DENA NATH AND ORS.versusNATIONAL FERTILIZERS LTD. AND ORS.

                      DENA NATH AND ORS.                                    A

                                   v.
           NATIONAL FERTILIZERS LTD. AND ORS.

                       NOVEMBER 22, 1991
                                                                            B
 [K.JAGANNATHA SHETTY AND YOGESHWAR DAYAL, JJ.]

     Contract Labour (Regulation and Abolition) Act, 1970--Title, Pre-
amble and Statement of Objects and Reasons-Purpose and scheme. of the
Act.
                                                                            C'
     Contract Labour (Regulation and Abolition) Act, 1970--Sections 7.
12-Non-Comp/iance of by Principal Employer and Contractor
respectively-Effect-Employees employed through Contractor whether
becomes Principal Employer's employees.

     Constitution of India, 1950-Article 2.26-Writ of mand-                 D
amus-Question of abolition of contract labour-Government to decide
under section 10 of the Contract Labour (Regulation and ,,;bolition) Act,
1970 and not the High Court in a writ proceeding.

     Following its earlier decision in 1991(1) P.L.R.I. the High Court
held that the principal employer and the Contractor were liable for         E
prosecution under the Contra.ct Labour (Regulation and Abolition)
Act, 1970, if they made non-compliance of section 7 and section 12
of the Act, respectively. Further, it was held that the employee
employed through the contractor did not become the employees of
the principal employer.
                                                                            F
     C.A.No. 2335 of 1991 arose by special leave from the decision
of the High Court. The point invoh'ed in other appeals is common.
This Court, on th.e question, if the· principal employer did not get
registration under section 7 of the Act and/or the contractor did not
get a·-iicence under Section 12 of t.Jte,, Act, whether the person so
appointed by the principal employer through the contractor would            G
be deemed to the direct employees of the principal employer or not,
dismi$sing the appe.als.

     HELD:- 1.The iong title and the preamble of the Contract La-
bour (Regulation and Abolition) Act, 1970 show that it is an Act to
regulatf the empioyment of contract labour in certain establish-            H

                                  401
    402              SUPREME COURT REPORTS           [1991) SUPP. 2 S.C.R.

A   ments and to provide for abolition in certain circumstances and for
    matters connected therewith. The Statement of Objects and Reasons
    mentions that the system of employment of contract labour has tended
    itself to various abuses and the question of its abolition had been
    under consideration of the Government for a long time. (405 EJ

B        2. The Contract Labour (Regulation and Abolition) Act serves
    two-fold purpose (1) regulations of the conditions of service of the
    workers employed by the contractor who is engaged by a principal
    employer; and (2) also provides for the appropriate Government
    abolishing contract labour altogether, in certain notified processes
    operation or other works in any establishment. Netither the Act nor
c   the Rules framed by the Central Government or by any appropriate
    _Government provide that upon abolition of contract labour, the
    said labour would be directly absorbed by the principal employer.
    [407 H-408 A}

          3.. The Act as can be seen from the Scheme of the Act merely
D   regulates 'the employment of contract labour in certain establish-
    ment and provides for its abolition in certain circumstances. The
    A~t does not provide for total abolition of contract labour-but it
    provides for abolition by the appropriate Government in appropri-
    ate cases under Secti_on 10 of the Act. [413 H-414 A]

          4. ID the present case and the other connected Special Leave
E
    Petitions no notification bas been issued by the appropriate Govern-
    ment under Section 10 of the Act. [414 BJ

          5. It is not for the High Court to inquire into the question
    and decide whether the employment of contract labour in any proc-
    ess, operation or in any other work in any establishment should be
F
    abolished or not. It is a matter for the decision of the Government
    after considering the matter, as required to be considered under
    Section 10 of the Act. [414 C-DJ
                                                                             . ,•
         6. In proceedings under Article 226 of the Constitution merely
    because contractor or the employer bad violated any provision of
G   the Act or the Rules, the court could not issue any mandamus for
    deeming the contract labour as having become the employees of the
    principal employer. [414 EJ

          Mis Gammon India Ltd. and Others v. Union of India, [197.4)1 SCC
    596; Standard Vacuum Rejining-cD. v~ Their workmen, [1960)2 LLJ 233
H   (S.C.); F.C.L Loading and Unloading Workers Union v. Food Corpora-




                         .:.   .
         DENA NATH v. NATIONAL FERTILISERS [YOGESHWARDAYAL, J.)         403

 tion of India 1986 (2) SLR 454 (Karnataka); Food Corporation of India        A
 Workers Union-v. Food Corporation of India and others. [1990)61 FLR
 253 (Gujarat), referred to. .

      Gian Singh & Others v. F. CL, 1991(1) PLR 1 (Punjab and Haryana);
 The Workmen of Best & Crompton Industries Ltd. v. The Management of
 Best & Crompton Engineering Ltd. Madras and Ors, 1985(1) LLJ 492 B
 (Madras); and United Labour Union and Others v. Union of India and
 Others, 1990(60) FLR 686 (Bo,mbay), over ruled.

      P.Karunakaran v. The Chief Commercial Superintendent and Oth-
ers, 1988(2) LIC 1346 (Kerala) :md New·Delhi General Mazdoor Union
v. Standing Conference of Public Enterprises (Scope) & Another, 1991(2)       C
Delhi Lawyer 189, approved.

         CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2355 of
 1991.

                                  WITH·
                                                                              D
      Civil Appeal Nos. 2356-66/91, 2366A-69/9l, S.L.P.(C) Nos. 9755/
91, 98~0/91 & 10235-43of1991.

       From the Judgment and Order dated 27 .2.91 of the Punjab & Haryana
High Court in C.W.P. Nos. 8872/89, 10463, 10462/89, 15085/90, 17092/
89,. 11381/90, 15599/90, 12573/89, 14551/89, 10951/90 and 195of1991.          E
     b.S.Tiwatia, Anil Mauriya, A.K.Goel, Mrs. Sheela Goel and
B.Y.Kulkarni for the Appellants.

    y;Ratnaswami Attorney General; G.L.Sanghi, Sudhir Walia,
S.Murlidhar and Y.P.Rao for the Respondents.                                  F
      The Judgment of the Court was delivered by

         YOGESHWAR DAY AL, J. These appeals raise a question of the
SCQPe and effect of (ailure of compliance with Section 7 and/or Section 12
of the''C&nfract Labour (Regulation and Abolition) Act, 1970 (hereinafter     G
referred to as 'the Act').

      The question involved is that if the principal employer does not get
registration under Section 7 of the Act and/or the Contractor does not get
a licence under Section 12 of the Act whether the persons so appointed by
the principal :employer through the contract would be deemed to be the        H
direct employees of the principal employer or not.             .
    404                SUPREME COURT REPORTS             [1991) SUPP. 2 S.C.R.

A          There is a direct conflict between the decisions of the High Courts
    of Punjab, Kerala on the one hand and the decisions of Madras, Bombay,
    Gujarat and K.amataka High Courts on the other. The view of the Punjab
    and Kerala High Courts is that the only consequence of non-compliance
    either by the principal employer of Section 7 of the Act or by the contrac-
    tor in complying with Section 12 of the Act is that they are liable for
B   prosecution under the Act; whereas the view of the High Courts of Ma-
    dias, Bombay, Gujarat and Karnataka is that in such a situation the con-
    tract labour becomes directly the employee of the principal employer.

         For· the sake of convenience we deal with the facts of Civil Appeal
    No. 2355of1991.
c
          This appeal arises from the decision of a Division Bench of the
    Punjab & Haryana High Court dated 27th February, 1991 passed in writ
    petition No: 8872 of 1989. The Division Bench while deciding a batch of
    writ petitions followed its earlier decision in the case of Gian Singh &
    Ors. v. F.C.l, (1991) PLR I. (Letters Patent Appeal No. 1215 of 1990)
D   which has since been reported in 1991 (I) PLR I. The Division Bench in
    the aforesaid case of Gian Singh held that if the principal employer does
    not get registration as required under Section 7 of the Act and/or the
    Contractor does not get the licence under section 12 of the Act, the per-
    sons who are appointed by the principal employer through the contractor,
    the only consequence is the penal provisions contained in sections 23 and
E   24 of the Act and that the principal employer or contractor can be pros-
    ecuted under those sections, but the Act nowhere provides that such-em-
    ployees employed through the contractor would become ihe employee of
    the principal employer.

          In the High Court judgment, under appeal, reliance was placed on
F   behalf of the workmen on the views of the High Courts of Kamataka,
    Madras, Gujarat and Bombay in the cases reported as F. C.I. Loading and
    Unloading Workers Union v. Food Corporation of India (1986) (2) SLR
    454, The Workmen of Best & Crompton Industries Ltd. v. The Manage-
    ment of Best & Crompton Engineering Ltd., Madras and Ors., (1985) (1)
    LL! 492; Food Corporation of India Workers Union v. Food Corporation
G   of India and Others (1990) 61 FLR 253. and United Labour Union and
    Others v. Union of India and Others, (1990) 60 FLR 686. but the High
    Court took the view that it was not applicable.

          To appre~iate the correctness of one view or the other, it will b1
    necessary to go through the object and the scheme of the Act. The object:
H   of the Act were dealt with by the Supreme Court in the case of Mis
      DENA NATl:! v. NATIONAL FERTILISERS [YOGESHWAR DAYAL. J. J 405

Gammon India Ltd. and Others v. Union of India and Others, (1974) 1)          A
sec 596 in paragraph 14 at page 600 as follows:
           "The Act was passed to prevent the exploitation of contract
           labour and also to introduce better conditions of work. The Act
           provides for regulation and abolition of contract labour. The
           underlying policy of the Act is to abolish contract labour,        B
           wherever possible and practicable, and where it cannot be abol-
           ished altoget)ler, the policy of the Act is that the working
           conditions of the contract labour should be so regulated as to
           ensure payment of wages and provision of essential amenities.
           That is why the Act provides for regulated conditions of work
           and contemplates progressive abolition to the extent contem-       C
           plated by Section 10 of the Act, Section l 0 of the Act deals
           with abolition while the rest of the Act deals Jl!ainly with
           regulation. The dominant idea of Section 10 of ilie Act is to
           find out whether contract labour is necessary for the industry,
           trade, business, manufacture or occupation which is carried on
           in the establishment."                                             D

      As the long title and the preamble of the Act shows that it is an Act
to reg"lllate the employment of contract labour in certain establishments
and to provide for abolition in certain circumstances and for matters con-
nected therewith. The Statement of Objects and Reasons mentions that the
system of employment of contract labour has tended itself to various          E
abuses and the question of its abolition had been under consideration of
the Government for a long time. The Planning Commission had made
certain recommendations in the Second Five Year Plan viz. it undertook a
study in this behalf on improvement of service conditions of contract
labour where the abolition was not possible. The general consensus there-
after was that the contract labour system should be abolished wherever        F
possible and practicable and further that in a case where the system could
not be abolished altogether, the working conditions of contract labour
should be regulated so as to ensure payment of wages and provision of
essential amenities.

      The above objects have been brought into the Act which was en-          G
acted in 1970. Section 2 gives the definition of various words while sec-
tion 3 deals with the constitution of Central Advisory Board and section 4
deals with the constitution of State Advisory Board. The~oards are
empowered to constitute various committees as mentioned in 'Section 5.
Chapter III is important and deals with 'registration' of establishment
employing contract labour while Chapter IV deals with 'licensing' of          H
    406                 SUPREME COURT REPORTS             [1991) SUPP. 2 S.C.R.

A   contractors employed by these establishments. Section 7 deals with regis-
    tration of certain establishment notified by the Government and these
    establishments are obviously the principal employers as defmed in section
    2(g). Section 8 provides for revoca(ion of registration in certain cases and
    section 9 deals with the effect of non-registration.

B         Under Section 9 no principal employer of an establishment, to which
    the Act applies shall; (a) in case of an establishment required to be regis-
    tered under Section 7, but which has not been registered within the time
    fixed for the purpose under that section; (b) in the case of an establish-
    ment the registration in respect of which has been revoked under Section
    8 employ contract labour in the establishment after the expiry of the
C   period referred to in clause (a) or after th~· r~vocatioti. of registration.
    referred to in clause (b), as the case may be. Section 10 deals with the
    prohibition of employment of contract labour which reads as follows:

                "10. Prohibition of employment of contract labour - (I) Not.,.
                withstanding anything co.ntained in this Act, the appropriate
D               Government may, after consultation with the Central Board or,
                as the case may be, a State Board, prohibit, by notification in
                the Official Gazette, employment of contract Jabour in any
                process, operation or other work in any establishment.
                (2) Before issuing any notification under sub-section (I) in
E               relation to an establishment, the appropriate Government shall
                have regard to the conditions of work and benefits provided
                for the contract labour in that establishment and other relevant
                factors, such as -
                (a) whether the process, operation or other work is incidental
                    to, or necessary for the industry, trade, business, manu-
F                   facture or occupation that is carried on in the establish-
                    ment;
                (b) whether it is of perennial nature, that is to say, it is of
                    sufficient duration having regard to the nature of indus-
                    try, trade, business, manufacture or occupation carried on
G                   in that establishment;
                                                                                   l
                (c) whether it is done ordinarily through regular wor:ten in
                    that establishment or an establishment similar theret ;
               (d) whether it is sufficient to employ considerable number of
                   whole time workmen."
H         Chapter IV deals with the licensing of contractors. Sub clause (I) of
       DENA NATH v. NATIONAL FERTILISERS [YOGESHWAR DAYAL, J.]           407

   Section 12 states that w.e.f. such date as the appropriate Government may, A
- by notification in the Gazette,-. appoint, no contractor to whom this Act
   applies shall undertake or execute any work through the contract labour
   except under and in accordance with the licence issued in that behalf by
  the Licensing Officer. Sub-clause (2) of Section 12 provides that subject
   to the provisions of the Act, a licence in sub-section (1) may contain such
  conditions including, in particular, conditions as to hours of work, fixation B
  of wages and other essential amenities in respect of the labour contract as
  the appropriate Government may deem fit to impose in accordance with
  the rules, if any, made under Section 35 and shall be issued on payment of
  such fees and on the deposit of such sum, if any, as security for due
  performance of the conditions as may be prescribed. Section 14 provides
  for revocation, suspension and amendment of the licences while Section C
  15 provides for an appeal. Chapter VI deals with the penalties and proce-
  dures. Section 22 deals with the obstructions. Section 23 deals with con-
  travention of provisions regarding employment of contract labour-and
  Sections 24 and 25 deal with other offences and offences by companies.
  Chapter VII makes certain miscellaneous provisions and Section 30 pro-
  vides that laws and agreements inconsistent with the provisions of the Act D
  shall be void except where such agreements or contracts or standing or-
  ders afforded more favourable facilities to the employees than provided
  under the Act. We shall also refer to Rule 25 of the Rules which mentions
  the conditions subject to which licence could be issued to a contractor
  under Section 12. The said rule inter alia provides that a licence issued to
  a contractor shall not be transferable, that contractors cannot employ workmen E
  in excess of the number specified therein and that rate of wages payable to
  the workmen shall be the rate prescribed under the Minimum Wages Act,
  1948. Clause (v){a) of the Rule 25(2) is important and reads as follows:

            "In cases where the workmen employed by the contractor per-
            fonn the same or sim~lar kind of working as the workmen            F
            directly employed by the principal employer of the establish-
            ment, the wage rates, holidays, hours of work and.other condi-
            tions of service of the workmen of the contractor shall be the
            same as applicable to the workmen directly employed by the
            principal employer of the establishment on the same or similar
            kind of work.'                                                     G
       Rule 25(2) further provides for accommodation for women and chil-
 dren and for the times of work of females.

      From the above provisions it is clear that the Act serves two-fold
 purposes {I) regulation of the conditions of service of the workers em-       H
 ploy:d by the contractor who is engaged by a principal employer and; (2)
    408                SUPREME COURT REPORTS               [1991) SUPP. 2 S.C.R.

A   also provides for the appropriate Government abolishing contract labour
    altogether, in certain notified processes, operation or other works in any
    establishment. Neither the Act nor the Rules framed by the Central Gov-
    ernment or by any appropriate Government provide that upon abolition of
    contract labour, the said labour would be directly absorbed by the princi-
    pal employer.
B
           The question arises when the Act does not provide for such a meas-
    ure, but contents itself by merely regulating the conditions of service of
    the contract labour, can the Court in proceedings under Article 226 of the
    Constitution, where the principal employer or the licence contractor vio-
    lates the provisions of Section 9 or 12 respectively, direct that the contract
c   labour so employed would become directly the employee of the principal
    employer.

          The view of the Bombay High Court in the case of United Labour
    Union and Others v. Union of India (supra) was really concerned with the
    appropriate Government for purposes of notification being issued under
D   Section 10(1) of the Act. It took the view that the Central Government
    was the appropriate Government in relation to Air India Corporation but
    after analysing the provisions of Section 2(ii)(b), 7,8,12,20,21 and 29 the
    Bombay High Court took the view--

               "The combined effect of these provisions makes it clear that
E              for a valid employment of contract labour, two conditions must
               be fulfilled, viz., (I) every principal employer of an establish-
               ment must be registered and (2) the contractor must have valid
               licence. In other words, the mere registration by the principal
               employer or the holding of licence by contractor alone will not
               enable the management to treat the workmen as contract la-
F               bour. Whilst considering'the provisions of the Act, it must be
               kept in mind that this Act ·is a piece of beneficial legislation.
               The aim of the Act is to regulate conditions of service of
               contract labourers and to abolish contract labour under certain
               circumstances. It is therefore meant for securing proper condi-
               tions of service to under contract labour. It is not the purpose
G              of the Act to render workmen jobless. The interpretation which
               must be given is one which would further these objects and not
               one which results in greater hardship. It must be noted that
               there is no provision which states that the relationship of prin-
               cipal employer and workmen comes to an .end on the abolition
               of contract labour. On the contrary as already stated there-is a
H              deemed contract labour only if the two conditions of registra-
     DENANATH v. NATIONALFERTILISERS [YOGESHWARDAYAL,J.)                 409

          tion and licence are fulfilled. In such a case i.e., where either     A
          or both the conditions are not fulfilled, the necessary implica·
          tion would be that the workmen remain workmen of the princi-
          pal employer.It must be remembered that on a failure of the
          contractor to provide amenities or to pay wages the principal
          employer remains liable for the same. The same would be the
          position on a failure by reason of there being no valid contract      B
          labour.

               Mr. DhanUka, however, submitted that the Act provides
          certain penal consequences for non-registration. He submits
          that there no such provision in the Act, the same cannot be·
          implied. He submits that in the absence of any such provision C
          the Court cannot give  any   direction to that effect. In my view,
          the penal provisions are provided to dissuade employers from
          attempting to commit a breach of the provisions of the Act and
          the Rules made thereunder. They do not detract from the posi-
          tion that there can be no deemed contract labour if the two
          conditions are not satisfied. If the protection or right given by D
          reason of a deeming provision is not available then the natural
          consequence must follow in addition to the penal consequence,
          unless there is a·provision to the contrary. As already stated, in
          the Act there is no provision that the services of the workmen, .
          qua the principal employer, stand terminated on the contract
          labour becoming invalid and/or abolished".                         E
                                                      (emphasis supplied)

     The question arising before us directly came up for consideration
before a division bench of the Gujarat High Court in the case of Food
Corporation of India Workers Union v. Food Corporation of India and
Others (supra) which observed -                                                 F

                It is evident that (i) the principal employer should obtain a
          Certificate of Registration and (ii) the workmen can be em-
          ploye.d on contract labour basis only through licensed contrac-
          tor. The Certificate of Registration is required to be obtained
          by the principal employer, issued by the appropriate Govern-          G
          ment under the provisions of Section 7 of the Act. The licence
          is· to be obtained by the contractors under the provisions of
          Section 12 of the Act. The workmen can be employed as co11--
          tract labour only through licensed contractor. Unless both the~
          conditions are complied with, the provisions of the Contract
          Labour (Regulation and Abolition) Act, 1970 would not be              H
    410               . SUPREME COURT REPORTS            (1991] SUPP.' 2 S.C.R.

A              attracted. Both these conditions are required to be fulfilled, if
               one wishes to avail of the provisions of the Act. Even if one of
               the conditions is not complied with, the provisions of the Con-
               tract Labour (Regulation & Abolition) Act; 1970 would not be
               attracted. Therefore, in a situation wherein either of these two
               conditions is not satisfied, the position would be that a work-
B              man emplox,ed by an intermediary would be deemed to have
               been employed by the principal employer. In the result it is
               declared that during the period when the two conditions of
               obtaining registration under Section 7 by the principal em-
               ployer and of holding licence by the contractor are not com-
               plied with and the workmen are employed by contractor, the
C              workmen can claim to be direct employees of the principal
               employer."
          The decision of the Madras High Court in The Workmen of Best &
    Crompton Industries Ltd. v. The Management of Best & Compton Engi-
    neering Ltd., Madras and Ors.• really arose out of an award given by the
D   Labour Court in an industrial dispute. The industrial dispute had been
    raised by the workmen of the principal employer. They challenged the·
    termination of service of workmen by the Management as the Manage~
    ment did not requisition the service of 75. workmen after 16th October,
    1978 on the ground that they were employed by the licensed contractor.
    This led to an industrial dispute and on _a reference made of the said
E   industrial dispute, the Labour Court rejected the contention of the Man-
    agement and held that the so called contractor was a mere name-lender
    and did not hold licence under the Act and directed the reinstatement of
    the workmen with backWages and other benefits. This award of the La-
    bour Court was challenged before the High Court by the Management by a
    writ petition. The learned Single Judge of the Madras High Court took the
F   view that the conclusion of the Labour Court that the labour contractor
    was not early a labour contractor, but he was merely acting as a tool in the
    hands of the Management is not supported either by the pleadings of the
    parties or by the evidence. According to the learned single Judge there
    was absolutely nothing to displace the weighty documentary evidence in
    favour of the Management and therefore, he characterised the finding
G   entered by the Labour Court to the contrary as being perverse and vitiated.
    The division bench in Letters Patent Appeal reversed this finding of the
    learned Single Judge.

               The High Court observed at page 497 -
               "In order to enable the Management to have the benefit of the
H
               contract labour, the Act has now legalised the employmenf of
     DENA NATH v. NATIONAL FERTILISERS [YOGESHWARDAYAL,J.]                  411

           such contract labour, provided the intermediary contractor holds        A
           a valid licence and provided the Management also holds a
           valid licence as principal employer. This is subject to the pro-
           hibition contemplated under S.10. There is no need for us to
           examine the content of S.10 in this case. In order to regulate
           the employment of contract labour and to provide for abolition
           in certain circumstances, the said Act came to be passed. Ac-           B
           cording to S. 7:

            "Provided that the registering officer may entertain any such
            application for registration after expiry of the period fixed in
            this behalf, if the registering officer is satisfied that the appli-
          . cant was prevented by sufficient cause from making the appli-          C
            cation in time.

           (2) If the application for registration is complete in all re-
           spects, the registering officer shall register the establishment
           and issue to the principal employer of the establishment a
           certificate of registration containing such particulars as may be       D
           prescribed".

      Under S.12 of the Act, no contractor to whom this Act applies, shall
undertake or execute any work through contract labour except under and
in accordance with a licence issued in that behalf by the licensing officer.
Sub-s.(2) ofS.12 provides:                                                         E
           "Subject to the provisions of this Act, a licence under sub-s.
           (1) may contain such conditions including in particular condi-
           tions as to hours of work, fixation of wages an~Lother essential.
           amenities in respect of contract labour as the appropriate Gov-
           ernment may deem fit to impose in accordance with the rules,            p
           ifany, made under S.35 and shall be issued on payment of
           such fees and on the deposit of such sum, if any, as security
           for the due performance of the conditions as may be prescribed".

      The combined effect of these two proVisions in our view makes it
clear that for a valid employment of -                                             G
           "(l)Every principal employer of an establishment to which
           this Act applies shall, within such period as tb.e appropriate
           Government may, by notification in the Official Gazette, fix in
           this behalf with respect to establishments generally or ~ith
           respect to any class of them, make an application to the regis-         H
           tenng 'officer in the prescribed manner for registration of the
    412                SUPREME COURT REPORTS             (1991) SUPP. 2 S.C.R.

A              establishment;· contract labour, two conditions stould be satis-
               fied, viz., not only the principal employer but also the contrac-
               tor should possess the requisite licence. In other words, the
               holding of licence by ·one alone will not enable the manage-
               ment to treat the workmen as contract labour."

B         The.High Court ofKerala in the case of P.Kanmakaran v. The Chief
    Commercial Superintendent and Others, (1988) 2 L.l.C. 1346 took the
    same view as was taken by the Punjab & Haryana High Court in the
    judgment under appeal. A similar view was expressed by the Delhi High
    Court in the case of New Delhi General Mazdoor Union v. Standing
    Coriference of Public Enterprises (Scope) & Another, (1991) 2 Delhi·
C   Lawyer 189.

          The reference to the Labour Court/Industrial Tribunal could be as to
    whether it is necessary for the Management to employ contract labour
    directly or indirectly; a question can as well be referred whether the
    engagement of contract labour was bona fide or it was a camouflage. In
D   appropriate cases in industrial adjudication appropriate directions can be
    given to the principal employer in this behalf. This has been the subject
    matter of decisions by the Tribunals/Labour Courts and by this Court also.
    The case of Standard Vacuum Refining Co. v. Their Workmen 1960 2 LLJ
    233 is a case on this point. It was a case where the workmen employed by
    an oil refinery demanded that the contract system of labour adopted by
E   the company for cleaning .maintenance of the refmery belonging to the
    company should be abolished and the said demand was referred for adju-
    dication. It was found that the work for which the contract was given is
    incidental to the manufacturing process and is necessary for it and of a
    perennial nature which must be done every day and in these circumstances
    the Industrial Tribunal directed the Company to abolish the contract sys-
F   tem of labour with effect from a particular date and to have the said work
    done through workmen engaged by itself. This direction was given in
    view of the fact that the work was of a permanent nature and the labour
    employed through contractor was receiving much less wages than the
    unskilled workmen of the' company and they were not having any other
    benefits and amenities like provident'1Und, gratuity, bonus, privilege leave
G   etc. On the award of the Industrial Tribunal the Supreme Court gave the
    finding that it was an industrial dispute as defined under Section 2(k) of
    the Industrial Disputes Act. In dealing witllthe question whether the
    Tribunal was justified in giving the directions for abolishing the contra¢t
    system the Supreme Court noted that industrial adjudication genelf:tlly
    does not encourage employment of contract labour in modem times ait_d it
H   would be necessary to examine the merits of the dispute apart from gen-
      DENA NATH v. NATIONAL FERTILISERS [YOGESHWAR DAYAL, J.)            413

eral consideration that contract labour should not be encouraged; and that      A
in any case the decision should rest not merely on theoretical or abstract
objections to contract labour but also on the terms and conditions of the
contract labour and the grievance made by the workmen thereof. On facts
the Supreme Court observed :

            "It may be accepted that the contractor in the present case is      B
            an independent person and the system is genuine and there is
            no question of the company carrying on this work itself and
            camouflaging it as if it was done through contractors in order
            to pay less to the workmen. But the fact that the contract in
            this case is a bona fide contract would not necessarily mean
            that it should not be touched by the industrial tribunals. If the   C
            contract had been mala fide and a cloak for suppressing the
            fact that the workmen were really the workmen of the com-
            pany, the tribunal would have been justified in ordering the
            company to take over the entire body of workmen and treat it
            as its own workmen. But because the contract in this case was
            bona fide, the tribunal has not ordered the company to take         D
            over the entire body of workmen. It has left to it to decide for
            itself how many workmen it should employ and on wliat terms
            and has merely directed that when selection is being made
            preference should be given to the workmen employed by the
            present contractor."
                                                                                E
        The ~upreme Court also noticed that the industrial dispute was con-
. fined to the cleaning maintenance of the plant; the work was incidental to
  manufacturing process and the work is necessary for it and was of a
  perennial nature which must be done every day and such work is generally
  done by workmen in the regular employment of the employer and there
  would be no difficulty in having regular workmen for this kind of work. It    F
  noted that the matter would be different if the work done was of an
  intermittent or temporary nature or was so little that it would not be
  possible to employ full-time workmen for the purpose.

      It would be noticed that after the aforesaid observations of the Su-
preme Court in the case of Standard Vacuum Refining Company (supra)             G
the Parliament while giving power to the appropriate Government to pro-
hibit employment of contract labour in any process or operation or other
work in any establishment gave the guidelines in clauses (a),{b),(c) and
(d) of sub-section (2) of Section l 0, as noticed earlier, and guidelines are
practically based on the guidelines given to the Tribunals in the aforesaid
case of Standard Vacuum Refining Company by this court. The Act~an              H
    414                SUPREME COURT REPORTS              (1991) SUPP. 2 S.C.R.

A   be seen from the scheme of the Act merely regulates the employment of
    contract labour in certain establishment and provides for its abolition in
    certain circumstances. The Act does not provide for total abolition of
    contract labour but it provides for abolition by the appropriate Govern-
    ment in appropriate cases under Section l 0 of the Act.

B         In the present case and the other connected Special Leave Petitions
    no notification has been issued by the appropriate Government under
    Section l 0 of the Act vis-a-vis the type of establishment with whkh we
    are concerned.

          It is not for the High Court to inquire into the question and decide
c whether the employment of contract labour in any process, operation or in
    any other work in any establishment should be abolished or not.- It is a
    matter for the decision of the Government after considering the matter, as
    req1uired to be considered under Section 10 of the Act. The only conse-
    qu~nces provided in the Act where either the principal employer or the
    labour -~ontractor violates the provision of Sections 9 and 12 respectively
D   is ,the penal provision, as envisaged under the Act for which reference
    m~y be made to Sections 23 and 25 of the Act. We are thus of the firm
    view that in proceedings under Article 226 of the Constitution merely
    be)Cause contractor or the employer had violated any provision of the Act
    or thd rules, the Court could not issue any manda.Jl!US- for· deeming the
    contract labour as having become the employees of the principal em-
E   ployer .. we would not like to express any view on the,tfecision of the
    Kamataka High Court or of the Gujarat High-Co.un:::Gupra) since these
    decisions are under challenge in this court, but-wewould place on record
    that we do not agree with the aforequoted observations of the Madras
    High Court about the effect of non-registration of the principal employer
    or the non-Ucensing of the labour contractor nor with the view of Bombay
F   High c'ourt in the- aforesaid case. We are of the view that the decisions of_
    the Kerala High Court and Delhi High Court are correct and we approve:
    the same.

          In the result C.A.2355 of 1991 fails and is dismissed and in view of
    the observations in C.A. 2355of1991, C.A.Nos,2356-66/91, 2366A-69/91
G   and S.L.P .(C) Nos. 9755/91, 9830/91 & 10235-4.3/91 are also hereby dis-
    missed. In the circumstances of the case, parties are left to bear their own
    costs of the present proceedings.
             /
    V.P.R.                                                  Appeals dismissed