AIR INDIA STATUTORY CORPORATION v. UNITED LABOUR UNION AND ORS.

DECEMBER 6, 1996

[K. RAMASWAMY, B.L. HANSARIA AND S.B. MAJMUDAR, Jl] B

Contract Labour (Regulation and Abolition) Act, 1970:

Sections 2(1)(a) (As it stood before and after Amendment Act 14 of 1986), 2( 1)(b }, 8, 9, 10, 12, 14, and 16 to 19, 20, 21, 23 to 25. C Contract Labour (Regulation and Abolition) Central Rules, 1971 Rules 18(3), 21 to 25, 75, 77 and 78.

''Appropriate Government''-Meaning of-Establishment pertaining to an industry carried on by Central Government-i'linciples for determinatiori of appropriate Government laid down-Appellant initially a statutory autho1ity later reconstituted as a Company-fleld Central Government was appropriate Government before and after 1986 Amendment.

Contract Labour-Abolition of-Effect-Held on abolition Contractor stands removed from Regulation under the Act, and direct relationship of employer and employee is created between employer and workmen-Employee is obliged to absorb the workmen-On employer's failure to do so, High Court can give directions under Article 226-0bject of the Act explained.; F Industrial Disputes Act, 1947: Section 10.

Reference-Contract Labour-Abo/itiOn of-Employer is obliged to ab- sorb the workers-In such a case reference of dispute for absorption is not necessary. G '· Constitution of India, 1950 :

Articles 14 and 21-Right to work-Not a fundamental light-But after en1ploynient a person 1nust be dealt with assuring hini equality.

Article 38-Preamble--Social Justice-Relevance of for workmen. H 579

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A Article 226-High Courf--Power to issue directions for absorption of-Contract Labour-Upheld.

Judicial Review-Basic structure of Constitution-High Court has con- stitutional duty to enforce law by appropriate directions.

B Public Law-Private /aw-Distinction between Constitution-inter- pretation of-Principles for.

Words and Phrases :

C Regulation-Meaning of-Contract Labour (Regulation and Abolition) Act, 1970.

The appellant Corporation, initially a statutory authority, was sub- sequently reconstituted as a Company under the Companies Act, 1956. It engaged, as contract labour, the respondent union's members, for sweep- D ing, clearing, dusting and watching of the buildings owned and occupied by it. Subsequent to the coming into force of the Contract Labour (Regula- tion and Abolition) Act, 1970 the appellant obtained a certificate of Registration from Regional Labour Commissioner (Central) under the Act. Thereafter by a notification dated December 9, 1976 the Central Government prohibited employment of contact labour for sweeping, clean- E ing, dusting and watching of buildings owned or occupied by the estab- lishments in respect of which the appropriate Government under the Act was the Central .Government. By a letter dated January 20, 1972, the Regional Labour Commissioner (Central), Bombay informed the appel· lant that the State Government was the appropriate Government under F the Act. Therefore, by proceedings dated May 22, 1973 the Regional Labour Commissioner (Central) bad revoked the registration. By Amendment Act 46 of 1982, the Industrial Disputes Act, 1947 was made applicable to the appellant and was brought on statute book specifying the appellant as one of the industries in relation to which the Central Government is the appropriate Government and the appellant has been carrying on its busi- G ness "by or under its authority" with effect from August 21, 1982. The Act was amended bringing within its ambit the Central Government as ap- propriate Government by Amendment Act 14 of 1986 with effect from January 28, 1986. Since the appellant did not abolish the contract system and failed to e,nforce the notification of the Government of India dated H December 9, 1976, the respondents filed writ petition for directions to the appellant to enforce forthwith the notification abolishing the contract A labour system in the aforesaid services and to absorb all the employees doing cleaning, sweeping, dusting, washing and watching of the buildings owned or occupied by the appellant-establishment, with effect from the respective dates of their joining as contract Labour in the appellant's establishment with all consequential rights/benefits, monetary or other- B wise. The writ petition was allowed by a single Judge on November 16, 1989 directing that all contract workers be regularised as employees of the appellant from the date of filing of the writ petition. Preceding thereto, on November 15, 1989, the Government of India referred to the Central Advisory Board known as Mobile Committee under Section 10(1), which recommended to the Central Government not to abolish the contract C labour system in the aforesaid setvices ..The Division Bench dismissed the appeal. Similar was the fate of othejRp~~als.

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In appeals to this Court, on the questions :

1. What is the meaning of the word "appropriate Government under D Section 2(1) (a) of the Act?

2. Whether the view taken in Heavy Engineering case is correct in law?

3. Whether on abolition the contract labour- are entitled to be ab- sorbed; if so, from what date? E

4. Whether the High Court under Article 226 has power to direct their absorption; if so, from what date?

5. Whether it is necessary to make a reference under Section 10 of F the ID Act for adjudication of dispute qna absorption of the contract labour?

6. Whether the view taken by this Court in Dena Nath and Gujarat

- State Electricity Board's case is correct in law? G ' Disposing the appeals, this Court

1. The appropriate Government is the Central Government from the inception of the Act. The notification published under Section 10 on H

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A December 9, 1976, therefore, was in exercise of its power as appropriate Government. So it is valid in law. [603-G]

2. Before the Central or State Advisory Board advises the ap- propriate Government under Section 10(1) on the issue whether or not to B abolish the contract labour system, it has before it all the relevant factual material and the appropriate Government after the receipt and considera- tion of the recommendations and the material and then taken decision. It is not right to contend that the relevant factors for abolition of the contract labonr system in the establishment or the appellant was not before the Central Advisory Board before its recommendation to abolish the contract C Jabonr system in the establishment of the appellant. Tue minutes of the Board and the material furnished indicate that the work in all the estab- lishments inclnding those of the appellants, is of perennial nature satisfy- ing all the tests engrafted in Section 10(2) of the Act. Accordingly, on finding the work to be of perennial nature, it had recommended and the D Central Government had considered and accepted the recommendation to abolish the contract Jabour system in the aforesaid services. Having abolished it, the Central Government was denuded of its power under Section 10(1) to again appoint insofar as the above services of the Mobile Committee to go once over into the self-same question and the recommen- dations of the latter not to abolish the contract Jabour system in the above E services and the acceptance thereof by the Central Government are without any legal base, and, therefore, non est. [619-G-H; 620-A·B]

3. Constitutional issues require interpretation broadly not by play of words or without the acceptance of the line of their growth. Preamble F of the Constitution, as its integral part, is designed to realise socio economic justice to all people including workmen, harmoniously blending the details epumerated in the Fundamental Rights and the Directive Principles. The Contract Labour (Regulation and Abolition) Act, 1970 is a social welfare measure to further the general interest of the community of workmen as opposed to the particular interest of the individual entrepreneur. It seeks to achieve a public purpose, i.e. regnlated condi- tions of contract Jabour and to abolish it when it is found to be of perennial nature etc. Tue individual interest can, therefore, no longer stem the - forward Rowing tide and must, of necessity, give way to the broader pnblic purpose of establishing social and economic democracy in which every workmen realises socio-economic justice assured in the Preamble, Articles

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14, 15 and 21 and the Directive Principles of the Constitution. (608-A-D] A

4. Courts are sentinal in the qui vive of the rights of the people, in particular, the poor. The judicial function of a Court, therefore, in inter- preting the Constitution and the provisions of the Act, requires to build up continuity of socio-economic empowerment to the poor to sustain B equality of opportunity and status and the law should constantly meet the needs and aspiration of the society in establishing the egalitarian social order. Therefore, the concept engrafted in the statute require interpreta- tion from that perspective, without doing violence to the language. Such an interpretation would elongate the spirit and purpose of the Constitu- tion and make the aforesaid rights to the workmen a reality lest estab· C lishment of an egalitarian social order would be frustrated and Constitutional goal defeated. (609-D-F]

His Holiness Kesavananda Bharati Sripadagalavaru v. State of Kera/a, (1973] Supp. SCR 1; S.R. Bommai v. Union of India, [1994] 3 SCC 1; D Minerva Mills Ltd. & Ors. v. Union & Ors., [198Jl 1 SCR 206 = AIR (1980) SC 1789; Francis Coralie Mullin v. The Administrator, Union Tenitory of Delhi & Ors., AIR (1981) SC 746; Olga Tellis v. Bombay Municipal Corpora- tion, AIR (1986) SC 180; Delhi Transport Corporation v. D. T.C. Mazdoor Congress, AIR (1991) SC 101; State of Maharashtra v. Chandrabhan, AIR (1983) SC 803; Consumer Education and Research Centre and Ors. v. Union E of India, [1995] 3 SCC 42 = [1995] 1 SCALE 354; D.S. Nakara & Ors. v. Union of India, [1983] 2 SCR 165; State of Kamataka v. Shri Ranganath Reddy & Anr., (1978] 1 SCR 641; Sanjeev Coke Manufacturing Co. v. Bharat Cooking Coal Ltd. & Anr., (1983] 1 SCR 1000; LIC of India & Anr. v. Consumer Education & Research Centre & Ors., [1995] 5 SCC 482; Murlid- F har Dayandeo Kesekar v. Vishwanath Pandu Barde & Anr., (1995] Supp. 2 SCC 549; R. Chandevarappa & Ors. v. State of Kamataka and Ors., [1995] 6 SCC 309; Peerless General Finance and Investment Co. Ltd. & Anr. v. Reserve Bank of India, (1992] 2 SCC 343; D.K Yadav v. !.M.A. Industries Ltd., [1993] 3 SCC 259; Da/mia Cement (Bharat) Ltd. & Anr. v. Union of India & Ors. Etc., JT (1996) 4 SC 555; Bandhu Mukti Morcha v. Union of G India, [1984] 3 SCC 161; C.E.S.C. Ltd. & Ors. v. S.C. Bose & Ors., [1992] 1 SCC 441; P.G. Gupta v. State of Gujarat & Ors., (1995] Supp. 2 SCC 182; Mis. Shantisar Builders v. Narayan Khim/a/ Totame, [1990] 1 SCC 520; Chameli Singh & Ors. v. State of U.P. & Anr. [1996] 2 SCC 549 and D.K V. Prasad Rao & Ors. v. The Government of Andhra Pradesh represented by its H

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A Secretary, Home Department Secretariat Buildings, Andhra Pradesh Hyderabad & Anr., (1983) 2 AWR 344 = AIR (1984) AP, referred to.

Munn v. The People of Illinois, 94 US 115; Horatio, J. Olcott v. County Board of Supervisors of Fond Du Lac County, 21 L. Ed. 382; John 0. Graham, Commissioner, Depa1tment of Public Welfare, State of Arizona v. B Cannen Richardson Etc., 29 L. Ed. 2nd 534; Grace Marsh v. State of Alabama, 90 L. Ed. 265; Republic Ayiation Corporation v. National Labour Relations Board, 324 US 793 = 89 L. Ed. 1372; Georgia & Banking Co. v. James M; Smith, 128 US 377 = 32 L. Ed.174 and Gennan Aliance Insurance Co. v. IKL L~ws, 58 L. Ed. 1011 = 233 US 387, referred to. c Justice K.K. Mathew,. "Right to Equality and Property under the India Constitution pp. 47-48; St: Thomas Acquinas "Selected Political Writing" ' 169; Dean Rosco Pound ''An Introduction to Philosophy of Law" (1948 Ed.) (1954 Edn.) page 125; M. Cohen, "Property and Sovereignty" (13 Cornell Law Quarterly page 8; Edward Kent "Property, Power and Authority"; Herald D Laski, "Congress Socialist" dated April 11, 1936; Mahatma Gandhiji, "Socialism of My Concept; Pandit Jawahar Lal Nehru ''Independence and After That" (Collection of Speeches 1946-49) Publication Division, Govern- ment of India 1949 Edn. page 28; Agnes Heller, "Beyond Justice" page 180, referred to.

E 5. It is axiomatic, whether or not industry is controlled by Govern- ment or public Corporations by statutory form or administrative clutch or private agents, juristic persons, Corporation whole or Corporation sole, their constitution, control and working would also be subject to the same constitutional limitations in the trinity, viz., Preamble, the Fundamental F Rights and the Directive Pri.nciples. They throw open an element of public interest in its workings. They share the burden and shoulder constitutional obligations to provide facilities and opportunities enjoined in the Directive Principles, the Permeable and the fundamental rights enshrined in the Constitution. The word 'control', therefore, requires to be interpreted in the changing commercial scenario broadly in keeping with the aforesaid constitutional goals and perspectives. From this the following principles would emerge :

(a) The Constitution of the Corporation or instrumentality or agency or Corporation aggregate or Corporation sole is not of sole material relevance to decide whether it is by or under the control of the appropriate

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Government under the Act. A (b) If it is a statutory Corporation, it is au instrumentality or agency of the State. Ifit is a company owned wholly or partially by a share capital, floated from public exchequer, it gives indicia that it is controlled by or under the authority of the appropriate Government. B (c) In commercial activities carried on by a Corporation established by or under the control of the appropriate Government having protection under Articles 14 and 19(2), it is an instrumentality or agency of the State.

(d) The State is a service Corporation. It acts through its instrumen- c talities, agencies or persons - natural or juridical.

(e) The governing power, wherever located, most be subject to the fundamental constitutional limitations and abide by the principles laid down in the Directive Principles. D (0 The framework of service regulations made in the appropriate rules or regulations should be consistent with and subject to the same public law principles and limitations.

(g) Through the instrumentality, agency or persons conduct com- E mercial activities according to business principles and are separately accountable nuder their appropriate bye-laws or Memorandum of Associa- tion, they become the arm of the Government.

(h) The existence of deep and pervasive Sl&te control depends upon the facts and circumstances in a given situation'and in the altered situa- F tion it is not the sole criterion to decide whether the agency or instrumen- tality or persons is by or under the control of the appropriate Government.

(i) Functions of an instrumentality, agency or person are of public G importance following public interest element.

(j) The instrumentality, agency or person most have an element of authority or ability to affect the relations with its employee or public by virtue of power vested in it by law, memorandum of association or by~-laws or articles of association. H

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A (k) The instrumentality, agency or person renders an element of public service and is accountable to health and strength of the workers, men and women, adequate means of livelihood, the security for payment of living wages, reasonable conditions of work, decent standard of life and opportunity to enjoy full leisure and social and cultural activities to the workmen. B (I) Every action of the public authority, agency or instrumentality or the person acting on public interest or any act that gives rise to public element should be guided by public interest in exercise of public power or action hedged with public element and is open to challenge. It must meet C the test of reasonableness, fairness and justness.

(m) If the exercise of the power is arbitrary, unjust and unfair, the public authority, instrumentality, agency or the person acting in public interest, though in the field of private law, is not free to prescribe any unconstitutional conditions or limitations in their actions. D (617-A-H; 618-A-H]

Hindustan Aeronautics Ltd. v. The Workmen & Ors., (1975) 4 SCC 679; Rashtriya Mill Mazdoor Sangh v. Model Mills, Nagpur & Anr., (1984) Supp. SCC 443; Food Corporation of India Workers Union v. Food Corporation of E India & Ors., [1985) 2 SCC 294; Sukhdev Singh & Ors. v. Bhagatram Sardar Singh & Anr., (1975) 3 SCR 619; R.D. Shetty v. Airport Authority & Ors., (1979) 3SCR1014; Managing Director, UP. Warehousing Corporation &Anr. v. f.N. Vajpayee, (1980) 2 SCR 773; Ajay Hasia Etc. v. Khalid Mujib Seh- ravardi & Ors. Etc., (1981) 2 SCR 79; Rajasthan State Electricity Board, Jaipur v. Mohan Lal & Ors., (1967) 3 SCR 377; Praga Tools Corporation v. C.V. · F !manual, (1969) 3 SCR 773; Delhi Transport Corporation v. D. T.C. Mazdoor Corporation, AIR (1991) SC 101; Som Prakash Rekhi v. Union of India & Ors., (1981) 2 SCR 111; Manmohan Singh Jaitla v. Commissioner, Union Tenitory of Chandigarh & Ors., (1984) Supp. SCC 540; P.K. Ramachandra Iyer & Ors. v. Union of India & Ors., [1984) 2 SCC 141; A.L. Katra v. Project G and Equipment Corpn. of India Ltd., (1984) 3 SCC 316; Central Inland Water Transport Corporation Ltd. & Anr. v. Brojonath Ganguly & Anr., (1986) 3 SCC 156;LucknowDevelopmentAuthorityv.M.K Gupta, (1994) 1 SCC243; Star Enterprises & Ors. v. C.I.D. C. of Maharashtra Ltd., (1990) 3 SCC 280; LIC of India &Anr. v. Consumer Education & Research Centre & Ors., (1995) 5 SCC 482; G.B. Mahajan & Ors. v.Jalgaon Municipal Council & Ors., (1991) H 3 SCC 91; Shrisht Dhawan (Smt.) v. M/s. Shaw Brothers, (1992) 1 SCC 534;

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Khwaja v. Secretary of State for the Home Department & Ors., (1983) 1 All. A E.R. 765 and M/s. Gammon India Ltd. & Ors. v. Union of India & Ors., [1974] 1 sec 596, referred to.

6. The two Judge Bench in Heavy Engineering casr narrowly inter- preted the words 'Appropriate Government' on the Common Law Prin- ciples which no longer bear any relevance when it is tested on Article 14. B [619-C]

Heavy Engineering Mazdoor Union v. The State of Bihar & Ors., [1969] 3 SCR 995, overruled.

7. In a socialist democracy governed by the rule of law, private c property, right of the citizen for development and his right to employment and his entitlement for employment to the labour, would all harmoneously be blended to serve larger social interest and public purpose. All essential facilities and opportnnities to the poor people are fundamental means to development, to live with minimum comforts, food, shelter, clothing and health. Due to economic constraint, though right to work was not declared as a fundamental right, right to work of workman, lower class, middle class and poor people is the means to development and source to earn livelihood. Though, right to employment cannot, as a right be claimed but after the appointment to a post or an office, be it under the State, its agency, instrumentality, juristic person or plivate entrepreneur it is re .. quired to be dealt with as per public element and to act in public interest , assuring equality, which is a genus of Article 14 and all other concomitant rights emanating therefrom are species to make their right to life and dignity of person real and meaningful. [639-C; 637-F-H] F

8. So long as the contract labour system continues, the principal employer is enjoined to ensure payment of wages to the contract labour and to provide all other amenities envisaged under the Act and the Rules including provisions for food, potable water, health and safety and failure thereofvisits with penal consequences. The Act contains various provisions G in this regard. All of them are fundamental human rights to the workmen and are facets of rights to life guaranteed under Article 21. When the principal employer is enjoined to ensure those rights and payment of wages while the contract labour system is under regulation, the question arises whether after abolition of the contract labour system the workmen should be left in a lurch denuding them of the me~ns of livelihood and the enjoy- H

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A ment of the basis fundamental rights provided while the contract Iabonr system is regulated under the Act. The scheme of the Act gives indication that on the abolition of the contract labour system by publication of the notification in the Official Gazette, the necessary concomitant is that the whole time workmen are required for carrying on the process, operation or other work being done in the industry, trade, business, manufacture, or B occupation in that establishment. When the condition of the work which is of perennial nature etc., as envisaged in sub-section (2) of Section 10, thus are satisfied, the continuance of contract labour stands prohibited and abolished. The concomitant result would be that source of regular employ- ment becomes open. [646-B-E; G-H; 647-A-B] c

9. It is true that there is no express provision in the Act declaring the contract labour working in the establishment of the principal employer in the particular service to be the direct employees of the principal employer. The phrase "matters connected therewith" in the Preamble wonld fnrnish the consequence of abolition of contract labour. In this behalf, the D Gujarat Electricity Board case, attempted, by interpretation, to fill in the gap but it also fall short or full play and got beset with insurmonntable difficul- ties in its working which were not brought to the attention of the Bench. The object of the Act is to regulate the contract labour so long as the contract labour is not perennial. The Iabonr is required to be paid the prescribed wages and are provided with other welfare benefits envisaged under the Act direct sµpervision of the principal employer. The violation visits with penal consequences. Similarly, when the appropriate Government finds that the employment is of perennial nature etc. contract system stands abolished, thereby, it intended that if the workmen were performing the dnties of the post which were fonnd to be of perennial nature on par with regular service, they also require to be regularised. The Act did not intend to dennde them of their source of livelihood and means of development, throwing them out from employment. An Act is a socio-economic welfare legislation. Right to socio-economic justice and empowerment are constitutional rights. Right to means of livelihood is also constitutional right. Right to facilities and opportunities are only part of and means to right to development. Without employment or appointment, the workmen will be denuded of their means oflivelihood and resultant right to life, leaving them in·the lurch since prior to abolition, they had the work and thereby earned livelihood. [647-B-G]

Gujarat Electricity Board v. Hind Mazdoor Sabha & Ors., (1995) 5 SCC H 27, partly overruled.

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10. The Division Bench in Dena Nath's case has taken too narrow a A view on technical consideration without keeping at the back of the mind the constitutional animations and the spirit of the provisions and the object which the Act seeks to achieve. The operation of the Act is stru<· tured on an inbuilt procedure leaving no escape route. Abolition of con- tract labour system ensures right to the workmen for regularisation of B them as employees in the establishment in which they were hitherto work· .ing as contract labour through the contractor. The contractor stands removed from the regulation under the Act and direct relationship of "employer and employee" is created between the principal employer and workmen. [647-G·H; 648-A·B] c Dena Nath and Ors. v. National Fertilizers and Ors., (1992] 1 SCC 695, overruled.

11. The object of the Act is to prevent exploitation of labonr. The object, thereby, is to ensure continuity of work to the workmen in strict D compliance of law. The conditions of the labour are not left at the whim and fancy of the principal employer. He is bound under the Act to regulate and ensure payment of the full wages, and also to provide all the amenities enjoined under the Act and the rules made thereunder. On abolition of - contract labour, the intermediary i.e. contractor, is removed from the field and direct linkage between labour and principal employer is established. E Thereby, the principal employer's obligation to absorb them arises. The right of the employee for absorption gets ripened and fructified. If the interpretation in Dena Nath's case is given acceptance, it would be an open field for the principal employer to freely flout the provisions of the Act and engage workmen in defiance of the Act and adopt the principle of hire and lire making it possible to exploit the appalling conditions in which the workmen are placed. The contractor is an intermediary between the workmen and the principal employer. The moment the contract labour system stands prohibited under Section 10(1), the embargo to continue as a contract labour is put an end to and direct relationship has been provided between the workmen and the principal employer. Thereby, the principal employer directly becomes responsible for taking the services of the workmen hitherto regulated through the contractor. [648-B·H; 649·A]

Dena Nath and Ors. v. National Fertilizers Ltd. and Ors., [1992] 1 SCC 695, overruled. H

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A The Standard-Vacuum Refining Co. of India v. Its Workmen & Ors., [1960] 3 SCR 466; Security Guanis Board for Gmater Bombay and Thane District v. Security & Personnel Service Pvt. Ltd. & Ors., [1987] 3 SCC 413; I Sankar Mukhe1jee & Ors. v. Union of India & Ors., AIR (1990) SC 532; National Federation of Railway Porters, Vendors & Bearers v. Union of India B & Ors., [1995] 3 SCC 152; Anadi Mukta v. V.R. Rudani, [1989] 2 SCC 691; Unni Krishnan v. State of A.P., [1993] 1 SCC 645 and Comptroller &Auditor General of India v. K.S. Jagannathan, [1986] 2 SCC 679, referred to.

12. The legal right of an individual may be founded upon a contract or a statute or an instrument having the force of law. For public law remedy enforceable nnder Article 226 of the Constitution, the action of the authority need to fall in the realm of public law - be it a legislative act of the State, an executive act of the State or an instrumentality or a person or authority imbued with public law element. The question requires to be determined in each case. However, it may not be possible to generalise the nature of the action which would come either nnder public law remedy or private law field nor is it desirable to give exhaustive list of such actions. [650-C·Dl

13. The public law remedy given by Article 226 of the Constitntion E is to issne not only the prerogative writs provided there but also any order or direction to enforce any of the fundamental rights and "for any other purpose'. The distinction between public law and private law remedy by judicial adjudication gradually marginalised and became obliterated. [649.E-F] F LL C. v. Escourts Ltd. & Ors. [1986] 1 SCC 264; M. C. Mehta & Ors. v. Union of India & Ors., [1987] 1 SCC 395; Calcutta Gas Co. Ltd. v. State of West Bengal, AIR (1961) SC 1044; Mulchand v. State of M.P., AIR (1968) SC 1218; State of West Bengal v. V.K. Manda! & Ors., AIR (1962) SC 779; New Marine Coal Co. Ltd. v. Union of India, [1964] 2 SCR 859; Gujarat G State Financial CDlporation v. Lotus Hotel, [1983] 3 SCC 370; Mahabir Auto Store v. Indian Oil Corporation, [1990] 3 SCC 752; Shreelekha Vidyarthi v. State of U.P., [1991] 1 .>CC 212; Gillie v. West Noifolk and Wisbech Area Health Authority, (1986) AC 112; Dr. Roy v. Kensinstone and Chelsea Family Practioners Committee, (1992) IAC 624 and R.K. Panda & Ors. v. Steel H Authority of India & Ors., [1994] 5 SCC 304, referred to.

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14. The founding fathers placed no limitation or fetters to the power of the High Court under Article 226 of the Constitution except self-imposed limitation. The arm of the Court is long enough to reach injustice wherever it is found. The Court as sentinal in the qui vive is to mete out justice in I given facts. On finding that either the workmen were engaged in violation of the provisions of the Act or were continued as contract labour, despite prohibition of the contract labour under Section 10(1), the High Court has, by judicial review as the basic structure, constitutional duty to enforce the law by appropriate directions. It would, therefore, be necessary that in- stead of leaving the workmen in the lurch, the Court would properly mould the relief and grant the same in accordance with law. Though there is no express provision in the Act for absorption of the employees whose con- c tract labour system stood abolished by publication of the notification under Section 10(1) of the Act, in a proper case, Conrt as sentinal in the qui vive is required to direct the appropriate anthority to act in accordance with law and submit a report to the Court and based thereon proper relief should be granted. [649-C-E; 654-C-D] D Indira Gandhi v. Raj Narayan, AIR (1975) SC 2299 and S.R. Bommai v. Union of India, [1994] 3 SCC 1, referred to.

15. All the workmen in the respective services working on contract labour are required to be absorbed in the establishment of the appellant. E Though there exists no specific scale of pay to be paid as regular employees, it is for the establishment to take such steps as are necessary to prescribe scale of pay like class 'D' employee. There is no irnjJediment in the way of the appellants to absorb them in the last grade, namely, grade IV employees on regular basis. It is seen that the criteria to abolish the contract labour system is the duration of the work, the number of employees working on the job etc. That would be the indicia to absorb the emp.loyees on regular basis in the respective services in the establishment. Therefore, the date of engagement will be the criteria to determine their inter se seniority. In case, there would be any need for retrenchment of any excess staff, necessarily, the principle of "last come, first go" should be applied subject to his re-appointment as and when the vacancy arises. The

-- award proceedings as suggested in Gujarat Electricity Board case are beset with several incongruities and obstacles in the way of the contract labour for immediate absorption. Since the contract labour gets into the service of the principal employer, the Union of the existing employees may not H

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A espouse their cause for reference under Section 10 of the ID Act. The workmen on abolition of contract labour system have no right to seek reference under Section 10 of the ID Act. Moreover, the workmen imme- diately are kept out of job to endlessly keep waiting for award and there- after resulting in fnrther litigation and delay in enforcement. The B management would always keep them at bay for absorption. It would be difficult for them to work out their right. Moreover, it is a tardy and time-consuming process and years would role by. Without wages, they cannot keep fighting the litigation endlessly. The right and remedy would be a teasing illusion and would be rendered otiose and practically compell· ing the workman at the mercy of the principal employer. Considered from this pragmatic perspective, the remedy carved out in Gujarat Electricity Board case would be unsatisfactory. In the judgments nnder appeal, High Court has directed to absorb the services of the workmen from the date of the judgment. The respondent-Union did not challenge it. Therefore, the benefit to the employees of the respondent-Union from the date of the abolition of the contract labour system cannot be granted. The direction issned by the fligh Court to regularise their services with effect from the respective dates of judgments of the High Court with all consequential benefits is therefore upheld. [654-G-H; 665-A·H]

Gujarat Electricity Board v. Hind Mazdoor Sabha & Ors., (1995] 5 E sec 21, partly overruled. Per Majmudar, !. (Concurring)

1. On abolition of contract lab.our system from any establishment under Section 10 of the Act by the appropriate Government the logical and legitimate consequences thereof will be that the erstwhile regulated con· tract labour covered by the sweep of such abolition for the concerned activities would be entitled to be treated as direct employees of the employer on whose establishment they were earlier working and they would be entitled to be treated as regular employees at least from the day on which the contract labour system in the establishment for the work which they were doing gets abolished. (662-A·B]

2. Under the Contract Labour (Regulation and Abolition) Act, 1970 twin methodology had been adopted by the legislature. In the first instance, - it sought to regulate contract labour employed in any establishment wherein snch labour was not of a perennial nature but had to be regulated so that the right to life available to workmen as per Article 21 would not be A rendered illusory. Various welfare measures have been provided by the Act in connection with such regulations. The contract workers \tho are engaged by the contractor for the benefit of the principal employer are brought within the beneficial sweep of Chapter V of the Act. This is one facet of the Act. The other object of the Act is to abolish the contract labour system. In B cases where the contract labour is employed on a writ which is of perennial natnre; that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation that is carried on in the establishment of the principal employer. (666-E-G; 667-C-D)

p. 593 Copy page pinpoint

3. The qnestion is whether after abolition of contract labour system, the contract labourers who were earlier having regulatory protections would be rendered persona non grata and would be thrown out from the establishment and told off the gates. Then in such a case the remedy of abolition of contract labour would be worse than the disease and it has to be held that the legislature while trying to improve the lot of erstwhile contract labourers who are doing work of perennial nature for the prin- cipal employer and are doing work which is otherwise to be done by regular workmen had really left them in the lurch by making them lose all the facilities available to contract labour ou the establishment as per Chapter V and desired them to wash their hands off the establishment and get out and face starvation. It is axiomatic that if they continued to be contract labourers their wages would have been guaranteed under Section 21 of the Act with an obligation oii the principal employer to pay them if the contractor fails to discharge his obligation in connection with payment of wages. (658-A-D) F

4. Wages are the livelihood of workman and his large number of departments. If on abolition of contract labour system, contract labour itself is to be abolished, it would cause economic ruin and economic death to contract labourer and his dependentB for amelioration of whose lot, order under Section 10 is to be passed. If it is held that on abolition of contract labour system, the erstwhile contract labourers are to be thrown G out of the establishment lock, stock and barrel, it would amount to throwing the baby out with the bath water. That obviously cannot be the scope, ambit and purport of Section 10 of the Act. (658-D-F]

5. When the contract workers carry out the work of the principal H

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A employer which is of a perennial nature and if provisions of Section 10 gets attracted and such contract labour system in the establishment gets abolished on fulfilment of the conditions requisite for that purpose, it is obvious that the intermediary contractor vanishes and along with him vanishes the term 'principal employer'. Unless there is a contractor agent there is no principal. Once the contractor intermediary goes the term B 'principal' also goes with it: Then remains ont of this tripartite contractual scenario only two parties the beneficiaries of the abolition of the erstwhile contract labour system i.e. the workmen on the one band and the employer on the other who is no longer the principal employer but necessarily becomes a direct employer for these erstwhile contract labourers. Implicit C in the provision of Section 10 is the legislative intent that on ab.iliiion of contract labour system, the erstwhile contract-workmen would become direct employees of the employer on whose establishment they were earlier working and were enjoying all the regulatory facilities on that very estab- lishment under Chapter V prior to the abolition of such contract labour system. [658-G-H; 659-A-D]

6. Though the legislature has expressly not mentioned the conse- quences of such abolition, but the very scheme and ambit of Section 10 of the Act clearly indicate the inherent legislative intent of making the erstwhile contract labourers direct employees of the employer on abolition of the intermediary contractor. The very condition engrafted in Section 10(2) (d) shows that while abolishing contract labour from the given estab· lishment, one of the relevant consideration for the appropriate Govern- ment is to ascertain whether it is sufficient to appoint considerable number of whole time workmen. Even otherwise there is an inbuilt safety valve in F Section 21 of the Act which enjoins the principal employer to make payment of wages to the given number of contract workmen whom be has permitted to be brought for the work of the establishment if the contractor . fails to make payment to them. It is, therefore, obvious that the principal employer as a worldly businessman in his practical commercial wisdom would not allow contractor to bring larger number of contract labour G which may be in excess of the requirement of the principal employer. On the contrary, the principal employer would see to it that the contractor brings only those number of workmen who are required to discharge their duties to carry out the work of the principal employer on his establishment through, of course, the agency of the contractor. In fact the scheme of the H Act and regulations framed there-under clearly indicate that even the

AIR INDIA STATUIDRY CORPN. v. UNION l.ABOUR UNION 595 number of the workmen required for the given contract work is to be specified in the licence given to the contractor. Consequently, the aforesaid apprehension projected on behalf of the principal employer is more imagi· nary than real. Even apart from that, after the absorption of the erstwhile contract workmen by the principal employer on abolition of the contract labour system under Section IO, it is always open for the employer as an entrepreneur, in an appropriate case, if the excess working staff is not found to be required by him to retrench such excess staff in accordance with law by following the provisions of the Industrial Disputes Act, 1947. But that has nothing to do with the moot question as to what is the fate of erstwhile contract labour on abolition of contract labour system under the provisions of Section 10 of the Act. (659-E-H; 660-A-D] C

Gujarat Electricity Board, Thennal Power Station, Ukai, Gujarat v. Hind Mazdoor Sabha & Ors., (1995] S SCC 27, partly overruled.

7. Engagement of contract labour has been found to be unjustified by a catena of decisions of this Court. When the work is of perennial nature and instead of engaging regular workmen, the system of contract labour is resorted to, it would only be for fulfilling the basic purpose of securing monetary advantage to the principal employer by reducing . expenditure on work force. It would obviously be an unfair labour \practice and 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. Such a system was tried to be put to an end by the legislature by enacting the Act but when it found there are certain activities of establishment where the work is not of perennial nature then the contract labour may not be abolished but still it would be required to be regulated so that the lot of the workmen is not rendered miserable. The real scope and ambit of the Act is to abolish contract labour system as far as possible from every establishment. Consequently, on abolition which is the ultimate goal, the erstwhile regulated contract labour cannot be thrown out of establishment as tried to be submitted on behalf of the management taking resort to the express language of Section 10 of the Act. Such a conclusion reached by the two-Member Bench in Dena Nath's case flies in the face of the very scope and ambit of the Act and frustrated the very scheme of abolition of contract labour envisaged by the Act. [660-G-H; 661-A·C] H

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A Dena Nath v. National Fe1ti/izers Ltd., [1992) I SCC 695, overruled.

R.K Panda & On. v. Steel Autho1ity of India & Ors., [1994) 5 SCC 304, referred to.

CfVIL APPELLATE .JURISDICTION: Civil Appeal No. 15535 of B 1996 etc.

From the Judgment and Order dated 28.4.92 of the Bombay High Court in A. No. 146 of 1990.

Ashok Desai, Attorney General, T.R. Andhyarujina, Solictor C General, P.P. Malhotra, Ms. Indra Jaising, K.K. Singhvi, Sr. Advs., M.D. Sisodia, K. Swamy, Lalit Bhasin, Ms. Nina Gupta, Ms. Kiran Bhardwaj, Vineet Kr., Ms. Ethel Pereira, Ms. Ritu Makkar, P.P. Singh, G. Nageswara Reddy, C.V.S. Rao, Ms. Anil Katiyar, Ms. Anita Shenoi, Sanjay Parikh, B.N. Singhvi, Sanjay Singhvi, Anil K. Gupta, Ms. Pushpa Singhvi, T. Srid- D haran, P.K. Manohar, S.R. Bhat, Brij Bhushan, R.N. Keshwani, Ms. C. Ramamurthy and A.K. Sanghi for the appearing parties.