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7. The order of the learned Single Judge was challenged by the Corporation in Writ Appeal No.1422 of 1999. The Corporation contended that the Learned Single Judge committed an error in quashing the order dated 21.4.1999. It was pointed out that the respondents were employed as contract labour and the Circular dated 1.9.1988 did not permit absorption of contract labour, but only permitted absorption of those directly employed by the Corporation on casual basis or for a contractual period, on daily wages or on consolidated salary or piece rate basis or under work changed establishment. The Division Bench dismissed the Corporation's appeal vide order dated 30.9.1999. It accepted the contention of the Corporation that respondents were employed as "contract labour". It also impliedly accepted the contention of the Corporation that the respondents were not entitled to absorption under the Circular dated 1.9.1988. It, however, held that the work for which the respondents were employed as contract labour, that is to clean the buses and to sweep the bus stand premises, was perennial in nature and not seasonal. Purporting to rely on the decisions of this Court in Air India Statutory Corporation v. United Labour Union [1997 (9) SCC 377] and Secretary, Haryana State Electricity Board v. Suresh [1999 (3) SCC 601], it held that there was direct relationship of master and servant between the principal employer (Corporation) and contract labour (Respondents) and, therefore, the respondents were entitled to absorption. It did not, consider whether in the absence of a notification under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 (for short 'the CLRA Act') prohibiting contract labour, there could be a direction for absorption, even if the Respondents were contract labour. Thus, the ground on which the Division Bench upheld the decision of the learned Single Judge was different from the ground on which the writ petition was disposed of by the Single Judge. The said order of the Division Bench is challenged by the Corporation in this appeal by special leave.

8. In Air India (supra), this Court had held that though there is no express provision in the CLRA Act for absorption of contract labour, when engagement of contract labour stood prohibited on issuance of a notification under Section 10(1) of the CLRA Act, a direct relationship was established between the workers (contract labour) and the erstwhile principal employer, and the principal employer is obliged to absorb the workers. It also held that if the High Court finds that workmen were engaged in violation of the provisions of CLRA Act or were continued as contract labour, in spite of the prohibition notification issued under Section 10(1) of the CLRA Act, the High Court can, in exercise of its power of judicial review, mould the relief properly and direct the principal employer to absorb the contract labour, instead of leaving the workmen in the lurch, and it was not necessary for the workmen to seek a reference of the dispute relating to their absorption under section 10 of the Industrial Disputes Act, 1947. In Haryana State Electricity Board (supra), this Court following Air India, had held that where the work for which contract labour is employed, was perennial in nature (as contrasted from seasonal), contract labour system should be abolished by issuing a notification under section 10 of CLRA Act, so as to render the contract labourers, the direct employees of the principal employer. On the facts of the case, it was also held that the contract system prevailing in the Electricity Board (appellant herein) was not genuine, but a mere camouflage (to deprive workers, of the benefits under various labour enactments) and therefore, the court can pierce the veil and visualize the direct relationship between the Board and the contract labour. Consequently, this Court upheld the relief of reinstatement granted to Safai Karamcharis by the High Court.

9. In Steel Authority of India Ltd. & Ors. v. National Union Waterfront Workers & Ors. [2001 (7) SCC 1], a Constitution Bench of this Court overruled the decision in Air India (supra) and held that where contract labour are engaged in connection with the work in an establishment and employment of such contract labour is prohibited by issue of a notification under Section 10(1) of the CLRA Act, there was no question of automatic absorption of the contract labour working in the establishment and the principal employer cannot be required to absorb the contract labour. This Court also held that on a contractor engaging contract labour in connection with the work entrusted to him by the principal employer, it does not culminate into a relationship of 'master and servant' between the principal employer and the contract labour. This Court held that whether the contract labour system was genuine or a mere camouflage has to be adjudicated only by the Industrial Tribunal/court and not by the High Court in its writ jurisdiction. We extract below the relevant portions of the principles summed up by this Court :

"(5). On issuance of prohibition notification under Section 10(1) of the CLRA Act prohibiting employment of contract labour or otherwise, in an industrial dispute brought before it by any contract labour in regard to conditions of service, the industrial adjudicator will have to consider the question 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 is a mere ruse/camouflage to evade compliance with various beneficial legislations so as to deprive the workers of the benefit thereunder. If the contract is found to be not genuine but a mere camouflage, the so-called contract labour will have to be treated as employees of the principal employer who shall be directed to regularize the services of the contract labour in the establishment concerned subject to the conditions as may be specified by it for that purpose in the light of para 6 hereunder.