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"Whether the action of the Management of International Airport Authority of India, Madras is justified in not absorbing the workers/members of Airport International Cooperative Service Society, their Contractor. If not, to what relief the concerned workmen are entitled ?"

Fifth Round

11. In the meanwhile IAAI issued a tender notice dated 19.11.1990 inviting tenders for the cargo handling work at the Air Cargo Complex. The said tender notice was challenged by the first respondent Union in W.P. No.18560 of 1990. In that petition, the first respondent Union inter alia contended that the IAAI had no valid registration of its establishment under section 7 of the CLRA Act and therefore the contract labour namely the workers employed by the society should be treated directly employed by IAAI. The said writ petition was dismissed by the High Court by order dated 6.12.1990 holding that in the absence of a notification under section 10 of the CLRA Act, prohibiting employment of contract labour in regard to the process of cargo handling, and in the absence of any material to show that the workers were deemed to be workmen of IAAI, the appropriate remedy was to agitate the matter before the concerned labour authority instead of filing a writ petition. The said order of the learned Single Judge was challenged by the union by filing a writ appeal (WA No.1265/1990) which was dismissed by judgment dated 3.1.1991. The Division Bench noted that IAAI had registered its establishment under section 7 of the CLRA Act on 23.3.1990 and the tender notice was issued only thereafter on 19.11.1990. The Division Bench also held that the Union having consciously resorted to the remedy available under industrial law, and not having demurred against the dismissal of WP No.9110/1989 cannot re- agitate the same question in a writ petition challenging the tender notice. Sixth Round

19. A course correction, if we may use that expression, was applied by the Constitution Bench, in SAIL. This Court made it clear that neither section 10 nor any other provision in CLRA Act provides for automatic absorption of contract labour on issuing a notification by the appropriate government under section 10(1) of the CLRA Act and consequently the principal employer cannot be required to absorb the contract labour working in the establishment. This Court further held that on a prohibition notification being issued under section 10(1) of the CLRA Act, prohibiting employment of contract labour in any process, operation or other work, if an industrial dispute is raised by any contract labour in regard to conditions of service, the industrial adjudicator will have to consider whether the contractor has been interposed either on the ground of having undertaken to produce any given result for the establishment or for supply of contract labour for work of the establishment under a genuine contract, or as a mere ruse/camouflage to evade compliance with various beneficial legislations so as to deprive the workers of statutory benefits. If the contract is found to be sham or nominal and merely a camouflage, then the so called contract labour will have to be treated as direct employees of the principle employer and the industrial adjudicator should direct the principle employer to regularize their services in the establishment subject to such conditions as it may specify for that purpose. On the other hand if the contract is found to be genuine and at the same time there is a prohibition notification under section 10(1) of CLRA Act, in respect of the establishment, the principal employer intending to employ regular workmen for the process, operation or other work of the establishment in regard to which the prohibition notification has been issued, it shall give preference to the erstwhile contract labour if otherwise found suitable, if necessary by giving relaxation of age. As noticed above, SAIL did not specifically deal with the legal position as to when a dispute is brought before the Industrial Adjudicator as to whether the contract labour agreement is sham, nominal and merely a camouflage, when there is no prohibition notification under section 10(1) of CLRA Act.

20. But where there is no abolition of contract labour under section 10 of CLRA Act, but the contract labour contend that the contract between principal employer and contractor is sham and nominal, the remedy is purely under the ID Act. The principles in Gujarat Electricity Board continue to govern the issue. The remedy of the workmen is to approach the industrial adjudicator for an adjudication of their dispute that they are the direct employees of the principle employer and the agreement is sham, nominal and merely a camouflage, even when there is no order under section 10(1) of CLRA Act. The industrial adjudicator can grant the relief sought if it finds that contract between principal employer and the contractor is sham, nominal and merely a camouflage to deny employment benefits to the employer 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 has direction and control over the employee. But where there is no notification under section 10 of the CLRA Act and where it is not proved in the industrial adjudication that the contract was sham/nominal and camouflage, then the question of directing the principal employer to absorb or regularize the services of the contract labour does not arise. 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 contractor, if the right to regulate employment is with the contractor, and the ultimate supervision and control lies with the contractor. 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 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.

(ii) There was no violation of section 9A of the ID Act.
(iii) In the absence of a notification under section 10 of CLRA Act prohibiting the employment of contract labour in the operation of cargo handling work, the workmen employed as contract labour are not entitled to claim absorption.

30. In the light of our findings on the two questions the order of the Division Bench cannot be sustained and is liable to be set aside and the order of the learned Single Judge has to be restored. We may however note that the last direction given by the learned Single Judge that in the event of the Central Government issuing a notification under section 10 of CLRA Act, all those who had worked as contract labour under the contract between IAAI and society should be absorbed in the same manner as was directed by this Court in Air India is a direction which is bad in law, as subsequent to the said decision of the learned Single Judge, this Court in SAIL, reversed the decision in Air India. IAAI did not challenge the said direction. SAIL has also made it clear that the decision in Air India is overruled prospectively and any declaration or direction issued by industrial adjudicator or High Court for absorption of contract labour following the judgment in Air India shall hold good and shall not be set aside, altered or modified on the basis of the decision in SAIL. Therefore, the said direction of the learned single Judge which has attained finality, as IAAI did not challenge the same, is not disturbed. In view of the above, the appeal is allowed in part, the order of the Division Bench is set aside and the order of the learned Single Judge is restored.