractor was removed
and they became the workmen directly employed by the Corporation and
were therefore_, the workmen of the respondent; and unless their services
were legally terminated, they cannot be discontinued from service of the
Corporation and some other master imposed upon them.
(ii) that apart
from being an unfair labour practice, the changeover was illegal and vindic··
tive and malicious in character and that the respondent was legaHy bound
to give a notice of the said change to the Union as contemplated u/s. 9A
of the I.D. Act.
On the other hand, the respondent·Corporation argued
(i) that even when the so called direct payment system was introduced after
removing the contractor, it was basically a spill over of the old contract
system save and except that the contractor was replaci::d by Sardars/Mondals
to whom total payment on piece rate was made and who distributed tbe
wages to the individual workmen, the rate of payment remaining the san1e
as ·was in vogue at the time the contractor handled the work;ind therefore
at no point of time, the concerned workman ever became the direct workmen of the Corporation and no question of giving a notice of change arose
as required by section 9(A) of the r.D. Act.
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Allowing the appeal,
HELD :
(1) 'Workmen' has been defined in the Industrial disputes
Act to mean 'any person (including an apprentice) employed in any industry
to do ..•... 11 •
The expression 'employed bas at least two known conaotations but as used in the definition, the context would indicate
that it is
used in the sense of a relationship brought about by express or implied
contract of service io \Yhich the employee renders service for which he is
engaged by the employer and the latter agrees to pay him in cash or kind
as agreed between them or statutorily prescribed.
It discloses a relationship of command and obedience.
The essential condition of a person being
a workman within the terms of the definition is that he should be employed
to do the work in that industry and that there should be, in other words,
an employment of his by the employer and that there should be a relationship between the employer and him as between employer and employee or
master and servant.
Unless a person is thus employed there can be no
question of bis being a 'workman' within the definition of the term as
contained in the l.D. Act. [1075F-H; !076A·B]
Dharangadhara Chemical Works Ltd.
v. State of Saurashtra, [1957]
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SCR IS2; roferred to.
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WORKMEN v. FOOD CORPN.
106'7
(2)
No employer since the introduction of the J.D. Act, 1947 and
A
contrary to its Certified Standing Orders as statutorily required to be
drawn up under the Industrial Employment (Standing Orders) Act, 1946
can dispei::ise with the service of any workman without complying with the
law in force.
Any termination of service contrary to the provisions of the
Standing Orders and the provisions of the l.D. Act, 1947 would be void.
It is not necessary to call in aid precedents to substantiate this too obvious
and well-established proposition.
Section 9A also makes it obligatory
upon an employer who proposes to effeot any change in the conditions of
service applicable to any workman in respect of any matter specified in the
Fourth Schedule to give a notice of desired or intended cb~1nge.
It cannot
do so without giving to the workman likely to be affected by the change
a notice in the prescribed manner of the nature of the change proposed to
be effected and within 21 days of giving such notice.
[IOSOB-C; !082H; 1083A-B]
3(i) It is nowhere suggested that Sardars/Monda1s were contractors.
They were mere1y the agents of the Corporation for distributing the salary/
wages earned by each workman as set out in the register to be maintained
in respect of each workman by his name and tho wages earned by him at
the piece rate.
Once the rate remained unchanged even after the removal
of the contractor, the qualitative change in the position of workmen conse·
quently would be, that the workmen's earnings at piece rate accelerated
upward because the contractor's commission whatever be retained unto
himself became available to the workmen and they benefitted.
Therefore,
the abolition of the contract system and the introduction of direct payment
system brought about a basic qualitative change in the relationship between
the Corporation and the workmen engaged for handling foodgrains in that
on the disappearance of the intermediary contractor, a direct re~ationship
of master and servant came into existence between the contractor anu the
workmen. [ I078D-G]
3(ii) MoreoverJ it was obligatory for the Corporation to arrange for
handling the bags of foodgrains.
The workmen handled the foodgrains
for the Corporation and none else.
For this service rendered, the Corporation agreed to pay and paid wages at piece rate to each workman whose
name appeared in the register to be maintained for the purpose as per the
directions given by the District Manager.
If the pay packets were actually
distaibuted by Sardars/Moodals, they can be said to be doing clerical work
on behalf of the Corporation in the same manner as a clerk in the Accounts
Department prepares and distributes pay packets for each employee of the
Corporation month to month.
If the clerk cannot be said to be the
emloyer, ipso facto the Sardars/Mondals could not be clothed \\'ith the
status of the replaced contractor.
The intermediary screen having disappeared, the direct relationship came into existence and the conclusion is
inescapable that since the introduction of the direct payment system, the
workmen became the workmen of the Corporation and a direct
master
servant relationship came into existence. [1079A-C]
3(iii) The finding of the tribunal when it observed something
contrary to record that the contractor system was not discontinued
but it
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SUPREME COUllT REPORTS
(1985] 2 S.C.R.
was really snatched away by the Mazdoors from the contractor apart from
being perverse is contrary to record and overlooks two important lettors
dated January 18, 1973 and April 28, i977 by wbich the Union and tho
Manaaing Director respectively affirmed the voluntary settlement arrived
at between the parties, both for abolishing the contract system and introducing the direct payment system.
The Tribunal feel into a serious error
in overlooking relevant evidence and drawing surmises contrary to the
record.
Tnerefore, the award of the Tribunal rejecting the reference and
denying the benefit must be quashed and set aside and an a'ward be made
that the aforementioned 464 workmen who had become the ·workmen of
the Corpcration continued to be the workmen employed by the Corporation
and shall be entitled to all ~he rights1 liabilities, obligations and dutie& as
prescribed for the workmen by the Corporation. [10790-E; 10830-H]
(4)
When workmen working under an employer are told that they
have ceased to be the workmen of that employer, and have become workmen of another employer namely, the contractor in this case, in legal
parlance such an act of the first employer constitutes discharge, termination
of service or retrenchment by whatsoever name called and a fresh employment by another employer namely, the contractor.
If the termination of
D
service by the first employer is contrary to the wel1 estabHshed legal position
the effect of the employment by the second employer is wholly irrelevant.
No attempt was made to justify the termination of service of the aforementioned workers of the Corporation by the subtle device of introducing
a contractor so as to bring about a cessation of contract of employment
between the workmen and the Corporation and a fresh contract of employment between the workmen and the contractor.
If what was intended to
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be done was retrenchment, ex facle the action is contrary to the provisions of
Sec. 25F of the I.D. Act, 1947.
Viewed from either angle, the action of
introducing so as to displace tho contract of service bet"een the Corporation
and the workmen would be illegal and invalid and ab initio void and such
action would not alter, change or have any effect on ti:lc status of the
afore-mentioned 464 workmen who have become the workmen of the
Corporation. [I080C-F]
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(S)
If the workmen Jikely to be affected by the change are persons
to whom the Fundamental and Supplementary Rules, Civil Services (Classification, Control and appeal) Rules, Civil Services (Temporary Ser.vice)
Rules, Revised Leave RUies, Civil Setvice Regulations, Civilians in Defence
Services (Classification Control and Appeal) Rules or the Indian Railway
Establishment Code or any otber rules or regulations that may be notified in this behalf by the appropriate Government _in the Official Gazette,
apply ao notice of change would be necessary before effecting a chaage.
No attempt was made on behalf of the respoodent·Corporation to urge
that any of the aforementioned rules would govern the conditions of service
of the workmen involved in the dispute.
Now after introducing the direct
payment system agreed to between the parties, if the Corporation
of the
employer wanted to introduce a change in
respect of any of the matters
set out in Fourth Schedule, it was obligatory to give a notice of change.
Item I in the Fourth Schedule provides : 'wages, including the period and
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WORKMEN v. FOOD CORPN. (Desai, J.)
1069
mode of payment'.
By cancelling the direct payment system and intro·
ducing the contractor, both the wages and the mode of payment are being
altered to the disadvantage of the workmen.
Therefore, obviously a notice
of change was a must before introducing the change, otherwise it would be
an illegal change.
Any such illegal change invites a penalty under Sec. 31
(2) of the I.D. Act, 1947.
Such a chance which is punish:ible as a criminal
offence would obviously be an illegal change. It must be held that without
anything more such an illegal change would be wholly ineffective. [1083C-F]
(6)
The Food Corporation of India was set up under the
Food
Corporations Act 1964.
The scheme of Lhe Food Corporations Act would
not permit the Corporation an instrumentality of the State, to act in a
manner thoroughly arbitrary by first keeping a contractor, removing him
and reinducting him without a semblance of consideration for the fate of
the working for it or for its benefit or for some work
connected with the
functions of the Corporation.
Therefore, the scheme of the Act has hardly
any relavance save and except that its action is likely to be struck down as
arbitrary being violative of Art. 14, but it is not necessary to go so far
because the relief under the Industrial Disputes Act is readily available
to the workmen.
While the trend is in the direction
of abolition of
contract labour, this public sector undertaking appears to be completely
oblivious to the trend and the p.:ice-setter as enacted by the Parliament
in the Contract Labour (Regulation and Abolition) Act, 1970.
The Act
was enacted with a view to abolishing wherever possible or practicable,
the employment of contract labour.
The Corporation attempted by its
action to reverse that trend which docs not credit to it.
Where the law
helps, sucb anti.Jabour practices must be thwarted or nipped in the bud.
(108IG-H;1082C-D]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1055 (NL)
of 1981.
From the Award of Central Government Industrial Tribunal,
Calcutta dated 29 8.1980 in Reference No. 13 of 1977 dated
27.9.1980.
T.S. Krishnamurthi, S.K. Nandy and C.S. Vaidyanathan, for
the Appellants.
S.N. Kacker, S. Chatterjee aud A.K. Panda, for the Respondents.
The judgment of the Court was delivered by
DESAI, J.
Vacillation on the part of a public sector un~er
taking has pushed this trivial dispute to the Apex Court addmg
th anxiety and misery on the part of lowest grade workmen
~ e
....
and wasteful eipenditure on futile 1lt1gat1on.
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10'70
SUPREME COURT REPORTS
{1985) 2 S.C.R.
Food Corporation of India ('Corporation' for short) was
set up under an Act of Parliament being the Food Corporations
Act, 1964 ('Act' for short) to provide, amongst other, for the
establishment of Food Corporations for the purpose of trading
in food-grains and other food·stuffs and for matters connected
therewith and incidental thereto.
For performance of the functions statutorily prescribed under Sec 13 of the Act namely, to
undertake the purchase, storage, movement. transport, distribution
and sale of foodgrains
and other foodstuffs,
the
Corporation has to set up godowns/depots and other storage
facilities and to engage Jabour for handling foodgrains at the
godowns ·or in transit.
The Corporation adopted different
methods at different places for employing labour for handling
foodgrains.
One sue!: depot has been setup by the Corporation
at Siliguri in West Bengal State.
Number of workmen designated
as handling Mazdoor were employed at Siliguri Depot.
At the
relevant time, 464 workmen were attached to this depot.
It
appears initia!ly a contractor was engaged by the Corporation
for handling storage and transit of foodgrains at Siliguri Depot.
Subsequently, by negotiations and settlements. the contract system
was abolished and the workmen were directly paid the wages,
presumably at piece rate for the service rendered by them by the
Corporation. A forther attempt was made to bring about a
basic change in the system by reinducting the intermediary
contractor.
This attempt to change the status of the workmen
from being workmen of the Corporation to becoming the Jabour
employed by the contractor was resisted by 'Food Corporation of
India Workers' Union ·-appellant herein-('Union' for short)
and it Jed to negotiations between the Corporation and the Union
resulting i·l a settlement as evidenced by Union's letter dated
January 18, 1973. Two terms of the settlement may be noticed
here. They read as under :
"(i) the FCI management agrees to take a final decision by 1.4 73 on the demand of the Union for
departmentalisation of the workers working in the
Corporations'
permanent owned large-size godowns, where work goes on al! the year ronnd in
West Bengal, Bihar, Orissa, Assam and New
Delhi.
(ii) ...................................... .
(iii) ·······································
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WORKMEN v. ~·ooo CORPN. (Desai, J.)
(iv) In the meantime the Food Corporation of India
management agrees to introduce the direct payment system to the workers working in their
owned godowns as also in the hired godowns at
the same stations at which this system is introduced for the owned godowns in the aforesaid States.
.......................... ,, ....................................... .
The payment to the workers will be made at the
rates at which the contractors are being paid
now".
1071
These terms of settlement have been set out in the aforementioned letter of the Union. The Managing Director in his
reply dated January 20, 1973 confirmed the decision taken as
indicated in the Jetter under reply. It would thus appear that
the negotiations ended in a settlement. The Corporation addres ·
sed communication No. A-50(38)/72-Labour dated April 28,
1973 to its various Regional Managers in the aforementioned
five States pointing out therein that the procedure in respect of
direct payment to labourers laid down in the communication
shall be followed.
The method adopted is that the bills for the
piece rate wages payable to handling Mazdoors should be prepared
by the Depot Staff, and the Sardar/Mondal would accept payment and sign bills on their behalf and distribute the wages to
the handling labour. A copy of this letter was also sent to the
Joint Secretary of the Union. By the letter dated October 29,
1973 of the District Manager of the Corporation at Siliguri
addressed to the Joint Secretary of the Union, the Union was
informed to advise the local representatives of the workmen 'to
submit the wage bill in time in which particulars of per head
out turn by name' was required to be mentioned. The expression
'per head out turn' means tbe quantum of work rendered by
each workman with his name so that his wage at piece rate e.an
be calculated and paid to him. This system of payment was
being implemented and was in vogue, till January 27, 197 5.
On
account of some other industrial dispute, the members of the
Union who were workmen attached to Siliguri Depot went on
strike on and from January 28, 1975. This strike was called off
on March 9, 1975· The usual management response followed
and effective from March 10, 19 7 5 the Corporation changed the
method of payment superseding the direct payment system and
reintroducing contractor system and that too without giving any
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SUPREME COURT REPORTS
[1985] 2 s.c.R..
notice of change as contemplated by Sec. 9A of the Industrial
Disputes Act, 1947 ('I.D. Act' for short). As a direct consequence of this change, the Corporation discontrnued employment
of 464 workmen attached to Siliguri Depot and brought in the
intermediary contractor and treated the afore-mentioned workmen
as the workmen employed by the contractor. The Union protes·
ted against this i!legal action alleging that apart from being an
unfair labour practice, the changeover was illegal and vindictive
and malacious in charactor. According to the Union these 464
workmen were already accepted as the workmen of the Corporation and unless their services were legally terminated, they
cannot be discontinued from service of the Corporation and some
other master imposed upon them.
An industrial dispute in this behalf raised by the Union
was referred by the Central Government to the Central Government Industrial Tri bun a\, Calcutta under Sec. 1 O of the I.D. Act
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for adjudication. The reference was in the following terms :
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"Whether the discontinuance of employment of
464 workers of their Si!iguri Depot with effect from
21-7-75 by the management of Food Corporation of
India is lawful and justified ? If not, to what relief
are the workers entitled ?"
The Corporation contested the reference inter alia contending that ordinarily the handling of foodgrains at varions depots
was entrusted to a contractor who employs his own workmen and
that this system of employing the contractor was unavoidable
because the receipt and distribution of foodgrains at various
depots is not a continuous process but solely depends upon the
transport system and work is of a fluctuating nature. It was
admitted that direct payment system was introduced at Siliguri
Depot and the contractors were replaced by workers working
under their Sardars and they were never accepted as direct workmen of the Corporations. It was contended that the Sardars
replaced the contractor but the system remains the same and
that the workers were paid the same rate as were paid to the
contractors and at no point of time the workmen ever became
the direct workmen of the Corporation. A reference to the
strike of the workmen at the Siliguri Depot was made in the
written statement and it was stated that the strike was not called
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WORKMEN v. FOOD CORPN. (Desai. J.)
1073
off by the workmen unanimously but it had to be discontinued
on account of prohibitory order made by the appropriate Government while exercising its power to make a reference of the existing industrial dispute under Sec.
IO of the J.D. Act for adjudication.
It was contended that Sec. 9-A of the J.D. Act is not
attt acted because tre1e was no
change which necessitated a
notice.
The allegaticns of victimisation and unfair \abour
practice were denied.
The rival contentions and the nature of reference necessitated a decision on the question : whether the workmen represented
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by the union and attached to Si!iguri Depot were or had become
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at any point of time the workmen of the Corporation and whether
an illegal change made with regard to their conditions of service
by the Corporation ?
Chapter II-A was introduced in the Industrial Disputes
Act, 1947 by Sec. 6 of the Amending Act 36 of 1956 which
cam~ into force on March 10, 1957. Sec. 9A imposed an obligation on the employer to give a notice of change, if he proposes
to effect any change in the conditions of service applicable to
any workman in respect of any matter specified in the Fourth
Schedule. Item No. 1 in the Fourth Schedule reads : 'wages, in_
eluding the period and mode of payment'. Thus if mode of
payment in vogue is sought to be changed by the employer, Sec.
9A imposes an obligation to give a notice of change to the workmen likely to be affected by such change in the prescribed manner
cogently setting out the nature of the change proposed to be
effected.
Any change effected without following the procedure
prescribed in Sec. 9A will be punishable under Sec. 31 (2 of the
I.D. Act.
The dispute between the parties revolves round the status
of 464 workmen whose discontinuance from employment resulted
in the industrial dispute which was referred for adjudication. In
short the dispute is : whether the workmen covered by the reference were the workmen of the Corporation or employed by the
contractor and were therefore, the workmen of the contractor ?
The Union contends that even though the workmen were initially
engaged by the contractor when the work of handling foodgrains
brought to Siliguri Depot was entrusted to a contractor but subse·
quently at least from April, 1973, the intermediary contractor
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SUPREMB COURT REPORTS
[1985) 2 S.C.R.
was removed and they became the workmen directly employed
by the Corporation and were therefore, the workmen of the
Corporation.
On the other band, the Corporation contends
that the work of handling
foodgrains at Si!iguri Depot was
always entrnsted to a contractor because the work is of a fluctuating and intermitent nature and therefore, it was not possible to
have regular work force for handling the same.
According to the
Corporation. even when the rn-called dirett payment system was
introduced after removing the contractor, it was basica!Jy a spill
over of the old contract system save and except that the conractor
was replaced by Sardars/Mondals to whom total payment on
piece rate was made and who distributed the wages to the indh idual workman, the rate of payment remaining the same as was
in vogue at the time the contractor bandied the work.
It was
therefore,
submitted on behalf of the Corporation that at no
point of time, the concerned workmen ever became the direct
workmen of the Corporation and therefore, no question of giving
a notice of change arose as required by Sec. 9A of the I,D. Act.
The Tribunal held that initially there was a contractor
engaged to undertake handling of foodgrains.
The contractor
engaged the workmen for handling the foodgrains.
It was however, held that prior to the introduction of 'direct payment system'
in January 197 3 at no point of time the handling of foodgrains
which means loading and unloading from wagons, trncks and
then storing and stacking in the godowns, was ever Ul)dertaken
by the Corporation and always the work was entrusted to a
contract.or who engaged his own workmen. The Tribunal accep.
ted the contention of the Union that since January 2, 1973, the
contractor system was discontinued and what is called the direct
payment system was introduced.
The Tribunal however proceeded to observe that this did not bring about any change in the
status of the workmen and therefore, they never
became the
workmen of the Corporation. As a coro!lary. the Tribunal held
that reintroduction of the contractor system in 197 5 did not
constitute discontinuance of the services of the affected workmen.
In accordance with these fii>dings, the Tribunal negatived the
claim of the workmen and made the award to that effect.
Hence
this appeal by special Jeave.
The first and the foremost question is : what is the effect
of the introduction of direct payment system from January 2,
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wo.,KMBN v. FOOD CORPN. (Desai, J.)
1075
1973 on the status of the workmen involved in the reference ?
The Tribunal proceeded to examine the evidence about the
e'!.isteoce of contractor system p1ior to January, 197 3.
That is
hardly relevant. Pa1ties are agreed that prior to January 2, 1973
the work of handling foodgrains at SiJiguri Depot was entrusted
by the
Corporation to a contractor and the contractor engaged
the workmen and the workmen received their salaries or wages or
remuneration from the contractor as determined by the cont1 actor
or as agreed between the contractor and the workmen and therefore, the workmen were not the workmen. of the Corporation.
It ts merely adding to the length of the judgment to examine
evidence in respect of an admitted position. Correct approach is
to accept this uncontroverted finding of the Tribunal.
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It is not in dispute that since January 2, I 973 direct payment system was introduced. What does this direct payment
system imply ? Has it any impact on the relation between the
Corporation and the workmen to whom by the change introducing
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direct payment system. the Corporation removod the contractor,
took work from the workmen and agreed to pay each workman
by name on piece rate basis according to his out-turn work ?
Has it any bearing on the issne involved in the dispute, namely,
on the status of the workmen ?
Briefly stated, when Corporation engaged a contractor for
handling foodgrains at Si!iguri Depot, the Corporation had
nothing to do with the manner of handling work done by the
contractor, the labour force employed by him, payments made
by him etc.
In such a fact situation. there was no privity of
contract or employer and workmen between the Corporation and
the wo1kmen.
'Workman' has been defined (omitting the words
not necessary) in the Industrial disputes Act to mean 'any person
(including an apprentice .l employed in any industry to do ........... .'.
The expression employed has at least two known connotatioJ>s
but as used in the definition. the context would indicate that it is
used in the sense of a relationship brought about by express or
implied contract of service in which the employee renders service
for which he is engaged by the employer and the latter agrees
to pay him in case or kind as agreed between them or statu·
torily prescribed.
It discloses a relationship of command and
obedience.
The essential condition of a person being a workman
within the te.rms of the definition is that he should be employed
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1076
SUPREME COURT REPORTS
(1985] 2 s.c.R.
to do the work in that industry and that there shonld be. in
other words, an employment of his by the employer and that
there should be a relationship between the employer and him as
between employer and employee or master and servant
Unless a
person is thus employed there can be no question o; his being a
•workman' within the definition of the term as contained in the
Act. (Dharangadhara Chemical Works Ltd. v. State of Saurashtra(l).
Now where a contractor employs a workman to do the work
which he contracted with a third person to accomplish on the
definition as it stands, the workman of the contractor would not
without something more become the v.orkman of that third person.
Therefore, when the contract system was in vogue, the workmen
employed by the contractor were c1rtainly not the workmen of the
Corporation and no claim to that effect has been made by the
Umon.
On January 2, 1973 pursuant to the agreement arrived at
between the parties evidenced by the letter dated January 18, 1973,
the parties agreed to introduce and did introduce the direct payment
system to workmen working in the godowns owned by or hired by
the Corporation. Introduction of this system is confirmed by the
letter dated January 20, 1973 and was not disputed before us.
What
constitutes direct payment system becomes clear from the letter
dated April 28, 1977 addressed by the Corporation to all its Regional Managers working at Calcutta, Patna, Gauhati and Bhubaneswar.
As this has a direct bearing on the understanding of the concept of
direct payment in contra-distinction to the earlier prevailing system
of engaging contractor and in supersession of it, the same may be .
reproduced in extenso.
Says the letter :
"The procedure in respect of direct payment to
labourers laid down as under should be followed strictly :-
(I) The bills would be prepared by the Depot Staff.
(2) The Labour should authorise their Sardar/Mondal to
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accept payment and sign bills on their behalf and give
acquittance.
(3) The authorised Sardars/Mondals may then receive the
money after giving acquittance.
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(I) [1957] SCR 153
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WORKMEN v. FOOD CORPN. <Desai, J.)
( 4) The bill with acquittance in original should be with
FCI".
1077
Further amplifying this method, the Corporation by its letter
dated October 22, 1973, directed as under:
"I have been directed by Zonal Manager (East) that
the payment to be made to the workers directly by us after
the Direct Payment System.
You are therefore, requested to advise your local
representatives to submit the bill in time in which particulars of per head out-turn by namf should be mentioned,
so that we do not feel any difficulty to pass the bill and to
pay the workers in time. If formalities as directed by
Zonal Manager are not observed we will not be able to
pay the workers from next fortnight."
Examining the system of direct payment as setout in the letter
dated April 28, 1973 further amplified by the letter dated October
29, 1973, it becomes crystal clear that name of every workman
engaged to handle foodgrains at Siliguri Depot will be mustered in
a register and his daily out-turn "'ill be specified. The payment
will be by piece rate as was in vogue at the time of contractor
system. The bill will be prepared s~tting out the names of the
workmen and the out-turn of each. The pay bill will be prepared
by the Depot staff who are regular employees of the Corporation.
The payment will be made by the Corpora ti on but will be distributed to each workman according to the piece rate by whatare
called Sardar/Mondal. The bill with the acquittance in original
evidencing payment would be filed with the Corporation. It must
at once be made clear that a salary or wages of a workman in an
industrial undertaking can be monthly rated which requires the
workmen to render service daily for specified number of hours but
the rate per month is fixed. It can be piece rate corelated to daily
production with an obligation to render service daily for specified
number of hours, the monthly wage bill being worked out according to production. Both the systems are known to be in vogue in
industrial employment. When the contractor system was in vogue,
the contractor was being paid in lump sum arrived at by multiplying
the rate per bag to total number of bags. What number of workmen
and for what length of time they were to be engaged for doing the
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SUPllEMB COURT REPORTS
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handling work was left to the discretion of the contractor.
The
Corporation had nothing to do how many workmen were employed
nor the rate or method of payment by the contractor to the labour
force employed by him.
Corporation was solely concerned with
the number of bags handled by the contractor. It was not a
contract for supply of labour but it was specifically a contract for
handling bags of foodgrains.
When the ct.rec! payment system was
introduced, the intermediary
contractor
disappeared from the
picture. The work rendered by each workman had to be entered
into a muster
ro~l register.
The Corporation will distribute the
wages calulated on piece rate to each workman was required to be
a party to the acquittance roll to be retained by the Corporation.
The wages were distributed by Sardars/Mondals.
Can there be any doubt about the relationship between the
Corporation and the workmen since the date of abolition of the
contract system and introduction of direct payment system as discussed herein ? It is nowhere suggested that Sardars/Mondals were
contractors. They were merely the agents of the Corporation
for distributing the salary/wages earned by each workman as set
out in the register to be maintained in respect of each workman by
his name and the wages earned by him at the piece rate. Assuming
as was contended by Mr. K.acker on behalf of the respondentCorporation that once the rate remained unchanged even after the
removal of the contractor, direct payment system does not bring
about any qualitative change in the status of workmen, a fact that
stares into the eye and the one that cannot be overlooked is that
the contractor had not undertaken the contract obligation for some
altruistic motives.
He had done so for earning for profits. Now
accepting what Mr. Kacker and Mr. Pai submitted that the rates
remained unchanged the qualitative change in the position of workmen consequently would be, that the workmen's earnings at piece
rate accelerated upward because the contractor's commission "hatever he "retained unto himself became available to the workmen and
they benefitted. Therefore, the abolition of the contract system
and the introduction of direct payment system hereinbefore discnss·
ed brought about a basic qualitative change in the relationship
between the Corporation and the workmen engaged for handling
food grains in that on the disappearance of the intermediary contractor, a direct relationship of master and servant came into existence
between the contractor and the workmen. To illustrate this point
succinctly, let it be made clear that it was obligatory for the Corpo-
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WORKMEN v. FOOD COl\PN. (Desai, J.)
1079
ration to arrange for handling the bags of foodgrains.
The workmen handled the foodgrains for the Corporation and none else.
For
this service rendered, the Corporation agreed to pay and paid wages
at piece rate ta each workman whose name appeared in the register
to be maintained for the purpose as per the directions given by the
District l\!anager. If the pay packets were actually distributed by
Sardars/Mondals, they can be said to be doing clerical work on
behalf of the Corporation in the same manner as a clerk in the
Accounts Department prepares and distributes pay packet for each
employee of the Corporation month to month
If the clerk cannot
be said to be the employer, ipso facto the Sardars/Mondals could not
be clothed with the status of the replaced contractor. 1he intermediary screen having disappeared, the direct relationship came into
existence and the conclusion is inescapable that since the introduction of the direct payment system, the workmen became the workmen of the Corporation and a direct master servant relationship
came into existence.
The Tribunal fell into error when it failed to draw the logical
and inescapable conclusion from the facts hereinbefore discussed
and completely misdirected itself when it observed something
contrary to record that 'the contractor system was not discontinued
but it was really snatched away by the Mazdoors from the contractor'. The finding apart from being perverse is contrary to record
and overlooks two important letters dated January 18, 1973 and
April 28, 1977 by which the Union and the Managing Director
respectively affirmed the voluntary settlement arrived at between
the parties, both for abolishing the contract system and introducing
the direct payment system.
Therefore, the Tribunal fell into
a serious error in
overlooking relnant evidence and drawing surmises contrary to the record.
Its finding, therefore, becomes
unsustainable and cannot be upheld.
The next question to which we must address ourselves is
whether once on the introduction of the direct payment system, the
workmen acquired the status of the workmen of the Corporation,
was it open to the Corporation to unilaterally discontinue the system
without the consent of the workmen and reinduct contractor so as
to again introduce a smoke-screen which may on paper effectively
deny the status of being the workmen of the Corporation, acquired
by these workmen. And on discontinuance of the system of direct
payment, without ordering retrenchment of their services by the
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SUPllllMB COURT llllPOllTS
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Corporation, they obtained a fresh employment under the Contractor.
Is it legally permissible ? The question provides its own correct
and effective answer. No employer since the introduction of the
l.D.