Judgment
As delivered
CASE NO.:Appeal (civil) 7731 of 1997
PETITIONER:HARI SHANKAR SHARMA & ORS.
Vs.
RESPONDENT:M/S ARTIFICIAL LIMBS MANUFACTURING CORPN. & ORS.
DATE OF JUDGMENT: 26/11/2001
BENCH:S. Rajendra Babu & Ruma Pal
JUDGMENT:
RUMA PAL, J.
The respondent No. 1 is a Government of Indiaundertaking. It was incorporated under the Companies Act,1956 on 30th November 1972. One of the main objects forwhich the respondent No. 1 was established was to promote,encourage and develop the availability, use, supply anddistribution at reasonable cost in the country of artificiallimbs to needy persons particularly disabled defencepersonnel. For this purpose the respondent No. 1 set up afactory where more than 700 persons are employed. Therespondent No. 1 also set up a canteen for its employees.From time to time agreements were entered into between therespondent No. 1 and different contractors by which thecontractor agreed to prepare and serve food stuffs and otherrefreshments at the canteen. At the relevant time theconcerned contractor was Aditya Shukla, the respondentNo.2 herein.
According to the appellants, they were employed byseveral of the contractors and had been serving in the canteenfor several years. During the pendency of the contract withthe respondent No.2, the appellants raised an industrialdispute claiming to be regular workmen of the respondentNo. 1. The dispute was referred by the State Government tothe Labour Court. The Labour Court considered the evidence,both oral and documentary, and by an award dated 10th May1996, came to the conclusion that the appellants were not theemployees of respondent No. 1 but were employees ofrespondent No. 2. Being aggrieved with the award, theappellants filed a writ petition before the High Court atAllahabad. The High Court was of the view that theappellants claim was primarily for abolition of contractlabour in canteens and consequent absorption of the contractlabourers as employees of the principal employer, in this casethe respondent No. 1. The High Court rejected thesubmission and dismissed the writ petition.
Before us learned counsel for the appellant submittedthat the High Court had wholly misdirected itself. Accordingto the appellants, the issue was not whether the Labour Courtcould have directed abolition of contract labour but the issuewas whether the Labour Court was bound, on the basis of thedecision of this Court in Parimal Chandra Raha andothers v. Life Insurance Corporation of India and Others1995 Supp (2) SCC 611, to hold that the appellants were infact regular employees of the respondent No.1. It wassubmitted that the respondent No.1 was bound by Section 46of the Factories Act, 1948 to set up the canteen. It was alsosubmitted that the State Government had by notificationspecified the factory of the respondent No.1 under theprovisions of Section 46(1) of the Factories Act. It wascontended that since the respondent No.1 was statutorilyobliged to provide and maintain a canteen for the use of itsemployees, the canteen was part of the respondent No.1sestablishment and therefore the appellants who wereemployed in such canteen were the employees of therespondent No.1. It is the appellants case that the variousterms in the contract between the contractor and therespondent No.1 clearly showed that the appellants wereunder the direct supervision and control of respondent No.1.This, together with the fact that the appellants had continuedto be employed in the canteen despite several changes ofcontractors, showed that the appellants were in fact therespondent No.1s employees.
Learned counsel for the respondent No.1 submitted thatthe appellants had never challenged the contract between therespondent No.1 and the contractor as being a shamdocument to camouflage the fact that the appellants werereally the respondent No.1s employees. It was contendedthat in the absence of such a challenge, there was no scopefor the appellants to claim to be regular employees of therespondent no.1. Furthermore, according to the respondentNo.1, the Labour Court had duly considered the terms of thecontract and the oral and documentary evidence adducedincluding the evidence of the contractor himself, and hadcome to a categorical finding that the appellants were not theemployees of the respondent No.1. Finally, it was submittedthat in any event the facts on record clearly showed that theappellants were the employees of the contractor and that therespondent No.1 exercised no control over the appointment,continuation or dismissal from service of the appellants.
The submission of the appellants that because thecanteen had been set up pursuant to a statutory obligationunder Section 46 of the Factories Act therefore theemployees in the canteen were the employees of respondentNo.1, is unacceptable. First, the respondent No. 1 hasdisputed that Section 46 of the Factories Act at all applies toit. Indeed, the High Court has noted that this was never thecase of the appellants either before the Labour Court or theHigh Court. Second, assuming that Section 46 of theFactories Act was applicable to the respondent No. 1, itcannot be said as an absolute proposition of law thatwhenever in discharge of a statutory mandate, a canteen is setup or other facility provided by an establishment, theemployees of the canteen or such other facility become theemployees of that establishment. It would depend on how theobligation is discharged by the establishment. It may becarried out wholly or substantially by the establishment itselfor the burden may be delegated to an independent contractor.There is nothing in Section 46 of the Factories Act, nor hasany provision of any other statute been pointed out to us bythe appellants, which provides for the mode in which thespecified establishment must set up a canteen. Where it isleft to the discretion of the concerned establishment todischarge its obligation of setting up a canteen either by wayof direct recruitment or by employment of a contractor, itcannot be postulated that in the latter event, the personsworking in the canteen would be the employees of theestablishment. Therefore, even assuming that the respondentNo. 1 is a specified industry within the meaning of Section46 of the Factories Act, 1946, this by itself would not lead tothe inevitable conclusion that the employees in the canteenare the employees of respondent No. 1.
The observations in Parimal Chandra Rahas caserelied on by the appellants which might have supported thesubmission of the appellants have been explained by a largerbench in Indian Petrochemicals Corporation Ltd. vs.Shramik Sena and Others (1999) 6 SCC 439 where it washeld, after considering the provisions of the Factories Act andthe previous decisions on the issue, that the workmen of astatutory canteen would be the workmen of the establishmentonly for the purpose of the Factories Act and not for all otherpurposes unless it was otherwise proved that theestablishment exercised complete administrative control overthe employees serving in the canteen. (See also Barat FritzWerner Ltd. V. State of Karnatka 2001 (4) SCC 498, 504)It may be, and has been often so found, that theemployees of a contractor are de facto employees of theestablishment despite the existence of a written agreementbetween the contractor and the establishment. To this end ourattention was drawn to the agreement between the contractorand the respondent No.1. From a scrutiny of the agreement, itis clear that although the respondent No.1 had agreed toprovide the contractor with the basic infrastructure, the actualrunning of the canteen was the responsibility of thecontractor alone. For example, the respondent No.1 was togive the furnishings, dining tables, chairs, curtains, watercoolers etc., but the contractor was liable to indemnify therespondent No.1 for any loss or damage caused to these itemsdue to any act of omission or commission by the contractoror his employees. The cost of repairing and maintaining allthe equipment was also the contractors. It was also thecontractors obligation to provide the raw-material andensure that such raw- material was free from adulteration,contamination and was wholesome and fit for humanconsumption.
Under Clause 21, the contractor was obliged to provideall the facilities available to the workers under various labourlaws applicable to the respondent No. 1. The Contractor wasalso required to abide by all the provision of labour laws asapplicable from time to time and was liable for financialobligations under various labour laws as amended from timeto time. In case the contractor contravened any provisions ofthose laws and the respondent No. 1 suffered any damage,loss or harm due to any act of commission or omission of thecontractor, the contractor was bound to indemnify therespondent No. 1. Similarly, clause 31 of the agreementprovided The Contractor shall be responsible for dischargeof legal liabilities towards his employees and also forobserving all Laws and Government Rules relating toLabour viz. EPF Act, ESI Act, Payment of Wages Act,Minimum Wages Act and health in so far as they relate to thecanteen.
It is true that under clause 33, the respondent No. 1agreed to pay to the contractor service charges ofRs.73,372.48 per month upto 700 employees with thefollowing break up:
a) Rs.30,895.48 Salary and otherstatutory expenses
b) Rs.42,477.00 for neutrilisingthe price hike of the rawmaterial.
but this may have only ensured that the margin of profit of thecontractor was reasonable and fixed on relevant considerations.Besides the agreement must be construed in the background ofthe rules framed by the State Government under Section 46 (2) ofthe Factories Act, 1948. Under Section 46 (2) itself StateGovernment is empowered to lay down inter-alia : the standardin respect of construction, accommodation , furniture andother equipment of the canteen; and the foodstuffs to beserved therein and the charges which may be made therefor.Merely because there is compliance with the rules by therespondent No.1 (assuming that the rules applied) by providingthe equipment and for the rate at which the foodstuffs would besold at the canteen by the contractor would not necessarily meanthat the employer was running the canteen through the agency ofthe contractor. There must be something more.
Directly relevant to the crux of the matter is clause 43 of the agreement whereby the contractor was given the discretion to employ the workers already working in the canteen (like the appellants) but it was made clear that the contractor could take action against the canteen workers. It is noteworthy that the respondent No. 1 had no say as to who should be employed by the contractor nor the method of recruitment to be followed by the contractor. There was no obligation on the contractor to employ the persons who had served under earlier contractors. Even if the agreement had contained a condition that the contractor must retain the old employees, it would not necessarily mean that those employees were the employees of the establishment. As was said in R.K. Panda v. Steel Authority of India Ltd. (1994) 5 SCC 304:
Such a clause in the contract which is benevolently inserted in the contract to protect the continuance of the source of livelihood of the contract labour cannot by itself give rise to a right to regularisation in the employment of the principal employer. Whether the contract labourers have become the employees of the principal employer in course of time and whether the engagement and employment of labourers through a contractor is a mere camouflage and a smokescreen, as has been urged in this case, is a question of fact and has to be established by the contract labourers on the basis of the requisite material. It is not possible for the High Court or this court, while exercising writ jurisdiction or jurisdiction under Article 136 to decide such questions, only on the basis of the affidavits.
The issue is, therefore, primarily and ultimately one of fact to be determined by a fact finding tribunal . In the case before us, the terms of the agreement are inconclusive.
Before the Labour Court the contractor stated in cross- examination that he used to supervise and control his employees and pay their salaries. Even the witnesses for the appellants stated that their salaries were paid by the contractor. The appellants witnesses also said that the respondent No. 2 brought the raw material. The respondent No. 1s witnesses said that the respondent No. 1 had no hand in the selection of the employees of the canteen. The prescribed procedure for appointing employees of the respondent No. 1 was not applied to them. The respondent No. 1 did not record their attendance nor paid them their salaries. The Labour Court also noted that the appellants witnesses were unable to identify or name any officer of the respondent No. 1 who they claimed supervised their work. The Labour Court found that the appellants were unable to prove that the respondent No. 1 exercised any control or supervision over the employees of the contractor. After a detailed analysis of the evidence, the Labour Court concluded that the appellants were not the employees of respondent No. 1. The finding cannot be termed to be perverse. Given this, it would have been inappropriate for the High Court under Article 226 to re-appreciate the evidence and come to a different factual conclusion. The High court did not do that nor do we propose to do so under Article 136.
We accordingly dismiss the appeal but without any order as to costs.
See: Indian Petrochemicals Corporation Ltd. vs. Shramik Sena and Others 1999 (6) SCC 439 15
