Supreme Court of India
THE DIRECTOR STEEL AUTHORITY OF INDIA LTD.V. ISPAT KHADAN JANTA MAZDOOR UNIONversusISPAT KHADAN JANTA MAZDOOR UNION
- Citation
- 2019 INSC 728
- Decided
- 5 July 2019
- Disposal
- Disposed off
- Bench
- A M KHANWILKAR
Holding
Section 10(1) of the CLRA Act does not create a legal obligation for automatic absorption of contract labour, and a contract that was genuine before the prohibition notification remains genuine; therefore the CGIT’s finding that the contract was not sham and bogus stands and the High Court’s reversal is set aside.
Summary
The case concerned contract labour employed in SAIL's captive limestone mines under a tripartite agreement with contractors. After a prohibition notification under Section 10(1) of the Contract Labour (Regulation & Abolition) Act, 1970 was issued in 1993, the contract labour continued to work until their services were terminated in 1996. The Central Government Industrial Tribunal (CGIT) held that the contract was genuine and not a sham, and that the prohibition notification did not automatically absorb the labour into SAIL. The High Court reversed this finding, declaring the contract sham and ordering reinstatement. The Supreme Court, relying on its own Constitution Bench decision in Steel Authority of India Ltd. v. National Union Waterfront Workers, held that Section 10(1) does not provide for automatic absorption and that the CGIT’s factual findings were correct. Consequently, the High Court’s judgment was set aside and the appeal was allowed.
Issues considered
- Whether Section 10(1) of the Contract Labour (Regulation & Abolition) Act mandates automatic absorption of contract labour upon issuance of a prohibition notification.
- Whether the tripartite agreement between the principal employer and contractors became void, sham, or bogus after the prohibition notification.
- Whether the contract labour are entitled to reinstatement, back wages, and regularisation in the principal employer's establishment.
- Whether the High Court erred in reversing the factual findings of the CGIT.
- Interpretation of the penal provisions under Sections 23 to 25 of the CLRA Act in the context of continued employment after a prohibition notification.
Legislation cited
- Constitution of Indias. Article 12, s. Article 226, s. Article 227
- Contract Labour (Regulation & Abolition) Act, 1970s. 10(1), s. 12, s. 23, s. 25, s. 7
- Indian Contract Act, 1872s. 23
- Industrial Disputes Act, 1947s. 10, s. 25(H)
- Minimum Wages Act, 1948
Subjects
contract labourprohibition notificationautomatic absorptionsham contractindustrial disputeCGITtripartite agreementprincipal employercontractorpenal provisions
Judgment
[2019] 9 S.C.R. 123 123
THE DIRECTOR STEEL AUTHORITY OF INDIA LTD. A
v.
ISPAT KHADAN JANTA MAZDOOR UNION
(Civil Appeal Nos. 8081-8082 of 2011)
JULY 05, 2019 B
[A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]
Contract Labour (Regulation & Abolition) Act, 1970 – ss.7,
10(1), 12, 23 and 25 – Tripartite agreement entered between the
appellant, contractors and contract labour (working in the captive
C
mines of the appellant) as per which the contract labours were paid
due wages, not less than the rates prescribed under the 1948 Act –
Prohibition notification dated 17 th March, 1993 issued by the
appropriate Government u/s.10(1) of the CLRA Act – No fresh
agreement, in the interregnum period, was executed – Existing
agreement was extended from time to time and the contract labour D
was allowed to continue on the same terms and conditions, till their
services were terminated by the contractor in April, 1996 – Matter
eventually referred to the Central Government Industrial Tribunal
(CGIT) – CGIT inter alia held that the contract between the appellant
and the contractors was genuine and not sham and bogus – High
E
Court reversed the finding and held the contract to be sham and
bogus – On appeal, held: Supreme Court in the Constitution Bench
judgment in Steel Authority of India Ltd. made it clear that neither
s.10 nor any other provision in the CLRA Act provides for automatic
absorption of contract labour on issuance of prohibition notification
u/s.10(1) of the CLRA Act, and consequently the principal employer F
is not under legal obligation to absorb the contract labour working
in the establishment – Tribunal rightly concluded that the contract
was not sham and bogus and there shall be no automatic absorption
of contract labour on issuance of prohibition notification under
the CLRA Act – However, the finding of the CGIT that after the
G
issuance of prohibition notification, the contract became sham and
bogus is not sustainable – Mere issuance of the prohibition
notification under CLRA Act will not make the contract/agreement
void ab initio or bad in law – If the employees are allowed to continue
in terms of the earlier agreement after the prohibition notification
H
123
124 SUPREME COURT REPORTS [2019] 9 S.C.R.
A came into force, it may be illegal and continuance of service in the
absence of any contract has to face the penal consequences under
the CLRA Act – Impugned judgment set aside – Minimum Wages
Act, 1948 – Industrial Disputes Act, 1947 – s.10(1), 25(H)–
Constitution of India – Arts. 12, 226 and 227 – Indian Contract
Act, 1872 – s.23.
B
Contract Labour (Regulation & Abolition) Act, 1970 – Scheme
of – Discussed.
Disposing of the appeals, the Court
HELD: 1.1 The exposition of the judgment of the
C Constitution Bench of Supreme Court in Steel Authority of India
Ltd. and Others vs. National Union Waterfront Workers and Others
made it clear that neither Section 10 nor any other provision in
the CLRA Act provides for automatic absorption of contract labour
on issuing a notification by the appropriate Government under
D Section 10(1) of the CLRA Act, and consequently the principal
employer is not required or is under legal obligation by operation
of law to absorb the contract labour working in the establishment.
It was further held that on a issuance of notification under Section
10(1) of the CLRA Act, prohibiting employment of contract labour
in any process, operation or other work, if an industrial dispute
E is raised by any contract labour in regard to condition of service,
it is for the industrial adjudicator to consider 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
F a genuine contract, or as a mere ruse/camouflage to evade
compliance with various beneficial legislations so as to deprive
the workers of statutory benefits. If the contract is found to be
sham, nominal or camouflage, then the so-called labour will have
to be treated as direct employee of the principal employer and
the industrial adjudicator should direct the principal employer to
G regularise their services in the establishment subject to such
conditions as it may specify for that purpose in the facts and
circumstances of the case. On the other hand, if the contract is
found to be genuine and a prohibition notification has been issued
under Section 10(1) of the CLRA Act, in respect of the
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 125
KHADAN JANTA MAZDOOR UNION
establishment, the principal employer intending to employ regular A
workmen for the process, operation or other work of the
establishment in regard to which the prohibition notification has
been issued, it shall give preference to the erstwhile contract
labour if otherwise found suitable, if necessary by giving relaxation
of age as it appears to be in fulfilment of the mandate of Section
B
25(H) of the Industrial Disputes Act, 1947. [Paras 33-35]
[146-F-H; 147-A-D]
1.2 It was not disputed in the instant case that the contract
labourer who were working under a tripartite agreement were
allowed to continue under the self-same agreement executed prior
to the prohibition notification dated 17 th March, 1993 and C
extended from time to time by the competent authority even after
issuance of the prohibition notification and the services of the
contract workers were terminated by the contractor through whom
they were engaged after they proceeded on strike in April, 1996.
The Tribunal in its award dated 16th September, 2009 has recorded D
a finding of fact based on oral and documentary evidence placed
by the respective parties on record in reference to the fact whether
the contract was sham and bogus which was a primary cause of
adjudication and it was observed that the contractors employed
the contract labour on their own and they were the appointing
authority. Witnesses, contract labourer were examined and in E
their cross-examination they have stated that before the issuance
of notification dated 17th March, 1993, they were workers of the
contractor and payment was made to them by the contractors,
wage slips also show that the wages were being paid by the
contractors. There was no fresh contract ever entered between F
the parties. Exh. M/8 filed in R-721/05 and the evidence of the
witnesses shows that the contractor had terminated the services
of the contract labour in April 1996 and transferred some of the
contract labourers from the place of work and was the disciplinary
authority. It was further observed that the contractors had full
control over the skilled and professional work and the SAIL had G
right to reject the limestone, if it was not within the specified
approved grade as per terms and conditions of the agreement
and after extensive appreciation of the oral/documentary evidence
on record, CGIT recorded a finding of fact holding that the
contract was not sham and bogus at least up to the date of issuance H
126 SUPREME COURT REPORTS [2019] 9 S.C.R.
A of the prohibition notification dated 17th March, 1993. Although
in paragraph 85 of the award the Tribunal has recorded a finding
that after the issuance of prohibition notification dated 17th March,
1993 by operation of law, it became sham and bogus but such a
finding recorded in para 85 of the Award dated 16th September,
2009 is not sustainable in law for the simple reason that mere
B
issuance of the prohibition notification under CLRA Act will not
make the contract/agreement to be void ab initio or bad in law
and if the employees are allowed to continue in terms of the earlier
agreement after the prohibition notification under CLRA Act has
come into force, it may be illegal and continuance of service in
C the absence of any contract which stands extinguished by virtue
of prohibition notification has to face the penal consequences as
embedded under the scheme of CLRA Act. The High Court has
taken note of the various provisions of Mines Creche Rules,
1966, Maternity Benefits Act, Mines Act, 1952 and Metalliferous
Mines Regulations, 1961 and other statutory measures which
D
are applicable over the establishment of the appellant including
various welfare schemes which provide safety and security of the
workers. To say so, every establishment is under obligation to
implement the mandate of law but that could not be a determining
factor/denominator to test the contract agreement entered
E between the parties in arriving to a conclusion that such an
agreement is sham, nominal or camouflage as held by the High
Court in its impugned judgment. [Paras 39-42] [148-F-H;
149-A-H; 150-A-C]
1.3 The finding recorded by the High Court under the
F impugned judgment is not sustainable for the reason that effect
of the prohibition notification under Section 10(1) of CLRA Act
has been settled by the Constitution Bench of this Court in Steel
Authority of India Ltd. and Others and this Court has made it clear
that neither Section 10 nor any provision in the CLRA Act
provides for automatic absorption of contract labour on issuance
G of prohibition notification by the appropriate Government under
Section 10(1) of the CLRA Act and the Tribunal in the first place
being the fact finding authority has extensively examined the
documentary and oral evidence which came on record and also
the relationship of principal employer, contractor and contract
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 127
KHADAN JANTA MAZDOOR UNION
labour and the fact that their services were terminated by the A
contractor after the contract labour proceeded on a strike in April
1996. The Tribunal also considered various other factors in
extenso regarding the wage slips, identity cards and the nature
of work being discharged by the contract labour subsequent to
the prohibition notification dated 17 th March, 1993 and other
B
documentary evidence which came on record and recorded the
finding in return that the contract between the contractor and
the employee was not sham and bogus and the workmen were
not entitled for their absorption in service of the principal
employer. [Paras 44, 45] [150-H; 151-A-D]
1.4 To test it further, apart from the statutory compliance C
which every principal establishment is under an obligation to
comply with, its non-compliance or breach may at best entail in
penal consequences which is always for the safety and security of
the employee/workmen which has been hired for discharge of
the nature of job in a particular establishment. If the scheme of D
the CLRA Act and other legislative enactments which the
principal establishment has to comply with under the mandate of
law and taking note of the oral and documentary evidence which
came on record, the finding which has been recorded by the CGIT
under its award dated 16th September, 2009 in absence of the
finding of fact recorded being perverse or being of no evidence E
and even if there are two views which could possibly be arrived
at, the view expressed by the Tribunal ordinarily was not open to
be interfered with by the High Court under its limited scope of
judicial review under Article 226/227 of the Constitution of India
and this exposition has been settled by this Court in its various F
judicial precedents. It is true that judgment in Dena Nath and
Others is in reference to failure of compliance of Section 7 and 12
and not in reference to Section 10(1) of the CLRA Act but if the
scheme of CLRA Act is looked into which is a complete code in
itself, non-compliance or violation or breach of the provisions of
the CLRA Act, it result into penal consequences as has been G
referred to in Sections 23 to 25 of the Act and there is no provision
which would entail any other consequence other than provided
under Section 23 to 25 of the Act. [Paras 46-48] [151-E-H;
152-A-C]
H
128 SUPREME COURT REPORTS [2019] 9 S.C.R.
A 1.5 The Tribunal under its award dated 16th September,
2009 rightly arrived to the conclusion that the contract was not
sham and bogus and there shall be no automatic absorption of
contract labour on issuance of a prohibition notification under
the CLRA Act and the High Court committed manifest error in
reversing the finding of fact in return under its impugned
B
judgment. The impugned judgment of the High Court is set aside.
The respondent is at liberty to avail remedy for alleged breach of
the provisions of the CLRA Act, if so advised, in accordance with
law. [Paras 49, 50] [152-D-F]
Steel Authority of India Ltd. and Others v. National
C Union Waterfront Workers and Others (2001) 7 SCC
1 : [2001] 2 Suppl. SCR 343 – followed.
International Airport Authority of India v. International
Air Cargo Workers’ Union and Another (2009) 13
SCC 374 : [2009] 8 SCR 1 – relied on.
D
Air India Statutory Corporation and Others v. United
Labour Union and Others (1997) 9 SCC 377 :
[1996] 9 Suppl. SCR 579 ; Dena Nath and Others v.
National Fertilisers Ltd. and Others (1992) 1 SCC 695
: [1991] 2 Suppl. SCR 401 ; Silver Jubilee Tailoring
E House and Others v. Chief Inspector of Shops and
Establishments and Another (1974) 3 SCC 498:
[1974] 1 SCR 747; Hussainbhai, Calicut v. Alath
Factory Thezhilali Union, Kozhikode and Others
(1978) 4 SCC 257 : [1978] 3 SCR 1073; Indian
F Petrochemicals Corporation Ltd. and Another v. Shramik
Sena and Others (1999) 6 SCC 439 : [1999] 1 Suppl.
SCR 47 – referred to.
Case Law Reference
[2001] 2 Suppl. SCR 343 followed Para 1
G
[1996] 9 Suppl. SCR 579 referred to Para 7
[1991] 2 Suppl. SCR 401 referred to Para 22
[1974] 1 SCR 747 referred to Para 36
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 129
KHADAN JANTA MAZDOOR UNION
[1978] 3 SCR 1073 referred to Para 36 A
[1999] 1 Suppl. SCR 47 referred to Para 36
[2009] 8 SCR 1 relied on Para 37
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 8081-8082 of 2011 B
From the Judgment and Order dated 06.09.2010 of the High Court
of Madhya Pradesh, Principal Seat at Jabalpur in Writ Petition
Nos. 10963 and 12485 of 2009
With
Civil Appeal No. 8084 of 2011. C
Ranjit Kumar, Parag P. Tripathi, Colin Gonsalves, Ajit Kumar Sinha,
Ms. Indira Nair, Sr. Advs., Sunil Kumar Jain, Punya Garg,
R. C. Shrivastava, Abhishek Jain, T. G. Narayanan Nair, A. K. Sasidharan,
K. N. Madhusoodhanan, C. N. Sree Kumar, M. T. George, Ramesh
Babu M. R., Amit Sharma, Ms. Malavika B. Pillai, Advs. for the D
appearing parties.
The Judgment of the Court was delivered by
RASTOGI, J. 1. These appeals arise from the judgment dated
6th September, 2010 passed by the Division Bench of the High Court of
Madhya Pradesh in Writ Petition No. 10963 of 2009 and 12485 of 2009 E
setting aside the award passed by the Central Government Industrial
Tribunal(CGIT), Jabalpur dated 16th September, 2009 answering the
reference in the affirmative form and directing the contract labourers
who were in the employment of SAIL from 1993 till 1996(17th March,
1993 to April 1996) to be reinstated, and their cases be considered for
F
regularisation in accordance with Para 125 of the Judgment of this Court
in Steel Authority of India Ltd. and Others Vs. National Union
Waterfront Workers and Others1 declining to grant them back wages.
2. The case involves a chequered history and almost after four
rounds of litigation, the matter has reached at a stage where the reference
was made by the appropriate Government under Section 10(1) of the G
Industrial Disputes Act, 1947 to decide the industrial dispute raised by
the Union, namely, Ispat Khadan Janta Mazdoor Union vide notification
dated 27th January, 2003 followed with 22nd February, 2005.
1
2001 (7) SCC 1 H
130 SUPREME COURT REPORTS [2019] 9 S.C.R.
A 3. The seminal facts in brief which may be relevant for the present
purpose are that the appellant Steel Authority of India Limited (hereinafter
being referred to as “SAIL”) is a Government of India undertaking and
is a State within the meaning of Article 12 of the Constitution of India
and has steel plants in different parts of India. SAIL has one of the
captive lime stone and dolomite mines in Kuteshwar in the District of
B
Katni of Madhya Pradesh. Limestone and Dolomite are necessary
ingredients for manufacture of steel. The SAIL did blasting work as this
work had been departmentalised vide Notification dated 15th December,
1979 w.e.f. 22nd June, 1980. The contract labour of the contractors at
Kuteshwar Lime Stone Mines were doing the same jobs as enumerated
C in schedule of the prohibition Notification No. S.O. 707 dated 17th March,
1993 issued under Section 10(1) of the Contract Labour(Regulation &
Abolition) Act, 1970(hereinafter referred to as “CLRA Act”).
4. It is not disputed that the establishment of the appellant(SAIL)
is the registered establishment in terms of Section 7 of the CLRA Act
D and the contractors through whom the contract labour was engaged
were also holding a valid licence under Section 12 of the CLRA Act and
the workmen engaged as contract labour by the contractor in the
establishment of the appellant(SAIL) were paid their due wages in terms
of the tri-partite agreement entered into from time to time not less than
the rates so prescribed by the authority under the Minimum Wages Act,
E 1948.
5. The appropriate Government at a later stage issued a prohibition
notification of employment of contract labour for the establishment
wherein their services hired by the appellant SAIL under Section 10(1)
of the CLRA Act dated 17th March, 1993, the extract of which is referred
F to hereunder:-
“4. The Notification No.S.O.707 dated 17-3-93 was issued and
published by the Government of India whereby prohibited with
effect from the date of publication of this notification, the
employment of Contract Labour in the works specified in the
G following schedule in the Lime Stone and Dolomite Mines in the
country namely:
SCHEDULE
a. Raising of minerals including breaking sizing sorting of Lime
Stone Dolomite and,
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 131
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
b. Transportation of limestone and dolomite which includes A
loading and unloading from trucks, dumpers, conveyors and
transportation from mine site to factory.”
6. Pursuant to a prohibition notification issued by the appropriate
Government under Section 10(1) of the CLRA Act, the relationship of
contractor and contract labour stands ceased and by legal fiction, contract B
comes to extinct and the indisputed fact which has come on record is
that no fresh agreement, in the interregnum period, was executed and
the existing agreement to whom the appellant & contract labour is a
signatory was extended from time to time by the competent authority
and the contract labour was allowed to continue on the same terms and
conditions till their services were terminated by the contractor in the C
month of April, 1996.
7. Prior to the judgment of the Constitution Bench of this
Court[Steel Authority of India Ltd. and Others(supra)], the three
Judge Bench of this Court in Air India Statutory Corporation and
Others Vs. United Labour Union and Others2 discussed the legal D
consequence of the prohibition notification under Section 10(1) of the
CLRA Act prohibiting employment of contract labour, it was held that
on abolition of contract labour system from any establishment under
Section 10 of the Act by the appropriate Government, the logical and
legitimate consequences were that the erstwhile regulated contract E
labourer covered by the sweep of such abolition for the activities
concerned would be entitled to be treated as direct employee of the
employer on whose establishment they were earlier working and they
would be entitled to be treated as regular employees from the day on
which the contract labour system in the establishment for the work which
they were doing gets abolished. F
8. The effect of the prohibition notification under Section 10(1) of
the CLRA Act issued by the appropriate Government at the later stage,
came to be examined by the Constitution Bench of this Court in Steel
Authority of India Ltd. and Others (supra) wherein it was held that
there is no provision under CLRA Act whether expressly or necessary G
implication which provides for automatic absorption of contract labour
on issuance of a notification by the appropriate Government under Section
10(1), prohibiting employment of contract labour in any process, operation
2
1997(9) SCC 377
H
132 SUPREME COURT REPORTS [2019] 9 S.C.R.
A or other work in any other establishment and overruled the judgment in
Air India Statutory Corporation and Others (supra) making it clear
that neither Section 10 nor any other provision in the CLRA Act provides
for automatic absorption of contact labour on issuance of a notification
by the appropriate Government under Section 10(1) of the CLRA Act
and consequently the principal employer is not required by operation of
B
law to absorb the contract labour working in the establishment. The
exposition of law will be discussed at the later stage.
9. It reveals from the record that after the Constitution Bench
Judgment of this Court, the matter was agitated by the workers union
before the appropriate Government and after failure of the conciliation
C proceedings, the case of 3404 workmen was referred for adjudication
by the appropriate Government vide its notification dated 27th January,
2003 followed with 22nd February, 2005 to the Central Government
Industrial Tribunal(CGIT) is reproduced hereunder:-
1.“The Government of India, Ministry of Labour vide its
D Notification No.L-29011/97/2002-IR(M) dated 27-1-2003
has referred the following dispute for adjudication by this
tribunal:-
“I. “Whether the action of the Mines Manager, Koteshwar Lime
Stone Mines of Steel Authority of India Ltd. in terminating
E services of 3404 (3380+24- as per list attached) mine workers in
April 1996 who ceased to be contract labour after prohibition of
employment of contract labour in Lime Stone Mine vide
Notification No.S.O.707 dated 17-3-93 was legal, fair and
justified? If not, what relief the concerned workmen or heirs in
F case of deceased worker are entitled to?
II. Whether the action of the Mines manager, Koteshwar Lime
Stone Mines of Steel Authority of India ltd. in denying terminal
benefits of gratuity retrenchment compensation and exgratia
applicable to VRS seeking employees is fair and justified. If not,
G to what relief these workers/heirs are entitled to?
III. Whether the action of the management of the Mines
Manager, Koteshwar Lime Stone Mines of Steel Authority of
India Ltd. in disregarding Clause-8 of Memorandum of
Agreement signed between the Steel Authority of India, New
Delhi and their Unions including HMS and employing workers
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 133
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
through contractors on jobs of permanent and perennial nature in A
Mines between 5-20 years even without ensuring statutory wages
and service conditions was legal, fair and justified? If not, to what
relief concerned workmen/heirs are entitled?”
CORRIGENDUM
“Whether the employment of the workmen mentioned in this B
Ministry’s order of even number dated 27-1-2003 through
contractors is sham and bogus and whether in effect there is
direct employment by the company? If so, to what relief the
workmen concerned are entitled?”
10. The learned Tribunal(CGIT), as a fact finding authority, taking C
note of the pleadings on record framed the following issues:-
“I. Whether the reference R/40/03 is maintainable?
II. Whether the employment of the workmen through
contractors is sham and bogus and whether the said employment D
is considered to be direct employment by the management?
III. Whether the action of the Mines Manager, Kuteshwar Lime
Stone Mines of the Steel Authority of India Ltd. in terminating the
services of 3404(3380+24) as per list attached mine workers in
April 1996 who ceased to be contract labour after prohibition of
E
employment of contract labour in lime stone vide Notification
No.S.O.707 dated 17-03-93 was legal, fair and justified?
IV. Whether the said contact workers/heirs are entitled the
terminal Benefits of gratuity, retrenchment compensation and
ex-gratia applicable to VRS from SAIL?
F
V. Whether Lime Stone Mines violated the provision of Clause-8
of the memorandum of agreement signed between the SAIL, New
Delhi and their Unions and employing workers through
contractors on jobs of permanent and perennial nature was
justified, legal and fair?
G
VI. Whether the workmen/heirs are entitled to the wages to the
post in which they were engaged with parity of wages with that
of regular employees of the management with all consequential
benefits?
VII. Any other relief, the workmen/heirs are entitled to?” H
134 SUPREME COURT REPORTS [2019] 9 S.C.R.
A 11. The parties to the reference were called upon to lay evidence
in support of their respective claim and after taking note of the
evidence(oral & documentary), the Tribunal recorded the facts in seriatim
emerging from the records as under:-
(1) The evidence shows that the respective contractors employed
B the contract labours for their own and they were the
appointing authority.
(2) Wage slips, wagesheets and the evidence of the witnesses
clearly show that the contractors were paying wages to the
contract labours.
C (3) Exhibit M/8 filed in R721/05 and the evidence of the
witnesses show that the contractor dismissed the employee
and also transferred some of the employees from the place of
work and had disciplinary authority.
(4) The contract papers entered into between the management
D and the contractors and the evidence of the witnesses clearly
show that contractors had full control and supervision over the
work. The management had only to see that the labour laws
were being implemented and specified approved grade of lime
stone was being supplied.
E (5) The contract papers and the evidence show that the
contractors had full control over the skilled and professional
work.
(6) It is further clear from the contract papers that the SAIL had
right to reject the limestone, if it was not within the specified
F approved grade as per terms and conditions of the agreement.
(7) The contract agreements further show that there was penal
clause, if there was any breach of contract.
12. The Tribunal taking note of the evidence including oral and
documentary adduced in support of the reference held that the contract
G between the Management(SAIL) and the contractors was genuine and
not sham and bogus and the contract workers were allowed to continue
even after the prohibition notification under Section 10(1) dated
17th March, 1993 under the CLRA Act on the same terms and conditions
and the services of the contract labourer were terminated by the
H Contractor in April, 1996.
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 135
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
13. It may be noted that status of the workers after the issuance A
of notification dated 17th March, 1993 has also been examined by the
Tribunal and held as follows:-
(1) The contract labours after notification cease to function.
(2) The contract labours were still working in the establishment
from 1993 to April 1996 under the umbrella of the contractors B
who may be called as agent of the Principal employer or were
intermediary between the contract labours and the Principal
Employer after the publication of notification.
(3) The contract between the Principal Employer and the
contractors after publication of the notification ceases to exist C
and became not genuine.
(4) The wages were being paid to the contract labour by the so
called contractors in the same way as from before.
(5) The principal Employer was in need of the workers for the D
specified works even after the publication of the notification
as same workers were continuing in work till April, 1996.
(6) There is no evidence on the record to show that the principal
employer adopted the procedure of regularization and had in-
tended to employ regular workers as has been directed by the
E
Hon’ble Apex Court at Para 125 sub-para-6 in the Constitu-
tion Bench Judgment in the case of SAIL versus National
Union Water Front Workers (Supra) after the contract was
found genuine before the notification.
(7) There was no automatic absorption of contract labour on
F
issuing the notification prohibiting the employment of contract
labours.
(8) Contract labours were found employees of the respective
contractors before notification.
14. At the same time, in para 85 of the Award, the Tribunal further G
held that after issuance of the prohibition notification dated 17th March,
1993 in the instant case, the principal employer(SAIL) was prohibited to
employ any contract labour in any process, operation or other work in
the establishment and when the contract with the contractors after
prohibition notification became void and not genuine and the extension
H
136 SUPREME COURT REPORTS [2019] 9 S.C.R.
A of the period of contract of the respective contractors which has been
allowed to continue in the establishment by operation of law became
ab-initio void and sham and bogus. Para 85 of the Award is as under:-
“85. It is an established fact that the notification dated 7-3-93
came to the effect prohibiting the employment of contract labours
B from the date of its publication. As such, in the light of the
constitutional bench judgment in SAIL versus National Water Front
Workers Union & others (Supra) the contract of Principal
employer with contractor in regard to the contract labour comes
to an end beyond shadow of doubts and the contract with regard
to the contract labours subsequently after the notification dated
C 17-3-1993 becomes not genuine. The Principal employer was
prohibited to employ any contract labour in any process,
operation or other work in the establishment in any process,
operation or other work in the establishment to which the
notification relates at any time thereafter. It is evident that when
D the contract of the contractors after notification became itself
void and not genuine, the extension of the period of contract of
the respective contractors would be ab-initio void and sham and
bogus. Thus it is established that the contract of Principal
employer with contractors in regard to the contract labours
became subsequently sham and bogus after the notification No.
E S.O. 707 dated 17-3-1993 coming into the effect from the date of
its publication.”
15. The Tribunal finally held that the employment of the contract
labourer through contractors was not sham and bogus before notification
dated 17th March, 1993, but after publication of the said notification, by
F operation of law, the contract through contractors could not be considered
to be genuine but became void and sham as the contract labour was
allowed to continue in the establishment till April 1996. It was further
observed that the Union is at liberty to take recourse of the penal
consequences as mandated under Section 23 to 25 of the CLRA Act.
G Rest of the issues framed by the Tribunal(Issue nos. 3,4, 5 & 6) have
been consequently decided accordingly under the Industrial Award dated
16th September, 2009.
16. The appellant(SAIL) and the workers Union both filed writ
petitions in the High Court of Madhya Pradesh. The Union assailed the
H award dated 16th September, 2009. At the same time, SAIL challenged
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 137
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
the finding which was recorded in reference to the consequence of the A
prohibition notification as observed in Para 85 to that extent in the writ
petition.
17. The High Court in its limited scope of judicial review examined
the matter as a Court of Appeal reappreciated the evidence threadbare
and based on the same set of evidence(oral/documentary) reversed the B
finding of fact recorded by the Tribunal and observed that the contract
to be sham and bogus and observed as under:-
“41. As we have found the contract to be not genuine but mere
camouflage in the facts and circumstances and considering
prohibition notification under Section 10(1) of CLRA Act, inevitable C
conclusion is that the contract labours have to be treated as
employees of the principal employer.
42. Considering the large number of workers involved in the instant
case and the notification issued under Section 10 of CLRA Act,
the regular workmen have to be ultimately employed by the SAIL. D
We decline to grant the backwages to the workers in the instant
case. It would not be appropriate to saddle the huge liability of
back wages. However, we direct that the SAIL to start the process
of regular employment. The workers who were in the employment
from 1993 till 1996 are ordered to be reinstated, and their cases
be considered for regularization in accordance with the directions E
issued by the Apex Court in para 125 of Steel Authority of India
Ltd. and others vs. National Union Waterfront Workers and others
(supra).”
18. The judgment of the High Court dated 6th September, 2010 is
a subject matter of challenge before us in these appeals. F
19. Sh. Ranjit Kumar and Sh. Parag P. Tripathi, learned senior
counsel for the appellant submit that the CGIT in its award dated 16th
September, 2009 has not only extensively considered the oral and
documentary evidence placed on record but also took note of the judgment
of the Constitution Bench of this Court in Steel Authority of India Ltd. G
and Others(supra) and being the appropriate industrial adjudicator, after
going into merits and the evidence led by the respective parties to the
contract between management SAIL and contractors, arrived to the
conclusion that the contract was genuine and not sham and bogus under
its award dated 16th September, 2009 and the finding of fact recorded by
H
138 SUPREME COURT REPORTS [2019] 9 S.C.R.
A the Tribunal has attained finality and unless the approach of the Tribunal
was wholly perverse in the sense that the Tribunal has acted on no
evidence, it was not justified for the High Court to interfere over the
award of the industrial adjudicator sitting as a Court of First Appeal to
reappreciate the evidence and even if on the basis of the material on
record, two views are possible and one view has been expressed by the
B
Tribunal it was not open for the High Court to substitute its view under
the limited scope of judicial review under Sections 226 and 227 of the
Constitution of India. In the given circumstances, the finding of fact
which has been reversed by the High Court under its impugned judgment
holding the contract is not genuine but a mere camouflage, is legally not
C sustainable and deserves to be interfered by this Court.
20. Learned counsel further submits that normally the industrial
adjudicator is the final Court of facts and on its extensive discussion
based on the material available on record, it was held that there is no
employer and employee relationship between the appellant and
D respondent workmen and, therefore, the question of compliance of Section
25(n) of the Act does not arise and it was the contractor who had
terminated their services in April 1996 and it was the contractor who
had full control and supervision over the work of the labourers. It has
also concluded after examining the witness and appraisal of the
documentary evidence on record that the wage slips and identity cards
E were issued to them by the respective contractors and it were the
contractors who paid wages to the contract labour and few of the
witnesses have also supported payment through contractors.
21. Thus, the conclusion which has been arrived at by the Tribunal
that the contractors were exercising exclusive control over the contract
F labours and tools and equipment were supplied by the contractors as per
the terms of the contract and payment was made by respective
contractors to the contract labourers and not by the principal employer
and it was the contractors who terminated the services of the contract
labourers because they proceeded on illegal strike in April 1996 and all
G the agreements between the management and the contractors entered
into are of prior to the notification dated 17th March, 1993 prohibiting
employment of contract labour and subsequently it was only extended
by the competent authority from time to time until the services of the
contract labour were terminated, holding disciplinary powers against the
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 139
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
contract labour being supported by the cogent evidence on record was A
not open for the High Court to sit as a Court of Appeal and reappraised
the evidence under its impugned judgment.
22. Learned counsel placed reliance on the judgment of this Court
in Dena Nath and Others Vs. National Fertilisers Ltd. and Others3
and submits that mere violation of the prohibition notification under Section B
10(1) of the CLRA Act would not entail absorption of the contract labour
and at the best could be considered as further continuation to be illegal
resulting in penal consequences envisaged under Section 23 to 25 of the
Act.
23. Per contra, Sh. Colin Gonsalves, learned senior counsel for C
the respondent, on the other hand, while supporting the finding recorded
by the High Court in the impugned judgment further submits that the
Tribunal has committed a manifest error in not appreciating the
documentary/oral evidence on record and thus on reappraisal of the
evidence, the High Court was convinced that the finding of fact recorded
by the Tribunal under its award dated 16th September, 2009, being D
perverse, based on no evidence, has rightly interfered and recorded a
finding that the contract was sham and bogus and in consequence thereof
in terms of the Constitution Bench judgment of this Court, the workmen
became employee of the principal employer (SAIL) in the instant case
and entitled for the wages payable to the regular employee of the appellant E
SAIL and be considered for regularisation of service.
24. Learned counsel further submits that the employees are entitled
for the back wages which has been wrongly denied by the High Court
without any justiciable reasons and as they are contesting their claim
immediately after their services were terminated, the delay in fact has F
caused because of 3-4 rounds of litigation and was also due to the fact
that earlier it was held by this Court in Air India Statutory Corporation
and Others case (supra) that immediately on the issuance of a prohibition
notification under Section 10(1) of the CLRA Act, the contract labour
become entitled for automatic absorption in the establishment wherein
he was working prior to passing of the notification under Section 10(1) G
of the CLRA Act, which has been although overruled by the Constitution
Bench of this Court in Steel Authority of India Ltd. and Others(supra)
at a later point of time but at least there are no latches on the part of the
3
1992 (1) SCC 695 H
140 SUPREME COURT REPORTS [2019] 9 S.C.R.
A employees and they are entitled for wages for the period they have
worked and discharged their duties in the establishment of SAIL and
denial of their actual wages by the High Court in the impugned judgment
is legally not sustainable.
25. Learned counsel further submits that High Court has taken
B note of various tests for determining nature of contract which has been
laid down from time to time by the judicial pronouncements i.e. supervision
and control, effective and absolute control, disciplinary action, payment
of wages etc., the primary tests as the determining factor in arriving to a
conclusion as to whether any contract entered in contradistinction to
the tests laid down, if any, between the contractor and the contract labour
C that indeed is sham and bogus. The High Court on appraisal of the evidence
recorded its satisfaction on all the tests cumulatively and rightly held that
the contract between the contract labour and the contractor was sham
and bogus and once the finding has been recorded under the impugned
judgment, the consequence is restoring the relationship of the principal
D employer and of contract labour as an employer and employee and this
makes the respondent entitled for their regularisation of service and the
difference of salary which has been paid to their counterparts who were
regular in employment of the appellant establishment which indeed could
not have been denied to the respondent. In the given facts and
circumstances, no error has been committed by the High Court in the
E impugned judgment which may call for any interference.
26. Learned counsel for the respondent contended that the judgment
in Dena Nath and Others (supra) is not applicable for the reason that it
was of much prior to the Constitution Bench Judgment of this Court and
it has no application for the further reason that it was a case where the
F effect of failure of compliance of Section 7 and 12 of the CLRA Act
was a question and there was no such prohibition notification under Section
10(1) of the CLRA Act which came into consideration. Thus, what has
been expressed by this Court may not be of any assistance to the
appellant.
G 27. We have considered the rival submissions made by the parties
and with their assistance perused the materials available on record.
28. Before we proceed to examine the question raised in the
instant appeals any further, it may be apposite to take note of the indisputed
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 141
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
facts which has come on record and take a note of the facts recorded A
by the High Court in the impugned judgment.
29. It is not disputed that the appellant SAIL is a Government of
India undertaking and a State within the meaning of Article 12 of the
Constitution of India and has its steel plants in the different parts of
India. SAIL has one of the captive lime stone and dolomite mines in B
Kuteshwar in the District of Katni of Madhya Pradesh. Limestone and
Dolomite are necessary ingredients for manufacture of steel. The SAIL
did blasting work as this work had been departmentalised by Notification
dated 15th December, 1979 w.e.f. 22nd June, 1980 and various tripartite
agreements were executed between the principal employer(SAIL),
contractor and contract labour and from time to time wages to which C
the contract labour was entitled for in terms of tripartite agreement which
indisputedly was higher in comparison to the minimum wages notified by
the appropriate Government from time to time under the Minimum Wages
Act, 1948 was paid to each of the contract labour who had worked in
the establishment of the appellant. D
30. It is also not disputed that the contract labour which is
represented through union had worked in the schedule work which has
been prohibited by the appropriate Government under its notification
issued under Section 10(1) of the CLRA Act, dated 17th March, 1993
and there is no challenge to the prohibition notification dated 17th March, E
1993 at least in the instant proceedings.
31. After 3-4 rounds of litigation, a reference was made by the
Government of India, Ministry of Labour vide its notification dated 27th
January, 2003 followed by 22nd February, 2005 wherein respective claims
with supporting oral and documentary evidence were placed by the F
contesting parties. CGIT under its award dated 16th September, 2009
recorded a finding of fact holding that the contract was not sham and
bogus and if, at all, there was any violation in continuation of the contract
labour after issuance of the prohibition notification dated 17th March,
1973 that entail penal consequences as referred to under Sections 23 to
25 of the CLRA Act and further held that the respondent workmen G
were not entitled for reinstatement and answered the reference
accordingly under its award dated 16th September, 2009. The finding of
fact in return came to be overturned by the High Court in its limited
H
142 SUPREME COURT REPORTS [2019] 9 S.C.R.
A scope of judicial review under Article 226 & 227 of the Constitution of
India under the impugned judgment dated 6th September, 2010.
32. Before we may advert to examine the question in the instant
appeals any further, it will be apposite to take note of the legal effect of
the prohibition notification issued by the appropriate Government in
B exercise of power under Section 10(1) of the CLRA Act and its exposition
by the Constitution Bench of this Court in Steel Authority of India Ltd.
and Others (supra) overruling the judgment in Air India Statutory
Corporation and Others (supra). The legal consequence of Section
10(1) of the CLRA Act, has been noticed in paragraph 68, 88, 105 and
125 as follows:-
C
“68. We have extracted above Section 10 of the CLRA Act which
empowers the appropriate Government to prohibit employment
of contract labour in any process, operation or other work in any
establishment, lays down the procedure and specifies the relevant
factors which shall be taken into consideration for issuing
D notification under sub-section (1) of Section 10. It is a common
ground that the consequence of prohibition notification under
Section 10(1) of the CLRA Act, prohibiting employment of contract
labour, is neither spelt out in Section 10 nor indicated anywhere in
the Act. In our view, the following consequences follow on issuing
E a notification under Section 10(1) of the CLRA Act:
(1) contract labour working in the establishment concerned at
the time of issue of notification will cease to function;
(2) the contract of principal employer with the contractor in
regard to the contract labour comes to an end;
F
(3) no contract labour can be employed by the principal
employer in any process, operation or other work in the
establishment to which the notification relates at any time
thereafter;
(4) the contract labour is not rendered unemployed as is
G
generally assumed but continues in the employment of the
contractor as the notification does not sever the relationship of
master and servant between the contractor and the contract
labour;
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 143
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
(5) the contractor can utilise the services of the contract labour A
in any other establishment in respect of which no notification
under Section 10(1) has been issued where all the benefits
under the CLRA Act which were being enjoyed by it, will be
available;
(6) if a contractor intends to retrench his contract labour, he B
can do so only in conformity with the provisions of the ID Act.
The point now under consideration is: whether automatic absorption
of contract labour working in an establishment, is implied in Section
10 of the CLRA Act and follows as a consequence on issuance
of the prohibition notification thereunder. We shall revert to this C
aspect shortly.
105. The principle that a beneficial legislation needs to be construed
liberally in favour of the class for whose benefit it is intended,
does not extend to reading in the provisions of the Act what the
legislature has not provided whether expressly or by necessary D
implication, or substituting remedy or benefits for that provided by
the legislature. We have already noticed above the intendment of
the CLRA Act that it regulates the conditions of service of the
contract labour and authorizes in Section 10(1) prohibition of
contract labour system by the appropriate Government on
consideration of factors enumerated in sub-section (2) of Section E
10 of the Act among other relevant factors. But, the presence of
some or all those factors, in our view, provides no ground for
absorption of contract labour on issuing notification under sub-
section (1) of Section 10. Admittedly, when the concept of
automatic absorption of contract labour as a consequence of F
issuing notification under Section 10(1) by the appropriate
Government, is not alluded to either in Section 10 or at any other
place in the Act and the consequence of violation of Sections 7
and 12 of the CLRA Act is explicitly provided in Sections 23 and
25 of the CLRA Act, it is not for the High Courts or this Court to
read in someunspecified remedy in Section 10 or substitute for G
penal consequences specified in Sections 23 and 25 a different
sequel, be it absorption of contract labour in the establishment of
principal employer or a lesser or a harsher punishment. Such an
H
144 SUPREME COURT REPORTS [2019] 9 S.C.R.
A interpretation of the provisions of the statute will be far beyond
the principle of ironing out the creases and the scope of
interpretative legislation and as such, clearly impermissible. We
have already held above, on consideration of various aspects, that
it is difficult to accept that Parliament intended absorption of
contract labour on issue of abolition notification under Section
B
10(1) of the CLRA Act.
125. The upshot of the above discussion is outlined thus:
(1)(a) Before 28-1-1986, the determination of the question whether
the Central Government or the State Government is the appropriate
C Government in relation to an establishment, will depend, in view
of the definition of the expression “appropriate Government” as
stood in the CLRA Act, on the answer to a further question, is the
industry under consideration carried on by or under the authority
of the Central Government or does it pertain to any specified
controlled industry, or the establishment of any railway, cantonment
D board, major port, mine or oilfield or the establishment of banking
or insurance company? If the answer is in the affirmative, the
Central Government will be the appropriate Government; otherwise
in relation to any other establishment the Government of the State
in which the establishment was situated, would be the appropriate
E Government;
(b) After the said date in view of the new definition of that
expression, the answer to the question referred to above, has to
be found in clause (a) of Section 2 of the Industrial Disputes Act;
if (i) the Central Government company/undertaking concerned or
F any undertaking concerned is included therein eo nomine, or (ii)
any industry is carried on (a) by or under the authority of the
Central Government, or (b) by a railway company; or
(c) by a specified controlled industry, then the Central Government
will be the appropriate Government; otherwise in relation to any
G other establishment, the Government of the State in which that
other establishment is situated, will be the appropriate Government.
(2)(a) A notification under Section 10(1) of the CLRA Act
prohibiting employment of contract labour in any process, operation
or other work in any establishment has to be issued by the
appropriate Government:
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 145
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
(1) after consulting with the Central Advisory Board or the A
State Advisory Board, as the case may be, and
(2) having regard to
(i) conditions of work and benefits provided for the contract
labour in the establishment in question, and
B
(ii) other relevant factors including those mentioned in sub-
section (2) of Section 10;
(b) Inasmuch as the impugned notification issued by the Central
Government on 9-12-1976 does not satisfy the aforesaid
requirements of Section 10, it is quashed but we do so prospectively C
i.e. from the date of this judgment and subject to the clarification
that on the basis of this judgment no order passed or no action
taken giving effect to the said notification on or before the date of
this judgment, shall be called in question in any tribunal or court
including a High Court if it has otherwise attained finality and/or it
has been implemented. D
(3) Neither Section 10 of the CLRA Act nor any other provision
in the Act, whether expressly or by necessary implication, provides
for 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, E
operation or other work in any establishment. Consequently the
principal employer cannot be required to order absorption of the
contract labour working in the establishment concerned.
(4) We overrule the judgment of this Court in Air India case
[(1997) 9 SCC 377] prospectively and declare that any direction F
issued by any industrial adjudicator/any court including the High
Court, for absorption of contract labour following the judgment in
Air India case [(1997) 9 SCC 377] shall hold 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
G
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, in an industrial dispute brought before it by any contract
labour in regard to conditions of service, the industrial adjudicator
H
146 SUPREME COURT REPORTS [2019] 9 S.C.R.
A will have to consider the question whether the contractor has been
interposed either on the ground of having undertaken to produce
any given result for the establishment or for supply of contract
labour for work of the establishment under a genuine contract or
is a mere ruse/camouflage to evade compliance with various
beneficial legislations so as to deprive the workers of the benefit
B
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
regularise the services of the contract labour in the establishment
concerned subject to the conditions as may be specified by it for
C that purpose in the light of para 6 hereunder.
(6) If the contract is found to be genuine and prohibition notification
under Section 10(1) of the CLRA Act in respect of the
establishment concerned has been issued by the appropriate
Government, prohibiting employment of contract labour in any
D process, operation or other work of any establishment and where
in such process, operation or other work of the establishment the
principal employer intends to employ regular workmen, he shall
give preference to the erstwhile contract labour, if otherwise found
suitable and, if necessary, by relaxing the condition as to maximum
age appropriately, taking into consideration the age of the workers
E at the time of their initial employment by the contractor and also
relaxing the condition as to academic qualifications other than
technical qualifications.”
33. The exposition of the judgment of the Constitution Bench of
this Court made it clear that neither Section 10 nor any other provision
F in the CLRA Act provides for automatic absorption of contract labour
on issuing a notification by the appropriate Government under Section
10(1) of the CLRA Act, and consequently the principal employer is not
required or is under legal obligation by operation of law to absorb the
contract labour working in the establishment.
G 34. This court in Steel Authority of India Ltd. and Others (supra)
further held that on a issuance of notification under Section 10(1) of the
CLRA Act, prohibiting employment of contract labour in any process,
operation or other work, if an industrial dispute is raised by any contract
labour in regard to condition of service, it is for the industrial adjudicator
H to consider whether the contractor has been interposed either on the
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 147
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
ground of having undertaken to produce any given result for the A
establishment or for supply of contract labour for work of the
establishment under a genuine contract, or as a mere ruse/camouflage
to evade compliance with various beneficial legislations so as to deprive
the workers of statutory benefits. If the contract is found to be sham,
nominal or camouflage, then the so-called labour will have to be treated
B
as direct employee of the principal employer and the industrial adjudicator
should direct the principal employer to regularise their services in the
establishment subject to such conditions as it may specify for that purpose
in the facts and circumstances of the case.
35. On the other hand, if the contract is found to be genuine and a
prohibition notification has been issued under Section 10(1) of the CLRA C
Act, in respect of the establishment, the principal employer intending to
employ regular workmen for the process, operation or other work of the
establishment in regard to which the prohibition notification has been
issued, it shall give preference to the erstwhile contract labour if otherwise
found suitable, if necessary by giving relaxation of age as it appears to D
be in fulfilment of the mandate of Section 25(H) of the Industrial Disputes
Act, 1947.
36. It may be noted that the learned counsel for the respondent
has placed reliance on the judgments of this Court in Silver Jubilee
Tailoring House and Others Vs. Chief Inspector of Shops and E
Establishments and Another4; Hussainbhai, Calicut Vs. Alath Factory
Thezhilali Union, Kozhikode and Others5; Indian Petrochemicals
Corporation Ltd. and Another Vs. Shramik Sena and Others6 and
these cases have been considered by the Constitution Bench of this
Court in Steel Authority of India Ltd. and Others(supra) of which a
detailed reference has been made by us. F
37. Tests which are to be applied to find out whether the person is
an employee or an independent contractor in finding out whether the
contract labour agreement is sham, nominal or a mere camouflage has
been examined by this Court in International Airport Authority of India
Vs. International Air Cargo Workers’ Union and Another7 by the G
two-judge Bench of this Court. The relevant paras are as under:-
4
1974 (3) SCC 498
5
1978(4) SCC 257
6
1999(6) SCC 439
7
2009 (13) SCC 374 H
148 SUPREME COURT REPORTS [2019] 9 S.C.R.
A “38. The tests that are applied to find out whether a person is an
employee or an independent contractor may not automatically apply
in finding out whether the contract labour agreement is a sham,
nominal and is a mere camouflage. For example, if the contract is
for supply of labour, necessarily, the labour supplied by the
contractor will work under the directions, supervision and control
B
of the principal employer but that would not make the worker a
direct employee of the principal employer, if the salary is paid by
a contractor, if the right to regulate the employment is with the
contractor, and the ultimate supervision and control lies with the
contractor.
C 39. The principal employer only controls and directs the work to
be done by a contract labour, when such labour is assigned/allotted/
sent to him. But it is the contractor as employer, who chooses
whether the worker is to be assigned/allotted to the principal
employer or used otherwise. In short, worker being the employee
D of the contractor, the ultimate supervision and control lies with the
contractor as he decides where the employee will work and how
long he will work and subject to what conditions. Only when the
contractor assigns/sends the worker to work under the principal
employer, the worker works under the supervision and control of
the principal employer but that is secondary control. The primary
E control is with the contractor.”
38. These are the broad tests which have been laid down by this
Court in examining the nature and control of the employer and whether
the agreement pursuant to which contract labour has been engaged
through contractor can be said to be sham, nominal and camouflage.
F
39. It was not disputed in the instant case that the contract labourer
who were working under a tripartite agreement were allowed to continue
under the self-same agreement executed prior to the prohibition
notification dated 17th March, 1993 and extended from time to time by
the competent authority even after issuance of the prohibition notification
G and the services of the contract workers were terminated by the
contractor through whom they were engaged after they proceeded on
strike in April, 1996.
40. The Tribunal in its award dated 16th September, 2009 has
recorded a finding of fact based on oral and documentary evidence placed
H
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 149
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
by the respective parties on record in reference to the fact whether the A
contract was sham and bogus which was a primary cause of adjudication
and it was observed that the contractors employed the contract labour
on their own and they were the appointing authority. Witnesses Mangal
and Kodulal (contract labourer) were examined and in their cross-
examination they have stated that before the issuance of notification
B
dated 17th March, 1993, they were workers of the contractor and payment
was made to them by the contractors, wage slips also show that the
wages were being paid by the contractors. Other witnesses also in cross-
examination have supported that half of the PF amount of the workers
were deposited by their respective contractors. Exh. W/39 to W/54
submitted by the contract labours are the photocopies of the identity C
cards, pay slips, PF slips etc. These pay slips and identity cards do not
show that all 3079 workers were working after the notification dated
17th March, 1993 without break because number of these documents
are of prior to the notification. It further observed that all the agreements
between the management and the contractors are entered into prior to
D
the notification dated 17th March, 1993 prohibiting employment of contract
labour and only extended thereafter from time to time. It goes to show
that there was no fresh contract thereafter ever entered between the
parties. Exh. M/8 filed in R-721/05 and the evidence of the witnesses
shows that the contractor had terminated the services of the contract
labour in April 1996 and transferred some of the contract labourers from E
the place of work and was the disciplinary authority.
41. It was further observed that the contractors had full control
over the skilled and professional work and the SAIL had right to reject
the limestone, if it was not within the specified approved grade as per
terms and conditions of the agreement and after extensive appreciation F
of the oral/documentary evidence on record, CGIT recorded a finding
of fact holding that the contract was not sham and bogus at least up to
the date of issuance of the prohibition notification dated 17th March,
1993. Although in paragraph 85 of the award the Tribunal has recorded
a finding that after the issuance of prohibition notification dated 17th
March, 1993 by operation of law, it became sham and bogus but in our G
considered view, such a finding recorded in para 85 of the Award dated
16th September, 2009 is not sustainable in law for the simple reason that
mere issuance of the prohibition notification under CLRA Act will not
make the contract/agreement to be void ab initio or bad in law and if
H
150 SUPREME COURT REPORTS [2019] 9 S.C.R.
A the employees are allowed to continue in terms of the earlier agreement
after the prohibition notification under CLRA Act has come into force, it
may be illegal and continuance of service in the absence of any contract
which stands extinguished by virtue of prohibition notification has to face
the penal consequences as embedded under the scheme of CLRA Act.
B 42. The High Court has taken note of the various provisions of
Mines Creche Rules, 1966, Maternity Benefits Act, Mines Act, 1952
and Metalliferous Mines Regulations, 1961 and other statutory measures
which are applicable over the establishment of the appellant including
various welfare schemes which provide safety and security of the
workers. To say so, every establishment is under obligation to implement
C the mandate of law but that could not be a determining factor/denominator
to test the contract agreement entered between the parties in arriving to
a conclusion that such an agreement is sham, nominal or camouflage as
held by the High Court in its impugned judgment.
43. The High Court appears to be primarily persuaded with the
D issuance of a prohibition notification under Section 10(1) of the CLRA
Act as one of the salient factor to indicate that the committee constituted
under the Act, after examining various factors including perennial nature
of work, under the CLRA Act has recommended for abolition of contract
labour and accepted by the Central Government coupled with the
E continuation of employment of contract labour after issuance of the
prohibition notification under Section 10(1) of the CLRA Act in holding
that the action of the establishment was opposed to the public policy
principles enshrined under Section 23 of the Indian Contract Act and
taking work from the contract labour was in violation of the statutory
notification dated 17th March, 1993 and that appears to be the reason
F which persuaded to hold that the finding recorded by the Tribunal that
contractors had full control and supervision over the work in view of the
functioning of the scheme of mines was unsustainable, instead holding
the total control and supervision was that of management of the appellant
and the contract was sham and bogus and also the fact that in all the
G agreements executed between the parties, there was a provision of
abolition of contract labour in the matter of work of a perennial in nature
and certain other conditions of agreement in recording its satisfaction
that the contract was sham and bogus.
44. In our considered view, the finding recorded by the High Court
H under the impugned judgment is not sustainable for the reason that effect
DIRECTOR STEEL AUTHORITY OF INDIA LTD. v. ISPAT 151
KHADAN JANTA MAZDOOR UNION [RASTOGI, J.]
of the prohibition notification under Section 10(1) of CLRA Act has A
been settled by the Constitution Bench of this Court in Steel Authority
of India Ltd. and Others (supra) and this Court has made it clear that
neither Section 10 nor any provision in the CLRA Act provides for
automatic absorption of contract labour on issuance of prohibition
notification by the appropriate Government under Section 10(1) of the
B
CLRA Act and the Tribunal in the first place being the fact finding
authority has extensively examined the documentary and oral evidence
which came on record and also the relationship of principal employer,
contractor and contract labour and the fact that their services were
terminated by the contractor after the contract labour proceeded on a
strike in April 1996. C
45. The Tribunal also considered various other factors in extenso
regarding the wage slips, identity cards and the nature of work being
discharged by the contract labour subsequent to the prohibition notification
dated 17th March, 1993 and other documentary evidence which came
on record and recorded the finding in return that the contract between D
the contractor and the employee was not sham and bogus and the
workmen were not entitled for their absorption in service of the principal
employer.
46. To test it further, apart from the statutory compliance which
every principal establishment is under an obligation to comply with, its E
non-compliance or breach may at best entail in penal consequences which
is always for the safety and security of the employee/workmen which
has been hired for discharge of the nature of job in a particular
establishment. The exposition of law has been further considered in
International Airport Authority of India case(supra) where the contract
was to supply of labour and necessary labour was supplied by the F
contractor who worked under the directions, supervision and control of
the principal employer, that in itself will not in any manner construe the
contract entered between the contractor and contract labour to be sham
and bogus per se.
47. Thus, in our considered view, if the scheme of the CLRA Act G
and other legislative enactments which the principal establishment has
to comply with under the mandate of law and taking note of the oral and
documentary evidence which came on record, the finding which has
been recorded by the CGIT under its award dated 16th September, 2009
in absence of the finding of fact recorded being perverse or being of no H
152 SUPREME COURT REPORTS [2019] 9 S.C.R.
A evidence and even if there are two views which could possibly be arrived
at, the view expressed by the Tribunal ordinarily was not open to be
interfered with by the High Court under its limited scope of judicial review
under Article 226/227 of the Constitution of India and this exposition has
been settled by this Court in its various judicial precedents.
B 48. It is true that judgment in Dena Nath and Others (supra) is
in reference to failure of compliance of Section 7 and 12 and not in
reference to Section 10(1) of the CLRA Act but if we look into the
scheme of CLRA Act which is a complete code in itself, non-compliance
or violation or breach of the provisions of the CLRA Act, it result into
penal consequences as has been referred to in Sections 23 to 25 of the
C Act and there is no provision which would entail any other consequence
other than provided under Section 23 to 25 of the Act.
49. In our considered view, the Tribunal under its award dated
th
16 September, 2009 has rightly arrived to the conclusion that the contract
was not sham and bogus and there shall be no automatic absorption of
D contract labour on issuance of a prohibition notification under the CLRA
Act and the High Court of Madhya Pradesh has committed a manifest
error in reversing the finding of fact in return under its impugned judgment
dated 6th September, 2010 which, in our view, is not sustainable and
deserves to be set aside.
E 50. The appeals are accordingly disposed of and the impugned
judgment of the High Court dated 6th September, 2010 is hereby set
aside. The respondent is at liberty to avail remedy for alleged breach of
the provisions of the CLRA Act, if so advised, in accordance with law.
No costs.
F 51. Pending application(s), if any, also stand disposed of.
Divya Pandey Appeals disposed of.
G
H
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "contract labour"Sign in to search