Karnataka High Court
Tractors And Farm Equipment Ltd., ... vs State Of Karnataka And Anr. on 13 August, 2003
Equivalent citations: (2003)IIILLJ760KANT
Author: R.V. Raveendran
Bench: R.V. Raveendran
ORDER R.V. Raveendran, J.
1. Petitioner has its factory at plot No. 1, KIADB Industrial Area, Doddaballapur. Petitioner alleges that in the year 1997 it was employing 90 workmen in its Tractor Division and 71 employees in Engineering and Plastic Division. It is stated that even though it has no obligation in law to provide canteen facilities, it has still provided a canteen to supply food to its employees at highly subsidised rates purely as a welfare measure. Petitioner claims that having regard to its commitment to farm and agricultural sectors to supply its products at a reasonable and competitive price, it has arranged its operations in a cost effective manner. As a consequence, to make its operations viable, out of its sixteen areas of operation, it engaged contract labour in four areas which related to non production and welfare activities, that is operations which are neither directly nor indirectly connected with its production activities nor incidental to the work of its establishment in the true sense. The four areas of operation in which it engaged contract labour are: (i) House keeping, (ii) Cleaning/Garden maintenance, (iii) Security and (iv) Loading and Unloading.
2. The petitioner has given the following reasons for employing contract labour in those four areas:
(i) Housekeeping and Cleaning/Garden maintenance are not full time jobs.
(ii) In the interest of safety and to have full protection, it is better to entrust the security to an outside agency as the experience showed that any employee of the petitioner if entrusted with security duties, may not, out of sympathy/affiliation to colleagues, fully protect the interest of the Employer.
(iii) Loading and unloading is neither a full time job nor a regular job. It depends purely on the arrival and departure of transport vehicles.
It is also stated that similar establishments in the surrounding areas, engage contract labour for such non-production activities.
3. Petitioner alleges that when matters stood thus, at the behest of a politically motivated Trade Union Leader, the State Government has issued the impugned notification dated March 27, 1997 under Section 10(1) of the Contract Labour (Regulation & Abolition) Act, 1970 ('Act' for short) prohibiting with immediate effect, the employment of contract labour on the following process/operations of the petitioner:
I. TAFE (Tractor Division) II. TAFE (Plastic Division)
1) Assembling rate transmission
1) Machine Operating
2) Engine Moulding
2) Heating Equipment
3) Type Moulding
3) Grinding
4) Binding
4) Quality Control
5) Tractor-Driving
5) Blending
6) Quality Control
6) Tool Room
7) Plant stage
7) Stores
8) Maintenance
8) House Keeping
9) Store Material Movement
9) Material Movement
10) Diesel Generator Operating
10) Cleaning
11) House Keeping
11) Garden Maintenance
12) Material Movement
12) Canteen
13) Cleaning
13) Security
14) Canteen
14) Loading and Unloading
15) Security
16) Garden Maintenance
4. Petitioner contends that the said notification violates Section 10 of the Act as none of the criteria mentioned in the said Section has been taken into account or considered by the Government before issuing the said notification. Petitioner alleges that neither the State Government nor the State Contract Labour Advisory Board: (a) gave an opportunity to the petitioner to put forth its views or objections; (b) gave a hearing to find out whether prescribed criteria are fulfilled; (c) held any enquiry or investigation to find out whether it was necessary to issue such a notification. Petitioner alleges hostile discrimination, as only the petitioner has been singled out in their area for prohibiting contract labour. The petitioner alleges that the notification is vitiated on account of legal mala fide and colourable exercise of power. Petitioner has therefore filed this petition for quashing the said notification dated March 27, 1997 as being violative of Articles 14 and 19(1)(g) of the Constitution of India and seeking a direction to the first respondent not to enforce the same against the petitioner and not to take any coercive or consequential steps under the Act. This Court on April 7, 1997 while issuing rule, granted a conditional stay which continues to be in force till now.
5. The respondents have filed statements of objections contending that requirements of Section 10 of the Act have been fulfilled and there is neither mala fides nor discrimination. On the contentions raised, the question that arises for consideration is whether the notification dated March 27, 1997 is valid in law.
6. The object of the Act is to regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances and for matters connected therewith. Section 10 of the Act deals with prohibition of employment of contract labour. Sub-section (1) empowers the State Government, after consultation with the State Advisory Contract Labour Board, prohibit, by notification published in the official gazette, employment of contract labour in any process or operation or other work in any establishment (other than an establishment in respect of which the appropriate Government under the Industrial Disputes Act, 1947, is the Central Government). Sub-section (2) provides that before issuing any notification under Sub-section (1) in relation to an establishment, the appropriate Government shall have regard to the conditions of work and benefits provided for the contract labour in that establishment and other relevant factors such as:
(a) whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment;
(b) whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment;
(c) whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto;
(d) whether it is sufficient to employ considerable number of whole-time workmen.
7. The Primary object of the Act is to stop exploitation of contract labourers by contractors or establishments. The intention of the Act is not to abolish contract labour in its entirety, but only in appropriate cases. The decision regarding prohibition of employment of contract labour vests with the appropriate Government which should however consult the Advisory Board before taking a decision. Any decision taken in that behalf will be subject to judicial review. As Section 10 contemplates scrutiny of individual establishments for abolition/prohibition of a contract labour, a notification issued under Section 10 cannot be challenged on the ground of hostile discrimination and that contract labour had not been prohibited in other establishments.
8. A Constitution Bench of the Supreme Court considered the purport and effect of Section 10 of the Act in Steel Authority of India v. National Union Water Front Workers . The Supreme Court observed thus at pp. 1111, 1112 of LLJ:
"45....... A careful reading of Section 10 makes it evident that Sub-section (1) commences with a non obstante clause and overrides the other provisions of the CLRA Act in empowering the appropriate Government to prohibit by notification in the Official Gazette, after consultation with Central Advisory Board/State Advisory Board, as the case may be, employment of contract labour in any process, operation or other work in any establishment. Before issuing notification under Sub-section (1) in respect of an establishment the appropriate Government is enjoined to have regard to: (i) the conditions of work; (ii) the benefits provided for the contract labour; and (iii) other relevant factors like those specified in Clauses (a) to (d) of Sub-section (2). Under Clause (a) the appropriate Government has to ascertain whether the process, operation or other work proposed to be prohibited is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment; Clause (b) requires the appropriate Government to determine whether it is of perennial nature that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment; Clause (c) contemplates a verification by the appropriate Government as to whether that type of work is done ordinarily through regular workmen in that establishment or an establishment similar thereto; and Clause (d) requires verification as to whether the work in that establishment is sufficient to employ considerable number of whole-time workmen. The list is not exhaustive. The appropriate Government may also take into consideration other relevant factors of the nature enumerated in Sub-section (2) of Section 10 before issuing notification under Section 10(1) of the CLRA Act.
49. .....This clearly indicates that the Central Government had not adverted any of the essentials, referred to above, except the requirement of consultation with the Central Advisory Board. Consideration of the factors mentioned above has to be in respect of each establishment, whether individually or collectively, in respect of which notification under Sub-section (1) of Section 10 is proposed to be issued. The impugned notification ... does not reveal compliance of Sub-section (2) of Section 10. This is ex- facie contrary to the postulates of Section 10 of the Act. Besides it also exhibits non-application of mind by the Central Government."
9. In L & T Mc Neil Ltd. v Government of Tamil Nadu the validity of a notification under Section 10(1) of the Act prohibiting employment of contract labour in regard to the process of sweeping and scavenging in establishments/factories was considered. In that case there was no effective consultation with the State Advisory Board. The records also did not disclose any evaluation or relevant factors and materials by the Government before issuing the notification. The Supreme Court while quashing the Notification observed thus at pp. 736, 737 of LLJ:
"4. Consultation does not mean concurrence and the views of the Board are ascertained for the purpose of assisting the Government in reaching its conclusion on the matter, one way or the other. The Government reached the conclusions on the basis of notings made on various aspects ...
5. what is set out in this format is what is contained in Section 10 of the Act and is a mere repetition on the expressions used therein. The questions posed indicate the provisions contained in the Section, while answers given thereto are by monosyllables and it is not clear from the record available as to whether the same was based on any material.....
6. Thus, it is clear that no definite view was expressed by the Board in this regard. The fact that the Board had been consulted in the matter is indisputable. So also the fact that no decision was taken by it. Therefore, we asked the learned counsel for the State of Tamil Nadu to make available the necessary files leading to the draft notification and final notification and other materials that were relied upon in issuing the notification in question. Even after careful perusal of these files we found that there is no further or fresh material available in these files. In the circumstances, it is not very clear as to how the Government could have reached the conclusion one way or the other in the absence of any advice by the Board and in the absence of any material. The decision of the Government in issuing the notification under Section 10(1) of the Act is thus vitiated because of non-consideration of relevant materials. The mere fact that several notifications have been issued in relation to contract labour or that system in sweeping and scavenging has been abolished in some other industries may not, by itself, be sufficient to hold that a common notification applicable to all industries and establishments abolishing contract labour in sweeping and scavenging could have been issued by the Government without necessary material. The Government ought to take into consideration the relevant factors contained in Sections 10(2)(a) to (d) of the Act and thereafter decide the matter. These aspects were, however, lost sight of by the High Court in the decisions rendered by its earlier.
10. Therefore, a notification under Section 10(1) of the Act issued by the appropriate Government prohibiting employment of contract labour in any establishment will be valid only if it is issued: (a) after consultation with the Advisory Board; and (b) after considering the conditions of work and benefits provided for the contract labour in the establishment and other relevant factors, in particular those enumerated in Clauses (a) to (d) of Sub-section (2). We will now examine the facts of this case with reference to the said requirement of law.
11. TAPE Employment Union [second respondent] gave a representation dated October 11, 1995 to the State Government contending that the petitioner is not entitled to employ contract labour in regard to work of permanent or perennial nature and requested the Government to prohibit employment of contract labour by the petitioner: When the Government did not take any action on the said representation, the second respondent filed WP No. 43915 of 1995. The said petition was disposed by a learned single Judge of this Court by order dated December 18, 1995, merely recording the submission of the [earned Government Pleader that an endeavour will be made to take a decision on the said representation, within four months from the date of receipt of order. Immediately thereafter, second respondent sent a reminder dated January 5, 1996 to the State Government to take a decision on its representation, as stated in the order passed in W.P. No 43915/1995. The State Government considered the second respondent's representation and passed an order dated April 3, 1996 on the said representation, directing the second respondent to file a petition before the Advisory Board in the first instance. The State Government also informed the second respondent that after the Advisory Board examines the central issue and makes relevant recommendations, it will consider the same and pass appropriate orders. In the course of the order, the government has stated thus:
"The central issue which has to be determined in this case is whether the company in question has been indulging in any unfair labour practice by engaging contract labour when workmen can be employed directly even according to the tests laid down by Section 10(2) of the Act .... The State Advisory Board is the proper forum before which all the relevant facts should be placed by concerned parties and based on the detailed examination and its recommendations, the government would take appropriate action. The State Advisory Board will have to give sufficient opportunities to all concerned parties to place the necessary materials before them 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 (sic) terms. If, however, the contract labour is not abolished, the State Advisory Board has to reject the reference."
A copy of the said order was sent by the Government to the second respondent on April 3, 1996 itself. Another copy thereof was sent to the Labour Commissioner for information and action.
12. The Labour Commissioner sent a reply dated September 12, 1996 to the State Government reporting that enquiries revealed that petitioner was employing contract labour in 16 areas in its Tractor Division and 14 areas in its Plastics Division (enumerated in the letter; that Supreme Court in its decision dated May 9, 1996 has directed that the State Government should immediately prohibit-employment of contract labour in such areas; that the petitioner was employing contract labour in areas directly related to production and the factors mentioned in Section 10(2)(a) and (b) exist in the case of petitioner; and that therefore the Government should obtain the recommendations of the Advisory Board and take a decision as to whether employment of contract labour by petitioner should be prohibited or not. In pursuance of it, the State Government sent a communication dated December 9, 1996 directing the Labour Commissioner to place the matter before the State Contract Labour Advisory Board for consideration at its meeting scheduled to be held on the next day (December 10, 1996). Accordingly, the matter was placed before the Advisory Board. The proceedings of the Advisory Board dated December 10, 1996 discloses that the Advisory Board merely considered the reference made by the Government on December 9, 1996 and the report dated September 12, 1996 by the Labour Department to the Government and mechanically recommended abolition of contract labour in petitioner's establishment in 16 areas in Tractor Division and 14 areas in Plastics Division as per the report dated September 12, 1996 of the Labour Commissioner. The said recommendation was made without any independent enquiry and investigation by the Advisory Board.
13. The said proceedings dated December 10, 1996 of the Advisory Board also recommended abolition of employment of Contract Labour in certain areas of work in (i) Britannia Industries Ltd.; (ii) steel roiling mills; (iii) in hospitals and nursing homes apart from recommending abolition of contract labour in Industrial Canteens in factories where more than 250 workers were employed. The Secretary to Government, Labour Department put up a note on January 18, 1997, opining that in regard to petitioner herein and Britannia Industries Ltd., suggesting that a draft notification be issued calling for objections, giving 60 days time, and thereafter if necessary issue a final notification; and in regard to the remaining three the matter may be placed before cabinet. The Deputy Chief Minister on February 22, 1997 directed that the opinion of the Advocate Genera! may be obtained. Thereafter, the matter was referred to the Advocate General for his opinion. A subsequent note dated March 19, 1997 made by the Secretary to Government, Department of Labour, that the Advocate General had orally furnished his opinion that the Government can straightaway issue a final notification, abolishing contract labour without issuing any draft notification, and therefore proposing that notifications be issued abolishing employment of contract labour in all the five establishments recommended by the Advisory Board and that in the first instance in the case of petitioner herein and Britannia Industries Ltd. The said note, having been approved, the Government issued the impugned notification dated March 27, 1997.
14. It is thus seen that State Government did not apply its mind with reference to the criteria prescribed in Section 10 of the Act, at any point of time. Even the Advisory Board which normally invites representations/ objections and secures reports from the concerned, did not do so in the case of petitioner. The reference to the Advisory Board was made on December 9, 1996 and the Board received the reference on December 10, 1996 and on the same day passed a resolution recommending prohibition of employment of contract labour by the petitioner industry concerned merely acting on the report of the Labour Commissioner. As noticed above, Labour Commissioner's report was mainly in regard to areas of operation in petitioner's establishment where contract labour was employed. The Labour Commissioner had not held any enquiry or given any opportunity to the petitioner or the contractors or the employees to express their views in the matter. Thus, the recommendation of the Advisory Board in this case has also been made in a mechanical manner without any kind of enquiry or application of mind. In fact the action of the Advisory Board violates Government Order dated April 3, 1996 made on second respondent's representation wherein the Government had specifically stated that if the matter is referred to Advisory Board, it will have to give sufficient opportunity to all concerned parties, to place the necessary materials before taking a decision in the matter.
15. The position is no better when the recommendation of the Advisory Board was received by the Government. The Government did not consider the matter with reference to the conditions of work and benefits provided for the contract labour in the establishment of petitioner. Nor did it consider the matter with reference to any relevant factors including those enumerated in Section 10(2) of the Act. On the other hand, a note was put up merely referring to the recommendation of the Advisory Board and proposing that a draft notification be issued, calling for objections. But, strangely, neither a draft notification was issued nor opportunity was given to the employer or contractor or workmen to file their objections. On the other hand, purporting to act on the advice tendered by the Advocate General that objections need not be invited and the Government can straightaway issue a final notification under Section 10(1) of the Act, the final notification was issued on March 27, 1997. Thus, there is neither consideration nor application of mind by the State Government to any relevant aspect, let alone the aspects referred to in Section 10(2) before taking a decision to prohibit employment of contract labour in the petitioner's establishment. What is surprising is that Advisory Board also did not hold any enquiry or investigation or give opportunity to affected parties to have their say in the matter. Therefore having regard to the principles laid down by the Supreme Court in Steel Authority of India (supra) and L & T McNeil (supra), the notification dated March 27, 1997 has to be declared invalid and quashed.
16. Learned counsel for the second respondent submitted that Section 10(2) of the Act states that appropriate Government 'shall have regard to' the condition of work and benefits provided for the contract labour in that establishment and other relevant factors such as those mentioned in Section 10(2); that the words 'shall have regard to' have the same meaning as the words 'having regard to' that the use of such words would mean that consideration of the factors mentioned in Section 10(2) is not mandatory, but only for the general guidance of the Government; and therefore non-consideration of the factors mentioned in Section 10(2) will not render invalid, the notification dated March 27, 1997 issued under Section 10(1) of the Act, in the absence of any mala fides. He relied on the decisions of Supreme Court interpreting the words 'having regard to' in State of Karnataka v. Ranganatha Reddy and Shri Sitaram Sugar Co. Ltd. v. Union of India . He also submitted that in such matters, the endeavour of the Court should be to support the prohibition of contract labour, so as to advance the object of the Act.
17. The said contentions of the learned counsel for the second respondent cannot be accepted, as they run counter to the principles laid down by Supreme Court in Steel Authority of India (supra) and L & T McNeil (supra) directly dealing with Section 10 of the Act. In view of the above, it is unnecessary to consider the submission on behalf of the petitioner, that the decisions relied on by second respondent, interpreting the words 'having regard to' will not apply to Section 10(2) which uses the words 'shall have regard to' and not 'having regard to'. Even if the words 'shall have regard to' have the same meaning as the words 'having regard to' the second respondent's contention cannot be accepted. The following observations of the Supreme Court in Shri Sitaram Sugar Co. Ltd. case (supra), relied on by the second respondent (made with reference to Section 3(3C) of Essential Commodities Act relating to fixation of price of levy sugar) negative the contention of the second respondent:
"... The reasonableness of the order made by the Government in exercise of its power under Sub-section (3-C) will, of course, be tested by asking the question whether or not the matters mentioned in Clauses (a) to (d) have been generally considered by the Government in making its estimate of the price, but the Court will not strictly' scrutinise the extent to which those matters or any other matters have been taken into account. There is sufficient compliance with the sub-section, if the Government had addressed its mind to the factors mentioned in Clause (a) to (d), amongst other factors which the Government may reasonably consider to be relevant, and has come to a conclusion, which any reasonable person, placed in the position of the Government, ' would have to come to...."
(emphasis supplied)
18. The respondents lastly submitted that another recommendation made by the Advisory Board, in its proceedings dated December 10, 1996, with reference to 'Industrial Canteen in the Factories where more than 250 workers are employed' had been accepted by the Government by issuing a notification dated April 11, 1997 under Section 10(1) of the Act and that notification has been upheld by a Division Bench of this Court in Larson & Toubro Ltd. v. State of Karnataka (W.P. No. 14263/1997 and connected cases decided on March 30, 1998) which in turn has been affirmed by the Supreme Court in Barat Fritz Werner Ltd. v. State of Karnataka AIR 2001 SC 781 : 2001-I-LLJ-763. It is submitted that in view of that decision, the validity of the notification dated March 27, 1997 relating to petitioner should also be upheld. But, the facts relating to the notification dated April 11, 1997 prohibiting employment of contract labour in industrial canteens and factories, employing 250 workers or above, considered in Barat Fritz Werner are completely different. In that case the Supreme Court rejected the contentions of the employer that prohibition of contract labour is contemplated only in respect of operations which are activities closely and directly connected with the main activity of the factory or establishment, and not in regard to activities which are not integral to the work of the establishment. This Court and the Supreme Court examined the records and found that the Advisory Board had taken a decision to recommend abolition of contract labour only after giving due opportunity to the employer to make representations and file objections and by securing reports from different districts and information from labour department and others concerned; and that the Government also took note, in detail, of not only the report of the Advisory Board but also various factors mentioned in Section 10(2), that is conditions of works, the benefits provided to the contract labour in the establishment, need for such activity, whether it was perennial in nature or otherwise, whether such activity was carried on ordinarily through regular workmen in that establishment or similar establishments, and whether the work was sufficient to employ number of whole-time workmen, before reaching a decision. It is in those circumstances, the Supreme Court and this Court, came to the conclusion that Section 10(2) was fully complied with and consequently upheld the validity of the notification issued under Section 10(2).
19. Before parting, it is necessary to refer to the following decisions relied on by the learned counsel for the petitioner:
(i) Vegoils Pvt. Ltd. v. Workmen wherein the Supreme Court held that employment of contract labour in regard to the work of loading and unloading was permissible where the facts showed drastic variation in the nature of work to be done by the contractor and also showed that other similar establishments also got done such work through contract labour.
(ii) Gujarat Narmada Valley Fertilisers Co. Ltd. v. State of Gujarat 2000-I-LLJ-948 wherein the Gujarat High Court quashed the Notification under Section 10(2) prohibiting employment of contract labour in regard to security work, where Government failed to consider the question whether such work is done through regular workmen in other similar establishments.
As we have already held that the notification is liable to be quashed for non consideration of relevant factors as per Section 10(2), it is not necessary to consider these decisions further.
20. In the result, we allow this petition and consequently the notification dated March 27, 1997 is quashed. However, it is open to the State Government to examine the matter afresh in accordance with law.