Holding

The High Court erred in exercising writ jurisdiction to decide disputed facts and to order automatic abolition and absorption of contract labour; such matters must be decided by the appropriate Government or an industrial adjudicator under the CLRA Act.

Summary

The K.V. Shramik Sangh, a trade union representing contract workers in the Mumbai Municipal Corporation's solid waste management department, filed a writ petition seeking abolition of the contract labour system and absorption of the workers as permanent employees, alleging that the contracts were sham and that the corporation and contractors violated the Contract Labour (Regulation and Abolition) Act, 1970. The Bombay High Court, relying on the Air India case, ordered the immediate abolition of the contract system and the absorption of 782 identified workers, without referring the matter to the State Government or an industrial adjudicator. The corporation appealed, contending that the High Court exceeded its jurisdiction under Article 226 by deciding disputed questions of fact and by directing automatic absorption, which is contrary to the provisions of the Act and the later Steel Authority (SAIL) judgment. The Supreme Court held that the High Court could not adjudicate disputed facts under its writ jurisdiction, that a finding of a sham contract must be made by an industrial adjudicator based on evidence, and that absorption of contract labour cannot be ordered automatically. Consequently, the Supreme Court set aside the High Court order and remitted the matter to the appropriate authority, allowing the appeal.

Issues considered

The High Court's jurisdiction under Article 226 to decide disputed questions of fact and declare a contract labour arrangement as sham
Whether a contract labour system can be deemed sham solely on non‑compliance with the Contract Labour (Regulation and Abolition) Act, 1970
Whether the court can order automatic abolition and absorption of contract labour without a finding by the appropriate Government or industrial adjudicator
Whether the material (complaints, recommendations) cited by the Union can alone constitute a basis to deem the contract sham

Legislation cited

Bombay Municipal Corporation Act, 1888s. 365, s. 367, s. 61(C)
Contract Labour (Regulation and Abolition) Act, 1970s. 10, s. 10(2), s. 12, s. 4, s. 7

Subjects

contract laboursham contractabolition of contract labourabsorption of workersArticle 226 jurisdictionindustrial adjudicatordisputed factslabour law

Judgment

A MUNICIPAL CORPORATION OF GREATER MUMBAI
v.
K.V. SHRAMIK SANGH AND ORS.

APRIL 12, 2002

B [D.P. MOHAPATRA AND SHIVARAJ V. PATIL, JJ.]

Labour Laws:

Contract Labour (Regulation and Abolition Act, 1970)-Contract
C Labour-Employment of-Allegation that contract was sham-Denial of
allegation by principal employer-High Court orderedfor abolition ofcontract
labour system and absorption of identified contract labourers directly without
referring it to State or Industrial Adjudicator-Contract held to be sham on
the ground that the principal employer and the contractors did not comply
D with the provisions of the Act-On appeal-Held, order of High Court not
sustainable-High Court could have directed the appropriate Authority to
pass Orders instead of taking up the task on itself-When disputed questions
offact arise Court cannot arrive at conclusion that the contract was sham as
.a matter of law for non-compliance of the provisions of the Act-Absorption
of Contract Labourers cannot be auto~atic.
E
Constitution of India, 1950-Article 226-Jurisdiction under-
Adjudication of disputed question of fact-Held, not permissible. ·

Workmen, represented by the respondent-Union, who were working in
Solid Waste Management Department, one of the Sections of appellant-
F Corporation as contract labourers, filed writ petition seeking abolition of
contract labour system in the Department and for their absorption in the
Department as permanent employees. They alleged that the contractors as
well as the Corporation did not comply with the provisions of Contract Labour
(Regulation and Abolition) Act, 1970; that the Contract was a sham
G arrangement. The Union, in support of its petition referred to complaints filed
by it to the Labour Commissioner, and to the recommendations of Labour 'I
I
Commissioner, Labour Minister and Labour Contract Advisory Board with
regard to abolition of Contract Labour under Section 10 of the Act. The
Corporation denied that the arrangement was sham or illegal.

On interim direction by High Court to verify the authenticity of the List
·H 1122
MUNICIPALCORPN OF GREATER MUMBAI"· KV SHRAMIK SANGH } } 23

of the workmen claiming to be members of the Union, Labour Commissioner A
in his Reports pointed out that investigation regarding authenticity of
workmen could not be carried out as the contractors did not maintain any
record. He also suggested that in absence of any record, the list of the workers,
as submitted by the Union, might be considered as valid list.

High Court held that although powers to abolish contract labour vested B
in the Government but since the State/Authority could not take action to
prohibit employment of contract labour due to Election Code of Conduct,
the Court instead of referring the matter to State/Authority and relying on
Air India's case ordered for abolition of Contract Labour System in the
Department and ordered for absorption of 782 identified workers. It held the C
Contract as sham in view of the fact that the Corporation and the contractors
did not comply with the provisions of the Act. However, it did not record a
finding that the contract was sham or camouflage considering the material
on record.

In appeal to this Court, Corporation contended that High Court was D
not justified in exercising jurisdiction under Article 226 of the Constitution,
when the case involved disputed question of fact; that it was for Industrial
Adjudicator to decide in appropriate proceedings; that High Court was wrong
in ordering automatic abolition of contract labour on the basis of Judgment
in Air India's case as the same stood overruled by Judgment in Steel Authority's
case. E
Respondent-Union contended that contract labour system may be
characterised as sham if the work is of continuous nature, supervision and
control is by principal employer, and the work is of statutory nature; that
normally High Court inquires as to whether the contract labour system is a
F
sham, and direct absorption under ArtiCle 226, but where facts are by and
large undisputed and many years have passed and all the authorities have
commended the absorption of workers but the ultimate authority has failed
to act for a long time and it would be an act in futility and waste of time and
also cause injustice to the workers, High Court could go into the question of
facts and pass orders instead of remanding the matter. G
Allowing the appea~ the Court

HELD: 1.1. The conclusion of the High Court that the contract labour
system in the present case was sham cannot be sustained when the disputed
questions of fact arose for consideration in the light of rival contentions raised H
1124 SUPREME COURT REPORTS [2002] 2 S.C.R.

A by the parties. The conclusion cannot be arrived at as a matter of law for
non-compliance of the provisions of the Contract Labour (Regulation and
Abolition) Act, 1970, but a finding must be recorded based on evidence,
particularly when disputed, by an industrial adjudicator. High Court did not
go into the question of the contract being sham and did not record a finding
that the Labour Contract in the present case was sham or camouflage
B considering the material on record; even otherwise this being a serious and
disputed fact, High Court could not have appropriately adjudicated on the
issue exercising jurisdiction under Article 226 of the Constitution.
[1137-H; 1138-A; 1136-F; 1136-D-E]
,,._
c 1 secSteel Authority ofIndia Ltd v. National Union Waterfront Workers, [2001)
1, followed.

1.2. The material viz. the complaints of the Union recommendations "of
the Labour Commissioner, Labour Minister and the Labour Contract
Advisory Board in regard to abolition of contract labour under Section 10 of /
D the CLRA Act could not be a foundation or basis to say that the labour
contract was sham, camouflage or a devise to deny the statutory benefits to
the workers. [1137-B]
>-

Air India Statutory Corporation and Ors. v. United Labour Union and Ors.,
[1997] 9 sec 377, referred to.
E
1.3. The code of conduct relating to election, be~use of which the State
and Contract Labour Advisory Board were unable to act prohibiting
employment of Conduct Labour, related to 1998. The High Court instead of
taking up the task on itself could have directed the State Government/ ~

... Authority to pass orders within a given time. [1138-B)
F.
1.4. The impugned Judgment and Order are set. aside leaving it open
to the Union to seek remedies available in terms of Judgment of the
Constitution Bench in Steel Authority's case before the State Government or
the Industrial Adjudicator as the case may be. [1139-H; 1140-A)
G
Steel Authority ofIndia Ltd v. National Union Waterfront Workers, [2001)
1 sec 1, followed.

2. The direction of the High Court that workmen required for work in
the Solid Waste Management Department should not fall within the purview
H of the Act at all, but that they should be absorbed as direct employees of the
MUNICIPALCORPN. OF GREATER MUMBAI v. KV. SHRAMIKSANGH [SHIVARAJ V PATIL, J.] } } 25

Bombay Municipal Corporation, cannot be sustained. Absorption of Contract A
Labourers cannot be automatic and it is not for the Court to give such
direction. (1139-F, G, HJ

Steel Authority of India Ltd v. National Union Water.front Workers, (2001]
t sec 1, followed.
B
3. Merely because the records are not maintained by the contractors, it
may not be appropriate to accept the list of workers given by the Union. Even
from the reliefs granted by the High Court it is clear that 782 contract
labourers were identified as working through contractors. These directions
themselves indicate as to the disputed questions that arose for consideration. C
[1139-C, DJ

CIVIL APPELLATE JURISDICTION Civil Appeal No. 2675 of
2002.

From the Judgment and Order dated 9.8.99 of the Mumbai High Court D
in W.P. No. 1027 of 1997.

T.R. Andhyarujina, Minoo Sisodia, Pallav Sisodia, S.H. Ujjaiwala and
D.N. Mishra for J.B.D. and Co., for the Appellant.

Colin Gonsalves, Ms. Apama Bhat, Ms. Sweta Kakkad, K.J. John, S.V.
Deshpande, Ashwini Kumar, S.S. Shinde and Vishwajit Singh for the E
Respondents.

The Judgment o'. the Court was delivered by

SHIVARAJ V. PATIL, J. Leave granted.
F
This appeal is filed by the Municipal Corporation of Greater Mumbai
challenging the correctness and validity of the impugned judgment and order
made in the writ petition by the High Court. The writ petition was filed by
a registered trade union called Kachara Vahatuk Shramik Sangh (hereinafter
referred to as 'Union'). It claims to represent 2000 workmen doing the work G
of lifting, transporting and dumping of debris, garbage, silt, house gully
material etc., at the various dumping grounds of the Bombay Municipal
Corporation. The appellant herein is the respondent no. 1 in the writ petition
(hereinafter referred to as 'Corporation') and respondent nos. 2-33 are different
contractors who had been entrusted with the above-mentioned work on contract
basis. Respondent no. 34 is the State of Maharashtra and respondent no. 35 H
1126 SUPREME COURT REPORTS [2002] 2 S.C.R.

A is the Contract Labour Board established under the provisions of the Contract
Labour (Regulation & Abolition) Act, 1970 (CLRA Act). Respondent No. 36
is the Commissioner of Labour for the State.

In the writ petition, it was emphasized that the nature of work carried
out by the contract labour is perennial; merely because the Corporation has
B chosen to employ system of contract labour for discharging its statutory
obligations, the contract labour does not cease to be workman of the principal
employer-the Corporation. According to the writ petitioners (Union) , if at
all, contract labour system was to be permitted, it could be done only in
accordance with the provisions of the CLRA Act; an employer could not be
C allowed to carry on work through contract labour unless provisions of the
statute were strictly complied with and that the Corporation was carrying on
the work through contract labour for almost 15 years even without registering
itself as a principal employer, that too through contractors who were not
holding any licence under the CLRA Act. It is the further case of the Union
that it kept on complaining to the Labour Commissioner about the gross
D violation of law and the legal rights of the workmen concerned. The Labour
Commissioner, after investigation into the complaints, addressed letter dated
18. 7 .1998 to the Chief Secretary. of the State recommending abolition of the
contract labour system observing that Solid Waste Management Department
is one of the sections of the Corporation, which is in operation for more than
E hundred years; in this Department the work of collection, transportation,
dumping and disposal of the garbage, refuse, debris etc. is performed. The
Labour Commissioner also stated in the letter that the Solid Waste Management
Department had applied for registration as principal employer under the CLRA
Act o~ 17th December, 1996. In the meanwhile, the writ petition had already
been filed, so the said application was kept_ in abeyance. He also stated that
F none of the contractors had obtained licence under the provisions of the
CLRA Act. He further pointed out that by the letters of 25th October, 1997
and 19th May, 1998, the Union had made representations to the Chairman of
the State Contract Labour Advisory Board requesting him to advise the State
Government to abolish the system of employment of contract labour in the
Solid Waste Management Department of the Corporation. In the letter of the
G Labour Commissioner, it is also stated that the work performed by the workers
employed by the contractors is of regular and permanent nature. In the writ
petition, it is also stated that the contract entered into by the Corporation with
the contractors is a sham arrangement. The workmen concerned with the writ
petition are in law and in fact employees of the Corporation, particularly so,
H when the task of sweeping and cleaning roads, gullies and removal of debris
MUNICIPALCORPN_ OF GREAfER MUMBAI v. K_V SHRAMIK SANGH [SHIVARAJ V. PATIL, J.} 1127

and garbage etc. are the statutory duties to be performed by the Corporation A
under Sections 61(C) , 365 and 367 of the Bombay Municipal Corporation
Act, 1888 (for short the 'Act'). It is also stated in the writ petition that the
conditions of service of these workmen are horrible inasmuch as they are
required to handle corpses of animals, excreta of animals and human-beings
from house gullies and garbage dumps toxic and other danger material etc.
In support of the writ petition, reliance was placed to the Circular dated B
26.4.1985 issued by the Govt. of Maharashtra relating to Bhangi Mukti
(prevention of scavenging), Circular dated 30.8.1996 issued by the Corporation
on the precautionary measures to be taken while engaging contract labour,
the letter dated 27 .11.1996 addressed to the Additional Commissioner,
Corporation, by the then Chairman of the Standing Committee of the C
Corporation Shri Hareshwar Patil stating that the garbage workers were not
properly treated; there was no difference between the permanent workers of
·the Corporation and the contract workers; their conditions were really pitiable
and steps are to be taken to improve the situation. Reference is also made to
' the letter of the Labour Commissioner dated 18. 7.1998 addressed to the
Chief Secretary of the State requesting to recommend the matter to the State D
Contract Labour Advisory Board for abolition and prohibition of the contract
labour system. The Minister for Labour of the State addressed a letter dated
4.2.1999 to the Commissioner of the Corporation recommending for abolishing

... the existing contract system. In the writ petition, the following reliefs were
sought: E
"(a) for a Writ" of Mandamus or any other appropriate Writ, order
or direction, directing the State of Maharashtra and Contract
Labour Board, Bombay Municipal Corporation to forthwith
abolish the contract labour system in the Solid Waste Department
and for regularization of the services of all the workmen F
concerned with this Petition with retrospective effect forthwith
and to pass appropriate order forthwith.
(b) for an order directing the Respondent to maintain status quo in
respect of the employment of the workmen concerned with this
Petition. G
(c) • For an order directing the Respondent No. I to forthwith absorb
all the workmen concerned with this Petition as regular and
permanent workmen with retrospective effect from their initial
date of work.
(d) For an order directing the Respondent No. I to treat all the H
1128 SUPREME COURT REPORTS [2002] 2 S.C.R.

A workmen concerned with this case on par with the permanent
workmen in terms of wages and all service
conditions ..................... "
In reply to the writ petition the Corporation in the affidavit filed on its
behalf inter alia submitted that the writ petition should be dismissed declining
B to entertaining it under Article 226 of the Constitution to adjudicate the
disputed questions of facts. Section 61 (2) of the Act imposes a statutory duty
on the Corporation for removal of garbage. The Solid Waste Management
Department has employees, mukadams and overseers engaged in the activity
of removal of garbage. For this purpose the Department uses its own staff ......
and not contract labour. It has its own vehicles for the purpose of removal
C of garbage. Because of insufficiency of vehicles it also hires private vehicles
on contract basis for the removal of garbage; the vehicle owners supply the
vehicles with a driver and cleaner; and only the Corporation employees are
engaged in removal of garbage.

Further, according to the Corporation, under Section 367 of the Act its
D Commissioner provides or appoints in proper and convenient situations public
receptacles, depots and places for the temporary deposit or final disposal of
the refuse/debris. Under Section 368, if the owner or occupier of any trade
premises desires permission to deposit trade refuse, collected daily or

E
periodically from the premises, temporarily upon any place appointed by the
Commissioner in this behalf, he may, on the'application and on payment of
such charges, allow the applicant to deposit refuse/debris. The Corporation
...
merely provides its services to those generators of debris like MHADA or
private land owners or builders, who are liable to pay stipulated charges for
the work of disposal of debris performed by the Corporation. For the purpose
of removal of debris the Corporation accepts separate tenders from the
F contractors. This work, not being the statutory responsibility of the Corporation,
is not.done by its employees. Copy of the tender submitted by the contractor
for removal of debris and copy of the contract entered into by the Corporation
with the contractors, as per Ex.-5 and 6, clearly show that the workers engaged
in the said activity of removal of debris are not employees of the Corporation.
G The allegations that merely paper arrangements are made by the Corporation
to avoid statutory liabilities and that such contracts are sham av.d illegal are
denied by the Corporation. It is also stated that the Corporation has been
taking stringent action against the contractors so that they should comply
with the statutory requirements such as Minimum Wages Act and the.
contractors are also directed to provide the labourers with good quality of·
H raincoats with caps, gum boots and hand gloves etc. It is denied that the
MUNICIPAL CORPN. OF GREATER MUMBAI"· K.V. SHRAMIK SANGH (SHIVARAJ V PATIL. J J 1129

Corporation is using the contract labour as slaves or bonded labour. It is the A
specific case of the Corporation that the workers engaged by the contractors
are not its employees

It is further the case of the Corporation that CLRA Act does not abolish
contract labour as alleged by the Union; the power to abolish contract labour
vests with the appropriate Government and in this case the appropriate B
Government is State Government. The appropriate Government before
abolition of contract labour under Section 10 of the CLRA Act must consult
State Board, constituted under Section 4 of the CLRA Act being an expert
body, before contract labour can be provided. Further, the relevant factors
such as whether the work is incidental or necessary for the establishment is C
to be taken into consideration as contemplated under Section I 0 of the CLRA
Act. Based on these statements made in the affidavit the Corporation prayed
for dismissal of the writ petition.

The High Court by its order dated 18.11.1998 in Writ Petition No.
2135/98 ordered the Labour Commissioner to authenticate the list of workmen D
of the respondent No. 1 - Union. The Labour Commissioner on 9.2.1999
,. gave his report to the High Court stating that it was not possible for him to
verify the authenticity of the list of workmen.

However, the High Cpurt allowed the writ petition and made the
• following order:- E
"(a) The system of employing contract labour on the work in Solid
Waste Management Department shall be discontinued by the
first Respondent-Corporation with immediate effect.
(b) 782 contract labourers who have been identified as working F
through contractors on the work of Solid Waste Management
Department shall be absorbed as permanent employees in the
employment of the first Respondent-Corporation on the
appropriate wage scales and extended all cond1tions of service
as available to other permanent employees doing same or similar
work in the employment of the first Respondent-Corporation. G
(c) A Committee comprising of an officer to be nominated by the
Commissioner of Labour, an officer to be nominated by the
Municipal Commissioner and a representative of the Petitioner-
Union, shall verify the claims of all workmen other than those
whose claims have already been verified by the Commissioner H
1130 SUPREME COURT REPORTS [2002) 2 S.C.R.

A of Labour, after taking such evidence as the said Commiit:ee
desires.
(d) The said Committee shall make a report to the Municipal
Corporation indicating the persons who were actually working
as contract labourers in the Solid Waste Management
B Department on the date on which the Writ Petition was filed.
Immediately on receipt of such report, the first Respondent
Corporation shall absorb such workmen also as permanent
workmen in the Solid Waste Management Department and
extend to them pay and all co~ditions of service and benefits
as given to other permanent workmen doing same or similar
c
(e)
work.
Though, strictly speaking, under the principles laid down in Air
India's case (supra) , the workmen would have to be absorbed
-
as permanent employees and given all the benefits from the
dates of their respective employment, as we have found some
D difficulty with regard to identification, we direct that the
absorption into service as permanent employees and extension
of all benefits shall be done as from the date of the Writ Petition
i.e. from lst July, 1997."
·On behalf of the Corporation it was contended:
E
(a) That the disputed questions of facts arose for consideration in
the writ petition. Hence the High Court was not right and
justified in adjudicating those disputed questions of facts
exercising jurisdiction under Article 226 of the Constitution; as
held by this Court in various decisions in matters like this it
F was for the industrial adjudicator to decide in appropriate
proceedings; even assuming that all the conditions of contract
labour under Section I 0 of the CLRA Act were shown to exist
it was for the court to order abolition of contract labour;
(b) The matter ought t.o have been left to be decided by the
G Government as to abolition of contract labour as laid down by
this Court in BHEL Workers Association, Hardwar and Ors. v.
Union of India and Ors., [1985) I SCC 630, Catering Cleaners
of Southern Railway v. Union of India and Ors., [ 1987) I SCC
700 and Gujarat Electricity Board, Thermal Power Station, Ukai,
H Gujarat v. Hind Mazdoor Sabha and Ors., [1995) 5 SCC 27.
. MUNICIPAL CORPN. OF GREATER MUMBAI v K V SHRAMIK SANGH [SH!VARAJ V. PATIL, J.J } } 3}

(c) The High Court was also wrong in ordering automatic abolition A
--- of the contract labour on the basis of judgment of this Court in
Air India Statutory Corporation and Ors. v. United labour
Union and Ors., [1997] 9 SCC 377; the said judgment now
stands overruled by the Constitution Bench judgment of this
Court in Steel Authority of India ltd. v. National Union
Waterfront Workers, [2001] I SCC I. B
(d) Neither there was enquiry nor finding was recorded by the
High Court that the labour contracts with the contractor were
sham or camouflage or only device to deprive the worker of
... the benefits otherwise available to him; the High Court has not
ordered absorption of the labours on the ground that the labour c
"'- contracts were sham or bogus; the High Court without enquiry
and consideration whether such contracts were sham proceeded
to say so on the ground that such labour contracts were made
without complying with the provisions of the CLRA Act and,
therefore, there is automatic absorption. D
(e) The Union has not filed cross-objections against the High Court
judgment complaining that the High Court ought to have
4.
recorded a finding that such contracts were sham; further such
investigation as to whether contracts were sham could be
investigated only by an industrial adjudicator as strongly held E
by this Court in several cases including in the reasoned
Constitution Bench judgment in SAIL (supra).

On behalf of the Union submissions were made supporting the impugned
~ judgment and order, contending that
F
(a) contract labour system may be characterized as sham if the
work is of continuous nature, supervision and control is by the
principal employer, the work is of statutory nature, the principal

- employer and the contractor cannot produce any records such
as pay slips, muster roll, attendance cards or wage registers to
show that the workers were actually employed through a G
contractor, the workers work in the establishment of principal
employer, neither the principal employer nor the contractors
.,,_ have obtained licences or certificates under the CLRA Act, the
nature of work is essential to the work of the establishment, the
establishment rules itself provide that contract labour shall not H
1132 SUPREME COURT REPORTS [2002] 2 S.C.R.

A be used for perennial work and workers are kept in bondage.
(b) Normally the High Court, under Article 226 of the Constitution,
enquire as to whether the contract labour system is a sham, and
·--
direct absorption, but where facts are by and large undisputed,
many years have passed and all the authorities have
B recommended the absorption of workers but the ultimate
authority has failed to act for a long time and it would be an
act in futility and waste of time and also cause injustice to the
workers, the High Court could go into the question and pass
orders instead of remanding the matter.

C On behalf of both the sides our attention was drawn to relevant material
on record in support of their respective contentions.

After the High Court passed the impugned judgment and order, request
was made on behalf of the Corporation for staying the order to enable it to
approach this Court challenging the same. After hearing both sides, the High
D Court stayed the order for a period of six weeks subject to certain conditions
in the following terms:- ... ,

"(a) There shall be stay of our order for a period of six weeks,
except the direction pertaining to the appointment of the
Committee and the work to be done by it as provided in
E
paragraphs ( c) and (d) above.

(b) All 782 workmen who have already been identified by the
t
Office of the Commissioner of Labour shall be provided work I
by the first Respondent-Corporation and paid daily wages of ""I""
F Rs. 100 without prejudice to the rights and contentions of the
first Respondent-Corporation and also without prejudice to the
..,_f
I
rights and contentions of the concerned workmen.
t-
(c) The first Respondent-Corporation is not obliged to extend any '
G
other conditions of service except safety and sanitary equipments
to the concerned workmen during the period of six weeks from
today."
·- t,
I

On 26.10.1999, this Court passed order to maintain status quo till the
matter came up before the Motion Bench. On 5. l 1.l 999, this Court issued """'!"'
notice to the respondents and ordered to maintain status quo regarding
H employment of the concerned employees till further orders. ..~
MUNICIPA:LCORPN OF GREATER MUMBAI v, KV SHRAMIK SANGH[SHIVARAJ V PATIL,J.] 1133

In view of the order of this Court dated I 0.10.200 I, the ex-officio A
Member Secretary, State Contract Labour Advisory Board and Commissioner
of Labour at Mumbai filed additional affidavit on behalf of respondent no.
35 saying that the Union by its letter dated 19.5.1998 requested the State
Contract Labour Advisory Board to take up the matter regarding prohibition
of contract labour system prevailing in the Solid Waste Management B
Department of Corporation. Pursuant to the direction received from the
Government of Maharashtra dated 9.2.1999, the Board in its meeting held on
6.3.1999 heard the representatives of the Corporation and the Union and
advised the Corporation to abide by the CLRA Act and the Minimum Wages
Act, 1949 and to provide all facilities to the contract labourers employed in
the Solid Waste Management. It is further stated that in view of the impugned C
judgment and due to the pendency of Special Leave Petition in this Court, the
State Contract Labour Advisory Board has kept the matter in abeyance.

The High Court noticing the duties of the Municipal Corporation under
the Act contained in the various Sections held that the said provisions imposed
statutory duties on the Corporation to keep the city clean free of garbage, D
rubbish, refuse etc. The High Court took the view that if the Corporation
chose to employ some other agency to discharge its obligation, it could do
so provided it is consistent with the applicable legal provisions; after the
enforcement of the CLRA Act under Section 7, the Corporation being principal
employer was compulsorily required to register itself with the appropriate E
registering authority and every contractor was required to obtain a licence
under Section 12 of the Act but neither the Corporation nor the contractors
complied with the said provisions in spite of the grievances voiced by the
union repeatedly. The High Court looking to the letter of the Labour
Commissioner dated 18th July, 1998 to the Chief Secretary of the State
recommending abolition of the contract labour system, letter& dated 4th F
February, 1999, 5th April, 1999 and 10th may, 1999 addressed by the Labour
Minister to the Commissioner of Corporation dealing with the working
conditions of the contract labour and inaction of the Corporation and finally
recommending for abolition of the contract labour system ordered for
absorption of workers directly. During the course of the argument, the learned
Addi. Govt. Pleader was asked as to why the said Contract Labour Abolition G
Advisory Board and the State of Maharashtra should not issue an order
prohibiting employment of contract labour in the Solid Waste Management
Department, it was informed that on account of election code of conduct,
decision could not be taken in the matter. In this view, the High Court felt
Iba\ the fate of the workers could not be left hanging on the sweet mercy of H
1134 SUPREME COURT REPORTS [2002) 2 S.C.R.

A the Corporation and/or the State Government and it has become the .-
/
responsibility of the Court to discharge its constitutional duty to see if the
Union was entitled to relief in law and grant them such relief by then and
there itself. Thereafter, the High Court referring to various decisions cited
and mainly relying on the decision of this Court in Air India case (supra) and
B applying the principles stated therein to the present case a11d allowed the writ
petition granting the reliefs to the union in terms already stated above.

In a recent Constitution Bench judgment of this Court in Steel Authority
of India Ltd and Anr. v. National union Waterfront Workers and Ors., [2001]
7 SCC 1 Air India case (supra) is specifically overruled. In the said judgment,
C after referring the various decisions of this Court including the decisions
cited before us and on elaborate consideration and analysis, the Constitution
Bench iri para 125 of the said judgment, outlined the condusions. To the
extent they· are relevant for the present purpose read:-

"125 . The upshot of the above discussion is outlined thus:-
D (1) .: ................................. ..

(2) ·····································
(3) Neither Section 10 of the CLRA Act nor any other provision in
the Act, whether expressly or by necessary implication, provides for
E automatic absorption of contract labour on issuing a notification by
the appropriate Government under sub-section (1) of Section 10,
prohibiting employment of contract labour, in any process, operation L
or other work in any establishment. Consequently the principal r-
employer cannot be required to order absorption of the contract labour
F working in the establishment concerned.

(4) We overrule the judgment of this Court in Air India case
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 shall hold
G good and that the same shall not be set aside, altered or modified on
the basis of this 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 10(1) of the
CLRA Act prohibiting employment of contract labour or otherwise,
H in an industrial dispute brought before it by any contract labour in
MUNICIPAL CORPI" OF GREATER MUMBAI v. K.V. SHRAMIK SANGH [SHIVARAJ V PATIL, J.] 1135

regard to conditions of service, the industrial adjudicator will have to A
consider the question whether the contractor has been interposed either
on the ground of having undertaken to produce any given result for
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 B
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
shall be directed to regularize the services of the contract labour in
the establishment concerned subject to the conditions as may be
•
specified by it for that purpose in the light of para 6 hereunder. C
(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
concerned has been issued by the appropriate Government, prohibiting
employment of contract labour in any process, operation or other
work of any establishment and where in such process, operation or D
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
consideration the age of the workers at the time of their initial E
employment by the contractor and also relaxing the condition as to
academic qualifications other than tec~nical qualifications."

Para 126 of the same judgment reads:-

"126. We have used the expression "industrial adjudicator" by design
as determination of the questions aforementioned requires enquiry F
into disputed questions of facts which cannot conveniently be made
by the High Courts in exercise of jurisdiction under Article 226 of the
Constitution. Therefore, in such cases the appropriate authority to go
into those issues will be the Industrial Tribunal/Court whose
determination will be amenable to judicial review." G
A Division Bench of the Bombay High Court following the judgment
of this Court in Air India case (supra) had directed the appellant to absorb
the contract labour but the Constitution Bench judgment in view of the
overruling of Air India case (supra) set aside the judgment of the High Court
leaving it open to the contract labour to seek appropriate relief in terms of
1136 SUPREME COURT REPORTS [2002] 2 S.C.R.

"A the main judgment as stated in para 136 of the Constitution Bench judgment.
Similar orders were passed as can be seen from paras 137, 140 and 146 of
the same judgment dealing with other cases where orders were passed by the
high Court relying on Air India case (supra) .

We do not consider it necessary to refer to the decisions cited by the
B learned counsel in the light of the authoritative pronouncement of the
Constitution Bench of this Court aforementioned.

Now, we proceed to consider the validity and correctness of the
impugned judgment and order in the light of judgment of the Constitution
Bench in SAIL case (supra) . The High Court held that the work entrusted to Jo.

C the members of the Union continued to be basically the work of the
Corporation itself of perennial nature; the Corporation has chosen to carry.
out the work under so-called system of labour contract without complying
with the provisions of the CLRA Act and as such the labour contract was a
· camouflage. We must state here itself that the Union in the writ petition
D alleged that the labour contract was sham and the Corporation specifically
denied it in its counter affidavit but the High Court did not go into this
question and did not record a finding that the labour contract in the present
case was sham or a camouflage considering the material on record; even
otherwise this being a serious and disputed fact in terms of the Constitution
Bench judgment aforementioned, the High court could not have appropriately
E adjudicated on the issue exercising jurisdiction under Article 226 of the
Constitution. It appears to us that the High Court proceeded to conclude that
the labour contract was not genuine and the workers of the Union were
employees of the Corporation because the Corporation and the contractors
did not comply with the provisions of the CLRA Act. Conclusion that the
F contract was sham or it was only camouflage cannot be arrived at as a matter
of law for non-compliance of the provisions of the CLRA Act but a finding
must be recorded based on evidence particularly when disputed by an industrial
adjudicator as laid down in various decisions of this Court including the
· Constitution Bench judgment in SAIL. The cases on which the High Court
placed reliance were the cases where finding of fact was recorded by the
G labour courts on evidence. In para 34 of the impugned judgment, it is stated:-
"This court is hardly competent to record evidence or appreciate it in
ex'ercise of its powers under Article 226 of the Constitution. This
Court as well as the Supreme Court have always taken the view that
writ jurisdiction should not be permitted to be invoked if disputed
H questio~s of facts are involved, is the submission of the learned
MUNICIPAL CORPN. OF GREATER MUMBAI v. K. V SHRAMIK SANGH [SHIVARA1 V. PATIL, J.J 113 7

counsel. The submissions are wholly unexceptionable. If the facts A
were not clear, we would have hardly allowed our writ jurisdiction to
be invoked. The material which we have referred to at several places
hereinbefore, is more than adequate, in our view, to come to the
conclusion we have arrived at."

The material referred to relates to the complaints of the Union, B
recommendations of the Labour Commissioner, Labour Minister and the
Labour Contract Advisory Board in regard to abolition of contract labour
under Section l 0 of CLRA Act but that material could not be a foundation
or basis to say that the labour contract Wjl.S sham, camouflage or a devised
to deny the statutory benefits to the workers. From the judgment under C
challenge, it is clear that Air India case (supra) weighed with the High Court
which judgment now stands overruled as already stated above. The High
Court rejected the contention that jurisdiction to abolish the contract labour
system vested with the appropriate Government under Section 10 of CLRA
Act and that power could be exercised after obtaining advice of the Contract
Labour Advisory Board which in tum had to keep several factors enumerated D
in clauses (a) to (d) of Section 10(2) ofCLRA Act stating that in the present
case in almost 15 years, there was no registration of principal employer; none
of the contractors ever held a licence under the Act; the work that was being
carried on fell within the parameters of clauses (a) to (d) of Section 10(2) of
the Act and having regard to what was said by the Chairman, Standing E
Committee of the Corporation and the contractors and the recommendation
of the Labour Commissioner to abolish the contract labour system. Further
the Minister for Labour of Govt. of Maharashtra went on to record in clear
terms that the Government had taken a decision to abolish system of contract
labour in the Solid Waste Management Department of the Corporation, the
High Court thought that there was sufficient material for abolishing the contract F
labour system. The High Court drew an inference that the State admitted that
all the requirements were satisfied for acting under Section 10(2) but because
of the election code of conduct it was unable to act and passed order for
absorption of workers saying that it had no impediment to do so in view of
its conclusions. Referring to Air India case (supra) , the High Court observed G
that the said judgment suggested that a contract labour system can be said to
be genuine only if it is carried in compliance with the provisions of the
CLRA Act and anything contrary thereto would lead to the presumption that
the purported contract labour system was merely a devise ·and sham. In our
view, the conclusion of the High Court that the contract labour system in the
present case was sham cannot be sustained in the light of what is stated above H
1138 SUPREME COURT REPORTS (2002] 2 S.C.R.

A and particularly when the disputed questions of fact arose for consideration
in the light of rival contentions raised by the parties. We have detailed them
above to say so.

The code of conduct relating to election related to 1998. The High
Court at the time of passing the impugned order could have directed the State
B Government/authority to pass orders within a given time frame but the High
Court took up the task itself.

It may also be noticed that the High Court by its order dated 18th
November 1998 directed the Labour Commissioner to verify the authenticity
of the list of workmen claiming to be the members of the Union. After
C investigation, the Labour Commissioner made three reports to the High Court
on 9th February 1999, 23rd April 1999 and 12th June, 1999. In the report of
9th February, 1999, the Labour Commissioner pointed out that the work of
investigation of the authenticity of the members of the Union could not be
carried out as the contractors did not maintain any record. In the said report,
D it is stated that :

"In these circumstances mentioned above, it has not been possible for .
the Commissioner of Labour to verify the authenticity of the list of
workmen claiming to be members of Kachara Vahatuk Shramik
Sangh."
E
The Labour Commissioner suggested that in the absence of any record
of contract labourers maintained by the principal employer/contractors, the
list of the workers as submitted by the Union may be considered as valid list.
In the said list, the Labour Commissioner had mentioneo that about 2000
workmen had been working since last 15 years as contract labourers. In the
F report of 23rd April, 1999, after giving the details of the work carried by
him, the Labour Commissioner says "that the Government Labour Officers
designated by him had interrogated the contract labourers present in the
Ward in the morning and filled up 1172 forms after interroga~ing 1172 workers.
It was also noticed that merely 219 workers' names were in the list and
G remaining 953 workers' names were not found in the list of that Ward."

In the report dated 12th June, 1999, the Labour Commissioner has also
indicated that out of 1540 workmen listed out in the writ petition, he had
been able to identify 541 workers. Similarly·, out of the 607 contract labourers
whose names were annexed to the list exhibited to the Chamber Summons
H No. 31 of 1991 in Writ Petition No. I 027 of 1997, he had been able to
MUNICIPAL CORPN OF GREATER MUMBAI i•. K.V SHRAMJK SANGH [SHIVARAJ \' PATIL. l J 1139

identify l 3 8 workers. Thus, he pointed out that, out of the total 214 7 workers A
whose names were put forward by the Union, the Government Labour Officers
were able to identify 947 workers while actually working on the dates of the
visits of the Government Labour Officers on 20th and 21st May, 1999.

The Corporation has disputed as to the number of workers under the
contract labour system and their authenticity and the period of their work etc. B
Merely because the records are not maintained by the contractors, it ,may not
be appropriate to accept the list of workers given by the Union. ji!Ven from
the reliefs granted by the High Court already extracted above, it is clear that
782 contract labourers were identified as working through contracts; a direction
was given to constitute a committee to verify the claims of all workmen other C
than already verified and to make a report to the Corporation indicating the
presence who were working actually as the contract labourers in the Solid
Waste Management Department on the date on which the writ petition was
filed. Further, immediately on receipt of such report, the Corporation shall
absorb such workmen as the permanent workmen. These directions themselves
indicate as to the disputed questions that arose for consideration. D

The High Court having said earlier although the power of abolishing
the contract labour system vested in the Government because of delay in
doing so, there was no impediment to pass such an order itself. In para 45
of the judgment, the High Court states thus:-
E
"We are inclined to direct that the workmen required for work in the
Solid Waste Management Department should not fall within the
purview of the Contract labour (Regulation & Abolition) Act, l 970
at all, but that they should be absorbed as direct employees of the
Bombay Municipal Corporation."
F
This direction cannot be sustained not being consistent with the judgment
of the Constitution Bench in SAIL case (supra) .

As laid down in the Constitution Bench judgment, absorption of contract
labourers cannot be automatic and it is not for the court to give such direction. G
Appropriate course to be adopted is as indicated in para 125 of the said
judgment in this regard. Thus having considered all aspects, we are of the
view that the impugned judgment and order cannot be upheld.

In the result, for the reasons stated and discussion made above, the
impugned judgment and order are set aside leaving it open to the Union to H
1140 SUPREME COURT REPORTS [2002] 2 S.C.R.

A seek remedies available in terms of para 125 of the judgment of the
Constitution Bench in SAIL aforementioned before the State Government or
the Industrial Adjudicator as the case may be. In case, the Union moves the
appropriate Government or the Industrial Adjudicator within four weeks from
today, they shall consider the same and pass appropriate orders within a
period of six months. Tile order to maintain status quo regarding the
B employment of the contract labourers to the extent indicated was passed in
the writ petition on 20.4.1998 and even after disposal of the writ petition, the
High Court stayed the order for a limited period and further this Court passed
order to maintain the status quo on 26.10.1999 which is continuing. In. these
circumstances, the order of status quo shall continue for a period of six
C months. We also make it clear that this order does not prevent the State
Government to proceed in accordance with law in the matter of abolition of
contract labour system. The appeal is allowed accordingly in the above terms. ·
No costs.

K.K.T. Appeal allowed.