Holding

The canteen workers are employees of the Life Insurance Corporation of India and are entitled to the minimum salary of its Class IV employees.

Summary

Parimal Chandra and other canteen workers of the Life Insurance Corporation of India (LIC) filed a writ petition seeking to be treated as regular employees of LIC and to receive the minimum salary paid to Class IV employees, invoking the principle of equal pay for equal work. The High Court initially granted the relief, but the Division Bench set it aside, holding that the canteens were run by committees, a cooperative society or contractors and that no employer‑employee relationship existed with LIC. The Supreme Court examined whether the provision of canteen services, though not statutorily mandated, had become an implicit condition of service and thus part of the establishment, making the workers employees of LIC. Relying on the Factories Act, prior case law and the factual record showing LIC’s dominant control over the canteen contracts, the Court held that the workers are indeed employees of LIC. Consequently, they are entitled to the minimum salary of Class IV employees from the date of filing the writ petition, with arrears and appropriate service conditions, subject to age and service‑length conditions. The appeal was allowed.

Issues considered

Whether the canteen workers are to be deemed regular employees of the Life Insurance Corporation of India.
Whether the principle of equal pay for equal work applies to grant them the minimum salary of Class IV employees.
Whether the relief claimed in the Supreme Court appeal was previously raised before the High Court.

Legislation cited

Constitution of Indias. Article 226, s. Article 32
Factories Act, 1948s. 46, s. 47
Industrial Disputes Act, 1947s. 31(2), s. 9A

Subjects

service lawequal pay for equal workemployer-employee relationshipcanteen workersLife Insurance Corporation of Indiaminimum wagesimplicit obligationindustrial dispute

Judgment

A PARIMAL CHANDRA AND ORS.
v.
LIFE INSURANCE CORPORATION OF INDIA AND ORS.

MARCH 29, 1995

B [P.B. SAWNT AND S.B. MAJMUDAR, JJ.]

Service Law: Life Insurance Corporation-Claim of canteen employees
that they are employees of corporation and thus entitled to parity with
employees of Corporation-Canteen facilities provided to staff for a very long
C time-By usage and customary benefits canteen facilities becoming the con-
dition of service-Corporation having dominating say in dictating the terms
of canteen contract-Contract indicating that Corporation was desirous of
running the canteen-Held on facts there was implicit obligation to provide
canteen services-Canteen workers held employees of Corporation-Factories
D Act and West Bengal shops and Establishment Act held inapplicable.
Principle of equal pay for equal work-Applicability of

Constitution of India, 1950 : Articles 226 and 32

E Writ-Canteen employees of LIC-l'rayer for wages equivalent to wages
paid to employees of LIC-Withdrawal of writ-Filing of writ in Supreme
Court-Preliminary objection that relief claimed in this Cowt was not claimed
before High Cou~eld not maintainable on facts.

Pleadings-Interpretation o~Should be read as a whole and const!Ued
F accordingly.
The appellant-workmen-working in the canteens at different offices
of the respondent-Corporation filed a writ petition in the High Court of
Calcutta for directions to the respondent-Corporation to comply with the
policy of equal pay for equal work and accordiL.:IY pay to the appellants
G the minimum salary that was enjoyed by the staff of the Corporation and
also to follow the policy which was prevalent for canteen workers in other
Government departments, railways and statutory corporations. The appel·
lants specifically pleaded that (i) the staff of the respondent-Corporation
at all its establishments were provided with facilities of canteen by tlte
H respondent-Corporation for more than few decades and that by usage and
34
P. CHANDRA v. L.l.C. 35
customary benefits canteen facilities became the condition of service of the A
employees - a fact not specifically controverted by the Respondent-Cor-
poration. (ii) being canteen employees and engaged in operation inciden-
tally connected with the industry carried on by the respondent-
corporation, the appellants antomatically became the direct employees
under the respondent-Corporation and as such they cannot be dis- B
criminated against and denied the prevalent minimum wages.

The case of the respondent-Corporation before the Single Judge of
the High Court was that the canteens did not belong to it nor were they
run by it. The Corporation only gave its employees the facilities to run the
canteens. The canteens were run during different periods either by the C
canteen-committees of the staff or their cooperative society. It has no
connection mnch less contract of employment with the appellants. Nor
does it have any control over their working conditions of service or the
termination of their services. Appellants were therefore not the employees
of the Corporation and cannot be deemed to be so.
D
However, the facts on record revealed in nnmistakable terms that
canteen services were provided to the employees for a long time and from
time to time the Respondent-Corporation was taking steps to provide the
said services. Further from the terms of the contract which was rxclusively
entered Into between the Corporation and the canteen Contractor - it was E
clear that the Corporation has the dominating say in dictating the terms
and conditions of the contract and that it was the Corporation and not the
employees of the Corporation or their union or cooperative society which
was desirous of running the canteen.

- A Single Judge of the High Court allowed the writ petition and
granted the relief prayed for. The respondent- Corporation preferred a
F

Letters Patent Appeal before the Division Bench of the High Conrt. The
averments made by the appellants in their rejoinder before the Division
Bench of the High Conrt to the effect that the job done by the canteen
employees was of perennial nature and was incidental to the running of G
the main business of the Corporation and it was being done by the
Corporation through their Intermediaries - sometimes by contractors,
sometimes by cooperative society and sometimes by canteen employees
themselves was not denied by the Corporation. However, the Division
Bench set aside the decision of the Single Judge and dismissed the H
36 SUPREME COURT REPORTS [1995] 3 S.C.R.

A appellants' writ petition by holding that (i) the canteen was being run by
a committee or coopera\jve society of the staff members of the Corporation
(ii) the Corporation only agreed tt)rovlde space to house the canteen and
certain chairs and tables for the Ilse of its staff members, (iii) an inde·
pendent contractor had been appointed to run the canteen (iv) and since
B no letter of appointment bad ever been issued by the Corporation and no
attendance register was maintained and the salary of the canteen workers
was being paid by tht independent _contractor and not from the funds of
the Corporation, there was no employer and employee relationship be·
tween the Corporation and the appellants.

C In appeal to this Court the questions which arose for consideration
were : (i) Whether the appellants should be deemed to be the regular
employees of the respondent-Corporation, and if so (ii) what Pay-scales
and other service conditions should be made available to them. A prelimi·
nary objection was raised on behalf of the respondent-Corporation that in
these proceedings the appellants have claimed relief which they bad not
D claimed before the High Court and hence they cannot ask for the relief in
question.

Allowing the appeal, this Court

E HELD : 1. The averments made in the writ petition, before the High
Court show in unmistakable terms that the appellants approached the
High Court with a specific plea that they are the employees of the respon·
dent-Corporation and as such, they should be paid the minimum wages
which are being paid to other regular employees. The relief of minimum
wages paid to the other regular employees of the corporation on the basis
F of the priedple of equal pay for equal work is thus claimed on the ground
'that they are also the regular employee. of the Corporation. Thus, the
relief claimed includes in it the basis of the relief, viz., their status as the
regular employees of the Corporation. Pleadings have to be read as a whole
and construed accordingly. Thus construed, the relief claimed leaves no
G doubt that it is based on the claim for the status of the regular employees
of the Corporation. Therefore, there· is no substance in the preliminary
objection. [43·E·G)

2. (i) Where, as under the provisions of the Factories Act, it is
statutorily obligatory on the employer to provide and main·
H taie canteen for the use of his employees, the canteen becomes
- P. CHANDRA v. Ll.C..

a part of the establishment and, therefore, the workers A
37

employed in such canteen are the employees of the manage-
menL [58-E]

(ii) Where, although it is not statutorily obligatory to provide a
canteen, it is otherwise an obligation on the employer to
provide a canteen, the canteen becomes a part of. the estah- B
lisbment and the workers working in the canteen, the
employees of the managemenL The obligation to provide a
canteen bas to be distinguished from the obligation to provide
facilities to run canteen. The canteen run pursuant to the
latter obligation, does not become a part of the establishment. C
[58-F]

(iii) The obligation to provide canteen may be explicit or Implicit.
Where the obligation is not explicitly accepted by or cast upon
the employer either by an agreement or an award etc., it may
be Inferred from the circumstances, alld the provisions of the D
canteen may be held to have become a part of the senice
conditions of the employees. Whether the provision for can-
teen senices bas become a part of the senice conditions or
not, is a question of fact to be determined on the facts and
circumstances in each case. [58-G-H]
E
Where, to provide canteen services bas become a part of the senice
conditions of the employees, the canteen becomes a part of the estab-
lishment and the workers in such canteen become the employees of the
management. [59-B]
·-.I
F
(iv) Whether a particular facility or service bas become .implicitly
a part of the service conditions of th• employees or not, will
depend, among others, on the nature of the service/facility, the
contribution the service in question makes to the efficiency of
the employees and the establishment, whether the service is
available as a matter of right to all the employees in thew · G
capacity as employees and nothing more, the number of
..J. employees employed In the establishment and the number of
emplo~ who avail bf the service, the length of time for which
the senice has been continuously available, the bou:'S during
which it Is available, the nature and character of management, H
38 SUPREME COURT REPORTS [1995] 3 S.C.R.

A the interest taken by the employer in providing, maintaining,
supervising and controlling the service, the contribution made
by the management in the form of infrastructure and funds
for making the service available etc. [59-C·D]

The Ahmedabad ma11ufacturi11g a11d Calico Pri11ting Company, ltd.
B (Calico Mills) v. 771eir Workmen, (1953) II LU 647; Saraspur Mills Co. Ltd.
v. Rama11lal Chimanlal and Ors., [1974] 3 SCC 66; Elphinstore Spin11ing and
Weaving Mills Company Ltd. v. S.M. Sable and ni11e other Clerks (the ,_ __
Bombay Taxtile Clerks Union, (1953) I LU 752; Dharangadhara Chemical
Works Ltd. v. State of Saurashtra, [1957] SCR 152; Cassidy v. Ministry of
C Health, (1951) 1 T.L.R. 539; Simmons v. Health Laundry Company, (1910]
1 K.B. 543; Basti Sugar Mills Ltd. v. Ram Ujagar and Others, [1963] 2 SCR
838; Hussainbhai, Calicut v. The Alath Factory Thozhilali Union, Kozhikode
and Others, (1978] 4 SCC 257; Workmen of the Food Coporation of India
v. Food Coporation of India, [1985] 2 SCC 136; MM.R. Khan and Ors. v.
Union of India and Ors., (1990] Supp. SCC 191; All India Institute
D Employees' Association v. Union of India, JT (1990) 1 S.C. 319 and Surendra
Prasad Khu&ral v. Chairman, MMT Coporation of India ltd., JT (1993) 5
SC 80, referred to

3. There is no dispute tl)at. the respondent-Corporation has not
E explicitly under taken i0· provide canteen services to its employees working
in the offices In question. The only obligation that it has explicitly accepted
was to provide to the employees. f~cilities to run canteen, such as premises,
furniture, electricity, water etc. Howe-fer, the facts on record show that the
Corporation had implicitly accepted the obligation to provide canteen
services and not merely the facilities to run the canteen. The facts on
F record show in unmistakable terms that canteen services have been
provided to the employees of the Corporation for a long time and it is the
Corporation which has been from time to time, taking steps to provide
the said services. In the circumstances, the canteen has become a part of
the establishment of the Corporation. The canteen committees, the
G cooperative society of the employees and the contractors engaged from
time to time are in reality the agencies of the Corporation and are, only
a veil between the Corporation and the canteen workers. Therefore, there
is no hesitation in coming to the conclusion that the canteen workers are
in fact the employees of the Corporation. (59-F, 66-H, 67-BJ

H 4. In view of the finding that the appellants are entitled to be the
P. CHANDRA v. L.l.C. 39
•
employees of the Corporation, they are entitled to the first relief they have A
claimed. They should be deemed to have become the regular employees of
the Corporation from the date of the filing of the writ petition before the
High Court and should, therefore, be paid the arrears of salary and other
monetary benefits, if any, from the said date after adjusting the salary and
monetary benefits that they may have received. The years of continuous
service put in by them even prior to the aforesaid date as canteen workers
B
should, however, be taken into account for the purpose of calculating their
retiral benefits. (67-D, 68-C]

_1 5. However, there is distinction between the present service conditions
of the appellants and the other Class IV employees of the Corporation. It is C
not possible for the Court to evaluate the work done by each of the
categories. Hence different service conditions will have to he prescribed for
the different appellants. The Corporation may have, therefore, to prescribe
appropriate service conditions for the canteen workers. Pending the
prescription of such service conditions, the Corporation should pay to all
the appellants the minimum of the salary presently paid to its Class IV D
employees taking into consideration and making allowance for the special
facilities, if any, available to them and also their special working conditions.
In addition, the Corporation should also give them the benefit of the other
service conditions available to its Class IV employees. [67-E, G, H 68-A)
E
6. The above direction to treat the appellants as the regular
employees of the Corporation will be subject to two conditions, viz., (a) .
that they were above the minimum and below the maximum age limit and
medically fit as per the regulations of the Corporation on the date of the
filing of the writ petition and (b) that on the date of the filing of the writ
petition before the High Court, and also during the pendency of the F
~ proceedings, they had put In a minimum of three years continuous service
as canteen workers in the canteens in question. For the purposes of
calculating the said three years qualifying service and the retiral benefits,
the service prior to the attainment of the minimum qualifying age under
the Corporation's .regulations shall be Ignored. [68-D-E] G
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1744 of
1992.

From the Judgment and Order dated 10.10.91 of the Calcutta High
Court in A. No. 655/89 (Mattar No. 2303/86). H
40 SUPREME COURT REPORTS (1995] 3 S.C.R.
•
V.M Tarkunde and S.K. Nandy with him for the Appellants.

G.L. Sanghi, H.K. Sil and Kailash Vasdev with him for the Respon-

B
dents.

The Judgment of the Court was delivered by -
SAWANT, J. The appellants-42 workmen· working in the canteen at
four different offices of the respondent • Corporation in Calcutta, are
involved in the :· ·esent proceedings. In 1985, they had approached this
Court for certair ·eliefs by a writ petition under Article 32 of the Constitu-
tion. By its ord · · of 19th July, 1986, this Court had directed them to
,.,_
approach the Hi:. ~h Court. Hence they had withdrawn the writ petition with
liberty to move t.1e High Court under Article 226 of the Constitution, which
they did and the present appeal arises out of the said proceedings. Since
on behalf of the respondents an objection is raised that the appellants have
been claiming in these proceedings relief which they had never prayed for
in the writ petition before the High Court, we may at the outset summarise
the contents of the writ petition filed by them in the High Court.·

2. In para 2 of the writ petition, the appellants have averred that they
are canteen employees of the Corporation and working in the canteens
managed by the Corporation. In para 3, they have stated that they are
employed in the canteens of the Corporation and some of them for
decades, since the inception of the Corporation and others for a minimum
of seven years, and are holding the designations variously of Canteen
General Manager, Canteen Manager-cum-Salesman, Kitchen Clerk, Can-
teen Clerk, Halwai, Assistant Halwai, Cook, Bearer, Wash-boy and
F Sweeper etc. In para 4 they have specified the four departmental canteens
of the Corporation where they have been working. In para 5, they have
averred there that they are· paid at the rate much below the rate at which
canteen employees working under different Government departmental
canteens including those run by statutory Corporations and Railways are
paid. They have also stated there that the employees of the canteens in
G different Government offices and Railways throughout the country are
enjoying at least the pay-scales which are enjoyed by the peons of the
respective offices. In para 6, they have given the emoluments which the
Class-IV employees of the Corporation get which are between Rs. 700 and
800 per month against the wages they get as canteen employees ranging
H from Rs. 100 to Rs. 200 per month. In paras 7 and 16 of the writ petition,
- P. CHANDRA v. L.l.C. [SAWANT,J.]

to quote them verbatim, it is then averred as follows :
41

A
"Your petitioners state that the employees and the staffs of the
respondent No. 1 at all its establishments are provided with
facilities of canteen by the respondents for more than few decades
and as such providing of canteen facilities forms a condition of
service of the employees and staffs of the respondent No. 1. Your B
petitioners state that by usage and customary benefits, canteen
facilities has become the condition of service of the employees of
the respondent no. 1 and as such running of the Canteen is
incidental to the running business and/or industry of the life
Insurance Corporation of India (Respondent No.l). C
x x x x x x x x

Your petitioners state that they are engaged in the work of the
canteen which is incidentally connected with the main industry of
the respondent no. 1 and as such they are workmen working under D
the respondent no.1."

It is against the background of the said averments in the main body
of the writ petition that in paragraph 18 thereof they have averred that the
respondent-Corporation being an instrumentality of the State and bellig the
.
' State within the meaning of ruticle 12 of the Constitution, cannot deny E
them equal pay-scales with other canteen employees of the Government
departments/Railways and other statutory Corporations or take a stand or
policy different from that followed by the Government departments, Rail-
ways and other instrumentalities· of the State. With regard to pay-~cales of
the canteen employees, they have stated there that till date the respondent- p
Corporation has not framed any pay-scale for the canteen employees and
as such have acted in a discriminatory manner violating Article 14 of the
Constitution. Thereafter, in ground No. 2 of the petition they have stated
that the canteen workers of the respondent-Corporation being engaged in
operation incidentally connected with the industry carried on by the
respondents, the respondents cannot deny them the minimum wages given G
to their employees. Jn ground No. 3 it is alleged that the canteen facility
being condition of service of the staff and employees of the respondent-
Corporation as per usage and custom, the appellants, being canteen
employees and engaged in operation incidentally connected with the in-
dustry carried on by the respondent, "automatically become the direct H
42 SUP RF.ME COURT REPORTS [1995) 3 S.C.R.

A employees under the re;pondents and as such they cannot be discriminated
against and denied the minimum wages that is prevalent in the Life
Insurance Corporation. In ground No. 4, they have stated that the appel-
lants are working under the respondents through the agencies, and being
engaged in work incidentally connected with the industry carried on by the
B Corporation, they are entitled to get the pay that is admissible to regular
employees of the Corporation. It is with these averments in the main body
of the petition and the grounds that the appellants have in prayer (b) of
the petition, claimed the relief of the issuance of the writ of mandamus
commanding the respondent-Corporation to comply with the policy of
"equal pay for equal work" and pay them the minimum salary that is
C enjoyed by the staff of the Corporation and also to follow the policy that
is prevalent for canteen workers in other Government departments, Rail-
ways and statutory Corporations. It is thus clear from the writ petition filed
by the appellants before the High Court that they have prayed for the relief
of mininrnm wages paid to the employees of the respondent-Corporation
D on •he ground that they are the regular employees of the Corporation. In
other words, it is implicit in the said relief claimed by them that they are
to be deemed to be the regular employees of the Corporation and paid the
minimum salary that is paid to its other regular employees.

3. The case of the respondent-Corporation before the learned Single
E Judge of the High Court as made out in their counter to the writ petition
was that the canteens did not belong to it nor were they run by it. The
Corporation only gave its employees the facilities to run the canteens. The
canteens were run during different periods either by the canteen-commit-
tees of the staff of their cooperative society through the contractors, and
p the appellants were engaged by the contractors or the cooperative society.
It has no connection much less contract of employment with the appellants.
Nor does it have any control over their working, conditions of service or
the termination of their services. They are, therefore, not the employees of
the Corporation and cannot be deemed to be so. Hence they are not
entitled to the relief claimed by them. The learned Single Judge by his
G decision of 27th September, 1989 allowed the writ petition and directed the
respondent-Corporation to implement the policy of equal pay for equal
work and pay the appellants minimum salary as is enjoyed by the regular
staff of the Corporation or such pay as is enjoyed by regular canteen
workers in the other Government establishments or public undertakings.
H The learned Judge also directed that the appellants shall be treated as
P. CHANDRA v. L.LC. [SAWANT.J.) 43
direct workers under the Corporation and shall be given all service benefits A
accordingly.

4. Against the said decision of the learned Single Judge, the respon-
dent-Corporation preferred a Letters Patent Appeal before the Division
Bench of the High Court which by the impugned decision dated 10th
October, 1991, allowed the appeal, set aside the decision of the learned B
Single Judge and dismissed the appellants' writ petition. It is this decision
of the Division Bench which is under challenge in the present appeal.

5. The questions to be answered· in this appeal, therefore, are : (i)
whether the appellants are or should be deemed to be the regular C
employees of the respondent-Corporation, and if the answer is in the
affirmative, (ii) what pay-scales and other service conditions should be
made available to them. ·

6. A preliminary ob.jection was raised to the framing of the first issue D
by Shri Sanghi appearing for the respondent-Corporation, as pointed out
at the outset, that the appellants had not claimed any such relief in the writ
petition itself and hence they cannot widen the scope of the petition and
ask for the relief in question in this appeal. We have referred in extenso to
the averments made in this writ petition, earlier. They show in unmistakable
terms that the appellants approached the High Court with a specific plea E
that they are the employees of the respondent-Corporation and as such,
they should be paid the minimum wages which are being paid to its other
regular employees. The relief of minimum wages paid to the other regular
employees of the Corporation on the basis of the principle of equal pay
for equal work is thus claimed on the ground that they are also the reguhr F
employees of the Corporation. Thus, the relief claimed includes in it the
basis of the relief, viz., their status as the regular employees of the Cor-
poration. It is unnecessary to restate here the law regarding the interpreta-
tion of the pleadings. They have to be read as a whole and construed
accordingly. Thus construed, the relief claimed leaves no doubt that it is
based on the claim for the status of the regular employees of the Corpora- G
lion. We, therefore, find no substance in the preliminary objection.
\
4· 7. Coming now to the main question as to whether the appellants
should be deemed to be the regular employees of the Corporation, we may
first refer to the statutory provisions with regard to the canteen. H
44 SUPREME COURT REPORTS (1995] 3 S.C.R. •
A Section 46 of the Factories Act, 1948 which is a Central enactment
read as follows :

"46. Canteens. - (1) The State Government may make rules requir-
ing that in any specified factory wherein more than two hundred
and fifty workers are ordinarily employed, a canteen or canteens
B shall be provided and maintained by the occupier for the user of
the workers.

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

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

(b) the standards in respect of construction, accommodation, fur-
niture and other equipment of the canteen;

(c) the foodstuffs to be served therein and the charges which may
D be made therefor;

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

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

(e) the delegation to the Chief Inspector, subject to such conditions
as may be prescribed, of the power to make rules under clause
(c)."
F
This provision has to be read with the relevant provisions of Section .>-
47 (1) of the said Act which are as follows :

"47. Shelters, rest rooms and lunch rooms. - (1) In every factory
wherein more than one hundred and fifty workers are ordinarily
G employed, adequate and suitable shelters or rest rooms and a
suitable lunch room, with provision for drinking water where
workers can eat meals brought by them, shall be provided and
maiiitained for the use of the workers;

H Provided that any canteen maintained in accordance with the

'~
P. CHANDRA v. L.l.C. (SAWANT,J.] 45

provisions of Section 45 shall be regarded as part of the require- A
ments of this sub-section : "

There is no dispute that the Factories Act is not applicable to the
offices of the 'respondent-Corporation. What is applicable is the West
Bengal Shops and Establishment Act which is a State enactment. However,
there is no provision in the said Act with regard to canteens. B

8. We may now refer to the law on the subject as is evolved through
various judicial decisions.

In the Ahmedabad Manufacturing and Calico Printing Company Ltd. C
(Calico Mills) v. 11ieir Workmen, (1953) II LU 647, which is a de, ·ion of
the Labour Appellate Tribunal of India and which is quoted approvingly
in Saraspur Mills Co. Ltd. v. Raman/al Chimanlal and Ors., (infra), the
facts were that by notifications issued by the State Government, the
provisions of Section 46 of the FactOiies Act, 1948 were made applicable D
to a large number of textile mills including the appellants before the
Triburlal. As a result, it was compulsory for the mills to maintain suitable

-- canteens for the use of their workmen. The contention of the appellant-
Mills was that assuming that the canteens were run through the contractors,
the canteen was not a part of the undertaking so as to render the manage-
ment responsible for the wages and dearness allowance of the staff of the E
canteen and that the maintenance of the canteen was not in the course of,
or for the purpose of conducting the undertaking. The Tribunal held that
in view of the statutory obligation cast on the mills to run the canteen, the
running of the canteen was a part of the undertaking. For this purpose, the
Tribunal also relied upon the decision of its Special Bench in E/phinstone p
Spinning and Weaving Mills Company Ltd. v. S.M. Sable and nine other
Clerks (the Bombay Textile Clerks' Union), (1953) I LU 752 where the
Tribunal had considered the case of employees of the grain shops run in
the Mills by the contractors. The Special Bench had held. there that the
employees of the grain shops were entitled to be regarded as the employees G
of the Mills since the running of the grain shop had become a part of the
undertaking within the meaning of the definition of 'employer' in sub-sec-
tion (14) (e) of Section 3 of the Bombay Industrial Relations Act. The
+ Tribunal held that there was a considerable similarity between the grain
shop and the canteen for the purposes of the said definition. The Tribunal
overruled the contention that the earlier decision of the Special Bench was H
46 SUPREME COURT REPORTS (1995] 3 S.C.R.

A erroneous and needed further consideration.

In Dharangadhara Chemical Works Ltd. v. State of Saurashtra, (1957)
SCR 152, the question was whether the agarias who were engaged by the
manufactures of salt were the workmen of the manufactures or whether
B they were independent contractors. The facts were that the appellant-
manufacturers were the lessees holding licences for the manufacture of salt
on the demis,·d land. The salt was manufactured by a class of professional
labourers known as agarias from rain water that got mixed up with the
saline matter in the soil. The work was seasonal in nature and commenced
in October after the rains and continued till June. Thereafter, the agarias
C left for their own villages for cultivation work. The demised lands were
divided into Plots called pattas and allotted to the agarias with a sum of
Rs. 400 for each patta to meet the initial expenses. The same patta was
generally allotted to the same agaria every year and if the patta was
extensive in area, it was allotted to two agarias. After the manufacture of
D salt, they were paid 5 as. 6 pies per maund. At the end of each season,
accounts were settled and they were paid the balance due to them. They
worked with the members of their families and were free to engage extra
labour on their own account and the manufacturer had no concern there-
with. No hours of work had been prescribed, no muster rolls maintained
nor were working hours controlled by the appellants. There were no rules
E as regards leave or holidays and they were free to come or.t of the works
after making arrangements for manufacture of salt. On these facts, the
Industrial Tribunal found that the agarias were workmen within the mean-
ing of the Industrial Disputes Act, 1947. This finding was confirmed by the
High Court which also held that the reference of the dispute made by the
F Government under Section 10 of the Industrial Disputes Act was com-
petent. This Conrt while confirming the finding of the Industrial Tribunal
and of the High Conrt, held that it was well-settled that the Prima facie
test of the relationship of master and servant was the existence of the right
in the employer not merely to direct what work was to be done but also to
control the manner in which it was to be done, the nature and extent of
G such control varying in different businesses and being by its very nature
incapable of being precisely defined. The correct approach is to consider
whether having regard to the n~ture of the work, there is due control and
supervision of the employer. A person could be workman every though he
did piece work and was paid not per day but by the job, or employed his
H own workmen and paid them for it. The Court noted the observations of
P. CHANDRA v. L.1.C. [SAWANT,J.] 47
Somervell, LI, in Cassidy v. Ministry of Health, (1951) 1 T.L.R. 539, which A
had taken the view that it was not necessary for holding that a person was
an employee that the employer should be proved to have control over his
work. The test of control was not one of universal application and there
were many contracts in which the master could not control the manner in
which the work was done. The correct approach would be to consider B
whether having regard to the nature of the work, there was due control
and supervision by the employer. The Court quoted the opinion of
Fletcher Moulton, L.J., in Simmons v. Health Laundry Company, (1910) 1
.,,.-, K.B. 543 where the learned Judge has observed as follows :

"In my opinion it is impossible to lay down any rule of law C
distinguishing the one from the other. It is a question of fact to be
decided by all the circumstances of the case. The greater the
amount of direct control exercised over the person rendering the
services by the person contracting for them the stronger the
grounds for holding it to be a contract of service, and similarly the
greater the degree of independence of such control the greater the D
probability that the services rendered are of the nature of profes-
sional services and tha_t the contract is not one of service.n

The Court then observed that the broad distinction between a
workman and an independent contractor lies in this that while the former E
agrees himself to work, the later agrees to get other persons to work. A
person who himself agrees to work and does so work and is, therefore a
workman, does not ceases to be such by reason merely of the fact that he
gets other persons also to work along with him and those persons are under
his control and are paid by him. What determines whether a person is a F
workman or an independent contractor is whether he has agreed to work
personally or not. If he has, then he is a workman and the fact that he gets
the assistance from other persons would not affect his status.

In Basti Sugar Mills Ltd. v. Ram Ujagar and Others, (1%3] 2 SCR 838,
the r.ase of the appellant-employer was that the work of the removal of the G
press mud had been given by it to a contractor and the respondent-
workmen were employed by that contractor to do that work. It is the
contractor who had terminated their services and the management had
nothing to do with the workmen who had approached the Court for relief
against the termination of their services and also for paying them the H
48' SUPREME COURT REPORTS [1995] 3 S.C.R.

A nummum wages prescribed under the Government notifications. This
Court held that the workmen were persons employed in the industry to do
manual work for reward Further, the appellant-Company was their
employer as the workmen were employed by the contractor with whom the
company had contracted in the course of conducting the industry for the
execution by the said contractor, of the work of removal of press mud
B which is ordinaril¥ part of the industry. The Court also held that the
expression "employed by thr factory" which occurred in the definition of
'workman' in 'the standing Orders applicable to the company, included
every person who was employed to do the work of the factory and was wide
enough to include the workmen employed by the contractor of the factory
C also.

[n Saraspur Mills Co. Ltd. v. Raman/al Chimanlal and Ors., [1974] 3
SCC 66, the facts were that the appellant- Company which was re~ponsible
for maintaining the canteen under the provisions of Section 46 of the
D Factories Act and the rules made thereunder, had entrusted the task of
running the canteen to a co-operative society. The society employed the
respondent- workmen in the canteen. The workmen filed an application
before the Labour Court under the Bombay Industrial Relations Act, 1946
making a grievance that they were not paid wages and dearness allowance
in accordance with the award of the Industrial Tribunal. In support of their
E claim, the workmen alleged that they become workers of the appellant, who
was bound to pay wages and dearness allowance as per the award. Since
the appellant was running the canteen under an obligation to do so under
the Factories Act, the running of the canteen was ordinarily a part of the
undertaking although the appellant did not itse:f run the canteen but
F handed over the premises to the co-operative society to run it for the use
and welfare of the company's employees and to discharge it legal ol:liga-
tion. The appellant had resisted the claim by contending that the workmen
had never been employed by it or by its agent or contractor. They were in
fac~ employed by the Co-operative society which was its licensee. The
Labour Court dismissed the workers' claim. However, in appeal, the In-
G dustrial Court allowed the claim by holding that the employees of the co-
operative society were the employees of the appellant. This Court referred
to the amended definition of 'employee' and employer' in Section 3 (13)
and 3 (14) of the Bombay Industrial Relations Act which read as follows :

H "(13) 'employee' means any person (including an apprentice)
- P. CHANDRA v. L.1.C. (SAWANT,J.] 49
employed in any industry to any skilled or unskilled manual, A
supervisory, technical or clerical work for hire or reward, whether
the terms of employment be express or implied and includes-( a)
a person employed in the execution of any work in respect of which
the owner of an undertaking is an employer within the meaning Of
sub-clause (e) of clause (14).
B
xxxxxxx

(14) 'employer' includes -

xxxxxxx
c
(a) Where the owner of any undertaking in the course of or for
the purpose of conducting the undertaking entrusts the execution
of the whole or any part of any work which is ordinarily a part of
the undertaking, to any person otherwise than as the servant or
agent of the owner, the owner of the undertaking." D

'rhe Court also referred to the definition of 'worker' under the
- --<.
Factories Act, 1948. The Court then referred to its earlier decision in Basti
Sugar Mills Ltd. v. Ram Ujagar and Others, [1963] 2 SCR 838 and held that
since under the Factories Act, it was the duty of the appellant to run and
maintain the canteen for use of its employees. The ratio of the decision in E
Ahmedabad Mfg. and Calico Printing Co. Ltd. & Others v. Their Workmen,
(1953) II LLJ 647, would be fully applicable in which the very same
provisions of the Act were considered and confirmed the finding of the
Industrial Court.
F
In Hussainbha~ Calicut v. The Alath Factory Thozhilali Union, Koz-
hikode and Others, [1978] 4 SCC 257, the facts were that the petitioner was
a factory owner manufacturing ropes. A number of workers were engaged
by him to make ropes. According to the petitioner, they. were hired by
contractors who had executed agreements with the petitioner to get the
work done. Out of the workmen engaged by the contractor, 29 were denied G
employment. They raised an industrial dispute which was referred by the
State Government to the Industrial Tribunal. The Tribunal upheld the
contention of the workmen that they were the employees of the petitioner
and directed their reinstatement. The award of the Tribunal was upheld by
the learned Single Judge of the High Court as well as by the Division Bench H
50 SUPREME COURT REPORTS (1995) 3 S.C.R.

A in appeal. This Court while dismissing the employer's petition ·at th"
admission stage itself with an elaborate judgment, held that the work done
by the workmen was an integral part of the industry. The raw material was ·
supplied by the management. The factory premises as well as the equip-
ment used belonged to the management and even finished product was
B taken by the management for its own trade. Defective articles were
directed to be rectified by the management. The workmen were broadly
under the control of the management. On these facts, the Court held that
where a worker or a group of workers, labours to produce goods or services
and these goods or services are for the business of another, that other is
in fact, the employer. He has economic control over the workers' subsis-
C tence, skill and continued employment. If he for any reason, chokes off,
the workers are virtually laid of. The preseuce of intermediate contractors
with whom alone the workers have immediate or direct relationship ex
contractu is of no consequence, when on lifting the veil or looking at the
conspectus of factors governing employment, we discern the naked truth,
D though draped in different perfect paper arrangement that the real
employer is the Management, not the immediate contractor. Myriad
devices, half-hidden in fold after fold of legal form depending on the
degree of concealment needed, the type of industry, the local conditions
and the like may be resorted to when labour legislation casts welfare
obligations on the real employer, based on Articles 38, 39, 42, 43 and 43-A
E of the Constitution. The Court must be astute to avoid the mischief and
achieve the purpose of the law and not be misled by the maya of legal
appearances. If the livelihood of the workmen substantially depends on
Jabour rendered to produce goods and services for the benefit and satis-
faction of an enterprise, the absence of direct relationship or the presence
F of dubious intermediaries of to make-believe trappings of detachment from
the management cannot snap the real life-bond. The liability cannot be
shaken off. The Court, however, added that if there is total dissociation in
fact, between the disowning management and the aggrieved workmen, the
employment is, in substance and in real-life terms, by another. The
management's adventitious connections cannot ripen into real employment.
G On this reasoning, the Court confirmed the finding of the High Court and
dismissed the petition.

In Workmen of the Food Corporation of India v. Food Corporation of
India, [1985] 2 SCC 136, initially the work of handling foodgrains at Siliguri
H depot of the respondent- Corporation was entrusted by it to a contractor.
P.CHANDRA v. L.I.C. [SAWANT,J.] 51
The contractor engaged handling-mazdoors for the purposes of the work. A
The mazdoors received the wages from the contractor as determined by
him or as agreed between the contractor and the workmen. From January
1973, pursuant to an agreement between the Corporation and the workers
working in the Corporation's godown, the direct payment system to the
workmen was introduced in place of the existing contract labour system. B
Under this system, the bills for the piece-rate wages payable to the 'han-
dling-mazdoors were to be prepared by the depot staff and the Sar-
dar/Mondal was to accept the payment after giving acquittance and signed
bills on their behalf and distribute the wages to the handling-mazdoors.
The bill with acquittance in the original would remain with the Corpora-
tion. The Union of the workmen was informed to advise local repre- C
sentative of the workmen to submit the wage bill in time mentioning therein
particulars 'per head out-turn by name' till January 1975. This system of
payment was in vogue till January, 1975 when the Corporation superseding
.the direct payment system reintroduced the contract labour system without
· giving any notice to the affected workmen. Consequently, 464 workmen D
attached to the Siliguri depot were treated as employed by the contractor.
An industrial dispute was raised by the union against this action of the
Corporation and a reference was made to the Tribunal for adjudication.
The Tribunal justified the corporation's action and held that reintroduction
of the contractor system did not constitute discontinuance of the services E
of the affected workmen. The questions for determination were whether as
a result of the introduction of the direct payment system, the concerned
workmen had become direct workmen of the Corporation and whether the
reintroduction of the contractor system of payment resulted in discon-
tinuance of the services under the Corporation for which notice under
Section 9A of the Industrial Disputes Act, 1947 was essential. The Court F
while allowing the workmen's appeal held that the essential condition for
a person to be workman within the meaning of the Industrial Disputes Act
is that he should be employed to do the work in an industry and there
should be an employment of his by the employer and that there should be
a relationship of the employer and employee as between master and G
servant. Where the contractor employs a workman to do the work which
he contracted with a third person to accomplish, the workmen of the
contractor would without something more become the workman of that
third person. When the contractor system was in vogue, the contractor was
being paid in lump sum arrived at by multiplying the rate per bag to total H
52 SUPREME COURT REPORTS (1995] 3 S.C.R.

A number of bags. Thus, the Corporation was solely concerned with the
number of bags handled by the contractor. It was not a contract for supply )
of labour, but specifically a contract for handling bags of foodgrains.
Therefore, when the contractor system was in vogue, the workmen
· employed by the contractor were not workmen of the Corporation. But
B introduction of the direct payment system, brought about a basic qualitative
change in the relationship between the Corporation and the workmen
engaged for handling foodgrains in that on the disappearance of the
intermediary ·contractor, a direct relationship of master and servant came
into existence hetween the Corporation and the workmen. It was obligatory
on the Corporation to arrange for handling the bags of foodgrains. The
C workmen handled the foodgrains for the Corporation and none else. For
this semce rendered, the Corporation agreed to pay and paid wages at
piece rate to each workman whose name appeared in the register main-
tained for the purpose as per the directions given by the District Manager.
If the pay packets were actually distributed by Sardars/Mondals, they can
D be said to be doing clerical work on behalf of the Corporation. Thus since
the introduction of the direct payment system, the workmen became the
workmen of the Corporation and a direct master-servant relationship came
into existence. When workmen working under an employer are told that
they have ceased to be the workmen of that employer and have become
E workmen of another employer, viz,. the contractor in this case, in legal
parlance such an act of the first employer constitutes discharge, termina-
tion of service or retrenchment by whatsoever name called, and a fresh
employment by another employer, viz., the contractor. If the termination
of service by the first employer is contrary to the well- established legal
F position, the effect of the employment by the second employed is wholly
irrelevant. The introduction of a contractor so as to bring about a cessation
of contract of employment between the workmen and the Corporation and
a fresh contract of employment between the workmen and the contractor,
if motivated to effect retrenchment, ex facie the action is contrary to Section
25-F of the Industrial Disputes Act. Viewed from either angle, the action
G of re-introducing the contractor so as to displace the contract of service
between the Corporation and the workmen would be illegal and invalid and
ab initio void and such action would not alter, change or have any effect
on the status of the affected workmen who had become workmen of the
Corporation. Even assuming that the scheme of the Food Corporation Act,
H 1964 permits the Corporation to engage a contractor, the Act would not
P. CHANDRA v. L.l.C. [SAWANT,J.] 53
permit the Corporation, which is an instrumentality of the State com- A
prehended in the expression 'other authority' in Article U, to act in a
manner thoroughly arbitrary by first keeping a contractor, removing him
and reinducting him without a semblance of consideration for the fate of
the workmen working for it for its benefit or for some work connected with
the functions of the Corporation. By cancelling the direct payment system B
and introducing the contractor, both the 'wages' and the 'mode of the
payment' within the meaning of Item I of the Fourth Schedule to the
Industrial Disputes Act are being altered to the disadvantage of the
workmen. Therefore, a notice of change under Section 9-A was a must
before introducing the change, otherwise it would be an illegal change
which would attract penalty under Section 31 (2). Such an illegal change C
would be wholly ineffective.

, In M.M.R Khan & Ors. v. Union of India & Ors., (1990] Supp. SCC
191, the facts were that the canteens run by different railway establishments
were classified into three categories, viz., (i) statutory canteens, i.e., can- D
teens required to be provided compulsorily in view of Section 46 of the
Factories Act; 1948, (ii) non-statutory recognised canteens set up as a staff
welfare measure with the prior approval and recognition of the Railway
Board as per the procedure detailed in the Railway Establishment
Manual, and (iii) non-statutory non- recognised canteens, i.e., those which
were established without the prior approval or recognition of the Railway E
Board. The Government of India notification dated 11th December 1979
had declared the employees of the departmental canteens/tiffin rooms as
holders of civil posts. The Division Bench of the Calcutta High Court had
directed the Union of India to. recognised the wo.-kers of the statutory
canteen at Kharagpur as employees of the Railway administration under F
the Factories Act but had rejected the workers' demand to pay salary and
allowances to them as if they were railway employees. The appeal preferred
by the Union of India against the said decision was disposed of by this
Court by its order of October 27, 1990 in the following words :

"The benefits accruing to the workers under the decision of the G
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 were applicable to canteen employees. In
this view, a final pronouncement on this question by this Court H
54 SUPREME COURT REPORTS (1995] 3 S.C.R.

A 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."

On December 4, 1984, a Division Bench of the Madras High Court
relying upon the aforesaid order of this Court held in a case that canteen
B employees will have to be treated as Railway employees for the purpose of
the Factories Act in view of the concessions made by the Railways before
this Court and also the concessions made hy the counsel appearing for the
Railways befor!' the High Court. Against this background, writ petitions
under Article 32 and appeals by special leave were filed by the employees
C of all the three types of railway canteens claiming that they should be
treated as railway employees and should be extended all service conditions
available to the railway employees. While allowing the writ petition and the
appeals of the employees of the statutory canteens and of the non-statutory
recognised canteens, this Court held as follows :

D
"Since in terms of the Rules made by the State Governments under
Section 46 of the Factories Act, it is obligatory on the railway
administration to provide a canteen, and the statutory canteens
have been established pursuant to the said provision, it must be
held that the canteens are incidental to or connected with the
E manufacturing process or the subject of the manufacturing process.
The provisicn of the canteens is deemed by the statute as a
necessary concomitant of the manufacturing activity. Even where
the employees are appointed by the Staff committee/cooperative
society, their appointment is made by the department through the
F agency of the committee/society as the case may be. The statutory
canteens have been in existence at their respective places con-
tinuously for a number of years. The premises as well as the entire
paraphernalia for the canteens is provided by the railway ad-
ministration and belong to it. The employees engaged in the
canteens have also been in service uninterruptedly for many years.
G Their wages are reimbursed in full by the railway administration.
The entire running of the canteens including the work of the
employees is subject to the supervision and control of the agency
of the railway administration whether the agency is the staff com-
mittee or the society. In the Establishment Manual the legal
H responsibility for running the canteen ultimately rests with the
P.CHANDRA v. L.l.C.jSAWANT.J.I 55
railways, whatever the agency that may intervene. The number and A
the category of the staff engaged in the canteen is strictly controlled
by the administration.

xxxxxxxxx

No distinction can be made between the employees of statutory B
canteens and those of non-statutory canteens. The only difference
is that the statutory canteens are established wherever the railway
establishments employ more than 250 persons as is mandatory
~ under the provisions of Section 46 of the Factories Act while
non-statutory canteens are required to be established under para·
graph 2831 of the Railway Establishment Manual where the
c
strength of the staff is 100 or more. The employees who otherwise
do the same work and work under the same conditions and under
a similar management cannot be treated differently merely because
the canteen happens to run at an establishment which employs 250
or less than 250 members of the staff. The smaller strength of the D
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. A classification made between the
employees of the two types of canteens would be unreasonable and
will have no rational nexus with the purpose of the classification.
E
The "Administrative Instructions on Departmental Canteens in
Offices and Industrial Establishments of the Government" are
applicable to both statutory and non-statutory recognised canteens.
The Instructions do not make any difference between the two so
far as their applicability is concerned.
F
"'. However the employees of the non-statutory non· recognised
canteens are not entitled to claim the status of the railway servants.
These 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 nor of the contractors who run them
who keep on changing, much less of the workers engaged in these
G
11
canteens.

Accordingly, this Court held that the workers engaged by the
statutory canteens as well as those engaged in non-statutory recognised
canteens in the railway establishment were railway employees and they H
56 SUPREME COURT REPORTS [1995] 3 S.C.R.
-
'

A were entitled to be treated as such.

In All India Institute Employees' Association v. Union of India, JT
(1990) 1 S.C. 319 the writ petition was filed in this Court by an Association
of about 2000 employees working in 500 different Railway institutes and
. B clubs in various parts of the country. Their grievance was that they were
not treated as railway employees. It wa; their case that although the
institutes and clubs in which they worked were not statutory, they were on
par with the employees in the statutory canteens run in the railway estab-
lishments proper. It was further their case that the institutes and clul:,s were
set up to provide recreational facilities to the railway employees and they
C were managed by committees consisting of representatives of all the mem-
bers of the institutes/clubs elected periodically. The institutes/clubs had
about 10 categories uf employees. The employees were appointed by the
committees and the salaries were paid out of the contributions received
from the members of the respective institute/club and the grants-in-aid
D given by tne Railway Board to them. The committee of management was
presided over by the President who was the concerned Railway Divisional
Manager or his nominee. The railway administration had the right to
dissolve or to form the ad hoc committees for running the institutes/clubs.
It was also the case of the workmen that the Railway Board had always
treated the institutes/clubs as an integral part of the railways since not only
E they received grants-in-aid but also other facilities from the Railways. The
Railway Establishment Manual made a special provision for the institutes
and clubs and it stated that a railway institute should be looked upon as a
club provided by the railway, rent-free for the benefit of its employees and,
therefore, the railways should provide everything whioh a landlord or-
F dinarily would, and the institute should pay for all that a tenant should
usually be liable to pay. The Manual stated that the railway administration
will bear (a) the first cost of the building including the cost of electric
installations, necessary furniture, roads, fancies, tennis court and other
playgrounds and wherever possible, the garden was also to be provided
and (b) the cost of maintenance and alterations. This Court distinguished
G the canteens run in the railway establishments and the railway institutes
and clubs by pointing out the material difference between the two. Firstly,
the canteens were invariably a part of the establishment concerned and
they were run to render senices during the hours of work since the services
by their very nature were expected directly to assist the staff in discharging
H their duties efficiently. The lack of canteen facilities is ordinarily bound to
P.CHANDRA ,._ L.I.C.[SAWANT,J.] 57
hamper and interfere with the normal working of the staff and effect'\heir A
efficiency. The Court also held that the canteen services are today regarded
as a part and parcel of every establishment so much so that they have been
made statutorily mandatory under the Factories Act in establishments
governed by the said Act where more than 250 workers are employed. The
canteen services are thus no longer looked upon as a mere welfare activity B
but as an essential requirement where sizable number of employed work
and that is why the Railway Establishment Manual made a provision for
canteens even where the Factories Act did not apply. However, the same
cannot be said of the. institutes and clubs. Although the Railway Estab-
. lishment Manual makes provisions for them, the provisions are of the
materially different nature and pattern. There is no provision either for c
subsidy or loan directly from the funds of the railway administration. They
have to run on the membership fees and fixed grants received from the
Staff Benefit Fund which consists of receipts from the forfeited provided
fund and bonus and of fine. The grant further is made to each institute/club
at the rate of Rs. 14 per capita of the non- gazetted staff employed at the D
· relevant railway establishment. Out of this contribution, only Rs. 4 per
capita are spent on activities of the institutes/clubs, the rest of the amount
being spent on education etc. The wages and allowances of the staff of the
institutes/clubs '1'e paid by the institutes/clubs thomselves and they are not
subsidised by the railway administration as in the case of the statutory and E
non-statutory recognised canteens. Further, by their very nature the ser-
vices of the institutes/clubs are availed of beyond working hours only and
not all the members of the railw•y staff avail of them. One had to be a
member by paying fees to do so. The membership was further optional.
That is why most of the staff employed in the institutes/clubs was part-time.
Out of about 1741 employees engaged in 449 institutes and 332 clubs,
F
nearly half were part- time employees. The services rendered by the
employees were also not of a uniform nature. They were engaged for
different services with service conditions according to the requirement. The
institutes/clubs also do not engage in any uniform activities, the activities
conducted by them varying depending upon the infrastructure ·and the G
facilities available at the respective places. What is more important is that
the provision of the institutes/clubs is not mandatory. They are established
as a part of the welfare measure for the railway staff and the kind of

' activities they conduct depend, among other things, on the fund available
to them, the activities having been tailored to the budgets. If the cost of H
58 SUPREME COURT REPORTS [1995] 3 S.C.R.

A activities goes beyond the means, they have to be curtailed. On these facts,
this Court held that the staff members employed by the railway in-
stitutes/clubs are not the employees of the Railways.

In Surendra Prasad Khugsal v. Chainnan, MMT Corporation of India
Ltd., JT (1993) 5 SC 80, the workers employed in non-statutory recognised
B canteens in the respondent· Corporation bad approached this Court by a
writ petition under Article 32 of the Constitution, relying upon the decision
of this Court in M.M.R. Khan case (supra). The Court found that the said
decision which had decided the claim of the non· statutory recognised
canteens was decided on the facts of the case including the provisions of
C the Railway Establishment Manual, the notifications and circulars. issued
by the Railway Board from time to time and other documents. On the other
hand, there were disputed facts in the case in hand which could not be
resolved in a writ petition under Article 32. The Court , therefore, referred
the matter to the Industrial Tribunal for adjudication.

D 9. What emerges from the statute law and the judicial decisions is as
follows:

(i) Where, as under the provisions of the Factories Act, it is statutory ""
obligatory on the employer to provide and maintain canteen for the use of
E his employees, the canteen becomes a part of the establishment and,
therefore, the workers employed in such canteen are the employees of the
management.

(ii) Where, although it is not statutorily obligatory to provide a
canteen, it is otherwise an obligation on the employer to provide a canteen,
F the canteen becomes a part of the establishment and the workers working
in the canteen, the employees of the management. The obligation to
provide a canteen has to be distinguished from the obligation to provide
facilities to run canteen. The canteen run pursuant to the latter obligation,
does not become a part of the establishment.

G (iii) The obligation to provide canteen may be explicit or implicit.
Where the obligation is not explicitly accepted by or cast upon the
employer either by an agreement or an award etc., it may be inferred from
the circumstances, and the provision of the canteen may be held to have
become a part of the service conditions of the employees. Whether the
H Provision for canteen services has become a part of the service conditions
.1
P.CHANDRA v. L.l.C.[SAWANT,J.) 59
· or not, is a question of fact to be determined on the facts and circumstances A
in each case.

Where to provide canteen services has become a part of the service
conditions of the employees, the canteen becomes a part of the estab-
lishment and the workers in such canteen become the employees of the
management. B

(iv) Whether a particular facility or service has become implicitly a
part of the service conditions of the employees or no~ will depend, among
others, on the nature of the service/facility, the contribution the service in
question makes to the efficiency of the employees and the establishment, C
whether the service is available as a matter of right to all the employees in

-
'
their capacity as employees and nothing more, the number of employees
employed in the establishment and the ·number of employees who avail of
the service, the length of time for which the service has been continuously
available, the hours during which it is available, the nature and character
of management, the interest taken by the employer in providing, maintain- D
ing, supervising and controlling the service, the contribution made by the
management in the form of infrastructure and funds for making the service
available etc.

10. We may now examine the facts in the present case in the light E
of the above tests.

There is no dispute that the respondent-Corporation has not explicit-
ly undertaken to provide canteen services to its employees working in the
offices in question. The only obligation that it had explicitly accepted was
to provide to the employees facilities to run canteen such as premises, F
furniture, electricity,,water etb.However, the facts on record show that the
corporation had implicitly acceptep the obligation to provide canteen
services and not merely the facilities to run the canteen. These facts are :

(a) In para 6 of the counter-affidavit filed on behalf of the Corpora-
tion before the learned Single Judge in the High Court, it is stated that at G
the time the Corporation was established, i.e., 1st September, 1956, all the
Insurers carrying on life insurance business ·in India both inland and foreign
1 were merged and/or vested in the Corporation. Some of the merged offices
of the erstwhile Insurers had canteens which were used to be run or
managed by different employees union. After the establishment of the H
60 SUPREME COURT REPORTS [1995] 3 S.C.R.
A Corporation, those canteens continued to be run and managed by the
particular employees' unions. While being so run, there were complaints
to the Corporation from the employees about the quality and nature of
food supplied as i; evident from the letters of several employees' unions
written in or about 1972. Hence in or about 1973, the Corporation was
B oblige~ to appoint a committee to examine the alleged complaints and to
find out ways and means as to how best such canteens could be run and
managed. The Committee made its recommendations and in pursuance of
the recommendations, the responsibility to run and manage !he canteens
was entrusted to contractor obviously by the Corporation, though the
counter has not stated the latter fact in so many words. The contractors
C started managing the canteens and this practice continued till 1979. It is
stated in the counter that one of the employees' unions was the Life
Insurance Corporation Employees' Association (Calcutta Division) of
which one Shri Sukumar Mnkherjee' was General Secretary and the said
Mnkherjee is also the President of the Employees' Unions of the appellants
D herein. Althoue}i it is also averred there that the said Mukherjee who
represented the appellants at all material times also did not come out with
a case that the appellants were the employees of any departmental canteens
run or managed by the Corporation and that it was for the first time that
before this Court in the writ petition filed under Article 32 of the Constitu-
tion that the appellants had sought. to make out the purported case that
E they were the employees of the departmental canteens belonging to and/or
run and/ar managed by the Corporation, these facts are not relevant for
the purpose of examining whether, in fact the relationship of employer and
employee existed between the Corporation and the appellants.

F (b) The counter further goes on to say that in the meanwhile, the
workers working in the canteens started agitating for higher emoluments
and/or other benefits and as ·such, the contractors abandoned their entrust·
ment and the facilities of canteen available to the employees suddenly came
to a stop. Thereafter, a cooperative society of the employees of the Cor-
poration known as LIC Employees Cooperative Society Ltd., was formed
G and it started managing canteens at different offices, of the Corporation in
Calcutta w.e.f. 1st September, 1979. While such managemeL<t was continu-
ing, the workers in the .canteens in or about 1981 started agitation for
enhancement of their salary and other benefits and submitted a charter of
demands both to the said cooperative society and to the Corporation. The
H dispute was referred to the Assistant Labour Commissioner (Central) and
P.CHANDRA V. L.I.C. [SAWANT,J.] 61
in pursuance of a notice dated 15th April, 1982 issued by the Assistant A
Labour Commissioner, a meeting was held at his behest on 10th May, 1982
A, with a representative each of the canteen workers' union and of the
Corporation. The employees' cooperative society, however, did not par-
ticipate in the conciliation proceedings. By a notice dated 14th August,
1982 the canteen workers notified that they would go on strike if the
demands were not met. Thereafter, the Assistant Labour Commissioner
B
called the Zonal Manager of the Eastern Zonal Office of the Corporation
at Calcutta and others concerned, (or a discussion on 10th September,
.;;~·
1982). The canteen workers went on strike \t.e.f. 1st December, 1982 and
the conciliation proceedings were held for the last time on 15th December,
1982. As a result of the said strike, the canteen facilities available to thec•
employees of the corporation were again stopped. Thereupon, the LIC
Employees' Association complained against the stoppage of the said
facilities. Pursuant to the said complaint, the Labour Commissioner
(Central) took up the matter and issued notice to the respective parties
while of course included the respondent- Corporation, for discussion. The
D
central office of the Corporation was also to make some altern;;tive arran-
gement for running the said canteen. The discussions were held at the
- ~
conciliation level and the Conciliation Officer submitted his failure report.
On 26th March, 1983, the Corporation addressed a letter to the then Zonal
Labour Commissioner ei]llaining the entire position. The canteen workers
continued their strike and the Corporation had to find out some other E
alternative arrangement with a view to continue the canteen service
rendered to the ~mployees. The Corporation, therefore, by a notice dated
14th March, 1983 called for appointment of contractors to run the canteens
and in pursuance thereof, contractors W.Ore appointed who in turn took
over the responsibility" of the canteen workers who were till that time
F
working in the canteens.

It is, however, the case of the Corporation in the counter that in spite
of the failure report submitted by the Regional Labour Commissioner
(Calcutta) the dispute was not referred for adjudication and the Central
Government accepted that the canteen workers were not the employees G
of the Corporation but were the employees of the contractors as is evidence
from letter dated 6th February, 1984 addressed by the Central Government
~ to the Zonal Manager, Eastern Zonal Office of the Corporation.

It is also the case of the Corporation in the said counter that the H
62 SUPREME COURT REPORT!' (1995] 3 S.C.R.

A Corporation at no point of time exercised any control over the contractors
except those covered by the contracts in writing between the contractors
and the Corporation.

From the aforesaid averments in the counter, the following facts
emerge. Even from times much prior to the coming into existence of the
B respondent-Corporation, canteen services were available to the employees
of the insurance companies which were later merged with the Corporation
in 1956. Between 1956 and 1978, the canteClli were being managed by the
canteen committees. Between 1973 and 1979, they were managed by the
contractors appointed by the Corporation. In 1979, the management was
·C taken over by the cooperative society of the employees. In 1981, there was
an industrial dispute raised by the canteen workers both with the coopera-
tive society and the corporation. In the conciliation proceedings it is only
the Corporation which participated. From 1983 onwards, the canteens were
again managed by the contractors appointed by the Corporation with
D written agreements with them. The Central Government's letter dated 6th
February, 1984 refusing reference of the dispute for adjudication to the
Industrial Tribunal makes it clear that the demand raised by the canteen
workers was both for increase of wages and for their absorption in the ~ -

Corporation. The parties to the dispute included the Zonal Manager,
Eastern Zonal Office as well as Senior Divisional Manager of the Corpora-
E lion at Calcutta. In the letter the Central Government while refusing to
refer the dispute for adjudication gave the reason that the canteen
i>mployees were reported to have been employed by the cooperative society
and not by the LIC and, therefore, there was no employer-employee
relationship between the canteen employees and the LIC. In other words,
F the Central Government had taken the stand that the employees concerned
were not the employees of the contractors but of the employee's coopera-
tive society. Although this cannot be taken as the conclusive finding on the
issue, it has relevance of its own in the context of the facts which have
emerged in the matter of the employment of the canteen workers.

G (c) We have then a copy of the agreement dated 15th June, 1983
entered into between the Corporation and the contractor, and the Cor-
poration has admitted that similar agreements were entered into with the
later contractors from time to time. The contents of the specimen of the
agreement are revealing for our purpose. (i) The agreement is entered into
H e~clusively between the contractor and the Corporation and there is no
P.CHANDRA v. L.I.C.(SAWANT,J.] 63
other party to the contract. The preamble of the agreement begins as A
follows : 'Whereas the Life Insurance Corporation of India, Calcutta
Divisional Office.... is desirous of running a canteen by a contractor on
approved terms and conditions at ..... and whereas the said contractor has
accepted the said terms as offered to him.... It is hereby declared and
agreed as follows". It is, therefore, clear from the preamble itself that it is B
the Corporation and not the employees of the Corporation or their union
or cooperative society which was desirous of running the canteen and
which had engaged the contractors; (ii) The Corporation was desirous of
running the canteen through a contractor on the terms offered to him by
the Corporation. In other words, the contractor is only an agent of the
Corporation; (iii) Clause (1) of the agreement shows that contract deals C
with quality of foodstuff, tea, coffee and other permissible drinks to the
employees of the Corporation and the contract will remain operative for a
period of one year only from the date of the contract; (iv) By clause (2),
the Corporation undertakes to provide to the contractor free of cost, space,
tables, chairs, fans, lights and water, although the cost of fuel or gas charges D
were not to be borne by the Corporation; (v) Clause (3) makes it clear that
the foodstuff was to be cooked and prepared inside the premises of the
canteen and no outside foodstuff except cold drinks would be sold in the
canteen. Clause (4) makes it obligatory on the contractor to maintain
regular supply of quality food while clause (5) provides that the existing E
price of the foodstuff, tea, coffee etc. should be continued for a period of
about six months from the date of the contract and revision will be
considered thereafter or even before by discussion with the canteen com·
mittee as well as well with the contractor; (vi) Clause (6) makes it clear
that the fittings, furniture and fixtures of the canteen $hall belong to the F
Corporation's concerned office and removal of the above in any cir·
cumstances was impermissible; (vii) Clause (8) states that the caution
money is to be kept with the Corporation as interest free deposit and the
question of revision or adjustment of such deposit will arise either at the
time of the termination of the contract or at any time earlier should the
Corporation decide in the event of any loss or damage; (viii) Clause (9) is· G
important in that it states that it is the Divisional Office of the Corporation
which reserves the right to add to, alter or rescind the terms and conditions
of the contract and also to advise on any matter connected with the
canteen; (ix) Clause (11) then stipulates that the canteen shall not be kept
open for counter service but only floor service shall be allowed and no H
64 SUPREME COURT REPORTS [1995] 3 S.C.R.

A employee shall be allowed to use the canteen except during the lunch
hours.

The aforesaid terms of the contract further make it clear that the
Cqfporation has the dominating say in dictating the terms aod conditions.
. of the contract aod that apart from the fact that the Corporation alone is
B a party to the contract aod neither the Corporation's employees nor aoy
cooperative society of the employees, it is the Corporation which has the
right to continue or terminate the contract aod also to modify aod dictate
the new terms of the contract. This is the state of affairs which has been
continuing at least from 1983. """ '
c ( d) It is also apparent from the history of the maoagement of the
caoteen that it was maoaged through different mechaoisms such as the
canteen committee, cooperative society aod the contractor. During the
major period from 1973 to 1979 aod thereafter from 1983 onwards, the
contractors have been on the scene. Although, we do not have the
D specimen of the contract that was entered into with the contractors from
1973 to 1979, even if it is presumed that the contractors were appointed
during that period by the Caoteen committees, it is not disputed that even
these caoteen committees were controlled by the Corporation and were
manned by the Corporation's officers.
E (e) What is further, in the rejoinder filed by the appellaots before
the Division Bench of the High Court it was specifically averred in Para-
graph 6 thereof that the job done by the canteen employees was of
perennial nature and was incidental to the running of the main business of
the Corporation. It was being done by the Corporation through their
F intermediaries - sometimes by contractors, sometimes by cooperative
society aod sometimes by canteen employees themselves. The inter-
mediaries came ~nd went but ~he employment of the workers under the
Corporation remained constaot. These averments have not been denied
by the Corporation.

G (f) In the Writ petition filed by the appellaots, further, it was averred
that the employees of the Corporation at all its establishments, are
provided with facilities of canteen by the Corporation for more than a few
decades aod as such the provision of caot<¥on facilities was a condition of
service of the employees of the Corporation aod that by usage aod custom
H the benefits of caoteen facilities had become the conditions of service aod
P.CHANDRA v. l.I.C.[SAWANT,J.] 65
that the running of the canteen was incidental to the running of the business A
of the Corporation. This is not controverted specifically by the Corporation
~

' in its. reply filed before the Court.

(g) In addition, there are certain other facts which indicate that it
was the Corporation which was taking interest in not only managing the
canteen but also in the constitution of. the committees for management of B
the canteens. The appellants have produced a letter dated 14th March,
1983 addressed by the Additional Zonal Manager of the Corporation to

-.-... the employees of the Corporation who were elected to the canteen com-
mittee to inform them that they had been so elected and hoping that their
help and cooperation will strengthen the committee in the discharge of its c
I duties. If the Corporation had nothing to do with the management and the
constitution of the committees and their election, there was no reason for
the, said functionary to address such letter to the elected members of the
Committee. The letter shows that even in organising and electing the
canteen committees, the Corporation was playing its functional role.
D
(h) There is further a letter dated 22nd August, 1983 addressed by

.. the very same functionary to one M/s. S. Mistry in the matter of supply of
three black-boards.. The letter shows that the quotations for the black-
boards for the canteen were invited by the Corporation and the order for
the supply of the same was also placed by it and the bill was also to be E
paid by it.

11. In the: face of the aforesaid facts, it is difficult to support the
findings of the Division Bench that (a) the canteen is being run by a
committee or cooperative socieiy of the staff members of the Corporation
(b) the Corporation only agreed to provide space to house the canteen and F
certain chairs and tables for the use of its staff members, (c) an in de-
pendetit contractor has been appointed to run the canteen (d) and since
no letter of appointment has ever ·been issued by the Corporation and no
-,. attendance register is maint.ained and the salary of the canteen workers is
being paid by the independent contractor and not from the funds of the
Corporation, there is no employer and employee relationship between the
G
Corporation and the appellants.
I 12. The. facts on record on the other hand, show in unmistakable
terms that canteen services have been provided to the employees of the
Corporation for a long time and it is the Corporation which has been from H
SUPREME COURT REPORTS [1995) 3 S.C.R.
A time to time, taking steps to provide the said services. The canteen com-
mittees, the cooperative society of the employees and the contractors have
only been acting for and on behalf of the Corporation as its agencies to
provide the said services. The Corporation bas been taking active interest
even in organising the canteen committees. It is further the Corporation
B which has been appointing the contractors to run the canteens and entering
into agreements with them for the purpose. The terms of the contract
further show that they are in the nature of directions to the contractor
about the manner in which the canteen should be run and the canteen
services should be rendered to the employees. Both the appointment of the
contractor and the tenure of the contract is as per the stipulations made
C by the Corporation in the agreement. Even the prices of the items served,
the place where they should be cooked, the hours during which and the
place where they should be served, are dictated by the Corporation. The
Corporation bas also reserved the right to modify the terms of the contract
unilaterally and the contractor has no say in the matter. Further, the record
D shows that almost all the workers of the canteen like the appellants have
been working in the canteen continuously for a long time whatever the
mechanism employed by the Corporation to supervise and control the
working of the canteen. Although the supervising and managing body of >
the canteen has changed hands from time to time, the workers have
E remained constant This is a part from the fact that the infrastructure for
running the canteen, viz., the premises, furniture, electricity, water etc. is
supplied by the corporation to the managing agency for running the can-
teen. Further, it cannot be disputed that the canteen service is essential for
the efficient working of the employees and of the offices of the Corpora-
F tion. In fact, by controlling the hours during which the counter and floor
service will be made available to the employees by the canteen, the Cor-
poration has also tried to avoid the waste of time which would otherwise
be the result if the employees have to go outside the offices in search of
•uch services. The service is available to all the employees in the premises
of the office itself and continuously since inception of the Corporation, as
G pointed out earlier. The employees of the Corporation have all along been
making the complaints about the poor or inadequate service rendered by
the canteen to them, only to the Corporation and the Corporation bas been
taking steps to remedy the defects in the canteen service. Further, when-
ever there was a temporary breakdown in the canteen service, on account
H of the agitation or of strike by the canteen workers, it is the Corporation
P.CHANDRA v. L.l.C. (SAWANT,J.] 67
which has been taking active interest in getting the dispute resolved and A
the canteen workers have also looked upon the Corporation as their real
employer and joined it as a party to the industrial dispute raised by them.
In the circumstances, we are of the view that the canteen has become a
part of the establishment of the Corporation. The canteen committees, the
cooperative society of the employees and the contractors engaged from B
time to tirne are in reality the agencies of the Corporation and are, only a
veil between the Corporation and the canteen workers. We have, therefore,
no hesitation in coming to the conclusion that the canteen workers are in
fact the employees of the Corporation.

13. The next question is as to what relief the appellants are entitled. C
As pointed out earlier, the appellants have prayed for the relief of their
absorption by the Corporation as its regular employees and also for pay as
is paid to the other employees of the Corporation. In view of our finding
that the appellants who are the canteen workers in the four offices of the
Corporation in Calcutta are entitled to be the employees of the Corpora- D
tion, the appellants are certainly entitled to the first relief they have
claimed. The question, however, is to what service conditions they would
- ., be entitled. They have prayed for the minimum salary paid to the
employees of the Corporation which necessarily means the minimum salary
of the lowest paid employees of the Corporation, i.e., of class IV
employees. There would be no difficulty in directing the payment to them E
of the minimum of the salary paid to the Class IV employees of the
Corporation. However, there is distinction between the present service
conditions of the appellants and the other class IV employees of the
Corporation. For example, the appellants get free food, and free tea. Their
hours of service may also differ. There are also different categories of F
canteen workers such as General Manager, canteen Manager-cum-Sales-
man, Kitchen Clerk, Canteen Clerk, Halwai, Assistant Halwai, Cook,
Bearer, Wash-boy, Sweeper etc. It is not posstble for the Court to evaluate
the work done by each of the categories. Hence different service conditions
will have to be prescribed for the different appellants. The Corporation
may have, therefore, to prescribe appropriate service conditions for the G
canteen workers.

Pending the prescription of such service conditions, the Corporation
should pay to all the appellants the minimum of the salary presently paid
to its Class IV employees taking into consideration and making allowance H
68 SUPREME COURT REPORTS (1995) 3 S.C.R.

A for the special facilities, if any, available to them and also their special
working conditions. In addition, the Corporation should also give them the
benefit of the other service conditions available to its Class IV employees.

14. The question further is from which.date the appellants should be
'.leemed to have become the employees of the Corporation and should,
B therefore, be entitled to the minimum salary and the other benefits. Taking
into consideration the relevant facts and circumstances on record, we are
of the view that they should be deemed to have become the regular
employees of the Corporation from the date of the filing of the writ petition
before the High Court and should, therefore, be paid the arrears of salary
C and other monetary benefits, if any, from the said date after adjusting the
salary and monetary benefits that they may have received. The years of
continuous service put in by them even prior to the aforesaid date as
canteen workers should, however, be taken into account for the purpose
of calculating their retiral benefits.

D We, however, make it clear that the above direction to treat the
appellants as the regular employees of the Corporation will be subject to
two conditions, viz., (a) that they were above the minimum and below the
maximum age limit and medically fit as per the regulations of the Corpora-
tion on the date of the filing of the writ petition and (b) that on the date
E of the filing of the writ petition before the High Court and also during the
pendency of the proceedings, they had put in a minimum of three years
continuous se~ce as canteen workers in the canteens in question. For the
purposes of calculating the said three years qualifying service and the
retiral benefits, the service prior to the attainment of the minimum qualify-
ing age under the Corporation's regulations shall be ignored.
F
15. The appeal is allowed in the above terms with no order as to
costs.

,T.N.A. Appeal allowed.