Holding

Because BHEL is exempt from the 1990 notification and the evidence shows the workers were employed and paid by contractors with only secondary control by BHEL, there was no direct employer‑employee relationship, rendering the Labour Court’s award perverse and subject to being set aside.

Summary

The Supreme Court examined whether Bharat Heavy Electricals Ltd. (BHEL) was subject to the 24‑April‑1990 notification issued under the Contract Labour (Regulation and Abolition) Act, 1970, and whether the workmen who were engaged through contractors were direct employees of BHEL. The Court held that BHEL’s Haridwar operations are exempt from the notification and that the workers were paid by the contractors, with BHEL exercising only secondary control through gate passes issued for security. Consequently, no direct employer‑employee relationship existed, making the Labour Court’s award of reinstatement perverse. The Court also clarified that a concession made by counsel on mixed questions of fact and law does not bind a party and cannot be used to sustain an erroneous finding. The perverse award and the High Court’s supporting judgment were set aside, and the appeals were allowed.

Issues considered

Whether the 24‑April‑1990 notification under the Contract Labour (Regulation and Abolition) Act, 1970 applies to BHEL’s operations in Haridwar, Uttar Pradesh.
Whether the workmen engaged through contractors are to be treated as direct employees of BHEL under the Uttar Pradesh Industrial Disputes Act, 1947.
Whether the Labour Court’s award of reinstatement without back wages is perverse and liable to be set aside.
Whether a concession made by counsel on a mixed question of fact and law can preclude re‑agitation of the issue on appeal.
Whether the extended definition of ‘employer’ in Section 2(i)(iv) of the Uttar Pradesh Industrial Disputes Act, 1947 applies to the facts of the case.

Legislation cited

Constitution of Indias. 226
Contract Labour (Regulation and Abolition) Act, 1970
Indian Evidence Act, 1872s. 18
Uttar Pradesh Industrial Disputes Act, 1947s. 2(i)(iv)

Subjects

contract labouremployer‑employee relationshipexemption notificationLabour Court awardperverse awardArticle 226Uttar Pradesh Industrial Disputes Actcontrol and supervisionmixed question of fact and lawjudicial review

Judgment

504 [2019]REPORTS
SUPREME COURT 4 S.C.R. 504 [2019] 4 S.C.R.

A BHARAT HEAVY ELECTRICALS LTD.
v.
MAHENDRA PRASAD JAKHMOLA & ORS.
(Civil Appeal No. 1799-1800 of 2019)
B FEBRUARY 20, 2019
[R. F. NARIMAN AND VINEET SARAN, JJ.]
Contract Labour (Regulation and Abolition) Act, 1970:
Notification dated 24.4.1990 issued under the Act, 1970 – Exemption
from its applicability to BHEL – Held: BHEL, insofar as their UP
C
operations are concerned, in Haridwar, in particular, are exempted
from the applicability of the Notification – Labour laws.
Contract Labour (Regulation and Abolition) Act, 1970:
Termination of worker – Award of reinstatement by Labour Court –
Labour Court based its finding on direct relationship between the
D
parties on the gate passes issued by the appellant, and on a
concession made by the appellant’s representative – Held: Evidence
showed that the gate passes were issued only at the request of the
contractor for the sake of security and safety and also from
administrative point of view – This evidence was missed by Labour
E Court when it arrived at a conclusion that a direct relationship ought
to be inferred from this fact – Moreover there was nothing to show
that the work performed by the contract labour was ordinarily part
of the industry of appellant – Labour Court’s award is perverse
and is set aside in exercise of jurisdiction under Art.226 –
Constitution of India – Art.226 – Uttar Pradesh Industrial Disputes
F
Act, 1947.
Contract Labour (Regulation and Abolition) Act, 1970:
Whether employed labourers were direct or contractual employees
– Held: Principal employer cannot be said to control and supervise
the work of the employee merely because he directs the workers of
G the contractor ‘what to do’ after the contractor assigns/ allots the
employee to the principal employer – In the instant case, evidence
led on behalf of appellant showed that no wages were ever been
paid to workers by appellant – Workers themselves admitted that
there was no appointment letter, provident fund number or wage
H slip from appellant insofar as they were concerned – Further, it was
504
BHARAT HEAVY ELECTRICALS LTD. v. MAHENDRA 505
PRASAD JAKHMOLA & ORS.

also specifically pointed out that the names of 29 workers were on A
the basis of a list provided by the contractor in a bid that was made
consequent to a tender notice by appellant – Therefore, there was
nothing on facts to show that the contract labour that was engaged,
even de hors a prohibition notification, was in the facts of the instant
case ‘sham’ – Thus, Labour court erred in holding that the alleged
B
contract with the contractor was “sham”.
Concession: Where a question is a mixed question of fact and
law, a concession made by a lawyer or his authorised representative
at the stage of arguments, cannot preclude the party for whom such
person appears from re-agitating the point in appeal – Concession
on mixed questions of fact and law cannot decide cases as the C
evidence as a whole has to be weighed and inferences drawn
therefrom.
Words and phrases: Expression ‘control and supervision –
Meaning of, in the context of contract labour – Labour laws.
D
Allowing the appeals, the Court
HELD: 1.1 The Award of the Labour Court sets down
notification dated 24.04.1990 that was issued under the 1970 Act.
A reading of the said notification makes it clear that the appellant,
insofar as their UP operations are concerned, in Haridwar, in E
particular, are exempted from the said notification. Despite this,
however, the Labour Court went on to apply the said notification,
which would clearly be perverse. The Labour Court based its
finding on direct relationship between the parties only on the
gate passes being issued by the appellant, and on a concession
made by the appellant’s representative. The said gate passes F
were issued, as has been stated by the appellant’s witness, only
at the request of the contractor for the sake of safety and also
from the administrative point of view. The idea was security, as
otherwise any person could enter the precincts of the factory.
This evidence was missed by the Labour Court when it arrived G
at a conclusion that a direct relationship ought to be inferred
from this fact alone. [Paras 10-11][513-B-F]
1.2 Where a question is a mixed question of fact and law, a
concession made by a lawyer or his authorised representative at
the stage of arguments cannot preclude the party for whom such
H
506 SUPREME COURT REPORTS [2019] 4 S.C.R.

A person appears from re-agitating the point in appeal. It would be
perverse to decide based only on a concession, without more,
that a direct relationship exists between the employer and the
workmen. Equally perverse is finding that the extended definition
of ‘employer’ contained in the Act would automatically apply. The
extended definition is contained in section 2(i)(iv) of the Uttar
B
Pradesh Industrial Disputes Act. In order that section 2(i)(iv)
apply, evidence must be led to show that the work performed by
contract labour is a work which is ordinarily part of the industry
of BHEL. On the facts of the instant case, that no such evidence
was, in fact, led. Consequently, this finding is also a finding
C directly applying a provision of law without any factual foundation
for the same. [Paras 13-15][514-F, G; 515-B, E, F]
2. In the instant case, the contractor pays the workmen
their wages. Secondly, the principal employer cannot be said to
control and supervise the work of the employee merely because
D he directs the workmen of the contractor ‘what to do’ after the
contractor assigns/ allots the employee to the principal employer.
The Labour Court’s Award being perverse ought to have been
set aside in exercise of jurisdiction under Article 226. The
workmen have themselves admitted that there is no appointment
letter, provident fund number or wage slip from BHEL insofar as
E they are concerned. Apart from this, it is also clear from the
evidence led on behalf of BHEL, that no wages were ever been
paid to them by BHEL as they were in the service of the contractor.
Further, it was also specifically pointed out that the names of 29
workers were on the basis of a List provided by the contractor in
F a bid that was made consequent to a tender notice by BHEL.
There is nothing on facts to show that the contract labour that is
engaged, even de hors a prohibition notification, is in the facts of
this case ‘sham’. [Paras 20, 23, 25, 26][520-A, D-F]
Basti Sugar Mills Ltd. v. Ram Ujagar and Ors. [1964] 9
G SCR 838; Steel Authority of India Ltd. And Ors. v.
National Union Waterfront Workers and Ors. (2000) 7
SCC 1 : [2001] 2 Suppl. SCR 343; Swami Krishnanand
Govindanand v. Managing Director, Oswal Hosiery
(Regd.) (2002) 3 SCC 39 : [2002] 2 SCR 1; C.M.
Arumugam v. S. Rajgopal (1976) 1 SCC 863 : [1976] 3
H
BHARAT HEAVY ELECTRICALS LTD. v. MAHENDRA 507
PRASAD JAKHMOLA & ORS.

SCR 82; General Manager, (OSD), Bengal Nagpur A
Cotton Mills, Rajnandgaon v. Bharat Lala and Another
2011 (1) SCC 635; Balwant Rai Saluja and Another v.
Air India Limited and Others (2014) 9 SCC 407 – relied
on.
Calcutta Port Shramik Union v. Calcutta River Transport B
Association and Others (1988) Supp SCC 768 : [1988]
Suppl. SCR 1034; Pepsico India Holding Private
Limited v. Grocery Market and shops Board and Others
(2016) 4 SCC 493 : [2016] 2 SCR 305; Harjinder Singh
v. Punjab State Warehousing Corporation (2010) 3 SCC
192 : [ 2010] 1 SCR 591; Steel Authority of India Ltd. C
And Others (2001) 7 SCC 1 : [2001] 2 Suppl. SCR 343
– held inapplicable.
Case Law Reference
[1964] 9 SCR 838 relied on Para 9 D
[2001] 2 Suppl. SCR 343 relied on Para 9
[2002] 2 SCR 1 relied on Para 12
[1976] 3 SCR 82 relied on Para 13
[1964] 2 SCR 838 relied on Para 15 E
(2011) 1 SCC 635 relied on Para 18
(2014) 9 SCC 407 relied on Para 21
[1988] Suppl. SCR 1034 held inapplicable Para 23
[2016] 2 SCR 305 held inapplicable Para 23 F
[2010] 1 SCR 591 held inapplicable Para 23
[2001] 2 Suppl. SCR 343 held inapplicable Para 26
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1799-
1800 of 2019 G
From the Judgment and Order dated 24.04.2014 of the High Court
of Uttarakhand at Nainital in Writ Petition No. 1021 of 2011
(M/S) and order dated 11.09.2014 in Review Application No. 644 of
2014 in Writ Petition No. 1021 of 2011 (M/S)]
H
508 SUPREME COURT REPORTS [2019] 4 S.C.R.

A With
Civil Appeal Nos.1837-38, 1915-16, 1919-20, 1885-86, 1883-84,
1887-88, 1913-14, 1917-18, 1921-22, 1893-94, 1865-66, 1897-98, 1899-
1900, 1867-68, 1909-10, 1803-04, 1805-06, 1807-08, 1809-10, 1907-08,
1887-88, 1871-72, 1873-74, 1905-06, 1877-78, 1817-18, 1819-20, 1903-
B 04, 1821-22, 1879-80, 1891-92, 1895-96, 1825-26, 1901-02, 1843-44, 1841-
42, 1845-46, 1875-76, 1815-16, 1813-14, 1847-48, 1811-12, 1849-50, 1851-
52, 1801-02, 1911-12, 1839-40, 1863-64, 1861-62, 1859-60, 1857-58, 1835-
36, 1855-56, 1881-82, 1853-54, 1827-28, 1833-34, 1829-30, 1889-90, 1831-
32, 1823-24 of 2019.
Sudhir Chandra, Sr. Adv., Parijat Sinha, Ms. Reshmi Rea Sinha,
C
Gaurav Ghosh, Rudra Dutta, Devesh Mishra, Anil Kumar Mishra,
Ms. Asha Jain Madan, Mukesh Jain, Ms. Madhu Talwar, Rahul Verma,
Mrs. D. Bharathi Reddy, Ms. Rachna Gandhi, Advs. for the appearing
parties.
The Judgment of the Court was delivered by
D
R. F. NARIMAN, J. 1. The present appeals arise out of a
judgment dated 24.04.2014 and a review dismissal from the aforesaid
judgment dated 11.09.2014, by which the High Court of Uttarakhand
has dismissed a writ petition against a Labour Court’s Award.

E 2. The brief facts necessary to decide these appeals are as follows:
3. By Reference Order dated 09.11.2004 under Section 4(k) of
the Uttar Pradesh Industrial Disputes Act, 1947, the following dispute
was referred to the Labour Court:
“Whether termination of services of workman Shri Mahendra
F Prasad Jakhmola, s/o Late Shri Vachaspati Jakhmola, Helper by
the employer, w.e.f. 13.11.2001, is justified and/or as per law? If
not, what benefit/relief the concerned workman is entitled for and
with what other details?”
4. Similar Reference Orders were made in 63 other cases.
G 5. Pleadings were filed before the Labour Court at Haridwar and
evidence was led on behalf of the appellant as well as by the workmen.
By an Award dated 01.11.2009, the Labour Court held, referring to a
notification, which is, notification dated 24.04.1990 under the Contract
Labour (Regulation and Abolition) Act, 1970 (hereinafter referred to as
H ‘1970 Act’), that the said notification, on application to the appellant,
BHARAT HEAVY ELECTRICALS LTD. v. MAHENDRA 509
PRASAD JAKHMOLA & ORS. [R. F. NARIMAN, J.]

would show that the workmen were not deployed to do the work A
mentioned in the notification. It was further held that based on
documentary evidence in the form of gate passes, the workmen, who
were otherwise employed by a contractor, were directly employed by
the appellant. It was also held to have been fairly conceded by the
employer’s representative that supervision, superintendence and
B
administrative control of all these workmen were with the appellant. It
was also held that under the extended definition of “employer” in the
Uttar Pradesh Industrial Disputes Act, 1947, even if the workmen are
regarded as workmen of a contractor, they would yet be workmen of
the appellant as the appellant was within the extended definition of
“employer” under the Act. This being the case, it was held that all such C
workers, being 64 in number, were entitled to be reinstated with immediate
effect but without backwages. From this Labour Award, a review petition
was filed by the appellant, in which it was clearly stated that no such
concession, as recorded by the Labour Court, was made before it. Further,
notification dated 24.04.1990 had no application as Bharat Heavy
D
Electricals Ltd. (BHEL) was exempted therefrom and, therefore, to
apply this notification to the facts of this case was also wrong. On
18.05.2011, this review was dismissed by the Labour Court holding:
“Considering the above noted discussion, as made in award dated
01.11.2009, I find force in the argument of opposite part-2 that as
far as notification dated 24.04.1990 is concerned, this court has E
already considered and has given its verdict on this notification
and now on review application no contrary inference can be
drawn by this court as prayed by the applicant. As far as
Notification dated 23.07.2010 (supra) is concerned, this notification
was not issued by Government when award was passed. As F
such, this notification cannot be said applicable at that time and no
benefit of later issued notification dated 23.07.2010 can be given
to applicant. Moreover, if applicant was exempted vide notification
on dated 24.04.1990, in such a case what was the necessity to
issue the second notification dated 23.07.2010 (supra) for
exemption of contract labour. G
On perusal of all the documents and legal preposition of law
laid down by Apex Court in Uttar Pradesh State Roadway
Transport Corporation versus Imtiaz Hussain (supra). I am in
agreement with the Opposite Party-2 that except arithmetical or
clerical errors, the order which was passed by the court on merit, H
510 SUPREME COURT REPORTS [2019] 4 S.C.R.

A cannot be changed, amended or altered. As far as case in hand is
concerned no clerical or arithmetical mistake is involved. As such,
application A-2 is liable to be rejected.”
6. A writ petition was filed, being W.P. No. 1021/2011, against the
aforesaid orders. This writ petition was dismissed by the first impugned
B order dated 24.04.2014 in which the High Court recorded that
“undisputedly” all petitioners, i.e., workmen, were performing the duties
which were identical with those of regular employees. Therefore, it can
be said that they were under the command, control, management of the
BHEL and, concomitantly, the contractor has absolutely no control over
the workmen in performing such duties. It was, therefore, held that the
C alleged contract with the contractor was “sham” and, consequently, the
Labour Court Award was correct in law and was upheld. Against this
order, a special leave petition was filed which was disposed of as follows: -
“…….
In the impugned order the High Court records,
D
“Undisputedly, all the petitioners, herein, were performing
the skilled/unskilled duties with the regularly appionted staff
of BHEL in BHEL Factory Premises and were reporting on
duties along with regular employees to perform identical duties
and had been working for fixed hours along with regular
E employees of BHEL.”
Mr. Sudhir Chandra, learned senior counsel for the petitioner
submits that the above position was seriously disputed and the
High Court has wrongly recorded “Undisputedly”.
If that be so, the course open to the petitioner is to approach
F the High Court seeking review of the impugned order. The
submission cannot be entertained for the first time by this Court
having regard to the statement of fact recorded in the impugned
order.
We observe that if review applications are filed within two
G weeks, the same will not be dismissed on the ground of delay.
Since special leave petitions are not being entertained on
the above ground, liberty is granted to the petitioner to challenge
the impugned order, in case, review applications are dismissed by
the High Court.
H Special leave petitions are disposed of.”
BHARAT HEAVY ELECTRICALS LTD. v. MAHENDRA 511
PRASAD JAKHMOLA & ORS. [R. F. NARIMAN, J.]

7. The appellant, then filed a review petition before the High Court, A
which disposed of the review stating:
“BHEL has submitted written statement before the learned
Labour Court. Paragraph 3 thereof reads as under:
“3.The workman concerned in the dispute Sri Mahendra Prasad
Jakhmola was never engaged by BHEL Haridwar and he was B
not their employee and they were not his employers. It appears
that he might have been engaged and employed by the
contractor Sri Madan Lal who also has been made party as
employer in the Industrial Dispute under reference.”
Plain reading of paragraph 3 of the written statement would C
go to suggest that even BHEL is not sure as to whether workmen
were supplied by the contractor or were engaged by the BHEL.
That being so, even if there was any Contract Labour Agreement
between the BHEL and Madan Lal, alleged contractor, same
seems to be sham transaction and camouflage. D
Not only this, the BHEL/employer-I has not placed on record
any material to demonstrate that under the alleged Labour
Contract Agreement payment was ever made in favour of Madan
Lal/alleged contractor for supplying labourers/workmen in
question; no material is available on the record to say what was E
the period of supplying the labourers under the contract.
In view of the above discussion, I do not find any good or
valid reason to review the judgment under review. Consequently,
all the review applications fail and are hereby dismissed.”
8. Shri Sudhir Chandra, learned senior counsel appearing on behalf F
of the appellant, has argued before us that the Labour Court Award was
perverse. Accordingly to him, it could not have applied the notification
dated 24.04.1990 as his client was excluded from such notification, and
being excluded from such notification, there was, consequently, no
prohibition on employment of contract labour. Further, if the evidence is
G
to be read as a whole, it is clear that the representative of BHEL made
it clear that, in point of fact, there were agreements with contractors
and that it is workers of such contractors, who were paid by them, that
are involved in the present dispute. He also added that no concession
was made before the Labour Court, as was pointed out in the review
petition, but, unfortunately, this plea was also turned down by the Labour H
512 SUPREME COURT REPORTS [2019] 4 S.C.R.

A Court, dismissing the review petition. Merely to state that because gate
passes were given, does not lead to inference that there was any direct
relationship between the appellant and the respondent-workmen. He
also argued that the High Court, in the first round, not only missed the
fact that the Labour Court Award was perverse, but committed the same
error by stating that the admitted position before the High Court was
B
also that the labour was directly employed by the appellant. This is why,
according to him, the Supreme Court sent his client back in review, but
the review order, after setting down a paragraph of the written statement
filed by the so-called employer, then arrived at an opposite conclusion
from what is stated therein. For all these reasons, therefore, according
C to him, the judgments of the High Court and the Labour Court Award
ought to be set aside. He also cited certain judgments before us to
buttress his argument that there was no manner of direct employment
between his client and the workmen.
9. Ms.Asha Jain, on the other hand, has pointed out to us that we
D should not exercise our discretionary jurisdiction under Article 136 of
the Constitution, inasmuch as the Labour Court Award is a fair Award,
as only reinstatement was ordered without backwages. She also argued
that, at no stage, had BHEL, which is a Government Company, reinstated
her clients despite the fact that there is no stay granted in their favour.
She went on to add that the concession that was made was rightly made
E before the Labour Court, and that the review petition did not contain any
statement by any authorised representative, who made such concession,
that he had not done so. She countered the argument that gate passes
were not the only basis of the Labour Court, concluding that a direct
relationship exists between the appellant and her clients. She argued
F that despite the change of contractors four times over, the same workers
continued showing, therefore, that there was a direct relationship between
these workmen and the employer. She also pointed out from certain
documents that the contractor got a 10 per cent profit and otherwise he
had nothing to do with the labour that was provided by him. She then
relied upon certain judgments which state that the power of judicial review
G of the High Court ought to be exercised with circumspection, and that
mere errors of law or fact cannot be interfered with. She also strongly
relied upon the judgment in ‘Basti Sugar Mills Ltd. v. Ram Ujagar and
Ors.’ [(1964) (2) SCR 838) to state that, in any event, even if these
employees were employees of the contractor, yet by the extended
H definition of ‘employer’ in the Uttar Pradesh Industrial Disputes Act, a
BHARAT HEAVY ELECTRICALS LTD. v. MAHENDRA 513
PRASAD JAKHMOLA & ORS. [R. F. NARIMAN, J.]

relationship of employer and workmen would exist under the said Act. A
She went on to cite certain passages in the ‘Steel Authority of India
Ltd. And Ors. v. National Union Waterfront Workers and Ors.’ [(2001)
7 SCC 1] to buttress her contention that even if there were agreements
with the contractor, they were only ‘sham’ or nominal on the facts of
this case.
B
10. Having heard learned counsel for both the sides, it is important,
first, to advert to the Award of the Labour Court. The said Award sets
down the notification dated 24.04.1990 that was issued under the 1970
Act. A reading of the aforesaid notification makes it clear that the
appellant, insofar as their UP operations are concerned, in Haridwar, in
particular, are exempted from the aforesaid notification. Despite this, C
however, the Labour Court went on to apply the said notification, which
would clearly be perverse. In addition, though Ms. Jain stated that
documentary evidence was filed, yet the Labour Court based its finding
on direct relationship between the parties only on the gate passes being
issued by the appellant, and on a concession made by the appellant’s D
representative.
11. What is clear from the evidence that was led by the parties is
that the aforesaid gate passes were issued, as has been stated by the
appellant’s witness, only at the request of the contractor for the sake of
safety and also from the administrative point of view. The idea was E
security, as otherwise any person could enter the precincts of the factory.
This evidence was missed by the Labour Court when it arrived at a
conclusion that a direct relationship ought to be inferred from this fact
alone. Further, as has been correctly pointed out by Shri Sudhir Chandra,
the appellant has, not only in the first review, but also in the writ petition
filed, taken the plea that no such concession was ever made. Moreover, F
quite apart from this plea and the counter plea of Ms. Jain that the
person who has made such concession should have stated that he did
not do so, concessions on mixed questions of fact and law cannot decide
cases as the evidence as a whole has to be weighed and inferences
drawn therefrom. G
12. Even a concession on facts disputed by a respondent in its
written statement cannot bind the respondent. Thus, in Swami
Krishnanand Govindananad v. Managing Director, Oswal Hosiery
(Regd.) [(2002) 3 SCC 39, this Court held:
H
514 SUPREME COURT REPORTS [2019] 4 S.C.R.

A “2. ……. It appears that when the case was posted for trial, the
learned counsel appearing for the respondent conceded the facts
disputed by the respondent in his written statement before the
Court. That statement of the advocate was recorded by the
Additional Rent Controller thus: “The respondent’s learned counsel
has admitted the ground of eviction and also the fact that the
B
applicant is a public charitable institution and for that purpose it
required the premises.” ……….
3. ………. Whether the appellant is an institution within the
meaning of Section 22 of the Act and whether it required bona
fide the premises for furtherance of its activities, are questions
C touching the jurisdiction of the Additional Rent Controller. He
can record his satisfaction only when he holds on these questions
in favour of the appellant. For so holding there must be material
on record to support his satisfaction otherwise the satisfaction not
based on any material or based on irrelevant material, would be
D vitiated and any order passed on such a satisfaction will be without
jurisdiction. There can be no doubt that admission of a party is a
relevant material. But can the statement made by the learned
counsel of a party across the Bar be treated as admission of the
party? Having regard to the requirements of Section 18 of the
Evidence Act, on the facts of this case, in our view, the
E aforementioned statement of the counsel for the respondent cannot
be accepted as an admission so as to bind the respondent.
Excluding that statement from consideration, there was thus no
material before the Additional Rent Controller to record his
satisfaction within the meaning of clause (d) of Section 22 of the
F Act. It follows that the order of eviction was without jurisdiction.”
13. Equally, where a question is a mixed question of fact and law,
a concession made by a lawyer or his authorised representative at the
stage of arguments cannot preclude the party for whom such person
appears from re-agitating the point in appeal. In ‘C.M. Arumugam v. S.
G Rajgopal’ [(1976) 1 SCC 863], this Court held:
“8. ………. That question is a mixed question of law and fact and
we do not think that a concession made by the first respondent on
such a question at the stage of argument before the High Court,
can preclude him from reagitating it in the appeal before this Court,
H when it formed the subject-matter of an issue before the High
BHARAT HEAVY ELECTRICALS LTD. v. MAHENDRA 515
PRASAD JAKHMOLA & ORS. [R. F. NARIMAN, J.]

Court and full and complete evidence in regard to such issue was A
led by both parties……….”
14. It would be perverse to decide based only on a concession,
without more, that a direct relationship exists between the employer and
the workmen. Equally perverse is finding that the extended definition of
‘employer’ contained in the Act would automatically apply. The extended B
definition contained in section 2(i)(iv) of the Uttar Pradesh Industrial
Disputes Act reads as follows:
“2. Definitions.
…………………………………………………………………………………………………………….
C
…………………………………………………………………………………………………………….
(i)’Employer’ includes-
…………………………………………………………………………………………………………….
…………………………………………………………………………………………………………….
D
(iv) where the owner of any industry in the course of or for the
purpose of conducting the industry contracts with any person for
the execution by or under such person of the whole or any part of
any work which is ordinarily part of the industry, the owner of
such industry;”
E
15. A look at this provision together with the judgment in ‘Basti
Sugar Mills Ltd. v. Ram Ujagar and Ors.’ [(1964) (2) SCR 838) relied
upon by Ms. Jain, would show that in order that section 2(i)(iv) apply,
evidence must be led to show that the work performed by contract labour
is a work which is ordinarily part of the industry of BHEL. We find, on
the facts of the present case, that no such evidence has, in fact, been F
led. Consequently, this finding is also a finding directly applying a provision
of law without any factual foundation for the same.
16. This being the case, it is clear that the Labour Court has arrived
at a conclusion which no reasonable person could possibly arrive at and
ought, therefore, to have been set aside. Apart from the Labour Court G
dismissing a review from its own order, we find that the High Court, in
the first impugned judgment dated 24.04.2014, has also arrived at findings
which are contrary to the evidence taken on record. First and foremost,
it could not have said that “undisputedly”, the labour that was employed
through contractors were performing identical duties as regular employees H
516 SUPREME COURT REPORTS [2019] 4 S.C.R.

A and that, therefore, without any evidence, it can be said that they were
under the control, management and guidance of BHEL. Secondly, when
it said that alleged contracts that were awarded in favour of contractors
and how many labourers, in what type of work etc. were asked for,
were not furnished, is also directly contrary to the evidence led on behalf
of the BHEL, in which such documents were specifically provided. Thus,
B
Shri Naveen Luniyal, in his evidence-in-chief, had pointed out:
“…………………………………………………………………………………………………………………
..
Thus, we entered into contract of workers with the contractors
which are document No. 8 and 9 of the above list and the same
C are marked Exhibit E-6 and E-7 respectively. The period of
contract used to be extended for the completion of assignment in
case the work was not completing in time or the same was being
extended. The concerned workman filed writs before Hon’ble
Delhi High Court seeking their regularization while impleading
BHEL as a party and it was ordered by the court that you may
D prefer your suit for regularization before C.G.I.T.
………………………………………………………………………………………………………………………
..
………………………………………………………………………………………………………………………
..
There is no master employer and servant relationship of the
E workers with BHEL and BHEL was also not making any payment
of salary to them as the workers were in the service of the
contractor. Thus, there does not arise any question of giving them
employment.
The workers were being issued gate passes at the request of
F the contractor, for the sake of safety and also from administrative
point of view, it was specifically bearing the mention that they are
the workers of the contractors. Any worker cannot enter in the
workplace if such gate passes are not issued. CISF takes care of
the safety in our organisation.”
G 17. Equally, the review judgment apart from being cryptic, draws
an unsustainable conclusion after setting out paragraph 3 of the written
statement of BHEL in the Labour Court. What was stated by BHEL in
paragraph 3 was that the workmen were only engaged by the contractor
and were not their employees. The written statement then goes on to be
speculative in stating that it appears that a workman might have been
H
BHARAT HEAVY ELECTRICALS LTD. v. MAHENDRA 517
PRASAD JAKHMOLA & ORS. [R. F. NARIMAN, J.]

engaged as an employee by a particular contractor. A plain reading of A
this written statement would certainly not suggest that BHEL is not sure
as to whether workmen were or were not supplied by a contractor, or
engaged by BHEL. What is clear from the written statement is that
BHEL has denied that the workmen were engaged by BHEL or that the
workmen were BHEL’s workmen. From this to conclude that the
B
transaction seems to be ‘sham’, is again wholly incorrect. Apart from
this, it is also incorrect to state that BHEL has not placed on record any
material to demonstrate that under the alleged labour contract, payment
was ever made in favour of Madan Lal, the alleged contractor. It has
been correctly pointed out by learned counsel appearing on behalf of
BHEL that in the very first sentence of the cross examination of the C
workmen, before the labour court, the workmen admitted that payments
of their wages were made by four contractors including Shri Madan
Lal. Also, the fact that Madan Lal was paid under the agreement with
BHEL was never disputed. Indeed, Ms. Jain’s argument that Madan
Lal only derived a 10 per cent profit from the agreement with him
D
presupposes payment to Madan Lal by BHEL under the agreement with
him. This finding again is wholly incorrect.
18. We, now come to some of the judgments cited by Shri Sudhir
Chandra and Ms. Asha Jain. In ‘General Manager, (OSD), Bengal
Nagpur Cotton Mills, Rajnandgaon v. Bharat Lala and Another’
[2011 (1) SCC 635], it was held that the well recognised tests to find out E
whether contract labourers are direct employees are as follows:
“10. It is now well settled that if the industrial adjudicator finds
that the contract between the principal employer and the contractor
to be a sham, nominal or merely a camouflage to deny employment
benefits to the employee and that there was in fact a direct F
employment, it can grant relief to the employee by holding that
the workman is the direct employee of the principal employer.
Two of the well-recognized tests to find out whether the contract
labourers are the direct employees of the principal employer are:
(i) whether the principal employer pays the salary instead of the G
contractor; and (ii) whether the principal employer controls and
supervises the work of the employee. In this case, the Industrial
Court answered both questions in the affirmative and as a
consequence held that the first respondent is a direct employee of
the appellant”
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518 SUPREME COURT REPORTS [2019] 4 S.C.R.

A 19. The expression ‘control and supervision’ were further
explained with reference to an earlier judgment of this Court as follows:
“12. The expression “control and supervision” in the context of
contract labour was explained by this Court in International
Airport Authority of India v. International Air Cargo Workers’
B Union thus: (SCC p.388, paras 38-39)
“38…. if the contract is for supply of labour, necessarily, the
labour supplied by the contractor will work under the directions,
supervision and control of the principal employer but that would
not make the worker a direct employee of the principal
C employer, if the salary is paid by a contractor, if the right to
regulate the employment is with the contractor, and the ultimate
supervision and control lies with the contractor.
39. The principal employer only controls and directs the work
to be done by a contract labour, when such labour is assigned/
D allotted/sent to him. But it is the contractor as employer, who
chooses whether the worker is to be assigned/allotted to the
principal employer or used otherwise. In short, worker being
the employee of the contractor, the ultimate supervision and
control lies with the contractor as he decides where the
employee will work and how long he will work and subject to
E what conditions. Only when the contractor assigns/sends the
worker to work under the principal employer, the worker works
under the supervision and control of the principal employer but
that is secondary control. The primary control is with the
contractor.”
F 20. From this judgment, it is clear that test No. 1 is not met on the
facts of this case as the contractor pays the workmen their wages.
Secondly, the principal employer cannot be said to control and supervise
the work of the employee merely because he directs the workmen of
the contractor ‘what to do’ after the contractor assigns/ allots the
G employee to the principal employer. This is precisely what paragraph 12
explains as being supervision and control of the principal employer that
is secondary in nature, as such control is exercised only after such
workman has been assigned to the principal employer to do a particular
work.

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BHARAT HEAVY ELECTRICALS LTD. v. MAHENDRA 519
PRASAD JAKHMOLA & ORS. [R. F. NARIMAN, J.]

21. We may hasten to add that this view of the law has been A
reiterated in ‘Balwant Rai Saluja and Another v. Air India Limited
and Others’ [2014(9) SCC 407], as follows:
“65. Thus, it can be concluded that the relevant factors to be
taken into consideration to establish an employer-employee
relationship would include, inter alia: B
(i) who appoints the workers;
(ii) who pays the salary/remuneration;
(iii) who has the authority to dismiss;
(iv) who can take disciplinary action; C
(v) whether there is continuity of service; and
(vi) extent of control and supervision i.e. whether there exists
complete control and supervision.
As regards extent of control and supervision, we have already D
taken note of the observations in Bengal Nagpur Cotton Mills
case [(2011) 1 SCC 635], International Airport Authority of
India case [2009 13 SCC 374] and Nalco case [(2014) 6 SCC
756].”
22. However, Ms. Jain has pointed out that contractors were E
frequently changed, as a result of which, it can be inferred that the
workmen are direct employees of BHEL. There is no such finding of
the Labour Court or any reference to the same by the High Court.
Consequently, this argument made for the first time in this Court together
with judgments that support the same, is of no consequence.
F
23. Ms. Jain also pointed out three judgments of this Court in
‘Calcutta Port Shramik Union v. Calcutta River Transport
Association and Others [1988 (Supp) SCC 768], Pepsico India
Holding Private Limited v. Grocery Market and Shops Board and
Others [2016 4 SCC 493] and ‘Harjinder Singh v. Punjab State
Warehousing Corporation’ [(2010) 3 SCC 192] for the proposition G
that judicial review by the High Court under Article 226, particularly
when it is asked to give relief of a writ of certiorari, is within well
recognised limits, and that mere errors of law or fact are not sufficient
to attract the jurisdicton of the High Court under Article 226. There is
no doubt that the law laid down by these judgments is unexceptionable. H
520 SUPREME COURT REPORTS [2019] 4 S.C.R.

A We may only state that these judgments have no application to the facts
of the present case. The Labour Court’s Award being perverse ought to
have been set aside in exercise of jurisdiction under Article 226.
24. Ms. Jain then argued that since no backwages were granted
but only reinstatement was ordered, we should not exercise our jurisdiction
B under Article 136 to set aside the said Award. When it is found that the
findings of the Labour Court are perverse, it is difficult to accede to this
argument. Equally, the argument that the so-called employer has not
complied with the Labour Court’s Award, despite there being no stay, is
an argument that must be rejected. In that a contempt petition could
always have been moved on behalf of the workmen for implementation.
C No such thing has been done in the present case.
25. The argument that the contractor, in the facts of the present
case, gets only a 10 per cent profit and nothing more, is again an argument
that needs to be rejected in view of the clear and unequivocal evidence
that has been led in this case. The workmen have themselves admitted
D that there is no appointment letter, provident fund number or wage slip
from BHEL insofar as they are concerned. Apart from this, it is also
clear from the evidence led on behalf of BHEL, that no wages were
ever been paid to them by BHEL as they were in the service of the
contractor. Further, it was also specifically pointed out that the names
E of 29 workers were on the basis of a List provided by the contractor in
a bid that was made consequent to a tender notice by BHEL.
26. Ms. Asha Jain’s reliance upon the judgment in ‘Steel Authority
of India Ltd. And Others’ [(2001) 7 SCC 1] is also misplaced. There is
nothing on facts to show that the contract labour that is engaged, even
F de hors a prohibition notification, is in the facts of this case ‘sham’.
27. Given this, we set aside the impugned judgments of the High
Court and the Labour Court’s Award.
The appeals are allowed in the aforesaid terms.

G
Devika Gujral Appeals allowed.

H