Delhi High Court
Balwant Rai Saluja & Ors. vs Air India Ltd. & Ors. on 2 May, 2011
Author: Dipak Misra
Bench: Chief Justice, Sanjiv Khanna
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 25th April, 2011
% Judgment pronounced on: 2nd May, 2011
+ LPA No. 388/2010
BALWANT RAI SALUJA & ORS. ..... Appellants
Through: Mr. Rudra Kahlon, Ms. Vandana
Kahlon, Advocates
versus
AIR INDIA LTD. & ORS. ..... Respondents
Through: Mr. Sandeep Sethi, Sr. Adv. with
Ms. Sangeeta Bharti, Ms. Nidhi
Minocha, Advs. for R-1
Ms. Meenakshi Sood, Adv. for R2&3
+ LPA No. 390/2010
RAKESH KUMAR & ORS. ..... Appellants
Through: Mr. Rudra Kahlon, Ms. Vandana
Kahlon, Advocates
versus
AIR INDIA LTD. & ORS. ..... Respondents
Through: Mr. Sandeep Sethi, Sr. Adv. with
Ms. Sangeeta Bharti, Ms. Nidhi
Minocha, Advs. for R-1
Ms. Meenakshi Sood, Adv. for R2&3
+ LPA No. 391/2010
MEHBOOB ALAM & ORS. ..... Appellants
Through: Mr. Rudra Kahlon, Ms. Vandana
Kahlon, Advocates
LPA 388/2010 with connected matters page 1 of 30
versus
AIR INDIA LTD. & ORS. ..... Respondents
Through: Mr. Sandeep Sethi, Sr. Adv. with
Ms. Sangeeta Bharti, Ms. Nidhi
Minocha, Advs. for R-1
Ms. Meenakshi Sood, Adv. for R-2&3
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA
1. Whether reporters of the local papers be allowed to see the judgment? YES
2. To be referred to the Reporter or not? YES
3 Whether the judgment should be reported in the Digest? YES
DIPAK MISRA, CJ
In view of the commonality of the controversy involved in this batch
of appeals, they were heard together and are being disposed of by a
singular order. For the sake of convenience and clarity, the facts from LPA
No.390/2010 arising out of WP(C) No.14178/2004 are adumbrated herein.
2. The appellants-workmen claimed to be the deemed employees of
the management of Air India Limited and on this basis, disputes were
raised and on eventual failure, the Central Government referred the
disputes to the Central Government Industrial Tribunal (for short ‗the
tribunal') for adjudication. It is worth noting that there were three
LPA 388/2010 with connected matters page 2 of 30
identical references barring the change of names of the workmen. The
terms of reference read as follows:
―Whether the demand of workmen S/Shri .....
employed by Chefair to provide canteen services at the
establishment of Air India is justified that they be
treated as deemed employees of the management of Air
India? If so, to what relief are the concerned workmen
entitled to?‖
3. It was the case of the workmen before the tribunal that they were
engaged on casual basis by the respondent-management in the Air India
Ground Service Department Canteen, Indira Gandhi International Airport,
New Delhi through Chefair, flight caterers, which was a unit of the Hotel
Corporation of India (HCI), a Government Corporation, the respondent
No.2 herein. It was urged that the canteen was established and maintained
by the Air India under the provisions of Section 46 of the Factories
Act, 1948 (for brevity ‗the 1948 Act') and by notification dated 21.1.1991,
the Lt. Governor of Delhi had directed that Rules 65-70 of the Delhi
Factories Rules, 1950 shall apply to the factories specified in the schedule
to the said notification and as the Air India Ground Service Department
Canteen finds mention at serial No.9., its workers were deemed to be the
LPA 388/2010 with connected matters page 3 of 30
employees of Air India. It was asserted before the tribunal that HCI had
entered into a contract with the respondent - Air India to maintain and
run the said canteen which was a maladroit device to circumvent various
provisions of the Contract Labour (Prohibition and Abolition) Act, 1970
(for short ‗the 1970 Act') and that the workmen were performing duties
which were permanent, perennial in nature and continuously required by
the Air India but were paid wages less than the wages paid to regular
employees performing the same duties. On the aforesaid foundation, the
workmen claimed regularization of service with back wages. As the
employees were disengaged during the pendency of the dispute, the same
was also assailed under Section 33-A of the Act.
4. The asseverations put forth by the workmen were resisted by the Air
India on the ground that there was no employer and employee
relationship between the workmen and Air India; that HCI of which
Chefair was a unit had independent status and as per its memorandum of
association, it was engaged in the business, inter alia, of establishing and
running canteens; that the canteen was being run and maintained by the
HCI on the basis of fixed subsidy for the employees of Air India which was
Rs.340 per month at the time of reference; that Air India was not aware of
LPA 388/2010 with connected matters page 4 of 30
the number of employees engaged by the HCI and it had no control over
the said employees who were governed by the Rules and Regulations and
service conditions of the HCI; that the infrastructure of the canteen was
provided by the Air India but the management was entrusted to the HCI
which was responsible for providing canteen services to the Air India
employees under the contract for running and maintaining the said
canteen; that the appointment letters, token numbers, ESI cards, etc. had
been issued to the workmen by the HCI and, therefore, under no
circumstances the remedy of regularization was tenable against Air India
as they were not employees of Air India.
5. The tribunal, on the basis of the material brought on record, came to
hold that the canteen, which was catering to the welfare of more than 2,000
workers of Air India, was a statutory canteen under Section 46 of the
Factories Act; that the canteen was situated within the premises of Air
India; that the HCI, which ran the canteen and carried the business, acted
under the control and supervision of Air India as was evincible from the
memorandum and articles of association; that Air India and HCI were not
entirely separate and independent entities; that there was inseparable and
insegregable nexus between the HCI and Air India and the statutory duty
LPA 388/2010 with connected matters page 5 of 30
of Air India cannot be said to be an independent act of HCI; that the
factual matrix clearly revealed that the canteen was not independently run
by the HCI on contract basis but on the contrary, the contract entered into
by Air India with the HCI was merely a camouflage since it was obligatory
on the part of Air India to establish a canteen; that Air India had
constituted a Committee of persons nominated from its employees and the
employees of HCI for looking into the problems of service, hygiene, etc. of
the canteen; and that the workmen employed to work in the canteen
through the agency were deemed to be employees of the owner of the
canteen, that is, Air India.
6. Being of this view, the tribunal directed that Air India has to treat
the employees of the canteen as its employees and extend the benefits and
further, since the workmen were terminated from their services during the
pendency of the dispute either before the Conciliation Officer or before the
labour court/tribunal, the same was illegal and, therefore, the appellants
were entitled to be reinstated with the consequential benefits of
regularization and parity of pay with 50% back wages along with 6%
interest.
LPA 388/2010 with connected matters page 6 of 30
7. Being dissatisfied with the aforesaid award, the respondent-
employer invoked the inherent jurisdiction of this Court under Articles 226
and 227 of the Constitution of India contending, inter alia, that the tribunal
had fallen into error by relying on the decisions in Kanpur Suraksha
Karamchari Union (Regd.) v. Union of India and others, (1988) 4 SCC 478
and M.M.R. Khan and others v. Union of India and others, 1990 Supp SCC
191; that the HCI and Air India cannot be treated to be a singular entity
inasmuch HCI was a government corporation having a separate entity;
that there was no material on record that Air India exercised any control or
supervision or disciplinary authority over the employees; that Air India
had no say in the appointment of the employees engaged by the HCI; that
providing infrastructure of a canteen cannot be treated to be a decisive test;
that the finding of the tribunal that the contract entered into by Air India
with the HCI was a sham one to avoid the provisions contained in the 1970
Act is baseless; that in law, a company is altogether distinct from its
shareholders and hence, the extent of shareholding of Air India in HCI was
totally immaterial to the issue; that merely because Section 46 of the
Factories Act provides for establishment of a canteen for the welfare of the
workmen, the same does not make the employees of the canteen
LPA 388/2010 with connected matters page 7 of 30
employees of the owner of the factory unless other additional factors,
which find mention in various decisions of the Apex Court, were satisfied;
that the grant of subsidy by Air India to its employees to avail food from
the canteen was totally an inconsequential and irrelevant factor; that the
constitution of a Committee to look after the hygiene and quality of food
was not an aspect to be taken into consideration to determine the status of
the employees of the canteen; and that the decision in M.M.R. Khan and
others (supra) was totally distinguishable and was not applicable to the
factual matrix of the case. The learned counsel for the management cited
various authorities before the learned Single Judge which have also been
cited before us to which we shall refer to at a later stage.
8. The stand and stance put forth by the Management was combated
by the respondent-workmen before the learned Single Judge supporting
the award passed by the tribunal and relying on the findings and the law
laid down in M.M.R. Khan and others (supra).
9. The learned Single Judge accepted the submissions canvassed by the
learned counsel for the management and dislodged the award. Be it noted,
LPA 388/2010 with connected matters page 8 of 30
the learned Single Judge took note of the fact that no relief was claimed
against the HCI before the tribunal.
10. We have heard Mr. Rudra Kahlon, learned counsel for the appellants,
Mr. Sandeep Sethi, learned senior counsel along with Ms. Sangeeta Bharti
and Ms. Nidhi Minocha, learned counsel for the respondent No.1 and Ms.
Meenakshi Sood, learned counsel for the respondents No. 2 and 3.
11. The core issue that emanates for consideration is whether in the
obtaining factual matrix it can be held that the employees of the canteen
established by Air India in its premises and run by the HCI be treated as
regular employees of the Air India. Before we advert to the factual canvas,
we think it appropriate to refer to the citations in the field, cull out the
principles and analyse whether they are applicable to the material brought on
record.
12. In M.M.R. Khan and others (supra) on which heavy reliance has
been placed by the learned counsel for the appellants, the Apex Court
referred to Section 46 of the 1948 Act, the circulars issued by the Railway
Board, the Railway Establishment Manual which deals with canteens and
proceeded to state as follows:
LPA 388/2010 with connected matters page 9 of 30
―Since in terms of the Rules made by the State
Governments under S. 46 of the Act, it is obligatory on
the Railway Administration to provide a canteen, and
the canteens in question have been established pursuant
to the said provision there is no difficulty in holding
that the canteens are incidental to or connected with the
manufacturing process or the subject of the
manufacturing process. The provision of the canteen is
deemed by the statute as a necessary concomitant of the
manufacturing activity. Paragraph 2829 of the Railway
Establishment Manual recognises the obligation on the
Railway Administration created by the Act and as
pointed out earlier paragraph 2834 makes provision for
meeting the cost of the canteens. Paragraph 2832
acknowledges that although the Railway
Administration may employ anyone such as a Staff
Committee or a Co-operative Society for the
management of the canteens, the legal responsibility for
the proper management rests not with such agency but
solely with the Railway Administration. If the
management of the canteen is handed over to a
consumer cooperative society the bye-laws of such
society have to be amended suitably to provide for an
overall control by the Railway Administration.
21. In fact as has been pointed out earlier the
Administrative Instructions on departmental canteens
in terms state that even those canteens which are not
governed by the said Act have to be under a complete
administrative control of the concerned Department
and the recruitment, service conditions and the
disciplinary proceedings to be taken against the
employees have to be taken according to the rules made
in that behalf by the said Department. In the
circumstances, even where the employees are appointed
by the Staff Committee/ Cooperative Society it will
have to be held that their appointment is made by the
Department through the agency of the
LPA 388/2010 with connected matters page 10 of 30
Committee/Society as the case may be. In addition, as
stated earlier, the Railway Board by its circular dated
June 8, 1981 had communicated that it was decided to
treat the employees of all statutory canteens, as railway
servants irrespective of the type and management of the
canteens, and to extend to them the conditions of
service and emoluments of the railway servants as
existed on October 21, 1980, w.e.f. 22nd October 1980. No
doubt it was stated in this letter that the said decision
would prevail till Government decided otherwise.
Subsequently on March 11, 1982, the Board also
prescribed the pay-scales, dearness allowance, house
rent allowance, city compensatory allowance and
productivity bonus, and fixed the age of their
superannuation. As also pointed out earlier, this Court
in its decision reported in (1988) 4 SCC 478; (AIR 1988
SC 1965), subsequently directed that for the purpose of
calculating pensionary benefits the service rendered by
the said employees prior to October 22, 1980 would be
computed. What is further, the Ministry of Railways by
its letter of May 13, 1983 placed on record the fact that
not only the employees of all the statutory canteens but
the employees of eleven Delhi based non-statutory
canteens had been treated as railway servants with
effect from October 22, 1980. It must be remembered in
this connection that neither the Railway Ministry nor
the Railway Board had stated in their letters/orders that
the employees of the statutory canteens and of the
eleven Delhi based non-statutory canteens were being
treated as railway servants only for the purposes of the
Factories Act or that they were to be so treated till
further decision of this Court.‖
After so stating, their Lordships proceeded to deal with the other
circulars issued by the Railway Administration and eventually held thus:
LPA 388/2010 with connected matters page 11 of 30
―Thus the relationship of employer and employee
stands created between the Railway Administration and
the canteen employees from the very inception. Hence,
it cannot be gainsaid that for the purposes of the
Factories Act the employees in the statutory canteens
are the employees of the Railways. The decisions of the
Calcutta and Madras High Courts (supra) on the point,
therefore, are both proper and valid.‖
13. It is worth noting that in the said case, the view that has been
expressed by the Apex Court is to the effect that the workers engaged in
the statutory canteens as well as those engaged in non-statutory
recognized canteens in the Railway Establishments are railway employees
and they are entitled to be treated as such.
14. In Employers in relation to the Management of Reserve Bank of
India v. Workmen, (1996) 3 SCC 267, the issue that emerged was whether
the persons working in the various canteens were employees of the
Reserve Bank of India. The plea of the Federation on behalf of the
workmen was that the Bank was under the statutory obligation to provide
canteen facilities to the employees and the same was being done through
agencies such as Implementation Committee (Canteen Committee),
Cooperative Society and contractor instead of the Bank doing it on its own
LPA 388/2010 with connected matters page 12 of 30
by employing persons directly. It was also put forth that the entire
economic control was with the Bank and so the workmen employed in all
these canteens were to be treated as the employees of the Bank. The said
stand was resisted by the Bank contending, inter alia, that the Bank did not
supervise or control the working of the canteens or the supply of eatables
to the employees and the disciplinary control over the persons employed
in the canteens did not vest with the Bank. That apart, various other pleas
were raised. It is worth noting that the Central Government Industrial
Tribunal, placing reliance on the decision rendered in M.M.R. Khan and
others (supra), expressed the view that the employees were entitled to the
reliefs as prayed for. Their Lordships adverted to the conclusions in
M.M.R. Khan and others (supra) in respect of three categories and held
thus:
―19. Category 1: Statutory Canteens: This Court in Civil
Appeal No. 368 of 1978 dated 22.10.1980 had held that
the employees in the statutory canteens were railway
employees for the purpose of the Factories Act. In the said
decision, this Court declined to interfere with the
rejection of the demand of the workers for pay and
allowances to them as if they were railway employees.
As a result of subsequent orders passed by the
Government, Railway Board and the decision of this
Court and instructions of the Department, it became
evident that the Government has complete control over
LPA 388/2010 with connected matters page 13 of 30
the canteens and the workers employed therein became
holders of civil posts within the meaning of Article 311
of the Constitution. Their recruitment and service
conditions are governed by the rules applicable to the
employees of the government department/office/
establishment to which the canteens are attached. In this
background, the Court adverted in detail to the various
government orders and circulars of the Railway Board
vis-a-vis Section 45 of the Factories Act and held that
the employees in the "statutory canteens" of the
railways will have to be treated as "railway servants". It
was further observed that the employees in the
statutory canteens are entitled to the status of railway
employees and they are entitled to succeed in their
claim purely on facts peculiar to them discussed in the
judgment.
20. Dealing with the second category-"Non-statutory
Recognised Canteens", the Court adverted to paras 2831
to 2834 of the Railway Establishment Manual and held
that the aforesaid provisions enjoin the Railway
Administration to take steps to develop their canteen
organisation to the maximum possible extent as a
measure of staff welfare preferably by encouraging the
development of Canteens for staff on co-operative basis.
This mandate was stated to be in addition to the canteens
required to be established by the Factories Act. On a
review of the various provisions of the Railway
Establishment Manual (the details whereof were
adverted to in paras 31 to 35 of the judgment) and
proceedings of courts, it was held in para 36 of the
judgment that there is hardly any difference between
the statutory canteens and non-statutory recognised
canteens. Detailed provisions of the Railway
Establishment Manual were highlighted to show that
the obligations of the Board under the Manual are
substantially similar to those enjoined under the
Factories Act and no distinction can be made between
LPA 388/2010 with connected matters page 14 of 30
the employees of the two types of canteens -- statutory
canteens and non-statutory recognised canteens -- so
far as their service conditions are concerned. So, it was
further held that the employees in the non-statutory
recognised canteens should be treated on a par, with
those employees in the statutory canteens and they
should be treated for all purposes as railway servants.
21. Dealing with the category of persons employed in
the "non-statutory non-recognised canteens", in para 38
of the judgment, this Court highlighted the fact that
they were not started with the prior approval of the
Board as required under paragraph 2831 of the Railway
Establishment Manual. They are not required to be
managed either as per the provisions of the Railway
Establishment Manual or the administrative
instructions. There is no obligation on the railway
administration to provide them with any facility nor are
they given any subsidy or loan. The canteens are run by
private contractors and there is no continuity either of
the contractors or the workers engaged by them. There
is further no obligation cast even on the local officers to
supervise the working of these canteens, there existed
no rules for recruitment of the workers and their service
conditions, and the canteens are run on ad hoc basis;
and in these circumstances it was held that the workers
engaged in these canteens are not entitled to claim the
status of the railway servants.‖
15. We have referred to the aforesaid decisions only to highlight how
the decision rendered in M.M.R. Khan and others (supra) was understood
in the backdrop of statutory canteens, non-statutory recognized canteens
and non-statutory non-recognized canteens.
LPA 388/2010 with connected matters page 15 of 30
16. In Indian Petrochemicals Corporation Ltd. and another v. Shramik
Sena and others, (1999) 6 SCC 439, a three-Judge Bench of the Apex Court
referred to the definition of Section 2(l) of the Factories Act which defines
a ‗worker'. Thereafter, their Lordships posed the question whether the
status of a workman under the Factories Act confines the relationship of
the employer and the employees to the requirements of the Factories Act
alone or does this definition extend for all other purposes which includes
continuity of service, seniority, pension and other benefits which a regular
employee enjoys. Their Lordships opined that the employees of a
statutory canteen ipso facto do not become the employees of the
establishment for all purposes. Their Lordships referred to the decision in
Parimal Chandra Raha v. LIC, 1995 Supp. (2) SCC 611 which was based
on the decision of M.M.R. Khan and others (supra) and expressed the view
as follows:
―22. If the argument of the workmen in regard to the
interpretation of Raha case 1995 Supp (2) SCC 611 is to
be accepted then the same would run counter to the law
laid down by a larger Bench of this Court in Khan case,
1990 Supp SCC 191. On this point similar is the view of
another three-Judge Bench of this Court in the case of
Reserve Bank of India v. Workmen (1996) 3 SCC 267.
Therefore, following the judgment of this Court in the
cases of Khan (supra) and R.B.I. (supra) we hold that
LPA 388/2010 with connected matters page 16 of 30
the workmen of a statutory canteen would be the
workmen of the establishment for the purpose of the
Factories Act only and not for all other purposes.‖
After so holding, their Lordships posed a question whether the
employees would become employees of the management for all purposes
in the obtaining factual scenario. Their Lordships took note of the
significant fact which showed the true nature of the employees'
employment and various other facets and eventually came to hold that if
all the factors were considered cumulatively, the respondents were in fact
the workmen of the appellant-management. In Workmen of the Canteen
of Coates of India Ltd. v. Coates of India Ltd. and others, (2004) 3 SCC
547, the issue arose whether the workmen employed in a canteen, which
was run in the premises of Coates of India Ltd., could be regarded as the
workmen of the respondent-company. It was urged before their Lordships
that it was the statutory obligation on the part of the company to provide a
canteen in the premises and, therefore, the employees of the canteen must
be presumed to be the workmen employed by the respondent-company
and no one else. Their Lordships concurred with the view expressed by the
High Court which had opined that the canteen employees were neither
directly appointed by the company nor the company had any supervisory
LPA 388/2010 with connected matters page 17 of 30
control over them and hence, they could not be treated as workmen
employed by the respondent-company.
17. In Workmen of Nilgiri Co-op. Mkt. Society Ltd. v. State of Tamil
Nadu and others, AIR 2004 SC 1639, their Lordships in paragraph 32,
while dealing with the factum of determination of relationship, have
observed thus -
―32. Determination of the vexed questions as to
whether a contract is a contract of service or contract for
service and whether the concerned employees are
employees of the contractors has never been an easy
task. No decision of this Court has laid down any hard
and fast rule nor it is possible to do so. The question in
each case has to be answered having regard to the fact
involved therein. No single test - be it control test, be it
organisation or any other test - has been held to be the
determinative factor for determining the jural
relationship of employer and employee.‖
Thereafter, their Lordships delineated upon the relevant factors
which are to be taken into consideration for such determination. We think
it apposite to reproduce the same.
―37. The control test and the organization test,
therefore, are not the only factors which can be said to
decisive. With a view of elicit the answer, the Court is
required to consider several factors which would have a
LPA 388/2010 with connected matters page 18 of 30
bearing on the result: (a) who is appointing authority;
(b) who is the pay master; (c) who can dismiss; (d) how
long alternative service lasts; (e) the extent of control
and supervision; (f) the nature of the job, e.g. whether, it
is professional or skilled work; (g) nature of
establishment; (h) the right to reject.
38. With a view to find out reasonable solution in a
problematic case of this nature, what is needed is an
integrated approach meaning thereby integration of the
relevant tests wherefor it may be necessary to examine
as to whether the workman concerned was fully
integrated into the employer's concern meaning thereby
independent of the concern although attached therewith
to some extent.‖
18. In Haldia Refinery Canteen Employees Union and others v. Indian
Oil Corporation Ltd and others, (2005) 5 SCC 51, the learned Single Judge
relying on the decisions in M.M.R. Khan and others (supra) and Parimal
Chandra Raha (supra) had held that the employees were, in fact, the
employees of the respondent-corporation and were being wrongly treated
as employees of the contractor. A direction was issued to absorb the
workmen and regularize them from the date of filing of the writ petition.
In the intra-court appeal, the Division Bench, placing reliance on the
decision rendered in Indian Petrochemicals Corporation Ltd. (supra), set
aside the order passed by the learned Single Judge. While dealing with the
LPA 388/2010 with connected matters page 19 of 30
appeal of the trade union, their Lordships referred to the decision in
Indian Petrochemicals Corporation Ltd. (supra) and re-stated the
principle, which, we think it apposite to reproduce -
―6. We have carefully considered the submissions
made by the learned counsel for the parties. In Indian
Petrochemicals Corporation Ltd. and another v. Shramik
Sena and others, (1999) 6 SCC 439 this Court while
disposing of an identical and similar question of law
and fact with regard to the status of the employees
working in the canteen and the status of the contractor
who was running the canteen on the contract basis
elaborately dealt with the scope of Section 46 of the
Factories Act, 1948, particularly with reference to the
definition of ―worker‖ as occurring in Section 2(1) of the
Factories Act. After elaborate analysis of the earlier two
judgments of this Court in M.M.R. Khan and others v.
Union of India and others, 1990 Supp SCC 191 and Parimal
Chandra Raha v. LIC, 1995 Supp. (2) SCC 611 cases it was
held that what has been held in these cases is that the
workmen were the employees of the management for
the purposes of the Factories Act alone and did not
become the employees of the establishment for any
other purpose. After referring to the arguments
advanced it was held: (SCC p. 449, para 22)
―22. If the argument of the workmen in regard
to the interpretation of Parimal Chandra Raha
(supra) is to be accepted then the same would run
counter to the law laid down by a larger Bench of
this Court in M.M.R. Khan and others (supra) case.
On this point similar is the view of another three-
Judge Bench of this Court in the case of Reserve
Bank of India v. Workmen, (1996) 3 SCC 267.
Therefore, following the judgment of this Court
LPA 388/2010 with connected matters page 20 of 30
in the cases of M.M.R. Khan and others (supra) and
R.B.I. (supra) we hold that the workmen of a statutory
canteen would be the workmen of the establishment for
the purpose of the Factories Act only and not for all
other purposes.‖
(emphasis supplied)
Further it was observed: (SCC p. 447, para 16)
―16. It is clear from this definition that a person
employed either directly or by or through any
contractor in a place where manufacturing
process is carried on, is a ‗workman' for the
purpose of this Act. Section 46 of the Act
empowers the State Government to make rules
requiring any specified factory wherein more
than 250 workers are ordinarily employed to
provide and maintain a canteen by the occupier
for the use of the workers. It is not in dispute,
pursuant to this requirement of law, the
management has been providing canteen facilities
wherein the respondents employees are working.
Hence, it is fairly conceded by the learned
counsel for the management that the respondent
workmen by virtue of the definition of the
‗workman' under the Act, are the employees of
the appellant management for purposes of the
Act.‖
7. After having gone into the question of worker
being declared the employee of the management for the
purpose of the Factories Act, the Court further analysed
the question as to whether such relationship as existed
between the worker and the employer under the
Factories Act could be extended to wider arenas. It was
held that the status of a workman under the Factories
Act confines the relationship of employer and
employees to the requirements of the Factories Act
LPA 388/2010 with connected matters page 21 of 30
alone and does not extend for any other purpose. It was
observed as under: (SCC p. 448, para 17)
―17. The question however is: does this status of
a workman under the Factories Act confine the
relationship of the employer and the employees
to the requirements of the Factories Act alone or
does this definition extend for all other purposes
which include continuity of service, seniority,
pension and other benefits which a regular
employee enjoys. The Factories Act does not
govern the rights of employees with reference to
recruitment, seniority, promotion, retirement
benefits, etc. These are governed by other
statutes, rules, contracts or policies. Therefore, the
workmen's contention that employees of a statutory
canteen ipso facto become the employees of the
establishment for all purposes cannot be accepted."
(emphasis supplied)
Thereafter, their Lordships proceeded to state as follows: -
―14. No doubt, the respondent management does
exercise effective control over the contractor on certain
matters in regard to the running of the canteen but such
control is being exercised to ensure that the canteen is
run in an efficient manner and to provide wholesome
and healthy food to the workmen of the establishment.
This, however, does not mean that the employees
working in the canteen have become the employees of
the management.
15. A free hand has been given to the contractor with
regard to the engagement of the employees working in
the canteen. There is no clause in the agreement
stipulating that the canteen contractor unlike in the case
LPA 388/2010 with connected matters page 22 of 30
of Indian Petrochemicals Corpn. Ltd. (supra) shall retain
and engage compulsorily the employees who were
already working in the canteen under the previous
contractor. There is no stipulation of the contract that
the employees working in the canteen at the time of the
commencement of the contract must be retained by the
contractor. The management unlike in Indian
Petrochemicals Corpon. Ltd. case (supra) is not reimbursing
the wages of the workmen engaged in the canteen.
Rather the contractor has been made liable to pay
provident fund contribution, leave salary, medical
benefits to his employees and to observe statutory
working hours. The contractor has also been made
responsible for the proper maintenance of registers,
records and accounts so far as compliance with any
statutory provisions / obligations is concerned. A duty
has been cast on the contractor to keep proper records
pertaining to payment of wages, etc. and also for
depositing the provident fund contributions with the
authorities concerned. The contractor has been made
liable to defend, indemnify and hold harmless the
employer from any liability or penalty which may be
imposed by the Central, State or local authorities by
reason of any violation by the contractor of such laws,
regulations and also from all claims, suits or
proceedings that may be brought against the
management arising under or incidental to or by reason
of the work provided / assigned under the contract
brought by the employees of the contractor, third party
or by the Central or State Government authorities.
16. The management has kept with it the right to test,
interview or otherwise assess or determine the quality
of the employees / workers with regard to their level of
skills, knowledge, proficiency, capability, etc. so as to
ensure that the employees / workers are competent and
qualified and suitable for efficient performance of the
work covered under the contract. This control has been
LPA 388/2010 with connected matters page 23 of 30
kept by the management to keep a check over the
quality of service provided to its employees. It has
nothing to do with either the appointment or taking
disciplinary action or dismissal or removal from service
of the workmen working in the canteen. Only because
the management exercises such control does not mean
that the employees working in the canteen are the
employees of the management. Such supervisory
control is being exercised by the management to ensure
that the workers employed are well qualified and
capable of rendering proper service to the employees of
the management.
17. In Indian Petrochemicals Corpn. Ltd. (supra) this
Court after analyzing the earlier judgments on the same
point has held that the workmen working in the canteen
become the workers of the establishment for the
purposes of the Factories Act only ad not for any other
purpose. They do not become the employees of the
management ofr any other purpose entitling them to
absorption into the service of the principal employer.
Factors which persuaded this Court in Indian
Petrochemicals Corpn. Ltd. case (supra) to take the view
that the workmen in that case were employees of the
managemet are missing in the present case. No power
vests in the management either to make the
appointment or to take disciplinary action against the
erring workmen and their dismissal or removal from
service. The management is not reimbursing to the
contractor the wages of the workmen. On these facts, it
cannot be concluded that the contractor was nothing
but an agent or a manager of the respondent working
completely under the supervision and control of the
management.‖
LPA 388/2010 with connected matters page 24 of 30
19. In Hari Shankar Sharma and others v. M/s. Artificial Limbs
Manufacturing Corporation and others, AIR 2002 SC 226, the Apex Court
has opined thus -
―5. The submission of the appellants that because the
canteen had been set up pursuant to a statutory
obligation under Section 46 of the Factories Act
therefore the employees in the canteen were the
employees of respondent No.1 is unacceptable. First,
the respondent No.1 has disputed that Section 46 of the
Factories Act at all applies to it. Indeed, the High Court
has noted that this was never the case of the ap0pellants
either before the Labour Court or the High Court.
Secondly, assuming that Section 46 of the Factories Act
was applicable to the respondent No.1, it cannot be said
as an absolute proposition of law that whenever in
discharge of a satturtory mandate, a canteen is set up or
other facility provided by an establishment, the
employees of the canteen or such other facility become
the employees of that establishment. It would depend
on how the obligation is discharged by the
establishment. It may be carried out wholly or
substantially by the establishment itself or the burden
may be delegated to an independent contractor. Thereis
nothing in Section 46 of the Factories Act, nor has any
provision of any other statute been pointed out to us by
the appellants, which provides for the mode in which
the specified establishment must set up a canteen.
Whereit is left to the discretion of the concerned
establishment or by employment of a contractor, it
cannot be postulated that in the canteen would be the
employees of the establishment. Therefore even
assuming that the respondent No.1 is a specified
industry within the meaning of Section 46 of the
Factories Act, 1946, this by itself would not lead to the
LPA 388/2010 with connected matters page 25 of 30
inevitable conclusion that the employees in the canteen
are the employees of respondent No.1.‖
Be it noted, in the said decision, their Lordships took note of the fact
that the decision rendered in Parimal Chandra Raha (supra) has been
explained by a larger Bench in Indian Petrochemicals Corporation Ltd.
(supra).
20. On the basis of the aforesaid enunciation of law, the factual matrix is
required to be tested. As is manifest, there is no material on record to
show that the respondent - Air India had any role in the appointment of
the employees in the canteen. No administrative or disciplinary action
could be taken by the respondent against the canteen workers. The
respondent had itself not undertaken the obligation to run the canteen but
had only provided facility so that its employees could avail the canteen
facilities. It is not a case where the employees of the canteen were enlisted
under a welfare fund scheme, provident fund scheme and medical scheme
of the respondent - management. The responsibility to run the canteen
was absolutely with the HCI and it was totally a contractual relationship
LPA 388/2010 with connected matters page 26 of 30
between the two. Air India had no say in the selection or other affairs of
the canteen workers.
21. The tribunal, as is noticeable, has treated HCI as a part of Air India
and not a separate entity. The learned Single judge has dealt with this
aspect in paragraph 17 of the order, which we think appropriate to
reproduce:
―17. A perusal of the Memorandum and Articles of
Association of HCI shows that the general management
of business of HCI vests in the Board of Directors of
HCI subject to the directions, if any, from time to time
of Air India in regard to the finance and conduct of the
business and affairs of HCI. The composition of the
Board of Directors of HCI is controlled by Air India in
consultation with the Government of India. The
question which arises is whether for the said reason
only it can be said that the employees though employed
by HCI are employees of Air India. This stares in the
face of the first principles of Corporate Law, dating
back to Solomon Vs. Solomon and Co.Ltd. 1897 AC 22
where it was held that in law a company is a person
altogether different from its shareholders. Air India is
nothing but the sole holder of the shares of HCI.
However HCI is a legal entity independent of its
shareholders. Merely because the shareholder is one,
the said fact does not eliminate the difference in the
identity of a company as a separate legal identity from
its shareholders. Also, merely because the Articles of
Association of a company provide that the management
or its affairs and business and finances shall be subject
to the direction, if any, issued by the sole shareholder,
LPA 388/2010 with connected matters page 27 of 30
the said fact again does not merge the identity of the
shareholder with the company. Neither has the CGIT
returned a finding nor have the respondent workmen
contended that in the exercise of the aforesaid Articles
of Association of HCI, Air India has issued a directive
as to whom to employ and whom not to employ and is
regulating or supervising the terms of employment of
any of the employees of HCI. Thus, in my view the
mere fact of HCI being a 100% subsidiary of Air India
and the aforesaid peculiar Articles of Association would
not be decisive of whether the employees aforesaid of
HCI and working in the canteen of Air India are to be
treated as employees of the Air India or not.‖
The said view is absolutely correct and there is no warrant to differ
with it.
22. It is also the stand of the workmen that the contract was a sham and
a camouflage to deprive the workmen from the benefits of regularization
and absorption relying on the provisions of the 1970 Act and the decision
in Steel Authority of India & ors. v. National Union Waterfront Workers
and others, (2001) 7 SCC 1. The said decision is not applicable as there
was no notification by the appropriate Government abolishing contract
labour in the running of canteens. That apart, there is no material on
record to come to the conclusion that the contract was a sham or
camouflage. In this context, we may refer with profit to the decision in
LPA 388/2010 with connected matters page 28 of 30
International Airport Authority of India v. International Air Cargo
Workers' Union & Anr., AIR 2009 SC 3063 where there is no abolition of
contract labour under Section 10 of the CLRA Act but the contract labour
contend that the contract between the principal employer and the
contractor is sham and nominal for which the remedy is purely under the
Industrial Disputes Act, 1947. Their Lordships have opined that the
industrial adjudicator can grant relief if it finds that the contract between
the principal employer and the contractor is sham, nominal and merely a
camouflage to deny employment benefits to the employees and that there
is in fact a direct employment by applying tests like who pays the salary;
who has the power to remove / dismiss from service or initiate
disciplinary action; who can tell the employee the way in which the work
should be done, in short, who gives direction and has control over the
employee. In the case at hand, as has been stated earlier, there is absence
of all these factors and, therefore, we do not find the award to be
sustainable.
23. In view of the aforesaid premised reasons, we do not perceive any
error in the order of the learned Single Judge as far as the claim of the
workmen to be employees of Air India and their regularization is
LPA 388/2010 with connected matters page 29 of 30
concerned. However, we may observe that as there has been no
advertence on merit, in respect of their rights qua HCI, it is open to the
appellants - workmen to put forth their claim as per law against the HCI.
We may further hasten to clarify that as there has been no delineation on
merit on the said score either by the tribunal or by this Court, in case the
controversy is raised before the industrial adjudicator by taking recourse
to the due process of law, the same shall be dealt with and decided in
accordance with law.
24. Resultantly, with the aforesaid observations, the appeals stand
dismissed without any order as to costs.
CHIEF JUSTICE
MAY 2, 2011 SANJIV KHANNA, J.
dk/kapil LPA 388/2010 with connected matters page 30 of 30