Holding

Employees of statutory and non‑statutory recognised railway canteens are to be treated as railway servants for all purposes, whereas employees of non‑statutory non‑recognised canteens are not railway servants.

Summary

The petitioners were workers in railway canteens classified as statutory, non‑statutory recognised, and non‑statutory non‑recognised. They sought to be treated as railway employees and to receive the same service conditions as other railway staff. The Court examined the statutory duty under Section 46 of the Factories Act, 1948 to provide canteens in establishments with more than 250 workers, the Railway Establishment Manual, and the Government of India’s Administrative Instructions on departmental canteens, which deem such canteen staff as holders of civil posts under Articles 309 and 311 of the Constitution. It held that employees of statutory and non‑statutory recognised canteens are railway servants for all purposes, while those in non‑statutory non‑recognised canteens are not. Accordingly, the petitions for the first two categories were allowed and the petitions for the third category were dismissed.

Issues considered

Whether employees of statutory railway canteens are railway employees for the purposes of the Factories Act, 1948.
Whether employees of statutory railway canteens are railway employees for all other purposes, including service conditions under Articles 309 and 311 of the Constitution.
Whether employees of non‑statutory recognised railway canteens should be treated as railway employees for all purposes.
Whether employees of non‑statutory non‑recognised railway canteens are entitled to the status of railway employees.

Legislation cited

Subjects

Railway canteen employeesStatutory canteenNon‑statutory recognised canteenNon‑statutory non‑recognised canteenFactories ActArticle 309Article 311Service conditionsCivil service statusAdministrative Instructions on departmental canteens

Judgment

M.M.R. KHAN AND ORS. ETC.
A
v.
UNION OF INDIA AND ORS. ETC.

FEBRUARY 27, 1990

[RANGANATH MISRA, P.B. SAWANT AND B
K. RAMASWAMY, JJ.]

Railway Establishment Manual: Para 2831-Employees of Rail-
ways established statutory and non statutory recognised canieens-
Whether railway servants.

The petitioners in this group of Writ Petitions are workers in
c
canteens run in different railway establishments. The relief claimed in
all the petitions is that the workers concerned should be treated as
railway employees and should be extended all service conditions which
are available to the railway employees.
D
For convenience sake, the canteens have been classified into three
categories, viz., (i) Statutory canteens; (ii) Non-statutory Recognised
Canteens, and (iii) Non-Statutory Non-Recognised canteens.

Chapter XXVIII of the Railway Establishment Manual contains
the necessary instructions for running the canteens. Paragraph 2829 of E
Chapter XXVIII of the Manual refers to the provisions of Section 46 of
the Factories Act, 1948 and nnder-writes the fact that under these
provisions, there is a statutory obligation on the Railway Administra-
tion to set up canteens in Railway establishments which are governed by
~ - the said Act and which employ more than 250 persons. Paragraph 2831
~ lays down the principles governing the setting up of the canteens which F
apply also to the non-statutory canteens provided for under paragraph
2830. Paragraph 2832 inter alia states that although the Administration
can employ as agent a Staff Committee or a Co-operative Society for
management, the legal responsibility for proper management rests not
with the agency but solely with the Railway Administration.
G
The Department of Personnel & Training, Ministry of Personnel,
Government of India, had issued Administrative Instructions on
Departmental Canteens in Offices and Industrial Establishments of the
Government. It is made clear in these instructions that the orders issued
under the said Instructions are applicable to all Canteens/Tiffin Rooms
functioning or to be set up in any Ministry, Department, Establish- H

687
688 SUPREME COURT REPORTS [ 1990] I S.C.R.

A. ment, Office, or Installation of the government of India (Industrial or '1111
non-industrial), including those functioning under the Ministries of J
Defence, P & T and Railways unless these three Ministries had pre-
viously decided to exempt any of the said Instructions due to specific
reasons.

R It was contended on behalf of the petitioner-workers that, in view
of the documents on record there is no reason why the employees in the 4
canteens concerned should not be giwn the status of the railway
employees with all consequential benefits.

On the other hand. it was contended on behalf of the Railways
that (i) the canteen employees are appointed by the Staff Managing
C Committees or Co-operative Societies and not by the Railway Administ-
ration and as such there is no relationship of master and servant bet- )
ween the Railwasy Administration and the Canteen employees, and in
no case can they be deemed as holders of civil posts, either for Article
309 or for Article 311 of the Constitution; (ii) the control exercised by
D the Railway administration is only to ensure that the canteens are run in
conformity with certain requirements; (iii) the Railways have a primary
objective of carrying goods and passengers and the welfare activities are
ancillary to the main objective; (iv) the canteens continue at the discre- ~
lion of the Railway Administration, and at any stage the Government
can change the form of this welfare measure and choose to have another
E set-up; (v) the Railways undertake varied welfare activities, and if it is
decided to treat the employees engaged in the canteens as railway
employees, it will be difficult to resist the claim from employees of these
other institutions for a similar status; and (vi) the Railway Establish-
ment Manual contains the necessary instructions for running the can-
teens, and hence the Railway Administration should be deemed to have '~
F been exempted from the operation of the Administrative Instructions on f
Departmental Canteens in Offices and Industrial Establishments of the
Government, issued by the Department of Personnel & Training.

Allowing the petitions filed by the employees of the statutory can-
tee:.s and non-statutory (recognised) canteens, and dismissing those of
G the non-statutory (non-recognised) canteens. this Court,

HELD: Statutory Canteens

(I) In terms of the Rules made by the State Governments under
Section 46 of the Factories Act, 1948 it is obligatory on the Railway
)I{ Administration to provide a canteen in an establishment which employs
M.M.R. KHAN v. U.0.1. 689

more than 250 persons. The provision of the canteen is therefore,
A
deemed by the statute as a necessary concomitant of the manufacturing
activity; [692C; G]

(2) The employees of the departmental canteens/tiffin rooms were
declared as holders of civil posts under the Government of India Notifi-
cation dated December 11, 1979 which is annexed to the Administrative B
Instructions on Departmental Canteens in Offices and Industrial
Establishments of the Government. That Notification states that all
posts in the said canteens/tiffin rooms are to be treated as posts in
connection with the affairs of the Union, and hence the incumbents
would qualify as holders of civil posts. Accordingly, service rules were
framed under Article 309 as per the notification issued by the Govern-
ment of India, Department of Personnel & Training on December 23, c
1980. [705H; 706A-B]

(3) The provisions contained in the Administrative Instructions,
show that the Govern111ent has a complete control o.ver the canteens and
the workers employed therein ·are holders of civil posts within the D
meaning of Article 311 of the Constitution. There recruitment and
service conditions are governed by the rules applicable to the em-
ployees of the Department/Office/Establishment to which the canteens
are attached. [701E]

(4) Although there is nothing expressly on record to show that the E
railway canteens are exempted from the said Administrative Instruc-
tions, but even assuming that the railway canteens are exempted by
·virtue of the relevant provisions of the Railway Manual, the fact
remains that there are as yet no notifications on the lines of December
11, 1979 and December 23, 1980 issued for the benefit of the employees
.in the railway canteens. [706E-F] F

(5) It cannot be argued that there is any difference in the work
performed by the employees in the canteens run in the establishments of
the Ministries. If the said two notifications are applicable to the
employees in the canteens rnn by the other departments of the Govern-
ment of India, there is no reason why the same should not apply also to G
the employees in the canteens run by the Railways. In the circum-
stances, it would be highly discriminatory not to apply the said two
_notifications to the employees in the Railway canteens. It would be
violative of Articles 14 and 16 of the Constitution. The employees in the
Statutory canteens of the Railways will therefore have to be treated as
Railway servants. [706F-H; 707A] H
690 SUPREME COURT REPORTS [1990] I S.C.R.

(6) Thus the relationship of employer and employee stands
A
created between the Railway Administration and the canteen employees
from the very inception. Hence, it cannot be gainsaid that for the
purposes of the Factories Act the employees in the statutory canteens
are the employees of the Railways. [7078]

B Order dated 22.10.1980 in Civil Appeal No. 368of1978 (Supreme
Court); Madras High Court; Writ Appeals Nos. 414-415 of 1978. refer-
red to.

(7) If by virtue of all these facts the employees are entitled to the
status of Railway employees they cannot be deprived of that status
merely because some other employees similarly or dis-similarly situated
C may also claim the same status. The argument to say the least can only
be described as one in terroram, and as any other argument of the kind l.
has to be disregarded. [708E]

Non-Statutory Recognised Canteen
D
(8) These canteens are run in the establishments which employ
250 or less than 250 employees; and are established with the prior
approval and recognition of the Railway Board. There is hardly any "'1
difference between the statutory canteens and non-statutory recognised
canteens. The only material difference is that while one is obligatory
E under the Factories Act, the other is not. However. there is no dif-
ference in the management of the two type of canteens. [711G; 712C]

(9) The Administration Instructions on Departmental Canteens
in Government Offices and Government Industrial Establishments do
not make any difference between the two so far as their applicability _is '(
F concerned. Hence, it cannot be seen why any distinction be made bet-
ween the employees of the two types of canteens so far as their service
conditions are concerned. For this very reason, the two notifications of
December 11, 1979 and December, 23, 1980 should also be equally
applicable to the employees of these canteens. [712G-H]

G (10) If that is so, then these employees would also be entitled to be
treated as railway servants. A classification made between the Ji
employees of the two types of canteens would be unreasonable and will ~
have no rational nexus with the purpose of the classification. Surely it I~·
cannot be argued that the employees who otherwise do the same work
and work under the same conditions and under a similar management
H have to be treated differently merely because the canteen happens to be
'
M.M.R. KHAN v. u:o.1. 691

run at an establishment which employees 250 or less than 250 members

it of the staff. [712H; 713A-B]

Non-Statutory Non-Recognised Canteens
A

(11) These canteens are run at establishments which employ JOO
or less than 100 employees, and are established without prior approval B
) or recognition of the Railway Board. [692E]

The Canteens are run more or less on ad hoc basis, the Railway
Administration having no control of their functioning. They are not
required to be managed either as per the provisions of the Railway
Establishment Manual or the Administrative Instructions. In the
circumstances the workers engaged in these canteens are not entitled to c
claim the status of the railway servants. [713H; 714A]
'---' ORIGINAL JURISDICTION:

Writ Petitions (C) Nos. 2275-86 of 1982 Etc. D

(Under Articie 32 of the Constitution of India)
~/
WITH

Special Leave Petition (C) No. 4090 of 1985. E

From the Judgment and Order dated 4.12.1984 of the Madras High
Court in W.A. No. 414/78.

B. Datta, Additional Solicitor General, G. Ramaswamy, Addi-
1'i tional Solicitor General, M.K. Ramamurthy, V.M. Tarkunde, Gobind F
Mukhoty, S.C. Manchanda, G.B. Pai, K.K. Venugopal, Mrs.
Shyamala Pappu, M.A. Krishnamurthy, Ms. Chandan Ramamurthy,
J.D. Jain, Ms. Kanwaljit Kochhar, K.B. Rohtagi, B.R. Agarwala,
Ms. Sushma Manchanda, R.B. Hathikhanwala, Ms. Sunita Sharma,
P.H. Parekh, S.S. Khanduja, Y.P. Dhingra, B.K. Saluja, H.S.
Parihar, Vipin .Chandra, R.K. Maheshwari, Pramod Dayal, R.P. G
Saxena, D.K. Garg, A.D. Sanger, Pramod Swamp, Krishna Prasad,
P.C. Kapur, A.N. Badriyar, M.P. Jha, V.N. Sharma Petitioner-in-
person, B.B. Sahoo, S. Srinivasan, Vineet Kumar, Ms. Urmila
Kapoor, Ms. S. Janani, Dalveer Bhandari, C. Ramesh, G.D. Gupta,
L.K. Gupta, G. Venkatesh Rao, Ms. A. Subhashini, Ms. Sushma Suri,
C.V. Subba Rao, P. Parmeshwaran, J. R. Das, S.K. Patri, Ms. Lira H
692 SUPREME COURT REPORTS [ 1990] I S.C.R.

Goswami, D.N. Mishra, V.J. Francis, N.M. Popli, S.K. Dhingra, K.J.
Ji John, Y.P. Rao, Mahabir Singh, Ms. Bharti Anand, Indra Makwana
and S.K. Jain for the appearing parties.

The Judgment of the Court was delivered by

B SAWANT, J. This group of petitions concerns the workers in -t--·
canteens run in the different railway establishments. The relief '\
claimed in all the petitions is that the workers concerned should be
treated as railway employees and should be extended all service condi-
tions which are available to the railway employees.

2. For our purpose, these canteens have to be classified into
C three categories, viz. (i) Statutory Canteens-These are canteens
required to be provided compulsorily in view of the provisions of
Section 46 of the Factories Act, 1948 (hereinafter referred to as the
Act) since the Act admittedly applies to the establishments concerned
and the employees working in the said establishments exceed 250; (ii)
D Non-Statutory Recognised Canteens-These canteens are run in the
establishments which may or may not be governed by the Act but
which admittedly employ 250 or less than 250 employees, and hence, it
is not obligatory on the railways to maintain them. However, they
have been set up as a staff-welfare measure where the employees
exceed 100 in number. These canteens are established with the prior
E approval and recognition of the Railway Board as per the procedure
detailed in the Railway Establishment Manual; and (iii) Non-Statutory
Non-Recognised Canteens-These canteens are run at establishments
in category (ii) above but employ 100 or Jess than 100 employees, and
are established without the prior approval or recognition of the Rail-
way Board
F
3. The present petitions concern employees in all the three types
of canteens. It will be convenient to deal separately with the emp-
loyees in the three types of canteens, because, the history of litigation
and the arguments advanced in respect of each of the categories are
different.

4.(i) Statutory Canteens: Section 46 of the Act which makes it
obligatory on an occupier of a factory as defined under the Act, to
provide a canteen or canteens where more than 250 workers are ordi-
narily employed ru~s as follows:

"Canteens: (1) The State Government may make rules
M.M.R. KHAN v. U.0.1. [SAWANT, J.) 693

requiring that in any specified factory wherein more than
A
two hundred and fifty workers are ordinarily employed, a
canteen or canteens shall be provided and maintained by
the occupier for the use of the workers.

(2) Without prejudice to the generality of the foregoing
power, such rules may provide for- B

(a) the date by which such canteen shall be provided;

(b) the standards in respect of construction, accommoda-
tion, furniture and other equipment of the canteen;

(c) the foodstuffs to be served therein and the charges c
which may be made therefore; >

(d) the constitution of a managing committee for the can-
teen and representation of the workers in the management
of the canteen; D

(dd) the items of expenditure in the running of the canteen
which are not to be taken into account in fixing the cost of
foodstuff and which shall be borne by the employer;

(e) the delegation to the Chief Inspector, subject to such E
conditions as may be prescribed, of the power to make
rules under clause (c)."

It is evident from the aforesaid provision that the occupier of a factory
(a railway establishment for the purposes of the said provisions is a
factory within the meaning of the Act) is not only obliged to run a F
canteen where more than 250 workers are employed but is also obliged
to abide by the rules which the concerned Government may make,
including the rules for constitution of a managing committee for run-
ning the canteen and for representation of the workers in the manage-
ment of the canteen. The occupier may also be required to bear a part
of the expenses of running the canteen and to comply with the rules G
prescribing standards in respect of construction, accommodation,
furniture and other equipment of the canteen the foodstuffs to be
served and the prices to be charged for them. In other words, the
whole paraphernalia of the canteen has to conform to the statutory
rules made in that behalf. As is pointed out on behalf of the Railways,
it appears that there are 89 such statutory canteens functioning in the H
railway premises.
694 SUPREME COURT REPORTS [1990[ 1 S.C.R.

A 5. It appears that the workers working in the statutory canteen
at Loco-Carriages and Electrical Workshops of the South Eastern
Railways Workshop, Kharagpur had preferred a writ petition in the
Calcutta High Court praying for a direction to the Union of India to
recognise them as railway employees and grant them all service condi-
tions available to the railway employees. A learned Single Judge by his
B decision dated 7.8.1973 dismissed the said petition holding that the
workers were not entitled to the reliefs claimed by them. Against the
said decision, the workers preferred an appeal before the Division
Bench of the said Court and the Division Bench by its decision of July
16, 1974, allowed the same and directed the respondent Union of India
to recognise the workers as employees of the Railway Administration
under the Factories Act, but rejected the demand to pay salary and
C allowances to them as if they were railway employees. On the other
hand, the High Court held that the employment of the workers must
be deemed to be on the basis of appointment letters and that they had
no statutory or legal right and the Railway Administration had no
corresponding statutory or legal obligation to pay salaries etc. above
D the minimum wages, or dearness allowances as claimed by them. The
court held that their service conditions were in the realm of contract or
depending on a policy followed by the Railway Administration, at its
discretion. Being aggrieved, the Union of India had come in appeal to y
this Court being Civil Appeal No. 368 of 1978. This Court by its order
of October 22, 1980 disposed of the appeal as follows:
E
"The benefits accruing to the workers under the decision of
the Calcutta High Court do not require to be interfered
with in this appeal. Prima facie we are inclined to agree
that the High Court decision is right. Moreover, the
learned Attorney General agrees to apply the Act as if it ./
F were applicable to canteen employees. In this view, a final f
pronouncement on this question by this Court need not be
given in the present case. We leave it open to Union of
India in an appropriate case to raise the point and seek a
pronouncement."

G The Act referred to in the aforesaid order obviously means the
Factories Act. Therefore, what was confirmed by this Court was the ;...
declaration given by the Cakutta High Court that the employees of the
Statutory Canteens were railway employees for the purposes of the
Factories Act and that their service conditions were determined by the
contract as incorporated in their appointment letters or by the policy
H decision of the Railway Administration which was discretionary. It is
M.M.R. KHAN ·v. U.0.1. ISAWANT, J.] 695
I

t necessary to note this fact at the very outset.

It has further to be remembered that the Calcutta High Court
had given the aforesaid declaration in favour of the statutory canteen
A

workers notwithstanding the fact that the canteens were managed by
the Committee of Management_ nominated by the Railway Administ-
ration or by a managing committee elected or nominated by the B
1, employees or by the Cooperative Society relying on the express provi-
sion contained in Chapter XXVIII of the Railway Establishment
Manual. It may, however, be mentioned that the High Court had
taken into consideration Note 2 of Para 2834(2) of the Manual which
had declared that in cases where the canteens were being run on co-
operative basis either by the Co-operative Society or the managing
committee of the staff, the canteen staff shall not be treated as railway c
servants because in that case master and servant relationship existed
-~ between the Co-operative Society (through its managing committee)
and the concerned employees. The High Court had relied upon the
fact that even in such cases the entire cost of the staff was reimbursed
by the Railway Administration tci the Co-operative Society managing D
committee and that over-all control over the canteen and the staff,

.... vested in the Railway Administration. In fact, the direction under para
2832 of the Railway Establishment Manual was that where even a
Co-operative Society was running the canteen, the bye-laws of the
Society should be suitably amended to provide for such overall control
by the Railway Administration since the legal responsibility for the E
proper management of the canteen vested not with the agent like the
Co-operative Soceity but solely with the Railway Administration.
'!'.
6. It is undoubtedly true, however, that this Court in its Order
'r dated October 22, 1980 had reserved the right to the Union of India to
raise the question as to whether the employees of the Statutory can- F
teens were the employees of the Railway Establishment under the
Factories Act and get a pronouncement on the san1e. It appears that
after the said order of this Court, the Railway Board had issued a
letter dated May 22, 1981 to the General Manager, South Eastern
Railway, Calcutta Conveying the decision of the Ministry of the Rail-
ways that the employees of Kharagpur Workshop Statutory Canteen, G
d, (which employees were a party to the said decision) should be deemed
to be railway servants with effect from October 22, 1980 and till
Government decided otherwise, the said workers would continue to be
governed by the conditions of service and emoluments as existed on
October 21, 1980. It was also stated there that what was stated in the
letter had the sanction of the President and the letter was issued with H
696 SUPREME COURT REPORTS [ 1990] 1 S.C.R.

the concurrence of the Finance Directorate of the Ministry of Rail- """
A ways. Subsequently, the Board issued another circular letter of June 8, •
1981 addressed to the General Managers of all Indian Railways stating
therein that it was decided that employees of all other statutory can-
teens on the railways irrespective of the type and management of the
canteens should also be deemed to be railway servants w.e.f. October
B 22, 1980 and that till Government decided otherwise, the staff of the .t
statutory canteens would continue to be governed by the conditions of \
service and emoluments as existed on October 21, 1980.

7. On March 11, 1982, the Railway Board issued a letter and
referred to its earlier communication of June 8, 1981 and September
18, 1981. In this, letter, it was stated ·that pursuant to the said two
C earlier communications (where it was stated that the question of pay
scale and retirement benefits were under consideration and that a
separate communication would follqw), a Schedule showing revised
pay scale applicable to the employees of the statutory canteens of the
railways was enclosed for necessary action. The letter stated that the
D existing employees of these canteens would be entitled to exercise an
option under Rule 2019 (F.R. 23) and Rule II either to retain their
existing pay scale as presently applicable to them or opt for the revised
pay scale. However, on promotion such employees would be com-
pulsorily brought on to the revised pay scales. It was made clear that
those who opt for the revised scales would not be eligible to other I
E facilities/perquisites admissible to them in their existing pay scale such "
as free food, snacks, commission etc. A period of three months was
given for exercising the option and it was stated that if no option was
exercised it would be assumed that the employees concerned had
elected to be governed by the revised pay scales w.e.f. October 22,
1980. The Schedule annexed to the letter mentioned, among other
p things, that the canteen employees will be entitled to the dearness
allowance, house rent allowance and city compensatory allowance as
per the instructions issued by the Railway Ministry; that the age of
retirement of employees would be 58 years as in the case of other
railway employees; and that the employees of the canteen would be
entitled to the benefit of productivity linked bonus on the principles
V applicable to the staff of the office/establishment to which they were
attached from the date of their being declared as railway servants.

8. In a decision of this Court reported in 1988 (4) SCC 478, this
Court directed that for the purpose of calculating pensionary benefits,
the service rendered by the said employees prior to October 22, 1980
H should also be computed. By its letter dated May 13, 1983 addressed to
M.M.R. KHAN v. U.0.1. [SAWANT, J.J 697

all the General Managers, the Ministry of Railways placed on record
A
the fact that pursuant to the Order of this Court dated October 22,
1980 the employees of all the statutory and 11 Delhi based non-
statutory canteens had been treated as railway servants w.e.f. October
22, 1980, and the revised pay scale applicable to the employees had
been communicated vide the Railway Board's letter dated March 11,
1982. B
iI
9. On December 4, 1984, a Division Bench of the Madras High
Court delivered a Judgment in Writ Appeal No. 414 of 1978, Railway
Board & Anr. v. Parthasarthy and Anr., and in Writ Appeal No. 415 of
1978 relying upon the order dated October 22, 1980, passed by this
Court and held that canteen-employees will have to be treated as
railway employees for the purposes of the Factories Act, in view of the c
concession made by the Railways before this Court and also the con
cession made by the counsel appearing for the Railways before the
High Court.

10. We have then on record an Office Order dated July 27, 1983 D
issued to an employee of a statutory canteen conveying to him appoint-
ment as a TY/Cleaner in a scale of pay plus usual allowances w.e.f.
January 12, 1983. In this order, it is stated that the employee would be
t eligible for house rent allowance under the Rules in force from time to
time, that he will be on .Probation for a period of one year and that the
appointment would be term·inated with 14 days' notice on either side. E
It is, however, a!lded that no such notice would be required, for the
termination of service as and by way of removal or dismissal as a
disciplinary measure effected after compliance with the provisions of
clause (2) of Article 311 of the Constitution of India. It is also stated
that the employee should take oath of allegiance to the Union of India
and that he should apply for allotment of quarters within 7 days from F
the date of his appointment and then alone should apply for house rent
allowance.

11. It is now necessary to refer to the relevant provisions of the
Railway Establishment Manual which deal with the canteens. Para-
graph 2829 of Chapter XXVIII of the Manual refers to the provisions G
of Section 46 of the Factories Act 1948 and underwrites the fact that
J.. under these provisions, there is a statutory obligation on the Railway
Administration to set up canteens in Railway establishments which are
governed by the said Act and which employ more than 250 persons.
The paragraph further mentions that Railway Administration should
strictly abide by the rules which are framed by the respective State H
698 SUPREME COURT REPORTS [1990] I S.C.R.

A Governments under sub-section 2 of the Act regarding the constitu-
tion of the Managing Committees of such canteens. Paragraph 2832
then ordains that the staff served by the said canteens should be
actively associated in their management, and for this purpose a Com-
mittee of management of the staff should be formed in accordance
with the rules framed by the concerned State Government. The
B paragraph further states that although the Administration can employ
as agent a Staff Committee or a Co-operative Society for management,
the legal responsibility for proper management rests not with the
agency but solely with the Railway Administration. In case the man-
agement is entrusted to a consumer co-operative society the bye-laws
of the society are directed by the said paragraph to be amended suit-
e ably to provide for an overall control by the Railway Administration.
Paragraph 2834 deals with the incidence of cost of the canteens. As
regards the statutory canteens, the paragraph directs that in addition
to the facilities which are given to the non-statutory canteens, the
Administration will have also to bear the expenditure on the entire
paraphernalia including the furniture as well as the salaries of the cook
D and the canteen staff. Note 2 of the said paragraph then states that
where the canteens are being run on co-operative basis either by
co-operative society or by Managing Committee of the staff and there
subsists a relationship of master and servants between the society/
managing committee and the workers, i.e. where the canteen staff has
been employed by the society/managing committee and not by the
E Administration as such, the canteen-staff are not to be treated as
railway servant even though the cost of this staff is reimbursed by the
Administration.

12. We have also on record the second edition (1988) of
"ADMINISTRATIVE INSTRUCTIONS ON DEPARTMENTAL --.;'
F CANTEENS IN OFFICES AND INDUSTRIAL ESTABLISH~ I
MENTS OF THE GOVERNMENT" issued by the the Deptt. of
Personnel & Training, Ministry of Personnel, Public Grievances &
Pensions of the Govt. of India, first published in 1980 (hereinafter
briefly called as the Instructions). They are applicable to:
(a) Canteens/Tiffin Rooms set up on departmental basis and run
G as per scheme issued by the Dept!. of Personnel and Training;
)
(b) Canteens/Tiffin Rooms set up on Co-operative basis by a
Society of Government employees with the Head of the Dept!./
Office/Establishment or his nominee as Chairman; and

H (c} Canteens/Tiffin Rooms set up in Industrial Establishments
M.M.R. KHAN v. U.0.1. [SAWANT, J.] 699
:... ,
(other than those covered under Section, 46 of the Factories Act)
.,.-, A
of the Government and which have not been exempted from
following the rules in the said Instructions due to the availability
of a separate and distinct set of rules and guidelines framed by
the controlling Ministries/Departments. (para 1.3)

~· It is made clear in these Instructions that the orders issued under the B
said Instructions are applicable to all Canteens/Tiffin Rooms function-
ing or to be set up in any Ministry, Department, Establishment,
Office, Installation of the Government of India (industrial or non-
industrial) which should be centrally registered with the office of the
Director of Canteens, Deptt. of Personnel & Training, New Delhi
including those functioning under the Ministries of Defence, P & T
and Railways, unless these three Ministries had previously decided to c
'
.J.. exempt any of their Canteens/Tiffin Rooms from the purview of the
said Instructions due to specific reasons, and they had framed or they
propose to frame a separate set of instructions for the exempted can-
teens. (para 1.4). The Instructions further state that the policy matters
and coordination on canteen matters will be centrally done by the D
Deptt. of Personnel and Training (Director of Canteens) (para 1.14).
To be entitled to subsidy all the departmental canteens have to get
r· themselves registered centrally with the Director of Canteens arid
Training (Para 1.15). The canteens are entitled to subsidy on wages
and gratuity payable to the workers employed in the canteens and for
their uniforms as well as to capital and replacement grants for equip- E
ment including utensils, crockeries, cuttlery and furniture and also to
interest-free loans. In addition to subsidy for equipment, the canteens
are also entitled to other facilities such as accommodation on nominal
rent of Rs. l electricity, water etc. The Instructions in terms state that
) since the canteens are run departmentally as a measure of staff
welfare, the beverages, snacks and meals etc. have to be made avail- F
able to the staff at economic rates and for this purpose the Govern-
ment has to provide necessary accommodation at the nominal rent and
provide the necessary grants, subsidy and. loans. (Para 1.2). fo addi-
tion, the ~oncerned DeQartment/Office has to bear the electricity and
water bills. In chapter V which deals with the personnel in the canteens,
the Instructions lay down the entitlement of Canteens/Tiffin Rooms to G
1- the number and categories of employees according to the grades of
Canteens/Tiffin Rooms. With regard to the recruitment rules, condi-
tions of service, status and the scales of pay of the canteen workers,
the procedure for taking disciplinary action against them as well as for
giving training to them, the chapter makes it clear that since the can-
teen workers have acquired the status of the holders of civil posts H
700 SUPREME COURT REPORTS I1990] 1 S.C.R.
w .e.f. October 1, 1979, their recruitment and conditions of service etc.
A
would'be governed by the rules framed under proviso to Article 309 of r
the Constitution contained in GSR 54 issued under Government of
India, Department of Personnel and Training Notification dated 23rd
December, 1980. It is made clear that the said rules also apply to 'the
employees of the Canteens run by the Co-operative Societies in con-
$ junction with the bye-laws of the Society and local co-operative laws in
force. It is further made clear that the workers in the non-statutory
departmental and co-operative Canteens/Tiffin Rooms will be paid the
pay and allowances at the same rate and on the same basis w.e.f. 26.9.
83 on which the employees of the statutory canteens are paid the same.

The chapter also mentions that before taking any disciplinary
C action against any canteen worker procedure as set out in chapter IV
(Conduct and Discipline) of GSR of 1954 dated 23rd December, 1980 )
published in the Gazette of India Part II Section 3, sub-Section (I) '
dated 17th January, 1981 will be followed. The chapter further directs
periodical training programmes to be arranged by the Director of Can-
0 teens for managerial. personnel and other canteen staff.
13. Chapter VI contains guidelines for constituting the Manag-
ing Committees of the canteens. This chapter ordains that the
Chairman of the managing committee should preferably be the Head
of the Department/Office himself or his Deputy, and that the Honor-
E ary Secretary of the managing committee should normally be the
Welfare Officer or the Administrative Officer of the Department/
Office of the minimum rank of a Section Officer or a Major or equiva-
lent in services, who shall be nominated by the Office/Establishment,
and in the case of Co-operative Canteens may be elected as per the
bye-laws of the Society. One of the officials who should be of the rank
IF of Section Officer/Major or above is to be nominated on the managing
Committee by the Chairman. Paragraph 6.11 defines the Legal Status
of the Managing Committee. It says that the Committee functions in
the Deptt./Office/establishment of the Government of India for the
welfare of the Govt. employees, under the orders of the Government
of India and its functions are connected with the affairs of the Union.
G The Committee, therefore does not enjoy an autonomous status. With
respect to the contractual obligations, it functions "for and on behalf
of the the President of India". The proceedings of the Committee will
not be conducted or decided on resolutions or voting system, but the
official decision will rest with the Chairman of the Managing Commit-
tee or the Head of the Department/Office. In the case of canteens run
lf by the co-operative societies, this provision is to apply as per the
M.M.R. KHAN v. U.0.1. [SAWANT, J.j 701

bye-laws of the society and the co-operative law in force. The presence
of the Chairman" and the Hony. Secretary is necessary to constitute the A
quorum for holding the meeting of the Managing Committee. The
Head of the Department/Office is given power to depute a Govern-
ment servant of the rank of Section Officer/equivalent or below if he
can be spared, for part time or whole time assistance to the Managing
Committee. The Department/Office concerned is required to provide B
stationery, stencils, cyclostyling facilities, postage stamps, office as-
sistance etc. to enable the Managing Committee to conduct its

-
business.

14. The annual accounts of the Canteens have to be submitted to
the Financial Advisers of the Department/Office concerned with
copies thereof to the Director of the canteens, and the audit of the c
_l_ accounts of the Canteens/Tiffin Rooms is to be carried out by the
"' Departmentalised Accounts Organisations of the concerned Minist-
ries/Departments/Offices. Out of the surplus of net profits of the Can-
teens, 1/3 amount is required to be remitted to the Director of Can-
teens Funds for welfare of the canteen employees in general. D

15. All the aforesaid provisions apply to all types of Tiffin
Rooms classified into Type B and A where the strength of the Depart-
ment/Office is between 25-49 and 50-99 respectively and to the Can-
teens classified in Types D, C, B and A where the strength is between
100-249, 250-499, 500-699 and 700-1200 respectively. Where the E
strength is above 1200 a further higher classification is given to the
Canteens.

16. These provisions contained in the Instructions, therefore,
show that the Government has a complete control over the canteens
and the workers employed therein are holders of civil posts within the F
meaning of Article 311 of the Constitution. Their recruitment and
service conditions are governed by the rules applicable to the
employees of the Government Deptt./Office/Establishment to which
the canteens are attached.

17. It is against this background that we have to consider the G
question as to whether the staff employed in the statutory canteens in
the Railway Establishment, industrial or non-industrial, are railway
employees or not. According to the workers, in view of the aforesaid
documents on record there is no reason why the employees in the
canteens concerned should not be given the status of the railway
e_mployees with all consequential benefits. On the other hand, the H
702 SUPREME COURT REPORTS [1990] 1 S.C.R.

A contention advanced on behalf of the Railways is that the documents
in question show that the employees of the statutory canteens are to be
deemed railway employees only for the purpose of the Factories Act
and for no other purpose. In no case, they can be deemed as holders of
civil posts either for Article 309 or for Article 311 or for any other
purpose.
B
18. On behalf of the employees, a preliminary objection was
raised, namely, that in view of the order of this Court dated October

-
22, 1980 in Civil Appeal No. 368 of 1978 and another, it is not open to
the Railways to agitate the question whether the employees in the
statutory canteens are railway employees or not, and further whether
they are railway employees for the purposes of the Factories Act. We
C are not inclined to entertain this objection for it is clear from the said
order that the Court had left open even the question as to whether the
employees of the statutory canteens were railway employees for the
purposes of the said Act. Hence, the question whether they are
employees of the railways for all purposes necessarily remains res
o integra. We may reproduce here the said order which is clear enough
on the subject:

"The benefits accruing to the workers under the deci-
sion of the Calcutta High Court do not require to be
interfered with in this appeal. Prima facie we are inclined
E to agree that the High Court decision is right. Moreover,
the learned Attorney General agrees to apply the Act as if
it were applicable to canteen employees. In this view a final
pronouncement on this question by this Court need not be
given in the present case. We leave it open to the Union of
India in an appropriate case to raise the point and seek a
F pronouncement.

Leave granted in the petition filed by Railway Can-
teen Karmachari Association.

We have in C.A. No. 368 of 1978 passed an order and
G the point raised by the workmen in this appeal closely
resembles the one raised in the sister case just referred to.
We apply the same principle as has been decided by the
Calcutta High Court to this case also and the workmen will
be given the same benefits. We, however, make it clear
here also that the Union of India will be free in an appo-
H priate case to challenge the correctness of the legal point
M.M.R. KHAN v. U.0.1. [SAWANT, J.] 703

decided by the Calcutta High Court. It will be equaly open
to the workmen to challenge the decision of the Delhi High A
Court if it becomes necessary. With these observations we
dispose of both the appeals. The appellants in C.A. No.
368/1978 will pay the costs of the respondents."

It must be remembered in this connection that both the Calcutta B
and the Madras High Courts had taken the view that the employees in
the statutory canteens were the employees of the Railways for the
purposes of the said Act. The Delhi High Court had distinguished the
decision of the Calcutta High Court on the ground that, that decision
did not apply to the employees in the non-statutory canteens with
which it was concerned, and had held that the employees of the non-
c
1 statutory canteens were not railway employees for any purpose. It is in
this circumstance that this Court had given liberty to the Railway
AdministratiOI) as well as the employees to challenge the respective
decisions of the Calcutta and Delhi High Courts. It will not, therefore,
be correct to say that this Court had pronounced its final opinion on
the said issue by the said order. It has also to be remembered in this D
connection that the issue before this Court in those matters was
whether the employees either of the statutory or non-statutory can-
teens were the railway employees for the purposes of the Factories
Act. The larger issue whether they were railway employees for all
purposes was neither discussed nor even tentatively decided in those
proceedings. We are, therefore, of the view that both the said issues E
are at large in the case of the employees of the statutory as well as of
the non-statutory canteens.

19. Before us therefore two issues arise for consideration, viz.
(a) whether the employees of the statutory canteens are railway emp-
loyes for the purposes of the said Act? and (b) whether they are F
railway employees for all other purposes as well?

20. As regards the first contention, namely, whether the said
employees are the employees of the Railway Administration for the
purposes of the said Act, according to us the view taken by the
Calcutta High Court in that behalf is correct. Section 2(1) of the G
Factories Act defines "worker" as follows:

'
'
·"Worker" means a person employed, directly or through
any ~g.,ncy (inciuding a contractor) with or without the
knowledge of the principal employer, whether for
remuneration or not in any manufacturing process or in H
704 SUPREly!E COURT REPORTS I 1990] 1 S.C.R.

A
cleaning any part of the machinery or premises used for a
manufacturing process, or in any other kind of work inci- y
dental to, or connected with, the manufacturing process, or
the subject of the manufacturing process but does not
include any member of the armed forces of the Union;"

B Since in terms of the Rules made by the State Governments
under Section 46 of the Act, it is obligatory on the Railway Administ-
ration to provide a canteen, and the canteens in question have been
established pursuant to the said provision there is no difficulty in hold-
ing that the canteens are incidental to or connected with the
manufacturing process or the subject of the manufacturing process.
The provision of the canteen is deemed by the statute as a necessary
C concomitant of the manufacturing activity. Paragraph 2829 of the Rail-
way Establishment Manual recognises the obligation on the Railway
Administration created by the Act and as pointed out earlier para-
graph 2834 makes provision for meeting the cost of the canteens.
Paragraph 2832 acknowledges that although the Railway Administra-
D lion may employ anyone such as a Staff Committee or a Co-operative
Society for the management of the canteens, the legal responsibility
for the proper management rests not with such agency but solely with
the Railway Administration. If the management of the canteen is
handed over to a consumer cooperative society the bye-laws of such
society have to be amended suitably to provide for an overall control
E by the Railway Administration.

21. In fact as has been pointed out earlier the Administrative
Instructions on departmental canteens in terms state that even those
canteens which are not governed by the said Act have to be under a
complete administrative control of the concerned Department and the
I" recruitment, service conditions and the disciplinary proceedings to be r
taken against the employees have to be taken according to the rules
made in that behalf by the said Department. In the circumstances,
even where the employees are appointed by the Staff Committee/
Cooperative Society it will have to be held that their appointment is
made by the Department through the agency of the Committee/
G Society as the case may be. In addition, as stated earlier, the Railway
Board by its circular dated June 8, 1981 had communicated that it was
decided to treat the employees of all statutory canteens, as railway
servants irrespective of the type and management of the canteens, and
to extend to them the conditions of service and emoluments of the
railway servants as existed on October 21, 1980, w.e.f. 22nd October
Iii 1980. No doubt it was stated in this letter that the said decision would
M.M.R. KHAN v.-U.0.1. ISAWANT, J.] 705

prevail till Government decided otherwise. Subsequently on March
11, 1982, the Board also prescribed the pay-scales, dearness allo- A
wance; house rent allowance, city compensatory allowance and pro-
ductivity bonus, and fixed the age of their superannuation. As also
pointed out earlier, this court in its decision reported in 1988 (4) SCC
478, subsequently directed that for the purpose of calculating pensio-
nary benefits the service rendered by the said employees prior to B
October 22, 1980 would be computed. What is further, the Ministry of
Railways by its letter of May 13, 1983 placed on record the fact that not
only the employees of all the statutory canteens but the employees of
eleven Delhi based non-statutory canteens had been treated as railway
servants with effect from October 22, 1980. It must be remembered in
this connection that neither the Railway Ministry nor the Railway
) Board had stated in their letters/orders that the employees of the c
.J statutory canteens and of the eleven Delhi based non-statutory can-
teens were being treated as railway servants only for the purposes of
the Factories Act or that they were to be so treated till further decision
of this Court.
D
It is possible to place a liberal construction on these letters/
orders and interprete the relevant direction namely, "till further direc-
tions from the Government" as being the directions after the decision
of this Court in the present matters, and for the sake of argument we
may proceed on that basis while dealing with the present contention.
The admitted facts, however, are that these canteens have been in E
existence at their respective places continuously for a number of years.
The premises as well as the entire paraphernalia for the canteens is
provided by the Railway Administration and belong to it. The
employees engaged in the canteens have also been in service uninter-
ruptedly for many years. Their wages are reimbursed iri full by the Rly.
Administration. The entire running of the canteens including the work F
of the employees is subject to the supervision and control of the
agency of the Railway Admn. whether the Agency is the staff-com-
mittee or the society. In fact, as stated by the Rly. Administration in
its Establishment Manual the legal responsibility for running the can-
teen ultimately rests with it, whatever the agency that may intervene.

•
' The number and the category of the staff engaged in the canteen is G
strictly controlled by the Administration. As has been pointed out
earlier, much before the order of this Court dated October 22, 1980,
the employees of the departmental canteens/tiffin rooms were
declared as holders of civil posts under the Government of India
Notification No. 6(2)/23/77-Welfare dated December II, 1979 which
notification is an annexure-4 to the Administrative Instructions H
706 SUPREME COURT REPORTS [1990] I S.C.R.

A referred to above. That notification stated that all posts in the said
canteens/tiffin rooms are to be treated as posts in connection with the
affairs of the Union, and accordingly, present and future incumbents
of such posts would qualify as holders of civil posts under the Central
Government. The notification further stated that necessary rules
governing the conditions of service of the employees would be framed
l3 under proviso to Article 309 of the Constitution to have retrospective
effect from October 1, 1979. Accordingly the service rules were
framed under Article 309 as per the Notification No. GSR-54 issued by
the Govt. of India, Deptt. of Personnel & Training on December 23,
1980. These rules contained both the recruitment rules and conditions
of service of the said employees including the procedure for discip-
C linary action to be taken against them. As stated earlier the
Administrative Instructions are applicable to the canteens/tiffin rooms
run by all the Ministries including the Railway Ministry unless they
had previously decided to be exempt from them and had framed their
own rules in that behalf. On behalf of the respondents, one Shri Sud,
Joint Director of Establishment, Ministry of Railways has filed an
p affidavit contending that Section F of Chapter XXVIII of the Railway
Establishment Manual (to the relevant paragraphs of which we have
made a reference earlier) contains the necessary instructions for run-
ning the canteens and hence the Railway Administration should be
deemed to have been exempted from the operation of the said
Administrative Instructions. Although there is nothing expressly on
E record to show that the railway canteens are exempted from the said
Instructions, we will proceed on the assumption that they are so
exempted by virtue of the relevant provisions of the Railway Manual.
But the fact remains that there are as yet no notifications on the lines
of December 11, 1979 and December 23, 1980 issued for the benefit of
the employees fo the railway canteens. Whatever the differences in the
f nature of work performed by the order staff in the different Ministries,
it cannot be argued that there is any difference in the work performed
by the employees in the canteens run in the establishments of the
Ministries. Hence, we are of the view that if the said two notifications
are applicable to the employees in the canteens run by the other
departments of the Government of India, there is no reason why the
G same should not apply also to the employees in the canteens run by the
Railways. On behalf of the Railway Admn. no material has been
placed before us to treat the employees in their canteens as a class 4
separate from the employees in the canteens run by the other depart-
ments of the Government. In the circumstances, it would be highly
\
discriminatory not to apply the said two notification to the employees
lf in the Railway canteens. It would be violative of Articles 14 and 16 of
M.M.R. KHAN v. U.0.1. JSAWANT, J.) 707

the Constitution. We are, therefore, of the view that the employees in
A
the statutory canteens of the Railways will have to be treated as Rail-
way servants.

Thus the relationship of employer and employee stands created
between the Railway Administration and the canteen employees from
the very inception. Hence, it cannot be gainsaid that for the purposes B
of the Factories Act the employees in the statutory canteens are the
employees of the Railways. The decision of the Calcutta and Madras
High Courts (supra) on the point, therefore, are both proper and
valid.

22. The next question is whether the said employees are railway
employees for all purposes. Mr. Ramaswamy, the learned counsel
c
j appearing for the Railways contended that the Railways undertake
varied welfare activities in the nature of handicrafts centres, co-
operative stores, banks, housing societies, credit societies, educational
institutions etc. and the Railways spend about a hundred crores annu-
ally on these activities. He submitted that if it is decided to treat the D
employees engaged in the canteens as railway cmploye.es it will be
difficult to resist the claim from employees of these other institutions
numbering over 27,500 for a similar status. He also submitted that the
Railways provide financial assistance to various non-Railway institu-
tions such as non-Railway schools. But teachers and other employees
working in these schools are the employees of the respective organisa- E
tions and cannot be treated as railway servants. Since, according to
him, the canteens are run for the benefit of the staff, the Government
has only a general responsibility to see that the labour laws are pro-
perly followed and not infringed. He further submitted that an indenti-
cal responsibility also devolves on the Railways in regard to contrac-
tors who execute works for the Railways with their own labour. In F
addition, the Railways have nearly 2.3 lakh casual labourers who are
normally employed on works which are of seasonal nature, intermitant
or extending over short periods. These employees are engaged by the
contractor to whom the execution of work is entrusted. In case the
employees of the canteens are to be treated as Railway servants, simi-
lar demands will be made from such casual labourers. His next conten- G
J tion in this behalf was that the Railways have a primary objective of
carrying goods and passengers, and the welfare activities are ancillary
to the main objective. Hence, the canteens continue at the discretion
of the Railway Administration where there have pr9vided 70% sub-
sidy to the management of the statutory canteens. If at .any stage the
Government so decides, it can change the form of this welfare measure H
708 SUPREME COURT REPORTS [1990] l S.C.R.

A and may choose to have another set-up which in their view may prove
more convenient and financially workable such as engaging a con-
tractor or an established agency like Tea Boad, Coffee Board,
Women's Organisation, etc. to run the canteens. For all these reasons,
he submitted the employees in the statutory canteens should not be
treated as the Railway employees.
B
23. While discussing above the contention that the employees in
the statutory canteens cannot be treated as Railway employees even
for the purposes of the said Act, we have referred to the various
developments, and documents on record including the court decisions.
It is not necessary to repeat them here. In view of the same, the
contention advanced by Mr. Ramaswamy that the Railway Admn. is
c engaged in varied welfare activities, and the employees engaged in
these activities will also have to be treated as Railway employees, in
case, the canteen employees are recognised as Railway employees
does not appeal to us. We express no opinion on the subject as to
whether the employees engaged in other welfare activities will or will
D not be entitled to the status of the Railway employees, since neither
they nor the facts pertaining to them are before us. Our conclusion
that the employees in the statutory canteens are entitled to succeed in
their claim is based purely on facts peculiar to them as discussed y
above. If by virtue of all these facts that they are entitled to the status
of Railway employees and they cannot be deprived of .that status
E merely because some other employees similarly or dis-similarly
situated may also claim the same status. The argument to say the least
can only be discribed as one in terroram, and as any other argum·ent of
the kind has to be disregarded.

24. (ii) Non-Statutory Recognised Canteens: Paragraph 2830 of
F the Railway Established Manual enjoins upon the Rly. Administration
to take steps to develop their canteen organisation to the maximum
possible extent as a measure of staff welfare preferably by encouraging
the development of canteens for staff on co-operative basis. This
in junction is for provision of canteens in addition to the canteens as
required by the Factories Act for which provision is made in paragraph
G 2829 of the said Manual. Paragraph 2831 lays down the principles
governing the setting up of the canteens which apply also to the non-
statutory canteens provided for under paragraph 2830. It says, among
others things, that a regular canteen should be provided where the
strength of the staff is 100 or more and a scheme for provision of a new
canteen should be submitted to the Railway Board for approval indi-
H eating financial implications duly vetted by the F.A.C.0. Paragraph
M.M.R. KHAN v. U.0.1. [SAWANT, J.] 709

2833 contain~ provisions for the management of such non-statutory
A
canteens. Among other things, it states that such canteens can be run
either by a Commfttee of Management to be formed for the purpose.or
by a Consumer-Cooperative Society. The Committee of Management
should consist of the duly elected representatives of the staff and
where it is run by a Cooperative Society, it should consist ofthe rep-
resentatives of the share-holders of the Society. However, in either of B
the cases, a representative of the Railway Administration is to be
nominated either as a Chairman or a Secretary or as a Member of the

.. Committee. This nominee of the Railway Administration is under an
obligation to bring to the notice of the Administration any decision of
the Managing Commttee which is likely to affect the interests of the
Railway Admn. in its capacity as an owner of the premises and of the
c
furniture, equipment, etc., or if the decision is likely to be of consider-
able harm to the staff. In such. cases, the Management Committee
cannot take action on the particular decision till the General Manager
of the Railway has recorded his decision thereon. The paragraph
further ordains that where the canteens are managed by a co-operative
society, the society should make a suitable provisions in its bye-laws D
for supervision of the canteen by the Committee of Management. The
paragraph also makes provision for granting loans to such canteens as
initial capital from the Staff Benefit Fund. Paragraph 2834 then details
various facilities which are extended to such canteens which include
the necessary accommodation, sanitary and electric installations,
furniture and cooking utensils. The Railway Admn. is also required to E
bear rent on sanitary and electric installations, service taxes and
charges for the electricity and water consumed. These canteens are
also entitled to subsidies at present to the extent of 70% of the wages
of the employees engaged therein.

25. It is further an admitted ·position that for the purposes of F
giving subsidy for wages, the rates of pay and allowances as obtaining
in July 1963 were adopted as a basis. In September 1967, on account of
a representation received from the canteen employees, the Railway
Board left the question of revision of the scales of pay and dearness
allowance to the Managing Committees. However to ensure that the
canteen employees functioning at the Metropolitan Cities were not G
affected adversely, the Board prescribed a minimum dearness allo-
wance relief to the said employees. In May 1970; the Board reviewed
• the question of scales of pay, and decided to enhance the dearness
allowance relief in respect of employees working in the Metropolitan
Cities, and also fixed the scales of pay of the employees working in all
non-statutory canteens (vide a Railway Board's letter No. E(.W) 69 H
710 SUPREME COURT REPORTS [1990] 1 S.C.R.

A C.N. 1-12 dated 29-5-1970). These scales of pay were again revised in y
December 1979, including dearness allowance for employees working ,
in the Metropolitan cities as well as for those working in cities other
than Metropolitan cities with effect from 1-10-1979 (Railway Board's
letter No. E-(W)/79-C.N. 1-12 dated 14-12-79). A further revision of
pay scales was effected by the Board in May 1983 (Railway Board's
$ letter No. E(W)/83/C.N. 1-8 dated 13-5-1983 to ensure compliance ·Ill
with th~ interim directions given by this Court on April 22, 1983. The ..
direction of this Court was to the effect that the salary and allowances
of the employees of the non-statutory canteens (recognised) should be
at the same rate and on the same basis as applicable to the employees
of the statutory canteens deemed as railway servants with effect from
C October 22, 1980. This direction was on the basis of the decision of this
Court given on October 22, 1989 (supra). It is further an admitted fact
that the Board has made applicable to these employees the scales of l. ,,.
pay as recommended by the Fourth Pay Commission with effect from ,r ~
January 1, 1986.

O 26. The employees in these canteens are also entitled to free
medical treatment as out-door patients in railway hospitals, to railway
passes/PTO's, one increment as an incentive for adoption of a small .
family. They are also governed by the provisions of the Employees' ~
Provident Fund Act. The Board has also framed recruitment rules for
. these employees vide its letter dated June 7, 1978. These rules, among
E other things, lay down minimum qualifying age for recruitment, and
superannuation age, minimum educational qualifications, the mode of
recruitment and eligibility for promotion for various posts. The
nominee of the Railway Administration on the Managing Committee
of the canteen is to be the Appointing Authority. At present there are
about 173 non-statutory recognised canteens employing about 2145
fl: workers. •

27. As pointed out earlier, from the decision dated March 7,
1980 of the Delhi High Court in Writ Petition No. 269 of 1980 filed on
behalf of the employees of eleven Delhi based non-statutory recog-
nised canteens, the Railway Canteen Karamchari Association had
c; filed a special leave petition before this Court being SLP No. 4132 of
1980 which was disposed of by this Court by its decision of October 22, ,...l_
1980 (supra). By that decision, this Court had disposed of the said
appeal in terms of the order which was passed in another similar Civil
Appeal No. 368 of 1978, and the employees were given the same
benefits by accepting the principle laid down by the Calcutta High
H Court. Thus by the said decision, the employees of the non-statutory
M.M.R. KHAN v. U.0.1. [SAWANT, J.] 711

canteens were directed to be treated on par with the employees of the
A
statutory canteens, although by giving liberty to the Railway
Administration to agitate the point that neither the employees of the
statutory nor of the non-statutory recognised ·canteens were railway
employees either for the purposes of the Factories Act or for any other
purpose.
B
28. Shri Ramaswamy advanced the same contentions in the case
of these employees as he advanced in the case of the employees of the
statutory-canteens. He submitted that these employees are appointed
by the Staff Managing Committee or Co-operative Societies and not by
the Rly. Administration, that their service in the canteen is purely in
the nature of a private employment as in a private sector undertaking
and that the recruitment procedm es differ widely from canteen to c
.-l.. canteen and they are not akin to the procedure followed by the Rail-
' ways. The Managing Committee which appoints the employees,
supervises and controls the canteens is a non-Government body. The
said Committee functions as a separate entity independent of the Rail-
way Administration and the control when exercised by the Railway D
Administration is only to ensure that the canteen is run in conformity
with certain requirements. There is no relationship of master and
servant between the Rly. Administration and the canteen employees.
The letters of appointment issued to the employees make it expressly
clear that the employment is non-Governmental and purely temporary
and does not carry any pensionary or gratuity benefits. The employees E
recruited further are not subjected to rigorous standards as to age
limit, educational qualifications, medical fitness, character verification
etc. He further submitted that the order dated October 22, 1980 passed
by this Court in the case of the employees of the eleven Delhi based
non-statutory canteens is expressly subject to the liberty given to the
T '
Railway Administration to contend in a future appropriate case that F
they are not railway employees and hence it cannot act as a precedent.
He also contended as he did in the case of the statutory canteen emp-
loyees, that if the employees engaged in these canteens are treated as
Railway servants, the employees engaged in other welfare activities,
casual labourers etc. may have also to be treated as such.
G
29. These arguments can be dealt with together. In the first
instance, there is hardly any difference between the statutory canteens
and non-statutory recognised canteens. The statutory canteens are es-
tablished wherever the railway establishments employ more than 250
persons as is mandatory under the provisions of Section 46 of the Act
while non-statutory canteens are required to be established under H
712 SUPREME COURT REPORTS I1990] I S.C.R.
paragraph 2831 of the Railway Estb. Manual where the strength of the
A
staff is 100 or more. In terms of the said paragraph, the non-statutory i
canteens to be recognised have to be approved of by the Railway
Board in advance. Every Rly. Administration seeking to set up such
canteens is required to approach the Railway Board for their prior
approval/recognition indicating financial implications involved duly
B vetted by the Financial Advisor and Chief Accounts Officer of the
Railway concerned. It is only when the approval is accorded by the
Railway Board that the canteen is treated as a recognised non-statu-
tory canteen. By the sanction, the details in regard to the number of
staff to be employed in the canteen, recurring and non-recurring
expenditure etc. are regulated. The only material difference between
the statutory canteen and non-statutory recognised canteen is that
c while one is obligatory under the said Act the other is not. However,
there is no difference in the management of the two types of canteens .l
as is evident from the provisions of paragraphs 2832 and 2833 which
respectively provide for their management. Regarding the incidence of
cost to be borne by the Railways again, as far as the Manual is con-
D cerned, the only additional obligation cast on the Administration, in
the case of the statutory canteens is that in addition to the facilities
given to the non-statutory canteens, the Administration has also to
meet the statutory obligations in respect of the expenditure for provid- "-.,
ing and maintaining canteens arising from the said Act and the rules

~
framed thereunder. A perusal of the relevant provisions shows that the
J!: said Act and the rules made thereunder do not make demands on the
Administration for more expenditure than what is provided for in the
Railway Manual for the non-statutory canteens. We have already
referred to the service conditions applicable to the employees of
)
the statutory and non-statutory canteens. Besides, while discussing the ....
case of the employees in statutory canteens we have pointed out the 'f
F relevant provisions of the Administrative Instructions on Departmen- '
ta] Canteens in Government Officers and Govt. Industrial Establish-
ments. These Instructions are applicable to both statutory and non-
statutory recognised canteens. The Instructions do not make any dif- .
ference between the two so far as their applicability is concerned. In
fact these Instructions require that the canteens run by engaging solely
q part-time daily-wage worked may be converted to departmental can-
teens (para 1.3). Hence we do not ·see why any distinction be made r'"
between the employees of the two types of canteens so far as their
service conditions are concerned. For this very reason, the two notifi-
cations of December 11, 1979 and December 23, 1980 (supra) should
also be equally applicable to the employees of these canteens. If this is
» so, then these employees would also be entitled to be treated as rail-
M.M.R. KHAN v. U.0.1. [SAWANT, J.] 713

·y way servants. A classification made between the employees of the two
A
types of canteens would be unreasonable and will have no rational
nexus with the purpose of the classification. Surely it cannot be argued
that the employees who otherwise do the same work and work under
the same conditions and under a similar management have to be
treated differently merely because the canteen happens to be run at an
establishment which employs 250 or less than 250 members of the staff. B
, The smaller strength of the staff may justify a smaller number of the
canteen workers to serve them. But that does not make any difference
to the working conditions of such workers.

We have already dealt with the other arguments advanced by
Shri Ramaswamy while dealing with the cases of employees in statu-
tory canteens. It is not necessary to repeat the said discussion here. We
c
are, therefore, of the view that the case of these employees should be
··-' . treated on par with that of the employe'es in the statutory canteens and
they should also be treated for all purposes as railway servants. This is
apart from the fact that by an order of this Court the employees of_
eleven Delhi based non-statutory recognised canteens have already D
been directed to be treated as railway servants for all purposes.

30. (iii) Non-Statutory Non-Recognised Canteens: The diffe-
rence between the non-statutory recognised and non-statutory non-
rcognised canteen is that these canteens are not started with the
approval of the Railway Board as required under paragraph 2831 of E
the Railway Establishment Manual. Though, they are started in the
premises belonging to the Railways they are so started with the
permission of the local officers. They are not required to be managed
either as per the provisions of the Railway Establishment Manual or
)-· the Administrative Instructions (Supra). There is no obligation on the
I Railway Administration to provide them with any facilities including F
the furniture, utensils, electricity and water. These canteens are
further not entitled to nor are they given any subsidies or loans. They
are run by private contractors and there is no continuity either of the
contractors or the workers engaged by them. Very often than not the
workers go out with the contractors. There is further no obligation cast
even on the local offices to supervise the working of these canteens. G
No rules whatsoever are applicable to the recruitment of the workers
...J-. and their service conditions. The canteens are run more or less on ad
hoc basis; the Railway Administration having no control on their
working neither is there a record of these canteens or of the con-
tractors who run them who keep on changing, much less of the workers
en_gaged in these canteens. In the circumstances we are of the view of H
714 SUPREME COURT REPORTS [ 1990 I 1 S.C.R.

A that the workers engaged in these canteens are not entitled to claim y
the status of the railway servants. I

31. The result, therefore, is that the workers engaged in the
statutory canteens as well as those engaged in non-statutory reco-
gnised canteens in the Railway Establishments are railway employees
B and they are entitled to be treated as such. The Railway Board has
already treated the employees of all statutory and eleven Delhi based
non-statutory recognised canteens as ·railway employees w.e.f.
October 22, 1980. The employees of the other non-statutory reco-
gnised canteens will, however, be treated as railway employees w.e.f.
April 1, 1990. They would, therefore, be entitled to all benefits as such
C railway employees with effect from the said date, according to the
service conditions prescribed for them under the relevant rules/orders.

The Writ Petitions and appeals of these employees are allowed )
to the above extent accordingly with no order as to costs.
D 32. As far as the employees in non-statutory non-recognised
canteens are concerned their petitions are dismissed. There will, how-
ever, be no order as to costs.

R.S.S. Petitions and Appeals allowed.