Gujarat High Court
Chief Engineer-Thermal Power ... vs Workmen Represented By Bijlee Mazdoor ... on 20 March, 2024
Author: Biren Vaishnav
Bench: Biren Vaishnav
NEUTRAL CITATION
C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 771 of 2018
In R/SPECIAL CIVIL APPLICATION NO. 16912 of 2005
With
CIVIL APPLICATION (FOR STAY) NO. 2 of 2018
In R/LETTERS PATENT APPEAL NO. 771 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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CHIEF ENGINEER-THERMAL POWER STATION,GEB.
Versus
WORKMEN REPRESENTED BY BIJLEE MAZDOOR PANCHAYAT & ORS.
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Appearance:
MR. K.M.PATEL, SENIOR COUNSEL WITH MS LILU K BHAYA(1705) for the
Appellant(s) No. 1
DS AFF.NOT FILED (N) for the Respondent(s) No. 3,4
MRS SANGEETA N PAHWA(527) for the Respondent(s) No. 1
NOTICE SERVED for the Respondent(s) No. 4
NOTICE UNSERVED for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
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NEUTRAL CITATION
C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024
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and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 20/03/2024
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV) 1 This appeal under Clause 15 of the Letters Patent has been filed by the original petitioner, Chief Engineer, Thermal Power Station, Gujarat Electricity Board, challenging the CAV Judgement dated 31.08.2017. By the judgement in Special Civil Application No. 16912 of 2005, the learned Single Judge, in a challenge to the judgement and award dated 24.03.2005 passed by the learned Industrial Tribunal, Nadiad, in Reference (ITN) No. 682 of 1998 partly confirmed the award of the Tribunal which directed the petitioner, appellant herein to treat the workmen engaged in railway track maintenance work as workmen of the Board from 01.01.2000 onwards waiving their educational qualification and satandard of maximum age of entry in the service of the Board. The learned Single Judge partly set aside the award of the Tribunal to a certain extent.
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NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined 2 Facts in brief are as under:
2.1 The respondent No.1, Bijlee Mazdoor Panchayat, through its workmen, raised an industrial dispute. It was their case that the perennial activity of the Gujarat Electricity Board is to generate and transmit electricity.
Thermal Power Stations at various places, including one at Dhuvaran, Taluka: Khambhat, District: Kheda have been set up. A railway track of 15.50 kms length and it terminate inside the power station which were earlier being maintained by the railways and now by the Board, is being used for transportation of coal and other materials to the power station. In light of the railways discontinuing to maintain the track, the work of such maintenance of the track was handed over to the workmen of the respondent Union who were engaged through a contractor.
2.2 The contract workers raised an industrial dispute and on it failing, a reference was registered which was Page 3 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined referred to the Tribunal. The reference inter alia was to the effect whether the contractors working at the Dhuvaran Thermal Power Station should be held to be sham and bogus and whether the workmen should be given the benefit of permanency with the Board from the date they entered service with the Board. The Tribunal, by its order dated 24.03.2005, passed an order which we have referred to hereinabove.
2.3 The learned Single Judge, by the judgement under challenge affirmed the order of the Tribunal though partly modified / set aside the same.
3 Mr.K.M.Patel, learned Senior Counsel appearing with Ms.Lilu K. Bhaya, learned counsel for the appellant, made the following submissions to challenge the order of the Tribunal and in turn, the order of the learned Single Judge.
3.1 Mr.Patel, learned Senior Counsel, would submit that Page 4 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined the track was earlier being maintained by the railways which, on the railways discontinuing the practice of maintenance, the Board had to hand over such maintenance work to a contractor.
3.2 Mr.Patel, learned Senior Counsel, would submit that, admittedly, the core activity of the Board was to generate and transmit electricity. Dhuvaran Thermal Power Station with automatic plants would therefore, in light of the activity of the Board, generate and transmit electricity. The railway track was used for transportation of coal and other materials and its maintenance therefore cannot be said to be a core activity of the Board. 3.3 Mr.Patel, learned Senior Counsel, would submit on reading the award in extenso of the Tribunal that the award of the Tribunal suffered from an error of jurisdiction. He would submit that reading the award would indicate that it had undertaken the exercise of holding the contract between the Board and the Page 5 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined contractor which engaged the workmen as sham and bogus. In fact, the eight criterias adopted by the Tribunal, keeping in view the decision of the Hon'ble Supreme Court in the case of Gujarat Electricity Board vs. Hind Mazdoor Sabha & Ors., reported in 1995 (5) SCC 27, and that of this Court in the case of Steel Authority of India Ltd vs. Gujarat Mazdoor Panchayat was erroneous.
3.4 Mr.K.M.Patel, learned Senior Counsel, would take the Court through the evidence of various witnesses to submit that the Tribunal has completely misconstrued and misread the evidence on record. He would submit that from the testimony of the witnesses of the Board, namely, that of Shri Natwarlal Ranchhodbhai Makwana (Exh.34), who was working as a Officer of the Gujarat Electricity Board, it was not clear that the Board was not carrying out any supervision of the contract workers and there was no "Control & Supervision" so as to draw an inference that the workmen of the contractor could be Page 6 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined held to be direct and permanent employees of the Board. 3.5 Mr.Patel, learned Senior Counsel, would also take us through the deposition of one Shri Vinodbhai Patel (Exh.35), who was the Executive Engineer of the Board and submit that it was the specific case of the officers of the Board that there was no disciplinary control or supervision nor was the Board paying the workers so as to affirm and declare that it was the Board who should be treated as the principal employer when in fact, it was the two contractors, Maganbhai and Kaasambhai, the Manager and Supervisor of M/s.Chirag Associates who were paying the workers and directing them to carry out the work and the nature thereof.
3.6 Mr.Patel, learned Senior Counsel, would also take us through the deposition of the contractors, Manager, Shri Maganbhai (Exh.39) who clearly stated that the workmen were engaged and paid. Therefore, the contract, supervision and control of the contractors and the eight Page 7 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined tests applied by the Tribunal, which inturn were confirmed by the learned Single Judge was clearly erroneous and deserved to be interfered with. 3.7 Mr.K.M.Patel, learned Senior Counsel, would submit that from the evidence on record, it was the case of the petitioner - appellant herein that the wage registers were maintained by the contractor, that they were produced for the period from January 1997 to March 2000. An adverse inference could not be drawn by the Tribunal on the ground that the earlier wage registers were not produced. The application for production of wage register was filed much after Maganbhai Chauhan, the last witness was examined by the Board on 01.02.2000. Even from the testimony of the workmen who were examined, it was clear that they were not in a position to make out a case that the supervision and control was with the Board and the Tribunal itself was of the opinion that the principal employer had no full control. 3.8 In other words therefore, if the type of control of the Page 8 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined Board was secondary, the Tribunal could not have declared that the workmen of the contractor be treated as direct employees of the Board. There was no evidence produced by the Union to show that the concerned workmen were selected or appointed by the Board. In fact, the evidence of the Officer would suggest that post the tender issued by the Board which awarded the contract to M/s. Chirag Associates, such contractor inturn engaged the workmen. The Tribunal, while interpreting the date of the license, committed an error in holding that if there is a breach, inasmuch as, there was no registration of the contract, it was not enough to establish an employer and employee relationship. In fact, it was otherwise. Breach of the provisions of the license had only penal consequences as set out by the Hon'ble Supreme Court in the case of Deenanath Vs. National Fertiizers Ltd., reported in AIR 1992 SC 457. 3.9 Mr.Patel, learned Senior Counsel, would submit that in light of the decision of the Constitution Bench of the Page 9 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined Hon'ble Supreme Court in the case of Steel Authority of India Limited vs. International Union of Bijlee Workers, reported in (2001) 7 SCC 1, the crietrias which were relevant for the purposes of prohibiting contract labour were set out which were not gone into by the Tribunal as well as by the learned Single Judge. Mr.Patel, learned Senior Counsel, would submit that the criteria under Sec.10(2) of the Contract Labour (Regulation & Abolition) Act, 1970, cannot be applied for declaring the contract system sham or paper arrangement. For this, he would rely on a decision of Hon'ble Bombay High Court in the case of Airport Authority of India vs. Indian Airport Employees Union., reported in (2016) II LLJ 431 BOM. Mr.Patel, learned Senior Counsel, would submit that the criteria for declaring the contract as sham and bogus have been set out in the decisions of the Hon'ble Supreme Court in the case of (a) Balwantrai Saluja vs. Air India Ltd., reported in (2014) 9 SCC 407, (b) International Airport Authority of India vs. International Air Page 10 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined Cargo Workers Union, reported in (2009) 13 SCC 374, (c) Bengal Nagpur Cotton Mills vs. Bharatlal., reported in (2011) 1 SCC 635 and (d) Bharat Heavy Electricals Ltd vs. Mahendra Prasad Jakhmola, reported in (2019) 13 SCC 82. He would refer to the relevant paras of the aforesaid decisions to submit that the Tribunal fell into error, inasmuch as, not only wrong criteria was applied, but such criteria so applied was contrary to the evidence on record.
3.10 Mr.Patel, learned Senior Counsel, would submit that if the CAV Judgement of the learned Single Judge is read, the learned Single Judge, except for reproduction of the relevant observations of the Tribunal in setting out the eight criteria, has not independently examined the issue and has solely not interfered with the award on the ground that it cannot do so merely because two views were possible. This in Mr.Patel's submission was an error which ought to have been corrected and when the Tribunal had applied a wrong criteria, misread the Page 11 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined evidence, the learned Single Judge could not have otherwise affirmed the award merely on account of holding that it was not open for it to do so. He would submit that, admittedly, there was a contract which was awarded based on a tender. It was not a case where there was absolute supervision and control of the Board and the judgements cited by the Tribunal in the case of Gujarat Electricity Board (supra), was no longer available in light of the judgement of the Constitution Bench. The eight criterias on the basis of which the Tribunal examined the matter is relevant. He would submit that (i) the activity and business of the principal employer is not relevant, (ii) once there was a genuine need for engagement of contract labour, unless prohibited, it was not open for the contractor / employer to do so, (iii) the length of continuous and uninterrupted service was hardly five years, (iv) the nature of work being perennial, was not necessary for the purposes of holding the contract being sham and bogus, (v) merely because the contract labour was engaged from nearby area would not Page 12 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined ipso facto lead to a conclusion that the Board had undertaken direct appointment, (vi) the extent of supervision and control do not assume importance when it was clearly established that there was no full control of the Board, (vii) that factor as to for whom the goods are produced is relevant because it is an obvious fact that engagement of contract labour is for production of goods and services by the employer and the eighth factor with regard to registration and license would entail only penal provisions in case of breach and would not be the criteria for adopting an employer - employee relationship with the Board.
4 Ms.Sangeeta Pahwa, learned advocate appearing for the respondent - Panchayat, would make the following submissions:
4.1 She would submit that the award of the Tribunal as well as the judgement of the learned Single Judge would indicate that there is no jurisdictional error. The tests applied by the Tribunal are just and proper as Page 13 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined enumerated in the judgement of the Division Bench of this Court in the case of Steel Authority of India Ltd vs. Gujarat Mazdoor Panchayat., reported in 2004 (1) GLR 729.
4.2 She would submit that such criterias have been enumerated in Sec.10(4). She would contend that arguments of the learned counsel for the appellant cannot be accepted as the findings of the Tribunal are based on evidence on record which the Tribunal held clearly on the basis of evidence that the contract was sham and bogus.
4.3 Ms.Pahwa, learned counsel, would take us through the Examination-in-Chief of the worker and submit that it was testified by the worker that they were appointed in the year 1992 and 1994 by the Board. Even the findings of the Executive Engineer and that of the Manager-
Maganbhai indicated that in the year 1993, 12 workers were appointed whereas the license was taken only in the year 1995. Admittedly therefore, the contract had no license from the year 1992 to 1995.
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NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined 4.4 Ms.Pahwa, learned counsel, would submit that the workmen had made an application at Exh.65 for production of documents and the contractor had responded vide Exh.71 that it had no documents for the period from 1992 to 1995. Oral evidence was available on record and so were documents and once there was evidence produced by the workmen and no evidence by the employer, and on shifting the burden to the employer, and the employer having failed to discharge such burden, would make the case of the employer ineffective. She would rely on a decision of the Hon'ble Supreme Court in the case of Director, Fisheries Department vs. Bhikhubhai Chavda., reported in 2010 (1) SCC 47. 4.5 In context of findings of the Tribunal on the extent of supervision and control of the principal employer, Ms.Pahwa, learned counsel, would submit that the Tribunal has considered the test of supervisory control as set down by the judgement of the Hon'ble Supreme Court in the case of International Airport Authority of India Page 15 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined (supra) and from the oral evidence of Maganbhai it is clear that it was Kaasambhai who was the Supervisor and he was not examined as to whether he supervised the work. No appointment letters or wage registers are produced by the employer from 1992 to 1995 though the workers were engaged from that period, and therefore, the employer had not produced any evidence to discharge the burden of workmen to prove otherwise. 4.6 Ms.Pahwa, learned counsel, would submit that no material was produced before the Industrial Tribunal to show that the contract was genuine. No tender document was produced. Moreover, the license that was produced was for the period from 01.10.1995 to 30.06.1996 which was not relevant. Ms.Pahwa, learned counsel, would rely on various rules of the Contract Labour Act to submit that there was a breach of such rules and in absence of production of such documents as stipulated under the rules, it was established that the contract given by the contractor was sham and bogus. To substantiate her case, Page 16 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined she would rely on the following decisions:
(1) Gujarat Electricity Board, Thermal Power Station, Ukai, Gujarat Vs. Hind Mazdoor Sabha & Ors., reported in (1995) 5 SCC 27.
(2) Steel Authority of India Ltd., Vs. Gujarat Mazdoor Panchayat., rendered in Special Civil Application No. 10225 of 1996 dated 18.09.2003.
(3) Gujarat Electricity Board, Ukai vs. Hind mazdoor Sabha., rendered in Special Civil Application No. 2119 of 1988 dated 15.12.1990.
(4) Govindbhai Kathadbhai Mayaid Vs. State of Gujarat., rendered in Letters Patent Appeal No. 1209 of 2010 dated 10.03.2011.
(5) Director, Fisheries Terminal Department Vs. Bhikubhai Meghajibhai Chavda., reported in (2010) 1 SCC 47.
5 Having considered the submissions made by the learned counsels appearing for the respective parties and having perused the award and the order / CAV Judgement Page 17 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined of the learned Single Judge, we find that the learned Single Judge in extenso has reproduced the relevant paragraphs of the decisions of the Tribunal in setting out the eight criterias raised before it to come to the conclusion that the contract of railway track maintenance was a contract which was sham and bogus, and therefore, the observations in the final order of the Tribunal cannot be faulted. Cautious of the fact that in an appeal arising out of an order / judgement of the learned Single Judge which inturn has considered award of the Industrial Tribunal which has examined the evidence before it, we would tread with caution, however, we are more or less compelled to undertake an exercise of reappreciation of the evidence in appeal in context of the arguments and the judgements cited before us, as the learned Single Judge has merely reproduced the findings of the Tribunal and made a passing observation that in exercise of powers under Articles 226 & 227 of the Constitution of India, it is not open for the Court to upset the order of the Tribunal even if two views were possible. Page 18 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024
NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined 5.1 The Tribunal considered the eight criterias in coming to the award it did pass. The first criteria that the Tribunal in light of the evidence considered was the issue relating to the activity and business of the Board. The Tribunal and the learned Single Judge came to the conclusion that the Board is engaged in production of electricity for which coal or oil / gas are used as fuel / raw material, and without such use the boilers and the turbine cannot operate, and therefore, it came to the conclusion that the maintenance of the railway line and the workers engaged in such activity were an integral part of the principal activity. It also on the second factor of the genuine need of engaging contractors observed that since the spare parts of the track have been kept in operational position, it was in direct proximity with the nature of work of the Board, there can be no genuine need for engaging the contract workers.
5.2 Examining the reasonings of the Tribunal in context of the evidence on record, what is evident is that it cannot Page 19 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined be said that the maintenance of the railway track was a core activity of the Board. It had come on record that post 2010 or 2011, the operation of the Unit was through piped gas and the railway track was under no use. The evidence of the workmen, namely, Chhatrasinh, who was examined at Exh.32, would indicate that though he deposed that the tools for carrying out the work were given by the Gujarat Electricity Board, and there was supervision carried out by the Officers of the Board, in the Cross-examination, it was evident that he had deposed that the muster rolls were maintained by the Gujarat Electricity Board was not known to him. For the wage registers for the period of 2000, which were shown to him, he admitted that the signatures were his though he said that the Board would give the tools and that it was the Board which paid the salaries. He denied knowledge of the fact as to who in the Board would pay the salaries. Similarly, one Natwarlal Ranchhodbhai Makwana, officer of the Board was examined at Exh.34 who clearly stated that the work of maintenance of Page 20 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined railway tracks was given to one M/s.Chirag Associates and the attendance registers were maintained by the contractor. Maganbhai, was the manager and Kaasambhai was the Supervisor of the contract workers. They were supervising the work carried out by these workers. In the cross-examination, he admitted that there was a work order dated 23.03.1992 (Exh.32) which was of one M/s.Chirag Associates. He denied the fact that if the work of maintenance of track was disturbed, the core activity of the Board would suffer.
5.3 The Executive Engineer, Vinodbhai was examined at Exh.35. He denied that if the maintenance work of the track stops, it would affect the production of the Board. It was his case that the maintenance work was carried out which was supervised by Maganbhai and Kaasambhai and that as and when necessary he would carry out weekly visit. Merely because in his cross-examination at one stage the Executive Engineer deposed that he would produce the relevant evidence that the workmen were Page 21 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined that of the Supervisor would not discount the case of the employer that work infact was carried out by the contract workers and that there was no full control and supervision of the employer i.e. Gujarat Electricity Board. 5.4 Maganbhai Chauhan, the Manager of the contract has been examined at Exh.39. He is also been examined as a witness of the contractor. Reading of the deposition indicates that the instruments and tools for carrying out maintenance work is provided by the contractor. That in case, the workers have to take leave, they have to take prior permission of Kaasambhai, the Supervisor. The work has to be carried out in accordance with the directions of the Supervisor, Kaasambhai. What we find from the discussion of this evidence of the Tribunal and considering the eight criterias, two of which we have set out hereinabove and the remaining six which the Tribunal has held to be factors in favour of holding absorption indicates that merely because the factor of the activity and business of the Board being generation of electricity Page 22 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined and maintenance of track being anciliary activity would not lead the Court to hold that the activity and business was a core activity of the Board which was essential and vital to the operation so as to suggest the engagement of contractor's workers as being an exercise on paper and being sham and bogus.
5.5 As far as the third factor with regard to length and continuous and uninterrupted service is concerned, we are in agreement with the submission of the learned counsel for the appellant Shri Patel that at best the workmen had been in service for a maximum of five years, and thereafter, they continued by virtue of the operation of the interim order. This itself would not work against the employer in coming to a conclusion that the contractor's workers deserve to be absorbed as having been working regularly and continuously and uninterruptedly. As far as the 4 th and the 5th factors with regard to supply of labour and perennial nature of the work is concerned, it has come on record that a tender Page 23 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined was floated and contract was awarded to M/s.Chirag Associates. The contract is on record and annexed to the petition and the terms of the contract inter alia indicate as one of the terms being compliance of labour laws. The earlier part of the decision of the Tribunal does indicate that the documents i.e. the tender documents and the contract were on record.
5.6 In light of this unequivocal and clear evidence of the contract being on record and the advertisement of the contract through which such contract workers were engaged, it cannot be held that there was a paper arrangement to consider the contract as being sham and bogus. Various decisions have been considered by this Court which have been shown by either side. We may consider the case of the International Airport Authority (supra). Considering the test that need to be applied to find out whether a person is an employee or an independent contractor and whether the contract labour is sham and bogus, the Hon'ble Supreme Court Page 24 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined held that merely because the worker supplied by the Contractor carries out the work under the directions and supervision of the principal employer and when the salary is paid by the contractor with his ultimate supervision would not make the contract sham and bogus. The control of the principal employer is only with regard to the work to be done. It will be apt to reproduce paragraphs 38 and 39 of the decision in the case of International Airport Authority of India (supra), which read as under:
"38. The tests that are applied to find out whether a person is an employee or an independent contractor may not automatically apply in finding out whether the contract labour agreement is a sham, nominal and is a mere camouflage. For example, if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lies with the contractor.
39. The principal employer only controls and directs the work to be done by a contract labour, when such labour is assigned / allotted/ sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned / allotted to the principal employer or used otherwise. In short, Page 25 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined worker being the employee of the contractor, the ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns / sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor."
5.7 In the case of Balwantrai Saluja (supra), where the Court considering the nature of control and exercise in the case of contract workers, the test that need to be laid down were two well recognized tests set out by the Hon'ble Supreme Court, namely, whether the principal employer pays the salary instead of the contractor and whether the principal employer controls and supervise the work of the employee. If these two tests are applied to the facts of this case, no evidence has been brought on record by the workmen to suggest that it was the principal employer who was paying the salaries and as far as the test of control and supervision is concerned, we have already referred to paragraphs 38 and 39 of the judgement in the case of International Airport Authority (supra). Even the Tribunal has on evidence Page 26 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined come to a positive finding that if not complete control and supervision, there was some control. Merely because of the factors of control discussed by the Tribunal which is contrary to the evidence as considered, it cannot be said that the employer had control and supervision. There was no evidence on record to suggest that the appointing authority was the principal employer, that he was the pay master, the he could dismiss such an employee etc., which clearly pointed out that the Tribunal applied the wrong test in coming to the conclusion of control and supervision against the employer and holding the contract to be sham and bogus. Paragraphs 60 to 65 of the decision in the case of Balwantrai Saluja (supra), read as under:
"60. In the case of Bengal Nagpur Cotton Mills case (supra), this Court observed that:
"9. In this case, the industrial adjudicator has granted relief to the first respondent in view of its finding that he should be deemed to be a direct employee of the appellant. The question for consideration is whether the said finding was justified.
10. It is now well settled that if the industrial adjudicator finds that the contract between the Page 27 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined principal employer and the contractor to be a sham, nominal or merely a camouflage to deny employment benefits to the employee and that there was in fact a direct employment, it can grant relief to the employee by holding that the workman is the direct employee of the principal employer. Two of the well-recognized tests to find out whether the contract labourers are the direct employees of the principal employer are:
(i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee. In this case, the Industrial Court answered both questions in the affirmative and as a consequence held that the first respondent is a direct employee of the appellant."
61. Further, the above case made reference to the case of the International Airport Authority of India case (supra) wherein the expression "control and supervision" in the context of contract labour was explained by this Court. The relevant part of the International Airport Authority of India case (supra), as quoted in Bengal Nagpur Cotton Mills case (supra) is as follows:
"38. ... if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a [pic]contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lies with the contractor.
39. The principal employer only controls and directs the work to be done by a contract labour, when such labour is Page 28 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined assigned/allotted/sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/ allotted to the principal employer or used otherwise. In short, worker being the employee of the contractor, the ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor."
62. A recent decision concerned with the employer- employee relationship was that of the NALCO case (supra). In this case, the appellant had established two schools for the benefit of the wards of its employees. The Writ Petitions were filed by the employees of each school for a declaration that they be treated as the employees of the appellantcompany on grounds of, inter alia, real control and supervision by the latter. This Court, while answering the issue canvassed was of the opinion that the proper approach would be to ascertain whether there was complete control and supervision by the appellant-therein. In this regard, reference was made to the case of Dhrangadhra Chemical Works case (supra) wherein this Court had observed that:
"14. The principle which emerges from these authorities is that the prima facie test for the determination of the relationship between master and servant is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do but Page 29 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined also the manner in which he shall do his work, or to borrow the words of Lord Uthwatt at p.23 in Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool) Ltd., (1952) SCR 696 "The proper test is whether or not the hirer had authority to control the manner of execution of the act in question".
63. The NALCO case (supra) further made reference to the case of Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State of T.N., (2004) 3 SCC 514, wherein this Court had observed as follows:
"37. The control test and the organization test, therefore, are not the only factors which can be said to be decisive. With a view to elicit the answer, the Court is required to consider several factors which would have a bearing on the result: (a) who is the appointing authority;
(b) who is the paymaster; (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."
64. It was concluded by this Court in the NALCO case (supra) that there may have been some element of control with NALCO because its officials were nominated to the Managing Committee of the said Page 30 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined schools. However, it was observed that the above- said fact was only to ensure that the schools run smoothly and properly. In this regard, the Court observed as follows:
"30. ... However, this kind of "remote control"
would not make NALCO the employer of these workers. This only shows that since NALCO is shouldering and meeting financial deficits, it wants to ensure that the money is spent for the rightful purposes."
65. Thus, it can be concluded that the relevant factors to be taken into consideration to establish an employer-employee relationship would include, inter alia,
(i) who appoints the workers;
(ii) who pays the salary/remuneration;
(iii) who has the authority to dismiss;
(iv) who can take disciplinary action;
(v) whether there is continuity of service; and
(vi) extent of control and supervision, i.e. whether there exists complete control and supervision. As regards, extent of control and supervision, we have already taken note of the observations in Bengal Nagpur Cotton Mills case (supra), the International Airport Authority of India case (supra) and the NALCO case (supra)."
5.8 Wage registers produced on record indicate that they were maintained by the contractor for the period from January 1997 to March 2000. That there was no absolute control of the employer. There was no evidence produced by the Union to show that the concerned Page 31 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined contract workmen were selected or appointed by the Board. Infact, the officers in not so many words stated that the Board has its own procedure and rules. The Tribunal in holding that since the contractor had no license pre 1995, is in our opinion contrary to the law laid down by the Hon'ble Supreme Court in the case of Dena Nath & Ors Vs. National Fertilisers Ltd & Ors., reported in (1992) 1 SCC 695. Para 22 of the decision would indicate that the only consequence provided in the Act where either the principal employer or the labour contractor violates the provisions of the Act are ipso facto and cannot lead one to held that the employee becomes direct employee of the principal employer. 5.9 In the case of Municipal Corporation of Greater Mumbai Vs. K.V.Shramik Sangh & Ors., reported in (2002) 4 SCC 609, in paragraph 19, the Hon'ble Supreme Court held as under:
"19. Now, we proceed to consider the validity and correctness of the impugned judgment and order in the light of judgment of the Constitution Bench in SAIL case (supra). The High Court held that the Page 32 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined work entrusted to the members of the Union continued to be basically the work of the Corporation itself of perennial nature; the Corporation has chosen to carry out the work under so-called system of labour contract without complying with the provisions of the CLRA Act, and as such the labour contract was a camouflage. We must state here itself that the Union in the writ petition alleged that the labour contract was sham and the Corporation specifically denied it in its counter affidavit but the High Court did not go into this question and did not record a finding that the labour contract in the present case was sham or a camouflage considering the material on record; even otherwise this being a serious and disputed fact in terms of the Constitution Bench judgment aforementioned, the High court could not have appropriately adjudicated on the issue exercising jurisdiction under Article 226 of the Constitution. It appears to us that the High Court proceeded to conclude that the labour contract was not genuine and the workers of the Union were employees of the Corporation because the Corporation and the contractors did not comply with the provisions of the CLRA Act. Conclusion that the contract was sham or it was only camouflage cannot be arrived at as a matter of 'law for non-compliance of the provisions of the CLRA Act but a finding must be recorded based on evidence particularly when disputed by an industrial adjudicator as laid down in various decisions of this Court including the Constitution Bench judgment in SAIL . The cases on which the High Court placed reliance were the cases where finding of fact was recorded by the labour courts on evidence. In para 34 of the impugned judgment, it is stated:-
"This court is hardly competent to record evidence or appreciate it in exercise of its powers under Article 226 of the Constitution.Page 33 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024
NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined This Court as well as the Supreme Court have always taken the view that writ jurisdiction should not be permitted to be invoked if disputed questions of facts are involved, is the submission of the learned counsel. The submissions are wholly unexceptionable. If the facts were not clear, we would have hardly allowed our writ jurisdiction to be invoked. The material which we have referred to at several places hereinbefore, is more than adequate, in our view, to come to the conclusion we have arrived at."
5.10 The Bombay High Court in a decision in the case of Airports Authority of India vs. Indian Airport Employees' Union & Ors., in paragraphs 84 and 85 observed that the parameters listed in Sec.10 and the violation thereof will not ipso facto lead to a conclusion that the contract is sham and bogus. Paragraphs 84 and 85 of the decision read as under:
"84. Throughout the earlier round of litigation, and the claim statement and depositions in the present reference, and in this petition, it is repeatedly asserted by the Union that the work carried out by the concerned workers was of perennial nature and permanent employees do same work. The Petitioner denies this. Even assuming this be the position as asserted by the Union, still it will not lead to declaring the contract being sham and bogus on that ground alone. In the decisions, which have been referred above, the Apex Court has made it amply clear that criterias under CLRA Act do not have Page 34 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined bearing on the disputes regarding the contract being sham and bogus. The Constitution Bench in SAIL-I has laid down that the abolition of the contract under section 10 and the resolution of dispute regarding the contract being sham and bogus operate in independently. Section 10 of CLRA Act delas with prohibition of employment of contract labour. It reads as under-
'10. Prohibition of employment of contract labour.-
(1) Notwithstanding anything contained in this Act, the appropriate Government may, after consultation with the Central board or, as the case may be, a State board, prohibit, by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any establishment. (2) 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 eestablishment 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 that is 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 consideratble number of whole-time Page 35 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined workmen.' The appropriate Authority therefore, can prohibit employment of contract labour in an establishment having regard to the conditions of work; benefits provided to the contract labour and relevant factors such as whether the work is of perennial nature having regard to the nature of industry to it, business, or manufacture. It can take into consideration that whether the work is done ordinarily through regular employees. The argument that the work is of perennial nature is relevant for creating a case for abolition of contract system in the establishment. The remedy for the workers, in such case, is to approach the Appropriate Government for prohibition and abolition of the system. In the present case, it was so done, but the notification was quashed and set aside by the High Court which position was confirmed by the Apex Court.
85. The parameters listed in Section 10 of CLRA Act were initially laid down by the Apex Court in the case of The Standard vacuum Refining Company of India Ltd Vs. Their Workers and another. In that case, also after laying down the principles the Apex Court did not hold that the contract was sham and bogus and only upheld the direction of the Tribunal to abolish the system. After the CLRA Act was enacted the test laid down by the Apex Court were incorporated in Section 10 of the Act. Therefore, the fact that the work is of perennial nature and is being done by regular employees will not ipso facto lead to a conclusion that the contract is sham and bogus. If there is no prohibition under the CLRA Act to employ contract labour, it cannot be said that because the work is of perennial nature and the work is being done by permanent employees that the contract is sham and bogus."
Page 36 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024
NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined 5.11 Reliance placed on a decision in the case of Gujarat Electricity Board (supra) by the learned counsel for the respondent, particularly paragraph 59 would indicate that there was a specific finding that there was an overall supervision of the work by the officers of the Board. In the facts of the present case, there is no evidence or evidence substantial enough to indicate such a fact before us. We, therefore, agree that the submission of the learned counsel for the respondent that there was evidence to suggest satisfaction of the eight factors to come to a conclusion that the contract was sham and bogus and therefore the workmen before the Tribunal deserved to be absorbed and engaged with the principal employer.
6 At the cost of reiteration, we are in agreement with the learned counsel Mr.Patel's submission that a wrong test or wrong criteria have been applied by the Tribunal and so affirmed by the learned Single Judge to come to the conclusion that the contract was sham and bogus, and Page 37 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined therefore, ipso facto the employer was bound to engage the workmen. Infact, the five tests which ought to have been applied or the twin tests which primarily have been applied before coming to the conclusion that the workmen can be said to be the employees of the principal employer have been set out by the decisions which we have extensively referred to hereinabove, inasmuch as, the question which need to be answered before coming to such a conclusion are:
(1) who appoints the workers; (2) who pays the salaries / remuneration; (3) who is the authority to dismiss; (4) who can take disciplinary action; (5) whether there is continuity of service; (6) extent of control and supervision i.e. whether there
exist complete control and supervision. 7 Applying these five tests in the facts of this case, we are of the opinion that the Tribunal misdirected itself and misinterpreted the evidence on record and the tests Page 38 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024 NEUTRAL CITATION C/LPA/771/2018 CAV JUDGMENT DATED: 20/03/2024 undefined applied by it in no way suggest that it could have directed the appellant to absorb the workmen treating it as a principal employer, and therefore, we are of the opinion that the order of the Tribunal dated 24.03.2005 passed in Ref. ITN No. 682 of 1998 and the judgement dated 31.08.2017 of the learned Single Judge rendered in SCA No. 16912 of 2005 confirming the order of the Tribunal both deserves to be quashed and set aside and are accordingly hereby quashed and set aside. Letters Patent Appeal is accordingly, allowed.
In view of disposal of the main appeal, civil application does not survive and stands disposed of, accordingly.
(BIREN VAISHNAV, J) (PRANAV TRIVEDI,J) BIMAL Page 39 of 39 Downloaded on : Wed Mar 20 20:47:11 IST 2024