GUJARAT ELECTRICITY BOARD, THERMAL POWER STATION UKAI, GUJARAT v. HIND MAZDOOR SABHA AND ORS. ETC.

the Act. Although the Act has been placed on the statute book with all benevolent intentions, and elaborate provisions are made to prevent the abuse of the contract labour system as is evident from the Statement of. Objects and Reasons and the provisions of the Act referred to by us in detail earlier, the legislature has not provided any relief for the concerned workmen after the contract is abolished. One reason for the same pointed out to us was that the workmen engaged by the contractor may not be qualified to be engaged by the principal employer according to the latter's rules of recruitment. In this respect, we envisage two different situations, first where similar type of work is being carried out by the direct employees of the principal employer and, second where the contract labour is engaged to execute work which is not being carried out by any section of the direct employees of the principal employer. As regards the first situation, the condition no. [5] of the licence to be granted to the contractor in Form VI under Rule 25 [1] of the Rules requires that wages rates, holidays, hours of work and other conditions of service of the contract workmen shall be the same as applicable to the workmen directly employed by the principal employer for performing the same or similar type of wor.k. In other cases, the wage rates, holidays, hours of work and other conditions of service of the workmen of the contractor, as per condition [6] of the said Form, shall be such as may be specified by the Chief Labour Commissioner [Central]. When the legislature has been careful enough to take such precautions, we are unable to appreciate as to why it could not have provided also for the absorption of the workmen who have been doing the work in question. It is possible that the contractor has been transferring his workmen from one job to another and the same workmen may not be working for all the time in the same establishment or the process. But as pointed out earlier, the application for registration under Rule 17 [1], the certificate of registration under Rule 18 [1], the register of establishment under Rule 18 [3], the application for licence under Rule 21 [1] and the licence granted under Rule 25 [1] all require the particulars of contract labour to be furnished in the prescribed form. Hence it should not be difficult to verify the workmen who were actually working in the establishment in question for a given period of time and the period for which they had worked since the record of payment of wages made to them would be available as it is to be made in the presence of the representative of the principal employer who is also responsible to make the payment of the whole of the wages or the balance of it in case the contractor makes default. For ensuring the payment to the · H

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A workmen, the muster roll has necessarily to be maintained. If they have in fact worked for a reasonably long time satisfactorily and have thus gained experience, it should not be difficult to identify and absorb them. In fact, they will any time be better then fresh recruits and their engagement would be beneficial to the establishment concerned. On account of the abolition B of the contract labour, the establishment will in any case require replace- ment of the contract labour. It may be that the establishment may not require the whole complement of the workmen erstwhile employed by the contractor. But that also may not always be correct since the contractor would more probably than not have employed less work-force than may be necessary in order to keep his margin of profit as wide as possible. C Whatever the case, the logic in not employing the workmen of the erstwhile contractor or those of them who may be necessary, in the principal estab- lishment after the contract is abolished, does not appear to be sound.

The legislature probably did not consider it advisable to make a D provision for automatic absorption of the erstwhile contract labour in the principal establishment on the abolition of the contract labour, fearing that such provision would amount to forcing the contract labour on the prin- cipal employer and making a contract between them. The industrial ad- judicator however is not inhibited by such considerations. He has the jurisdiction to change the contractual relationships and also make new E contracts between the employer and the employees under the ID Act. It is for this reason that in all cases where the contract labour is abolished, the industrial adjudicator, depending upon the facts of the case will have the authority to direct the principal employer to absorb such of the workmen of the erstwhile contractor and on such terms as he may determine on the p basis of the relevant material before him. Hence the legislature could have provided in the Act itself for a reference of the dispute with regard to the absorption of the workmen of the erstwhile contractor to the industrial adjudicator after the appropriate Government has abolished the contract labour. That would also have obviated the need to sponsor the dispute by the direct workmen of the principal employer. That can still be done by a suitable amendment of the Act.

15Copy pinpoint15. The answer to the question as to what would be the status of the erstwhile workmen of the contractor, once the contract labour system is abolished is therefore that where an industrial dispute is raised, the status of the workmen will be as determined by the industrial adjudicator. If the

GUJ. ELECTRICITY BOARD v. HIND MAZDOOR SABHA [SA WANT, J.l 213

contract labour system is abolished while the industrial adjudication is pending or is kept pending on the concerned dispute, the adjudicator can give direction in that behalf in the pending dispute. If, however, no in- dustrial dispute is pending for determination of the issue, nothing prevents an industrial dispute being raised for the purpose.

16Copy pinpoint16. The last but equally important question that remains to be answered is : who can raise an industrial dispute for absorption of the workmen of the ex-contractor by the principal employer. As has been pointed out earlier, if the contract is not genuine, the workmen of the contractor themselves can raise such dispute, since in raising such dispute the workmen concerned would be proceeding on the basis that they are in fact the workmen of the principal employer and not of the contractor. Hence the dispute would squarely fall within the definition of industrial dispute under Section 2(k) of the ID Act being a dispute between the employer and the employees. In that case, the dispute would not be for abolition of the contract labour, but for securing the appropriate service conditions from the principal employer on the footing that the workmen concerned were always the employees of the principal employer and they were denied their dues. In such a dispute, the workmen are required to establish that the so called labour contract was sham and was only a camouflage to deny them their legitimate dues. E However, the situation is obviously different when the labour con- tract is genuine and there is no relationship of employer- employee be- tween the principal employer and the workmen of the contractor. No industrial dispute can be raised by the workmen of the contractor either before or after the contract labour is abolished by the appropriate Govern- ment under Section 10 of the Act. This hurdle in raising the dispute will F however disappear if it is raised by the direct workmen of the principal employer who have (i) a community of interest with the contract labour, (ii) a substantial interest in the subject matter of the dispute and (iii) when the employer can grant the relief as is held in the following decisions : G In Workmen of Dimakuchi Tea Estate v. The Management of Dimakuchi Tea Estate, [1958] SCR 1156, the question for decision was whether the dispute raised by the workmen relating to a person who was not a workman could be an industrial dispute as defined in the ID Act and as the definition stood before the amendment of 1956. The appellants who were the workmen of the respondent, espoused the cause of one Dr. H

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A Banerjee, Assistant Medical Officer who had been dismissed without hear- ing, with a month's salary in lieu of notice, but who had accepted such payment and left the tea garden. The dispute raised was ultimately referred by the Government to the Tribunal. Both the Tribunal and the appellate industrial Tribunal took the view that as Dr. Banerjee was not workman, the dispute was not an industrial dispute as defined in Section 2 [k] of the B ID Act. In appeal from the said decision after analysing the provisions of Section 2(k), the majority of this Court summarised the law on the subject as follows:-

"To summarise. Having regard to the scheme and objects of c the Act, and its other provisions, the expression 'any person' in Section 2(k) of the Act must be read subject to such limitations and qualifications as arise from the context; the two crucial limita- tions are (1) the dispute must be a real dispute between the parties to the dispute (as indicated in the first two parts of the definition clause) so as to be capable of settlement or adjudication by one party to the dispute giving necessary relief to the other, and (2) the person regarding whom the dispute is raised must be one in whose employment, non-employment, terms of employment, or conditions of labour (as the case may be) the parties to the dispute have a direct or substantial interest. In the absence of such interest the dispute cannot be said to be a real dispute between the parties. Where the workmen raise a dispute as against their employer, the person regarding whose employment, non-employment, terms of employment or conditions of labour the dispute is raised need not be, strictly speaking, a 'workman' within the meaning of the Act must be one in whose employment, non-employment, terms of employment or conditions of labour the workmen as a class have a direct or substantial interest.

In the case before us, Dr. K.P. Banerjee was not a 'workman'. He belonged to the medical or technical staff - a different category altogether from workman. The appellants had no direct, nor sub- stantial interest in his employment or non-employment, and even assuming that he was a member of the same Trade Union, it cannot be said, on the tests laid down by us, that the dispute regarding his termination of service was an industrial dispute within the meaning of Section 2(k) of the Act."

GUJ. ELECTRICITY BOARD v. HIND MAZDOOR SABHA [SAWANT. J.) 215

Justice Sarkar, in his dissenting judgment, however held that the ID A Act did not make the interest of the workmen in the dispute a condition of the existence of an industrial dispute. Such an interest is incapable of definition and to make it a condition of an industrial dispute would defeat the object of the Act. The learned Judge further held that even assuming that workmen must be interested in order that there can be an industrial dispute, the present case satisfied that test and fell within the purview of section 2 [k) of the ID Act.

In The Standard-Vacuum Refining Co. case [supra] to which we had an occasion to refer to earlier in another context, after taking due note of the propositions of law laid down in Dimakuchi (supra), this Court has discussed the law on the subject elaborately. The said discussion bears verbatim reproduction here.

"....The definition of "industrial dispute' in Section 2(k) requires three things - D (i) There should be a dispute or difference;

(ii) The dispute or difference should be between employers and employers, or between employers and workmen or be- tween workmen and workmen; E (iii) The dispute or difference must be connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any person.

The first part thus refers to the factum of a real and substantial dispute, the second part to the parties to the dispute and the third F to the subject-matter of the dispute. The contention of the learned Solicitor-General is two-fold in this connection, namely, (i) that there is no real or substantial dispute between the company and the respondents and (ii) that the subject-matter of the dispute is such that it cannot come within the terms of the definition in G Section 2(k).

The first submission can be disposed of shortly. There is un- doubtedly a real and substantial dispute. between the company and the respondents on the question of the employment of contract- labour for the work of the company. The fact that the respondents H

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A who have raised this dispute are not employed on contract basis will not make the dispute any the less a real or substantial dispute between them and the company as to the manner in which the work of the company should be carried on. The dispute in this case is that the company should employ workmen directly and not through contractors in carrying on its work and this dispute is B undoubtedly real and substantial even though the regular workmen (i.e. the respondents) who have raised it are not employed on contract labour. In Dimakuchi case to which reference has been made, the dispute was relating to an employee of the tea estate who was not a workmen. It was nevertheless held that this was a c real and substantial dispute between the workmen and the com- pany. How the work should be carried on is certainly a matter of some importance to the workmen and in the circumstances it cannot be said that this is not a real and substantial dispute between the company and its workmen. Thus out of three in- gredients of Section 2 (k) the first is satisfied; the second also is D satisfied because the dispute is between the company and the respondents; it is the third ingredient which really calls for deter- mination in the light of the decision in Dimakuchi case.

Section 2(k), as it is worded, would allow workmen of a par- E ticular employer to raise a dispute connected with the employment or non-employment, or the terms of employment or with the conditions of labour of any person. It was this aspect of the matter which was considered in Dimakuchi case and it was held that the words "any person" used in Section 2(k) would not justify the workmen of a particular employer to raise a dispute about any one F in the world, though the words "any person" in that provision may not be equated with he words "any workman". The test therefore to be applied in determining the scope of the words "any person" in Section 2(k) was stated in the following words at pp.1174-75:

G "If, therefore, the dispute is a collective dispute, the party raising the dispute must have either a direct interest in the subject matter of dispute or a substantial interest therein the sense that the class to which the aggrieved party belongs is substantially affected thereby. It is the community of interest of the class as a H whole-class of employers or class of workmen-which furnishes the

p. 217 Copy page pinpoint

real nexus between the dispute and the parties to the dispute. We A see no insuperable difficulty in the practical application of this test. In a case where the party to a dispute is composed of aggrieved workmen themselves and the subject-matter of the dispute relates to them or any of them, they clearly have a direct interest in the dispute. Where, however, the party to the dispute also composed of workmen espouse the cause of another person whose employ- ment or non-employment, etc., may prejudicially affect their inter- est, the workmen have a substantial interest in the subject-matter of dispute. In both such cases the dispute is an industrial dispute."

We have therefore to see whether the respondents who have raised this dispute have a direct interest in the subject-matter of the dispute or. a substantial interest therein the sense that the class to which the respondents belong is substantially affected thereby and whether there is community of interest between the respon- dents and those whose cause they have espoused. There can be no doubt that there is community of interest in this case between the respondents and the workmen of Ramji Gordhan and Company. They belong to the same class and they do the work of the same employer and it is possible for the company to give the relief which the respondents are claiming. The respondents have in our opinion also a substantial interest in the subject-matter of the dispute, namely, the abolition of the contract system in doing work of this kind. The learned Solicitor-General particularly emphasised that there was no question of the interest of the respondents being prejudicially affected by the employment or non-employment or the terms of service or conditions of labour of the workmen of Rarnji Gordhan and Company and placed reliance on the words "may prejudicially affect their interest" appearing in the observa- tions quoted above. We may, however, mention that the test laid down is that the workmen espousing the cause should have a substantial interest iri the subject-matter of the dispute, and it was only when illustrating the practical application of the test that this Court used the words "may prejudicially affect their inter.est". Besides it is contended by Mr. Gokhale for the respondents that even if prejudicial effect on the interest of the workmen espousing the cause is necessary, this is a case where the respondents' interest H

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A may be prejudicially affected in future in case the contract system of work is allowed to prevail in this branch of the work of the company. He submits that if the company can carry on this part of the work by contract system it may introduce the same system in other branches of its work which are now being done by its B regular workmen. We do not think it necessary to go into this aspect of the matter as we have already indicated that prejudicial effect is only one of the illustrations of the practical application of the test laid down in Dimakuchi case, viz., substantial interest in the sense that the class to which the aggrieved party belongs is substantially affected thereby. It seems to us therefore that the c respondents have a community of interest with the workmen of Ramji Gordhan and Company who are in effect working for the same employer. They have also a substantial interest in the sub- ject-matter of the dispute in the sense that the class to which they belong (namely, workmen) is substantially affected thereby. Finally .. D the company can give relief in the matter. We are therefore of opinion that ail the ingredients of Section 2(k) as interpreted in · Dimakuchi case are present in this case and the dispute between the parties is an industrial dispute and the reference was com- petent.11 E

17Copy pinpoint17. In view of the aforesaid decision, it cannot be and was not disputed before us that the direct workmen of the principal employer can espouse an industrial dispute for absorption of the contractor's workmen and the industrial adjudicator will have jurisdiction to entertain such dispute and grant the necessary relief. The answer to the last question, viz., who can raise an industrial dispute for the purpose of absorption of the contractor's labour in the principal establishment is, therefore, as follows :

If the workmen of the so called contractor allege that in fact the con- tract is sham and they are in fact the workmen ofthe principal employer, they may raise the dispute themselves not for abolition of the contract labour system, but for making available to them the appropriate service conditions, When such dispute is raised, it is not for abolition of the contract labour, but for a declaration that the workmen concerned are in fact the employees of the principal employer, and for consequential reliefs on such declaration. If, H however, the contract is genuine, the direct workmen of the principal

p. 219 Copy page pinpoint

employer may espouse the industrial dispute for abolition of the contract A labour system and for absorption of the contractor's workmen as the direct workmen of the principal employer. When such dispute is raised by the direct workmen of the principal employer, the industrial adjudicator can entertain the reference; but in view of the provisions of Section 10 of the Act, he will have first to direct the woi;kmen to approach the appropriate Govern- B ment for considering the question as to whether the contract labour in ques- tion should or should not be abolished under the said provisions. If, on such reference being made by the workmen, the appropriate Government does not abolish the contract labour, the industrial adjudicator has to reject the rererence since the jurisdiction to abolish the contract is exclusively vested in the appropriate Government and he has no jurisdiction to adjudicate the C dispute. However, if the appropriate Government abolishes the contract labour, the industrial adjudicator can proceed to decide (i) as to whether the erstwhile contract labour should be absorbed in the principal establishment; (ii) if so, to what extent and (iii) on what terms. The decision on the points, will have to be given by him by giving opportunity to the parties to lead the D. necessary evidence.

18Copy pinpoint18. Our conclusions and answers to the questions raised are, there- fore, as follows :

(i) In view of the the provisions of Section 10 of the Act, it is only E appropriate Government which has the authority to abolish genuine labour contract in accordance with the provisions of the said Section. No Court including the industrial adjudicator has jurisdiction to do so. F (ii) if the contract is sham or not genuine, the workmen of the so called contractor can raise an industrial dispute for declaring that they were always the employees of the principal employer and .· for claiming the appropriate service conditions. When such dis- pute is raised, it is not a dispute for abolition of the labour G contract and hence the provisions of Section 10 of the Act will not bar either the raising or the adjudication of the dispute. When such dispute is raised, the industrial adjudicator has to decide whether the contract is sham or genuine. It is only if the ad- judicator comes to the conclusion that the contract is sham, that he will have jurisdiction to adjudicate the dispute. If, however, H

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A he comes to the conclusion that the contract is genuine, he may refer the workmen to the appropriate Government for abolition of the contract labour under Section 10 of the Act and keep the dispute pending. However, he can do so ifthe dispute is espoused by the direct workmen of the principal employer. If the workmen of the principal employer have not espoused the dispute, the B adjudicator, after coming to the conclusion that the contract is genuine, has to reject the reference, the dispute being not an industrial dispute within the meaning of Section 2 (k) of the ID Act. He will not be competent to give any relief to the workmen of the erstwhile contractor even if the labour contract is abolished c by the appropriate Government under Section 10 of the Act.

(iii) If the labour contract is genuine a composite industrial dispute can still be raised for abolition of the contract labour and their absorption. However, the dispute, will have to be raised invariab- ly by the direct employees of the principal employer. The in- D dustrial adjudicator, after receipt of the reference of such dispute will have first to direct t)le workmen to approach the appropriate Government for abolition of the contract labour under Section 10 of the Act and keep the reference pending. If pursuant to such reference, the contract labour is abolished by the ap- E propriate Government, the industrial adjudicator will have to give opportunity to the parties to place the necessary material before him to decide whether the workmen of the erstwhile contractor should be directed to be absorbed by the principal employer, how many of them and on what terms. If, however, the contract labour is not abolished, the industrial adjudicator has to reject the reference.

(iv) Even after the contract labour system is abolished, the direct employees of the principal employer can raise an industrial -. dispute for absorption of the ex-contractor's workmen and the adjudicator on the material placed before him can decide as to who and how many of the workmen should be absorbed and on what terms.

19Copy pinpoint19. It is in the light of the above position of law which emerges from the provisions of the Act and the judicial decisions on the subject that we

GUJ. ELECTRICITY BOARDv. HINDMAZDOORSABHA [SAWANf,J.] 221

have to answer the contentio.ns raised in different civil appeals before us. A As regards the present civil appeals, the facts of which have already been referred to earlier, Shri Venugopal, the learned counsel for the appellant- Board contended that none of the direct workmen of the Board had espoused the cause of the contract labour and hence the Tribunal had no jurisdiction to entertain the reference. He also submitted that any amount B of consent by the appellant-Board for such a reference will not confer jurisdiction on the Tribunal to entertain the reference.

As has been pointed out earlier, the order of reference of the dispute to the Tribunal was made by the State Government on the basis of a joint application for reference under Section 10(2) of the ID Act. The applica- C tion was duly signed by the present appellant-Board, all the seven contrac- tors involved in the dispute and by the then Surat Labour Union which had both direct as well as contract labourers, as its members. The respondent- union is the successor of the said Surat Labour Union. These facts show two things, viz., that contrary to the submission made by the learned counsel, the direct employees of the Board had espoused the cause of the contract labourers, and the appellant- Board had also accepted the fact that the dispute in question was raised and supported also by the said employees. No objection was taken before the Tribunal or the High Court either to the order of reference or to the adjudication of the dispute by the Tribunal that the dispute was not espoused by the direct employees of the appellant-Board. This would also show that the fact that the dispute was espoused by the direct employees of the Board was accepted by the Board and never questioned till this date. Apart from the fact, therefore, that the Board had signed the joint application for reference and therefore it cannot in an appeal by special leave under Article 136 of the Constitution F for the first time raise the question which is a mixed question of law and fact, we are of the view that even on facts as they stand, it will have to be held that the dispute was in fact espoused by the direct employees of the appellant-Board. We therefore reject the said contention.

20Copy pinpoint20. It was next contended that the dispute raised by the workmen was G for abolition of the contract and such a dispute could not have been entertained by the Tribunal in view of the provisions of Section 10 of the Act. For this purpose, the learned counsel relied upon clause (1) of the order of Reference. We find nothing in the said clause which supports the contention of the learned counsel. The clause reads as follows : H

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A "whether the workers whose services are engaged by the con- tractors, but who are working in the Thermal Power Station of Gujarat Electricity Board at Ukai, can legally claim to be the employees of the Gujarat Electricity Board?"

B It will be obvious from a reading of the said clause that what in fact is referred for adjudication is the determination of the status of the workmen, viz., whether though engaged by the contractors, they are legally the workmen of the appellant-Board? In other words, implicit in the said clause is the assertion of the workmen that they are in law the workmen of the appellant-Board and not of the contractors, and they wanted the C Tribunal to decide their exact legal status. This is clear from also the statement of claim filed by the workmen in support of their demand. In paragraph 3 of the statement of claim, it is averred that the Board has been employing Mukadam supervisors "who are draped in different paper arran- gements and are now known as contractors of the Thermal Power Station" D and the Board and the so-called contractors have joined hands for mass victimisation and termination of services even without payment of due , wages. Again, in paragraph 5 of the statement of claim, it is stated that the workmen are being paid wages by the management of the Board through Mukadam supervisors now known as contractors of the Board. The con- tractors come and go but the workmen are working throughout since the inception of the Thermal Power Station. The control, direction and initia- tion of these workmen are in the hands of the supervisors and technical staff of the Thermal Power Station. It is also alleged in the said paragraph that the so-called contractors are not the contractors as none of them have taken licence. It is also averred there that it is abundantly clear that the workmen employed to perform the permanent and perennial nature of duties are the employees of the Board. In paragraph 10 of the statement of claim, it is prayed that the Tribunal should hold and declare that the workers deployed in the Thermal Power Station under the garb of contrac- tor are the permanent employees of the Thermal Power Station managed and controlled by the appellant-Board". In paragraph 6 of the application for interim relief which was filed on behalf of the workmen, it was averred that the Board was through different agreements showing the workmen as if they were working under some intermediaries and the said intermediaries are !!make-believe trappings11 and are 11dubious 11 in nature and it was only to deprive the workmen of the benefits which are available to the employees of the Board that the said "make-believe trappings" were

'· GUJ. ELECIBICITYBOARDv. HIND MAZDOORSABHA [SAWANT,J.] 223

employed by the Board. It is therefore not correct to say that the present reference was for the abolition of the contract. The reference on the other hand, was for a declaration that the workmen were in fact and in law the employees of the appellant-Board and that they should be given the service conditions as are available to the direct employees of the Board.

B It was then contended by the learned counsel that the Industrial Tribunal has nowhere recorded a finding that the contract in question was sham, camouflage, make-believe or a subterfuge. On the contrary, accord- ing to him, the Tribunal has held that the contract labour of each of the contractors must be deemed to be the employees of the appellant-Board, firstly because the Board and the contractors had not produced valid proof of the registration certificate and the licences respectively, relying on the decisions of the Madras and Karnataka High Courts, and secondly, be- cause of the nature of the work. He submitted that the decisions of the Madras and Karnataka High Courts have been expressly overruled by this Court in Dena Nath case [supra]. As regards the nature of work, the exclusive jurisdiction to record a finding in that behalf is of the appropriate Government under Section 10 of the Act and the Tribunal is precluded from recording a finding in that behalf and abolishing the contract on the basis of such finding. In fact, the Tribunal has no jurisdiction to abolish the contract. E In the first instance, we find that the contention that the Tribunal has held that the workmen in question are the employees of the Board only because of the non-production of the valid proof of the certificate and the licences in question, is not correct. The Tribunal has, on the basis of the evidence on record, come to the conclusions, among others, that (i) the work was being done on the premises of the Board itself as the coal was being used for the purposes of the Board, viz., generation of electricity; (ii) the workmen were broadly under the control of the Board; (iii) there was overall supervision of the work by the officers of the Board; (iv) the work was of a continuous nature and (v) the work was an integral part of the overall work to be executed for the purposes of the generation of the electricity and that it had to be performed within specified time limits as part of the integrated process. The Tribunal has also in this connection referred to a decision of this Court reported in Hussainbhai, Calicut case [1978] 4 sec 257 to support its conclusion that in the aforesaid circumstan- ces found by it, the workmen in question were the employees of the Board. H

224 SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R. •.

A It is true that the Tribunal has not in so many words recorded a finding that the contract was sham or bogus or a camouflage to conceal th~ real facts. It is also true that the Tribunal has referred to the decisions of the Madras and Karnataka High Courts and on its finding that the Board and the contractors had not produced valid proof of the registration certificate and the licences for the relevant period has held that the workmen should be deemed to be the employees of the Board. However, the decision of the Tribunal has to be read as a whole. Thus read, the decision makes it clear that the Tribunal has based its conclusion both on the ground that the workmen were in fact engaged by the appellant-Board and not by the contractors who were merely intermediaries set up by the Board and also on the ground that there was no valid proof of the registration certificate and the licences in the possession of the Board and the contractors respectively. It is not, therefore, correct to say that the decision of the Tribunal is based only on the latter ground. We are of the view that there is a factual finding recorded by the Tribunal that the labour contracts in question were not genuine and the decision of the Tribunal is based on this ground as well.

It is also not correct to say that to arrive at the finding as to whether the labour contracts are genuine or not, the Court or the industrial ad- judicator cannot investigate the factors mentioned in Section 2 (a) to (d) E of Section 10(2) of the Act. The explanation to Section 10(2) makes the decision of the appropriate Government final only on the question whether the process or operation or the work in question is of a perennial nature or not, and that too when a dispute arises with regard to the same. If no such question arises, the finding recorded by the Court or the Tribunal in that behalf is not ineffective or invalid. Further, in all such cases, the Tribunal is called upon to record a finding on the factors in question not for abolishing the contract but to find out whether the contract is sham or otherwise. The contract may be genuine even where all the said factors are _ present. What is prohibited by Section 10 is the abolition of the contract except by the appropriate Government, after taking into consideration the said factors, and not the recording of the finding on the basis of the said factors, that the contract is sham or bogus.

21Copy pinpoint21. The next contention of the learned counsel that the reference with regard to he abolition of the contract labour was not maintainable after the coming into force of the Act has been sufficiently answered by us earlier

GUJ. ELECfRICITY BOARD v. HIND MAZDOOR SABHA [SAWANT, J.J 225

while discussing and recording our conclusions on the position of law in that behalf. Even on facts, we have pointed out that the present reference was not for the abolition of contract labour but for a declaration that the workmen were in law the employees of the appellant- Board. The industrial adjudicator has undoubtedly no jurisdiction to abolish a genuine labour contract in view of the provisions of Section 10 of the Act. However, it is not correct to say that the reference for the abolition of the contract, itself stands barred. It is the terms of the reference which will determine the jurisdiction of the industrial adjudicator to entertain and decide the refer- ence. The dispute as to whether the labour contract is genuine or not can be agitated by the workmen and the industrial adjudicator has jurisdiction to examine the controversy. If the contract is held to be genuine, the dispute if it is espoused by the direct workmen of the principal employer can be kept pending by the industrial adjudicator and the workmen may be referred by him to the appropriate Government for the abolition of the contract. If the appropriate Government abolishes the contract, the in- dustrial adjudicator can thereafter grant further relief, if claimed, viz., of the absorption of the workmen of the erstwhile contractor in the principal establishment. If, however, the appropriate Governn1ent does not abolish the contract, the industrial adjudicator may reject the reference, as stated earlier. It is not, therefore, correct to say that the reference of an industrial dispute seeking to abolish the contract is per se barred, as contended by the learned counsel. E

22Copy pinpoint22. It was also contended by him that the industrial Tribunal cannot make recruitment and create contract against third parties, and for this purpose, reliance was placed by him on the decisions reported in Indian General Navigation and Railway Company Ltd. & Anr. v. Their Workmen, F {1966) 1 LU 735; Krishna Kurup v. General Manager, Gujarat, Refinery, Baroda, [1986] 4 SCC 375 and Gurmail Singh & Ors. v. State of Punjab & Ors., [1991] 1SCC189.

In Indian General Navigation and Railway Company Ltd. and Anr. v. Their Workmen (supra), the facts were that the appellant company carried G on business of Inland Water Transport in north-east India between various river stations in Bengal and Assam and for this purpose, it maintained a number of ghats or stations on the river Brahmaputra in Assam. The company did not employ any workmen at any of the river stations for the work of cargo-handling and left all such work to be carried on by different H

226 SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.

A handling contractors. On 3rd May, 1954, an agreement was entered into between the company and its allied companies on the one hand and the Indian National Trade Union Congress (INTUC) on the other. The·agree- ment was that a tripartite conference would be held later to decide the question of direct employment of workmen by the company. The said B conference was held on 9th and 10th May, 1954 at which the company agreed that it would progressively introduce the system of direct employ- ment of labour in all transshipment ghats in Assam. Accordingly, direct labour was employed by the company in some of the major ghats, but in the smaller ghats the old contract labour continued. On 29th April, 1957, a conciliation meeting was held to consider the demand made by the C Sibsagar Transhipment Labour Union for direct employment of workmen at three minor ghats. No decision was, however, reached and the contract labour continued to work at the said ghats. Another tripartite meeting was held on 10th November, 1959 and it was then agreed that the company would employ direct labour in all the ghats on or before 1st April, 1960. D Meanwhile, a material change in the circumstances of the company's working took place in one sector of its operation. The company made arrangements to open a ghat in May, 1960 as an all-the-year-round main· line ghat replacing the current feeder service operation. This step repre· sentcd a major advance in the improvement of transport facilities and also led to the closure of one of the ghats on 17th May, 1960. As a result, 56 workmen involved in the dispute in the appeal before the Court, came to . be discharged by the payment of one month's basic pay. On these facts, the dispute raised was whether the termination of the services of the 56 workmen was justified and whether they were entitled to reinstatement with continuity of service and full wages. It was contended by the company that the said workmen were not its employees, and in the alternative, the , termination of the services of the workmen being the result of the closure of the ghat in question, they were not entitled to any relief. The Industrial Tribunal had made inconsistent findings. It had held that the relationship of master and servant had been proved between the company and the workmen in question but had also added that no direct employment was introduced, as was agreed to in the tripartite meeting held on 10th Novem- ber, 1959. The Industrial Tribunal had found that the workmen in question were the employees of the company and had also found that the closure was bona fide and real and each of the workmen was entitled to compen- H sation under sub-section (1) of Section 25FFF of the ID Act. On these

GUJ. ELECfRICITY BOARD v. HIND MAZDOORSABHA [SAWANf, J.] 227

facts, the Court held that the company had not directly employed the workmen at all and it is the contract labour which used lo work for the company at the ghat in question. The Court further found that though the company had guaranteed the payment at the prescribed rate to these workmen and in that sense had undertaken the liability to pay that money at that rate, the record showed that the money was paid to the contractor and the contractor paid it to the workmen from month to month until the ghat in question was closed. Even one month's basic pay which was paid to the workmen for retrenching them was paid to them through the contractor. The Court, therefore, held that the Tribunal was in error in coming to the conclusion that the workmen in question had been employed by the company. The company was not the employer of the workmen in question and hence the Tribunal could give them no relief. The workmen had claim, if any, against the contractor who was their employer.

In Krishna Kurnp v. General Manager, Gujarat Refinery, Baroda, (supra), out of 187 workmen, whose s~rvices had been terminated by the respondent-company by an oral order, 105 employees, in respect of whom the Gujarat High Court had recorded a finding for their absorption subject to scrutiny, were absorbed by the company, pending the special leave petition before this Court. Special leave was, therefore, granted for the remaining the 82 workmen. The Court by its order of 16th January, 1986 directed the Labour Commissioner to enquire into as to whether hey could be considered to be the employees of the company having regard to the nature of their employment, the period for which they had been employed off and on and all other relevant factors. The Commissioner found that the 82 workmen were not the employees of the company, but were contract labourers employed by the contractor. These findings were challenged on behalf of the workmen, and this Court accepted the said findings holding that the appellant had failed to prove that the workmen in question were direct employees of the company. The Court also observed that it was difficult to decide for the Court whether 82 workmen were doing the same work as was being done by the 105 workmen who were absorbed by the company. The Court also relied upon the affidavit filed on behalf of the company that it had not been able to provide work to all 105 workmen who were absorbed, and only 22 of them had been allotted work and the rest 83 had not been assigned any work whatsoever. The Court, therefore, held that it would not be justified in directing the company to absorb the 82 workmen and dismissed the appeal. H

228 SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.

A In Gurmail Sin!fi & Ors. v. State of Punjab & Ors. (supra), the appellants were in service as Tubewell Operators in the Irrigation Branch of the Public Works Department of the Punjab State. The State took a decision to transfer all the tubcwclls in the said Branch to the Punjab State Tubewell Corporation, a company wholly owned and managed by the State B of Punjab. Accordingly, the appellants were served with a notice on August 31, 1982, in terms of Section 25-F of the ID Act, terminating their services with effect from November 30, 1982 and on that date a notification was issued, abolishing the posts sanctioned for the Tubewell Circle, Irrigation Branch with effect from March 1, 1983. The appellants, inter alia, con- tended that in case the action of the Stale was upheld, the respondent company should be held to be under an obligation to employ the appellants with continuity of service and under the same terms and conditions which they were enjoying prior to the retrenchment from the service of the Stale. The appellants also contended that the notices did not fulfill the require- ments of clauses (b) and (c) of Section 25-F of the ID Act. The principal question before the Court, however, was whether in the circumstances the State was under an obligation to protect the terms and conditions of service of the Tubewcll Operators and whether there cannot be situations in which the Court or the industrial adjudicator should, in the interest of justice, fairplay and industrial peace, hold the employees entitled to continuity with the successor without being compelled to be satisfied with compensation from the predecessor. On these facts, the Court held as follows :

''Section 25FF provides that where there is a transfer of an undertaking by agreement or operation of law, an employee who loses his job because of such transfer will have a right to compen- F sation from the predecessor, except where he gets the benefit of uninterrupted service with the new employer on no less favourable terms than before and will be entitled to compensation in case he should be retrenched later by the new employer. If a transfer is fictitious or benami, Section 25-FF has no application at all. In such a case, "there has been no change of ownership or manage- G ment and despite an apparent transfer, the transferor employer continues to be the real employer and there has to be continuity of service under the same terms and conditions of service as before and there can be no question of compensation". A second type of cases is one in which there is in form, and perhaps also in law, a H succession but the management continues to be in the hands of

GUJ. ELECIBICITYBOARDv. HINDMAZDOORSABHA[SAWANT.J.] '229

the same set of persons organised differently. In such cases, the transferee and transferor are virtually the same and the overriding principle should be that no one should be able to frustrate the intent and purpose of the law by drawing a corporate veil across the eyes of the court Though these exceptions to the above rules would still be operative, it is not necessary here to decide whether this principle will help to identify the transferee corporation with the State Government for the present purposes, particularly as there is a catena of cases which do not approve of such identifica- tion. A third category of cases falling as an exception to the principle behind Section 25-FF is where, as here, the transferor and/or transferee is a State or a State instrumentality, which is required to act fairly and not arbitrarily and the court has a say as to whether the terms and conditions on which it proposes to hand over or take over an industrial undertaking embody the requisite of "fairness in action" and could be upheld. In such circumstances, it will be open to the Court to review overall aspects of transfer of the undertaking and the arrangement between the State Govern- ment and the Corporation and to issue appropriate directions that no injustice results from the changeover. Such directions could be issued even if the elements of the transfer in the present case fall short of a complete succession to the business or undertaking of the State by the Corporation, as the principle sought to be applied is a constitutional principle flowing from the contours of Article 14 which the State and Corporation are obliged to adhere to.

x x x x x x x F x x x x x x x

Looking at the facts of this case in the above perspective, it appears that the State Government has acted arbitrarily towards the appellants. It has abridged the the rights of the appellants by G purporting to transfer only the tubewells and retrenched the ap- pellants from service as a consequence. The conduct of the govern- ment in depriving the appellants of substantial benefits which have accrued to them as a result of their long service with the govern- ment, although the tubewells continue to be run at its cost by the Corporation wholly owned by it, is something which is grossly H

230 SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.

A unfair and inequitable."

Holding thus, the Court directed the absorption of the workmen by the Corporation, and granted them the benefit of their service with the Government for the purposes of the computation of their salary, length of B service and retirement benefits, but denied them the benefit to claim the seniority over the employees of the Corporation engaged, since its com- mencement in 1970. The Court further directed that the Corporation should ensure that the workmen were not retrenched as surplus on account of any close of any tubewells or other like reason until they retired or left the service of the Corporation voluntarily for any reason. c Thus, it would be seen that these three decisions have not in any way diluted the propositions of law laid down by this Court in Dimakuchi and Standard Vacuum (supra), where the Court has approved of the jurisdic- tion of the Tribunal to direct the principal employer to absorb the workmen of the erstwhile contractor as his direct employees depending upon the satisfaction of the factors laid down therein and on terms that the Tribunal on the basis of the material before it, may deem fit to fix in the circumstan- ces of the case.

It is also not correct to say that the Act is a complete Code by itself and, therefore, the industrial Tribunal has no jurisdiction to give a direction to the principal employer to absorb the workmen in question. We have already pointed out that the Act is silent on the question of the status of the workmen of the erstwhile contractor once the contract is abolished by the appropriate Government. Hence, as far as the question of deterrnina- F tion of the status of the workmen is concerned, it remains open for decision by the industrial adjudicator. There is nothing in the Act which can be construed to have deprived the industrial adjudicator of the jurisdiction to determine the same. So long as, therefore, the said jurisdiction has not been taken away from the industrial adjudicator by any express provision of the Act or of any other statute, it will have to be held that the said jurisdiction which, as pointed out above, has been recognised even by the decisions in Dimakuchi and Standard Vacuum cases (supra) continues to exist. In the exercise of the said jurisdiction, the industrial adjudicator can certainly make a contract between the workmen of the ex-contractor and the prin- cipal employer and direct the principal employer to absorb such of them and on such terms as the adjudicator may determine in the facts of each

GUJ. ELECTRICITY BOARD v. HIND MAZDOOR SABHA [SAW ANf, J.] 231

case. We find nothing in the decisions relied upon on behalf of the appellant which goes counter to this proposition of law. The decisions in Indian General Navigation and Railway Company Ltd., Krishna Kump and Gurmail Singh (supra) on which reliance is place on behalf of the appellant for the purpose, have already been discussed by us above. The only additional decision which is pressed into service in this behalf is Sanghi B leevaraj Ghewar Chand & Ors. v. Secretary, Madras Chillies, Grains Kirana Merchants Workers' Union and Anr., (1969] 1 SCR 366. By a common decision in this case, two appeals were decided by this Court. In one appeal, the establishment employed less than 20 employees and it was not a factory; in the other appeal, the establishment was in the public sector. By reason of exclusion under Section 1(3) of the Payment of Bonus Act, C 1965, the establishment in the first appeal was excluded from the applica- tion of that Act whereas by reason of exemption under Section 32(x), the establishment in the other appeal stood exempted from the operation of the said Act. On these facts, the question was whether the employees of this two establishments could claim bonus de hors the Payment of Bonus D Act and the Court held, considering the history of the legislation, the background and the circumstances in which the Bonus Act was enacted, and the object of the Act and its scheme, that the Act was an exhaustive Act, dealing comprehensively with the subject matter of bonus in all its aspects, and the Parliament had not left it open to those to whom the Act did not apply, by reason of its provisions either as to exclusion or exemp- E lion, to raise a dispute with regard to bonus through industrial adjudication under the ID Act or other corresponding law. The ID Act itself did not provide for a statutory right for payment of bonus although it had provided substantial rights for workmen with regard to lay off, retrenchment com- pensation etc. It will thus be clear that the right to bonus which was spelt F out by the judicial decisions was expressly denied by the Bonus Act to the workmen in the establishment concerned in that case, and yet the workmen claimed the bonus on the basis of the alleged provisions of the ID Act. In the present case, there is nothing in the Act, as pointed out earlier, which has either expressly or impliedly taken away the raising of an industrial dispute to absorb the ex-contractor's workmen in the principal estab- G lishment when the dispute has been espoused by the direct workmen or the jurisdiction of the Tribunal to give a direction for the purpose, of course, on such terms as it deems fit in the circumstances of each case.

For all these reasons, we are unable to accept the contention that the H

232 SUPREME COURT REPORTS [1995) SUPP. 1 S.C.R.

A industrial adjudicator cannot direct the principal employer to engage ex- contractors' workmen as direct employees.

23Copy pinpoint23. It was then contended that the bulk of the contract labour was engaged by the contractors in the process of unloading coal, and since the year 1989 the process of unloading coal had been fully mechanised at the B Ukai thermal Power Plant with which we are concerned and as such, no labour was required in the process of the unloading of coal. For this purpose, reliance was placed on the contents of the additional affidavit filed by the Board during the hearing of the present appeal. We are concerned in the present appeal with the award of the Tribunal dated 22nd C February, 1988. If a situation has, thereafter, arisen where the workmen directed to be employed by the award have become surplus, it is open for the appellant-Board to retrench them in accordance with the provisions of law. However, the situation in 1989 cannot be pressed into service to negative the award of 1988 by which the dispute raised in 1982 was adjudicated. D

24Copy pinpoint24. The last argument was that the appellant-Board has several other thermal power plants in the State where certain type of work is done through contract labour only by contractor and the present Thermal Power plant is only one of them. Any decision in the present appeal will have, therefore, according to the Board serious repercussions in the other plants. It is contended that this might also result in total break-down of the functioning of the Board which would not be in the interest of the workers as a class. To say the least, the argument is one in te"orem and has only to be stated to be rejected. The Board has to manage its affairs according to the provisions of law. The Courts cannot grant it exemption form the law on the ground that it will not be in an position to run its affairs.

For the above reasons, we confirm the decision of the High Court and the award of the Tribunal and dismiss the appeal with costs.

G CA.5498-02 & 5503/95 @SLP(C) No. 9310-9314 and 9315 of 1991.

25Copy pinpoint25. These appeals arise out of the decision of the High Court in a writ petition filed by the appellant-Union under Article 226 of the Con- stitution. In view of what we have held above, the decision of the High Court that the workmen concerned do not become the direct employees H of the respondent-enterprises merely because there are no registration

GUJ. ELECI'RICITY BOARD v. HIND MAZDOOR SABHA [SAWANT, J.] 233

certificates and licences with the respondent undertakings and the con- A cerned contractors respectively, has to be upheld. The decisions relied upon by Shri Mukhoty on behalf of the workmen, viz., D.S. Nakara & Ors. v. Union of India, [1983] 1 SCC 305;Delhi Transport Corporation v. D. T.C. Mazdoor Co,ngress, [1991] Suppl.1 SCC 600 and The State of Haryana v. Piara Singh, [1992] 4 SCC 118 are inapplicable to the issues involved in these appeals.

The remedy of the workmen is to raise a proper industrial dispute as indicated earlier for appropriate reliefs. If and when such dispute is raised, the Government should make the reference within two months of the receipt of the dispute and the industrial adjudicator should dispose of the same as far as possible within six months thereafter.

Civil Appeals are therefore dismissed but with no order as to costs.

CA. 5504/95 @S.L.P.(C) No. 13520 of 1991. D

26Copy pinpoint26. In this case, the Labour Court has given relief of reinstatement with back-wages to the workmen. There is no finding recorded by the Court whether the industrial dispute was raised by the direct employees of the appellant-Society and whether the labour contract was genuine or not. The Labour Court has proceeded to grant the relief to the workmen only on E the basis that the registration certificate and the licences under the Act were not produced by the Society and the contractors concerned respec- tively and, therefore, the workers should be deemed to be the employees of the Society.

In view of what we have held above, the award of the Labour Court F and the decision of the High Court are set aside. The workers are free to raise a fresh proper industrial dispute and claim appropriate relief. If and when such dispute is raised, the Government should make the reference within two months of the receipt of the dispute and the industrial ad- judicator should dispose of the same, as far as possible, within six months G thereafter.

Civil appeal is, therefore, allowed but with no order as to costs.

27Copy pinpoint27. While parting with these matters, we cannot help expressing our_ dismay over the fact that even the undertakings in the public sector have H

234 SUPREME COURT REPORTS [1995] SUPP. 1 S.C.R.

A been indulging in unfair labour practice by engaging contract labour when workmen can be employed directly even according to the test laid down by Section 10 (2) of the Act. The only ostensible purpose in engaging the ... contract labour instead of the direct employees is the monetary advantage by reducing the expenditure. Apart from the fact that it is an unfair labour practice, it is also an economically short-sighted and unsound policy, both from the point of view of the undertaking concerned and the country as a whole. The economic growth is not to be measured only in terms of production and profits. It has to be gauged primarily in terms of employ- ment and earnings of the people. Man has to be the focal point of development. The attitude adopted by the undertakings is inconsistent with the need to reduce unemployment and the Government policy declared from time to time, to give jobs to the unemployed. This is apart from the

D mandate of the directive principles contained in Articles 38, 39, 41, 42, 43 and 47 of our Constitution. We, therefore, recommend that -

[a] all undertakings which are employing the contract labour sys- tem in any process, operation or work which satisfies the factors mentioned in clauses [a] to [d] of Section 10[2] of the Act, should - on their own, discontinue the contract labour and absorb as many of the labour as is feasible as their direct employees;

[b] both the Central and the State Governments should appoint a E Committee to investigate the establishments in which the contract labour is engaged and where on the basis of the criteria laid down in clauses [a] to [d] of Section 10 [2] of the Act, the contract labour system can be abolished and direct employment can be given to the contract labour. The appropriate Government on its own should take initiative to abolish the labour contracts in the estab- lishments concerned by following the procedure laid down under the Act.

[c] the Central Government should amend the Act by incorporat- ing a suitable provision to refer to the industrial adjudicator the question of the direct employment of the workers of the ex-con- tractor in the principal establishment, when the appropriate Government abolishes the contract labour.

T.N.A. Appeals disposed of.