Holding

The matter must be remitted to the High Court for fresh determination, as the lower courts failed to apply the Steel Authority principles and to examine the factual issues, and no automatic absorption of contract labour is implied.

Summary

The Supreme Court examined two disputes referred by the Central Government under Section 10 of the Industrial Disputes Act, 1947, concerning whether workers engaged through a contractor at Sudamdh Colliery were to be treated as workmen of the principal employer, Bharat Coking Coal Ltd. The Tribunal and the Patna High Court had held the workers to be workmen of the principal employer, relying on the Air India case. The appellant argued that the Constitution Bench decision in Steel Authority of India Ltd. v. National Union Waterfront Workers overruled that view and that a notification under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 does not automatically absorb contract labour. The Court found that the lower courts had not examined the factual matrix, the alleged camouflage, the omission of workers' names, or the purported settlement, and had not applied the principles laid down in Steel Authority. Consequently, the Supreme Court allowed the appeals in part and remitted the matter to the High Court for fresh consideration within six months, without ordering any costs.

Issues considered

Whether workers engaged through a contractor are to be deemed workmen of the principal employer under Section 10 of the Industrial Disputes Act, 1947 in view of the Steel Authority of India Ltd. judgment.
Whether a notification under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 effects automatic absorption of contract labour.
Whether the lower tribunals erred by not considering the alleged camouflage, omission of workers' names, and the purported settlement.
Whether the delay in raising the dispute bars relief.

Legislation cited

Subjects

contract labourworkmenprincipal employercamouflageIndustrial Disputes ActSection 10absorptiondelaysettlementHigh Court remand

Judgment

.,, EMPLOYERS IN RELATION TO THE MANAGEMENT OF A
SUDAMDIH COLLIERY OF MIS BHARAT COKING COAL LTD.
V.

THEIR WORKMEN REPRESENTED BY RASHTRIYA COLLIERY
MAZDOOR SANGH

JANUARY 16, 2006 B

[ARIJlT PASAYAT AND TARUN CHATTERJEE, JJ.]

labour laws:
c
Co/1/ract labour-Absorption of-Courts below held them as workmen
ofprincipal employer-management-On appeal, matter remitted to High Court
to consider aji-esh in view of Conslitution Bench decision in Steel Authori~v's
case since when High Court decided the issue, Air India's case held the field-
Further, issue whether contractor was a camouflage, omission of names of D
·" workmen in reference filed and purported settlement between management
~
and workmen not considered in proper perspective-Industrial Disputes Act,
1947-Seclion 10.

Management of Coal Company denied employment to its workers.
Disputes were referred to the Industrial Tribunal. Tribunal held them to E
be workmen of the principal employer-Coal Company. Both the Single
Judge and the Division Bench of High Court upheld the order. Division
Bench of High Court relied on the case of *Air India Statutory Corporation
~ etc. v. United labour Union and Ors. and held that where the engagement
of workmen by a contractor is a camouflage to conceal the real relationship
between. principal employer and workmen, then also the workmen F
employed through unlicensed contractor are liable to be treated as
workmen of the principal employer. Hence the present appeal.

Appellant-Management contended that in view of the Constitution
Bench judgment of this Court in Slee/ Authority of India ltd. and Ors. v.
National Union Waterfront Workers and Ors. case that issuance of
G
notification prohibiting eRlflloyment of contract labour under section 10(1)
-{ of the Contract Labour (Regulation and Abolition) Act, 1970 does not
imply concept of automatic absorption of contract labour by the principal
employer, order of High Court cannot be sustained; that the dispute was
391 H
392 SUPREME COURT REPORTS [2006] I S.C.R.

A raised after about a decade; that the management and workmen had
arrived at a settlement; and that in the reference names of the workmen
were not given, thus, the workmen were not entitled to any relief.

Allowing the appeals and remitting the matter to the High Court,
the Court
B
HELD: 1.1. Tribunal and High Court did not consider the factual
position in the background of the legal position. At the point of time when
the matter was decided *Air India Statutory Corporation etc. v. United
labour Union and Ors. case held the field. But in view of the J
pronouncement of the Constitution Bench in **Steel Authority of India ltd
C and Ors. v. National Union Waterfront Workers and Ors. case the matter
needs to be re-examined by High Court. Further, there was no definite
finding by tribunal and/or High Court that the appellant had adopted a
camouflage. Mere reference to certain observations of this Court would
not suffice. Furthermore, High Court did not consider the effect of
D omitting the names of the claimants whose cause was being espoused by
the Union in the proper perspective and also the position regarding
purported settlement. In these circumstances, the matter is remitted to the
High Court to consider the matter afresh within a period of six months
from the date of allotment of the matter. 1399-C-G I

E *Air India Statutory Corporation etc. v. United labour Union and Ors., ..
AIR (1997) SC 645; Secretary. Haryana State Electricity Boardv. Suresh &
Ors. etc.. JT 11999] 2 SCC 435; **Steel Authority of India ltd. and Ors. v.
National Union Waterfront Workers and Ors.. 12001] 7 SCC I; Nitinkumar
Nathalal Joshi and Ors. v. Oil and Natural Gas Corporation ltd and Ors ..
120021 3 SCC 433; Nedungadi Bank ltd v. K.P. Madhavankutty and Ors ..
F 120001 2 SCC 455 and SM. Nilajkar and Ors. v. Telecom District Manager.
Karnataka, 120031 4 SCC 27, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1902-1903
of 2000.

G From the Judgment and Order dated 17.5.99 of the High Court of Patna
in LP.A. Nos. 424 and 425/98 (R).

Ajit Kumar Sinha for the Appellants.
"
S.B. Upadhyay, Ms. K.L. Das and Shiv Mangal Sharma for the
H Respondents.
\1ANAGEMENT OF SUDAMDIH COLLIERY"· RASHTRIY A COLLIERY MAZDOOR SANGH (PASAY AT. J J J 93
The Judgment of the Court was delivered by A
ARIJIT PASA YAT, J. Appellant calls in question the legality of the
judgment rendered by a Division Bench of the Patna High Court upholding
the judgment of the learned Single Judge. By the said judgments certain
persons were held to be workmen of the appellant.
B
Factual background in a nutshell is as follows:

The Central Government in exercise of power under Section I0 of the
Industrial Disputes Act, 1947 (in short the 'Act') referred the following two
disputes for adjudication to the Central Government Industrial Tribunal No. I,
Dhanbad (hereinafter referred to as the 'Tribunal'): C
Reference No.32 of 1989 dated 16th March, 1989:

I. "Whether the action of the management of Sudamdih Colliery of
M/s in denying employment to Shri Karma Rout and 21 others with
effect from 9.7.1977 is justified? If not, to what relief the concerned
workmen are entitled" and D
Reference No.35 of 1989 dated 20th March, 1989:

2. "Whether the action of the management of Sudamdih Area of M/
s BCCL in denying employment to Shri Bhagwat Singh and 3 others,
vi::. Shri Sapan, Karan Sahi and Shanti Thakur, who were engaged as E
sump cleaning mazdoors is justified? If not, to what relief are the
workmen. entitled"?

As the controversy involved in both the cases was the same, the Tribunal
heard them analogously and answered the references in favour of the workmen
declaring them to be workmen of the principal employer, namely, the F
Management of M/s. Bharat Coking Coal Ltd. (hereinafter referred to as the
'management') and directing for their reinstatement in service with effect
from the dates of references with 75% back wages. Being aggrieved by the
said combined Award, the management filed two writ petitions before the
Patna High Court, being CWJC No.859/1993 (R) and CWJC No. 856/1993 G
(R), which were dismissed by the learned Single Judge on I0th August,
1998. Not being satisfied with the judgment of the learned single Judge, the
_.J management has filed two appeals under clause I0 of the Letters Patent.

Relyi!)g on a decision of this Court in Air India Statutory Corporation
etc. v. United labour Union and Ors., AIR (1997) SC 645 the Division H
394 SUPREMF COURT REPORTS 120061 I S.C.R.

A Bench held that the decision of the learned Single Judge was unexceptionable. 't
Reference was also made to a decision of this Court in Secretary. Haryana
State Electricity Board v. Suresh and Ors. etc. JT [1999] 2 SCC 435 to hold
that where the engagement of workmen by a contractor is a camouflage to
conceal the real relationship between principal employer and tte workmen,
B then also the workmen employed through unlicensed contractor are liable to
be treated as workmen of the principal employer.

Mr. Ajit Kumar Sinha. learned counsel for the appellant submitted that
-~
the view expressed by the learned Single Judge and the Division Bench
cannot be sustained in view of the Constitution Bench judgment of this Court
C in Steel Authority of India ltd and Ors. v. National Uri ion Waterfront Workers
and Ors., [200 I) 7 SCC I . It was pointed out that though dispute purportedly
relating to the period 1976-77 was raised long after i.e. about a decade and
on that ~core alone the claimants were not entitled to any relief. There was
a settlement arrived at which was binding. But the Tribunal and the High
Court did not take note of the same. Additionally, in the reference names of
D the workmen were not given and it was not clear as to whose cause was .._
being espoused by che union. For the first time in the statement filed before
the Tribunal by the Union. the names were indicated. The reference was,
therefore, incompetent. but the Tribunal had lightly brushed it aside.

Mr. S.B. Upadhyay, learned counsel for the respondent on the other
E hand submitted that the decision in Steel Authority's case (supra) applies to
the present case as the so-called contractor was introduced as a camouflage.
This aspect has been noticed by the Tribunal. Additionally, the respondents
were not inactive and they were making all the efforts to get the matter
-~
settled. Merely because the names were not given, that did not render the
F reference incompetent. Further, the settlement referred to had no legal sanction.

In order to appreciate the rival submissions observations of this Court
in various cases need to be noted.

In Steel A u1/10ri1,1• 's case (supra) it was observed, inter a/ia, as follows
(at para 125 ):
G
"125 - The upshot of the above discussion is outlined thus:
(I )(a) Before 28-1-1986. the determination of the question whether >-
the Central Government or the State Government is the appropriate
Government in relation to an establishment. will depend, in view of
H the definition of th~ expression "appropriate Government" as stood in
~1ANAGEMENTOF SUDAMDJH COLLIERY" RASllTRIYA COLl.IERY \1AZDOOR SANGH [PASA YAT. J J 395
'(
the CLRA Act, on the answer to a further question, is the industry A
under consideration carried on by or under the authority of the Central
Government or does it pertain to any specified controlled industry, or
the establishment of any railway. cantonment board, major port, mine
or oilfield or the establishment of banking or insurance company ? If
the answer is in the affirmative, the Central Government will be the
appropriate Government; otherwise in relation to any other B
establishment the Government of the State in which the establishment
was situated, would be the appropriate Government;

(b) After the said date in view of the new definition of that expression,
the answer to the question referred to above, has to be found in
clause (a) of Section 2 of the Industrial Disputes Act; if(i) the Central C
Government company/undertaking concerned or any undertaking
concerned is included therein nominee, or (ii) any industry is carried
on (a) by or under the authority of the Central Government, or (b) by
a railway company; or (c) by a specified controlled industry, then the
Central Government will be the appropriate Government; otherwise D
in relation to any other establishment, the Government of the State in
which that other establishment is situated. will be the appropriate
Government.

(2)(a) A notification under Section 10( I) of the CLRA Act prohibiting
employment of contract labour in any process. operation or other E
work in any establishment has to be issued by the appropriate
Government:

(1) after consulting with the Central Advisory Board or the State
Advisory Board, as the case may be, and

(2) having regard to F

(i) conditions of work and benefits provided for the contract labour
in the establishment in question, and

(ii) other relevant factors including those mentioned .in sub-section
(2) of Section IO; G
_j
(b) Inasmuch as the impugned notification issued by the Central
Government on 9-12-1976 does not satisfy the aforesaid requirements
of Section 10, it is quashed but we do so prospectively i.e. from the
date of this judgment and subject to the clarification that on the basis
of this judgment no order passed or no action taken giving effect to H
396 SUPREME COURT REPORTS [20061 I S.CR.

A the said notification on or before the date of this judgment, shall be
called in question in any tribunal or court including a High Court if
it has otherwise attained finality and/or it has been implemented.

(3) Neither Section I 0 of the CLRA Act nor any other provision in
the Act, whether expressly or by necessary implication, provides for
B automatic absorption of contract labour on issuing a notification by
the appropriate Government under sub-section (I) of Section I 0,
prohibiting employment of contract labour, in any process, operation
or other work in any establishment. Consequently the principal
employer cannot be required to order absorption of the contract labour
working in the establishment concerned.
c
(4) We overrule the judgment of this Court in Air India case (Air
India Statlllory Corpn. v. United labour Union, [I 997] 9 SCC 377
prospectively and declare that any direction issued by any industrial
adjudicator/any court including the High Court. for absorption of
contract labour following the judgment in Air India case (Air India
D Statutory Corpn. v. United labour Union, [1997] 9 SCC 377 shall
hold good and that the same shall not be set aside, altered or modified
on the basis of th is judgment in cases where such a direction has been
given effect to and it has become final.

(5) On issuance of prohibition notification under Section I0( I) of the
E CLRA Act prohibiting employment of contract labour or otherwise,
in an industrial dispute brought before it by any contract labour in
regard to conditions of service, the industrial adjudicator will have to
consider the question whether the contractor has been interposed either
on the ground of having undertaken to produce any given result for
F the establishment or for supply of contract labour for work of the
establishment under a genuine contract or is a mere ruse/camouflage
to evade compliance with various beneficial legislations so as to
deprive the workers of the benefit thereunder. If the contract is found
to be not genuine but a mere camouflage. the so-called contract labour
will have to be treated as employees of the principal employer who
G shall be directed to regularise the services of the contract labour in
the establi.shment concerned subject to the conditions as may be )..

specified by it for that purpose in the light of para 6 hereunder.

(6) If the contract is found to be genuine and prohibition notification
under Section 10(1) of the CLRA Act in respect of the establishment
H concerned has been issued by the appropriate Government. prohibiting
MANAGEMENT OF SUDAMDIH COLLIERY"· RASHTRIYA COLLIERY \1AZDOOR SANGH [PASAYAT.J.] 397
y
employment of contract labour in any process, operation or other A
work of any establishment and where in such process, operation or
other work of the establishment the principal employer intends to
employ regular workmen, he shall give preference to the erstwhile
contract labour, if otherwise found suitable and, if necessary, by
relaxing the condition as to maximum age appropriately, taking into B
consideration the age of the workers at the time of their initial
employment by the contractor and also relaxing the condition as to
academic qualifications other than technical qualifications."

In a later case in Nitinkumar Nathalal Joshi and Ors. v. Oil and Natural
Gas Corporation Ltd. and Ors., (2002] 3 SCC 433), it was noted in paragraph C
8 as follows:

"8-ln the present case, the appellants were not absorbed by the principal
employer. Therefore, it cannot be said that the decision in Steel
Authority of India Ltd. case (200 I] 7 SCC I cannot be applied. The
directions issued by the learned Single Judge were modified by the D
Division Bench of the High Court and never given effect to. Therefore,
the directions issued by this Court in Steel Authority of India ltd.
case (200 I] ·7 SCC I are applicable on all fours."

· So far as delay in seeking the reference is concerned, no formula of
universal application can be laid down. It would depend on facts of each E
individual case.

However, certain observations made by this Court need to be noted. In
Nedungadi Bank ltd. v. KP. Madhavankuuy and Ors.. (2000] 2 SCC 455 it
was noted at paragraph 6 as follows:

"6. Law does not prescribe any time-limit for the appropriate F
Government to exercise its powers under Section I0 of the Act. It is
not that this power can be exercised at any point of time and to revive
matters which had since heel) settled. Power is to be exercised
reasonably and in a rational manner. There appears to us to be no
rational basis on which the Central Government has exercised powers G
in this case after a lapse of about seven years of the order dismissing
the respondent from service. At the time reference was made no
industrial dispute existed or could be even said to have been
apprehended. A dispute which is stale could not be the subject-matter
of reference under Section I 0 of the Act. As to when a dispute can
be said to be stale would depend on the facts and circumstances of H
398 SUPREME COl!RT REPORTS 120061 I S.C.R.
'/
A each case. When the matter has become final, it appears to us to be
rather incongruous that the reference be made under Section I0 of the
Act in the circumstances like the present one. In fact it could be said
that there was no dispute pending at the time when the reference in
question was made. The only ground advanced by the respondent
was that two other employees who were dismissed from service were
B reinstated. Under what circumstances they were dismissed and
subsequently reinstated is nowhere mentioned. Demand raised by the
respondent for raising an industrial dispute was ex-facie bad and
incompetent."

C In SM. Nilajkar and Ors. v. Telecom Dislrict Manager, Karnataku.
[2003 J 4 sec 27 the position was reiterated as follows: (at para 17)

·· 11. It was submitted on behalf of the respondent that on account of
delay in raising the dispute by the appellants the High Court was
justified in denying relief to the appellants. We cannot agree. It is
true, as held in Mis. Shalimar Works ltd. v. Their Workmen (supra)
D AIR (1959) SC 1217, that merely because the Industrial Disputes Act
does not provide for a limitation for raising the dispute it does not
mean that the dispute can be raised at any time and without regard
to the delay and reasons therefor. There is no limitation prescribed
for reference of disputes to an industrial tribunal, even so it is only
E reasonable that the disputes should be referred as soon as possible
after they have arisen and after conciliation proceedings have failed
particularly ,o when disputes relate to discharge of workmen
wholesale. A delay of 4 years in raising the dispute after even
reemployment of the most of the old workmen was held to be fatal
in Mis. Shalimar Works Limited v. Their Workmen (supra) AIR ( 1959)
F SC 1217, In Nedungadi Bank ltd. v. K. P. Mudhavunkulty and Ors ..
(supra) AIR (2000) SC 839, a delay of 7 years was held to be fatal
and disentitled to workmen to any relief. In Ratan Chandra Sammanta
and Ors. v. Union of India and Ors. (supra) ( 1993) AIR SCW 2214,
it was held that a casual labourer retrenched by the employer deprives
G himself of remedy available in law by delay itself. lapse of time
results in losing the remedy and the right as well. The delay would
).
certainly be fatal if it has resulted in material evidence relevant to
adjudication being lost and rendered not available. However. we do
not think that the delay in the case at hand has been so culpable as
to disentitle the appellants for any relief. Although the High Court
H
MANAGEME~TOF SUDAMDIH COLLIERY•·. RASllTRIYA COLLIERY MAZDOOR SANGH [PASA VAT. J J 399

has opined that there was a delay of 7 to 9 years in raising the dispute A
before the Tribunal but we find the High Court factually not correct.
The employment of the appellants was terminated sometime in 1985-
86 or 1986-87. Pursuant to the judgment in Daily Rated Casual
Employees Under P& T Department v. Union of India, (supra) AIR
( 1987) SC 2342, the department was formulating a scheme to
accommodate casual labourers and the appellants were justified in B
awaiting the outcome thereof. On 16-1-1990 they were refused to be
accommodated in the scheme. On 28-12-1990 they initiated the
proceedings under the Industrial Disputes Act followed by conciliation
proceedings and then the dispute was referred to the Industrial Tribunal
cum-Labour Court. We do not think that the appellants deserve to be C
non suited on the ground of delay."

It appears that the Tribunal and the High Court did not consider the
factual position in the background of the legal position as noted above. Of
course at the point of time when the matter was decided Air India's case
(supra) held the field. But, in view of the pronouncement of the Constitution D
Bench in Steel Authority's case (supra) the matter needs to be re-examined
by the High Court. Though it was submitted by Mr. Upadhyay that there is
a finding about the appellant having adopted a camouflage, there is no definite
finding by the Tribunal and/or the Eigh Court in this regard. Mere reference
to certain observations of this Court would not suffice without examination
of the factual position. Additionally, the effect of omitting the names of the E
claimants whose cause was being espoused by the Union has not been
considered by the High Court in the proper perspective. Similar is th1. position
regarding purported settlement. In these peculiar circumstances, it would be
appropriate for the learned Single Judge of the High Court to re-consider the
matter. Accordingly, the matter is remitted to the High Court so that learned F
Single Judge can consider the matter afresh taking into account the principles
set out above and consider their applicability to the background facts on the
issues raised by the appellant. As the matter is pending since long, learned
Chief Justice of the High Court is requested to allot the matter to a learned
Single Judge who shall make an effort to dispose of the matter afresh within
a period of six months from the date the matter is allotted by the learned G
Chief Justice.

The appeals are allowed to the aforesaid extent without any order as to
costs.

N.J. Appeals allowed. H