Management Of Swatantra Bharat ... vs Workmen Of Swatantra Bharat Mills
1995 Latest Caselaw 903 Del

JUDGMENT

M. Jagannadha Rao, J.

(1) Thirty five workmen of a statutory canteen established by the Mills (managed by DCM) under Section 46 of the Factories Act, 1948 to cater to the 5000 workers in the Mill, have been struggling for the last 25 years to get over a preliminary objection raised by the appellant-management in regard to the maintainability of the reference under Section 10 of the Industrial Disputes Act, 1947.

(2) This appeal by the Management deals with the correctness of the award dated 16.1.71 passed against the workmen. The award was set aside by the learned Single Judge on 30.11.83 holding that the reference is maintainable before the Tribunal. While the Tribunal held that there was no relationship of master and servant between the mill and the canteen workers, the learned Single Judge took the other view, holding that such relationship existed and set aside the award and remitted the matter to the Tribunal by judgment dated 30.11.83 and the Tribunal has now given its fresh decision on merits on 31.8.87 on quantum of wages in favor of the workmen and that has been challenged, this time, by the Management in Cw 720/88 which is still pending.

(3) The following are the facts: The writ petition Cw 869/71 was filed by the workmen of Swantantra Bharat Mills Canteen aggrieved by the original award dated 16.1.71 in I.D. 45/70 (published in Gazzette on 18.3.71). The terms of the reference, as per the order of the Lt. Governor, Delhi dated 27/29 June,1970 were as follows:-

(1)Whether the canteen employees are entitled to the following pay-scales and if so, what directions are necessary in the matter:- (a)(unskilled) Masalchis, Sweepers etc. Rs. 40-3-55-4-75-100 (b) (semi-skilled): Bearers, Waiters etc. Rs. 60-3-75-4-95-5-120. (c) (skilled): Cooks, Halwais, Counterman, Salesman etc. Rs. 80-4-100-5-125-6-155. (2) Whether the canteen employees are entitled to Da like other workmen of the mills, and if so, what directions are necessary in the matter.

" On a consideration of the pleadings of the parties, the Tribunal, in its order dated 16.1.71 framed the following point for consideration: Whether the reference is not competent for the reasons given in the application?"

(4) The Tribunal held that the reference was 'incompetent' inasmuch as the workmen were employed by the Trust, namely, "Employees Benefit Fund Trust, The Dcm Co. Ltd, Delhi" and that the canteen workers were not the employees of the appellant Mills.

(5) The learned Single Judge, by judgment dated 30.11.83 allowed the writ petition 869/71 filed by the workmen and held that the workmen were, in law, the employees of the Mill and not of the Trust. He quashed the decision of the Tribunal on the preliminary point and sent back the matter to the Tribunal for decision on the merits. We are here concerned, in this appeal by the Management as to whether the decision of the learned Single Judge on the preliminary issue is correct or not.

(6) The contention of the Management has been and is that the workmen were employed by the 'Employees Benefit Fund Trust, The Dcm Co. Ltd., Delhi" and that they were not the employees of the Swantantra Bharat Mills. In the main Mill, there are 5000 employees, while the canteen workers, whose rights are before us, are 35 in number (vide para 8 of Cwp 869/71). M/s Delhi Cloth & General Mills (hereinafter called Dcm ) owns the Swantantra Bharat Mills which is a Textile Mill with 5000 employees. The Mill is covered by Section 46 of the Factories Act, 1948 and inasmuch as the workmen in the Mill were more than 250, the mandate under Section 46 that there should be a canteen became applicable. The canteen is being run in the Mill premises and became a statutory canteen by virtue of Section 46 of the Factories Act.

(7) The Dcm created a Trust on 16.3.44 called the 'The Employees Benefit Fund Trust' and it was intended to organise and administer the work of welfare activities of the Mill employees like, establishing and maintaining hospital, dispensaries, schools, library, gymnasiums, club, debating society, dramatic clubs, games, sports etc..

(8) Admittedly, before Section 46 of the Factory Act became applicable in 1948 the Canteen was being run by the Mills directly till 1956 though the Trust was formed much earlier on 16.3.1944. The trust deed says that the Board of Directors of Dcm decided to 'create the trust', that the trust was functioning from 1.1.1941, but now in 1944, it had become necessary to declare the trust. Clause 4 says that the trustees should be 7 in number and all of them shall be workmen or officers of the Mills. Four of them shall be elected to represent the workmen of the Mills and three will be the officers of the Mills nominated by the Directors of the Mills. As per Clause 9 the Trust property shall consist of (a) balance at the credit of the Employees' Benefit Fund Account or the Sickness Insurance Fund Account as on 31.12.40, in the books of Dcm, transferred to the Trust (b) Such yearly contribution as the Mills may make to the trust (c) all sums realised by the Mills from workmen on account of fines including those for damage to cloth (d) all intent or income from the funds of the trust (e) all unclaimed moneys left with Mills by workmen dismissed or leaving service before they are entitled to payment of gratuity (f) any other property transferred by the Mills to the trustees.

(9) The trust monies, as per clause 11, are to be disbursed for (1) Company's contribution to the Pf (2) expenditure for Welfare activities for the benefit of the Mill workers (3) Bonuses, gratuities or annuities to be awarded to Mill workers.

(10) As per the claim dated 10.8.70 filed by the workmen before the Tribunal, it is stated that they were employees of the main Mills and ought to be paid the wages annuities and facilities being paid/given to workmen of the main Mills and by classifying their unskilled, semi-skilled and skilled workmen, as stated in the reference. They are entitled to annual increments for increase in efficiency and consumption units, both with the passage of time. They also claim weightage for past services as they have not been getting annual increments. Da is also claimed at par with workmen in the Mills. The mills raised a preliminary objection that the canteen workers were employees of the Trust and not employees of the Mills.

(11) The Tribunal, in its award dated 16.1.1971 relied upon various circumstances to come to the conclusion that the workmen were not the employees of the Mills but were the employees of the Trust.

(12) The learned Single Judge, in the judgment under appeal reviewed the case-law, the old and the new tests that were being employed by the Courts to judge whether the relationship of employer and employee existed between the management and the workers. He observed: "FROM the various decisions it is now clear that no single factor provides clear and candid test to decide this question. In my opinion, all the factors, namely, employer's power of selection and dismissal; right of control and supervising the method of doing the work; the nature and the place of work; the economic control and all other relevant circumstances have to be kept in mind."

(13) The learned Single Judge then took up the question on facts. He summarised the basic facts arrived at by the Tribunal as follows:- (1)LEAVEto them is sanctioned by the Trust; (2) Disciplinary action is taken against the workmen by the Trust: (3) Yearly increment and over-time bills are sanctioned by the Trust; (4) The canteen is being run on no profit no loss basis; (5) The space for running the canteen as well as furniture and utensils have been provided by the management; (6) Electric and water bills of the canteen are paid by the management; (7) The uniforms to the workmen were given by the Trust but the amount of the price of the uniforms was debited to the Management; (8) Earlier the canteen was being run by the Management and the Trust took the work of running the canteen in 1956; and (9) A settlement had been arrived at in Industrial Dispute No. 218 of 1962 between the Kapra Mazdoor Ekta Union, as representing the employees of the canteen and the Chairman of the Trust."

(14) We have omitted the first finding of the Tribunal here which no doubt stated that the workmen were employees of the Trust. This is because of the fact that that was an inference drawn by the Tribunal from the other basic facts as found by it. We shall come back to this aspect again during the discussion of the case on merits, towards the end.

(15) Learned counsel for the appellant-management has urged that the definitions of 'workman' in Section 2(s) and of 'industry' in Section 2(j) as they stood before the amendment by Act 46/82 and of 'employer' in Section 2(g) were quite narrow and the contractor's employees were, at the time of this reference in 1970, not deemed as the employees of the principal employer. Learned counsel points out that it was only in the 1982 Amendment that the definition of 'industry' in Section 2(j) was expanded to include "workman employed by such employer directly or by or through any agency, including a contractor" and this amendment itself would mean that earlier, such employees of an agent or a contractor were never deemed to be workmen under the principal employer. The present case was a reference prior to 1982 amendment of the Industrial Disputes Act, 1947.

(16) Learned counsel for the appellant-management also pointed out that the definition of 'worker' in Section 2(l) of the Factories Act, 1948 includes a person employed, directly or by or through any agency (including a contractor) with or without the knowledge of the principal employer) but that definition is not attracted while considering whether a reference is competent under Section 10 of the Industrial Disputes Act, 1947.

(17) On the other hand learned counsel for the respondent-workman contended that, according to the recent decision of the Supreme Court in Parimal Chandra Raha & Ors. vs. Life Insurance Corporation of India J.T. 1995(3) Sc 288 if the canteen is a statutory canteen envisaged by Section 46 of the Factories Act, then the canteen becomes part of the establishment and the workers become workers of the Mills. Reliance is also placed on various other decisions of the Supreme Court and the High Court, starting from Basti Sugar Mills vs. Ram Ujagar & Others 1963 (II) Llj 447(SC), Saraspur Mills Co. Ltd. vs. Ramanlal Chimanlal 1973 (2) Llj 130 (SC); Ahmedabad Mfg. & Calico Ptg. Co. Ltd. vs. Ram Tahel Ramanand 1972 (2) Llj 165 (SC) J.K. Cotton Spinning and Weaving Mills Co. Ltd vs. Labour Appellate Tribunal of India, 1963 Ii Llj 436 and Shivnandan Sharma vs. Punjab National Bank , P.M. Patel & Sons vs. Union of India and other cases to say that it is not always necessary to prove a contractual relationship. The principle of control and supervision, the right of rejection of the goods produced, the fact that the employment is incidental to the main Mill could also be useful tests. On facts of this case the canteen is located in the Mill and no rent is charged by the Mill from the trust, electricity and water are provided by the Mill, the utensils, crockery, cutlery and furniture are provided by the Mill, the cost of the uniforms supplied is debited to the Mill, the canteen employees are supplied soap and cloth at concessional rates by the Mill and the wages are paid by the Mill but through the trust and these are important facts. The trustees do not exercise authority over the employees of the canteen. These factors are relied upon in the writ petition.

(18) In reply, the learned counsel for the Management submitted that Parimal Chandra Raha's case is not a case of a reference to an Industrial Tribunal under the Industrial Disputes Act, 1947. Some of the other cases referred to by the petitioner arose under the U.P. Act or the Bombay Act where the words 'workmen' or the words 'employed in any industry' were wide enough to cover even the employees of a contractor and those rulings are distinguishable. It is submitted that the factual contentions are not correct and the employees in the canteen are the employees of the trust and not of the canteen.

(19) The point for consideration is whether the inference drawn by the learned Single Judge from the basic facts found by the Tribunal, namely,the inference that in law, the workmen of the canteen were employees of the Mills, is correct?

(20) We agree with the counsel for appellant-management that the cases relied upon by the counsel for the workmen Basti Sugar Mills or J.K. Cotton Spinning & Weaving Mills 1963 (2) Llj 447 (SC) arose under the U.P. Industrial Disputes Act, 1947, Saraspur Mills Co. vs. Ramanlal Chimanlal 1973 (2) Llj 130 (SC) arose under the Bombay Industrial Disputes Act, 1938 as amended in 1962, and that the case in Ahmedabad Mfg. Calico Ptg. Co. Ltd vs. Ram Tahel Parmanand 1972 (2) Llj 165 (SC) arose under the Bombay Industrial Relations Act, 1947, wherein the definitions of employee were far wider and included employees of an independent contractor too and that these decisions are distinguishable. We also agree with the appellant's counsel that M/s P.M. Patel vs. Union of India is distinguishable as it arose under Employees Provident Fund Act. No doubt, in M/s P.M. Patel's case, the case law was reviewed and general principles were laid down that the right to reject the goods produced by the workmen employed by a contractor could be an useful test. We shall assume that all these cases are distinguishable.

(21) But, in our view, among the rulings cited for the workmen, Shivnandan Sharma vs. Punjab National Bank, and Hussain bhai vs. Alath Factory Thozilali Union 1978 Ii Llj 397 are relevant. They arose under the Industrial Disputes Act, 1947 and are applicable. The judgment in Silver Jubilee Tailoring Home vs. Chief Inspector of Shops & Establishments 1973 (27 Fact & Lab Rep. 350) relied upon by workmen contains an elucidation of the recent developments in this field of law and is useful for the workmen. We are of the view that the recent decision in Parimal Chandra Raha's case Jt 1995 (3) Sc 288 relied upon by the respondent's counsel, lays down general principles applicable to statutory canteens under Section 46 of the Factories Act, 1948 and has a very important bearing on the case and is in point. We shall refer to these cases in some detail.

(22) In the first of these cases, namely Shivnandan Sharma's case, , which arose under the Industrial Disputes Act, 1947, it was laid down by the Supreme Court that if a master employs a servant (or agent) and authorises him to employ a number of persons to do particular job and to guarantee their fidelity and efficacy for a cost consideration, the employees thus appointed by the servant (or agent) will be equally (Along with their immediate master) the servants of the person who appointed such a servant (or agent). It is not always correct to say that persons appointed and liable to be dismissed by an independent contractor can in no circumstances be the employees of the third party. The question as to whose employee a particular person was has to be determined with reference to the fact and circumstances of each individual case. In that case, on facts, the Supreme Court held that the appellant therein was an employee of the Bank and that the Industrial Tribunal had the jurisdiction to order his reinstatement etc..

(23) Again in Hussain Bhai's case, 1978 (II) Llj 397 (SC), which arose under the Industrial Disputes Act, 1947, the Supreme Court observed that the true test may, with brevity, be indicated to be that where a worker or a group of workers/laborers are to produce goods or services and these goods or services are for the business of another, that other is, in fact, the employer. He has economic control over the workers' subsistence, skill and continued employment. If the former chokes off the work economically, the worker is virtually laid off. The presence of intermediate contractors with whom alone the workers have immediate or direct relationship as contractor is of no consequence when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different, perfect paper arrangement that the real employer is the Management, not the immediate contractor. There were myriad devices, half-hidden in fold-after-fold of legal form depending on the degrees of concealment needed. The type of industry, the local conditions and the like may be relevant and be resorted to by the Court in the interests of labour legislation and welfare obligations resting on the real employer, based on Articles 38,39,42,42 and 43-A of the Constitution of India. The Court must be astute to override the mischief and achieve the purpose of the law and not be misled by the merger of legal appearances.

(24) Silver Jubilee Tailoring House case, 1973 (27) fact & Lab. Rep. 350 (SC) arose under the A.P. Shops and Establishment Act but it contains general principles of law and refers to latest concepts in this branch of law. It says that during the last two decades (i.e. before 1973) the emphasis has shifted and no longer rests so strongly upon the question of control. Control is obviously an important factor and, in many cases, it may still be the decisive factor. But it is wrong to say that in every case, it is decisive. It is now no more than a factor, although an important one. The fact that generally the workers attend the shop which belongs to the employer and work there, on the machines, also belonging to him, is a relevant factor. When the services are performed generally in the employer's premises, this is some indication that the contract is a contract of service. It is possible that this is another fact incidental to employment. This is the sort of situation in which a Court will feel inclined to apply the 'organisation' test suggested by Denning L.J., in Stevan Jordan & Harrison vs. M.C. Donold & Evans 1952 (1) Tlr 101 (CA). The right not to give work to an employee is also treated as equivalent to removal in certain situations. If the employer provides the machines or the equipment, that is a very important factor etc.. (Atiyah, P.S. Vicarious Liability in the Law of Torts p. 65).

(25) Finally in Parimal Chandra Raha's case, Jt 1995 (3) Sc 288 a new principle has been laid down by the Supreme Court, in cases governed by the mandatory provision in Section 46 of the Factories Act, 1948 to have a 'canteen' as prescribed in the Act and the Rules. After an exhaustive review of the case law, Sawant J. finally held (J.T. 1995 (3) Sc 288) (304) "Where, as under the provisions of the Factories Act it is statutorily mandatory on the employer to provide and maintain a canteen for the use of its employees, the canteen becomes part of the establishment and therefore, the workers employed in such canteen are the employees of the management"

(26) This conclusion in the recent judgment in 1995, in our view, clinches the issue in favor of the workmen- respondents. If the Management is to provide a canteen mandatorily for its workers, the canteen becomes a part of the main establishment.

(27) In our view, the tests and principles of law laid down in the above cases are to be applied to the facts of the case.

(28) Before applying the above legal principles to the basic facts found by the Tribunal, we would like to refer to one other contention urged by the management before the learned Single Judge namely that the finding of the Tribunal that the workmen were under the employment of the Trust was a finding of fact and could not be disturbed under Article 226 of the Constitution of India. The learned Single Judge rejected this contention and in our view, he was right in doing so. His view is clearly supported by the decision of the Supreme Court in Lloyds Bank Ltd vs. Panna Lal Gupta 1961 (1) Llj 18 (SC) wherein, while dealing with the question whether a person was a workman or was having supervisory control, it was pointed out that the Court can interfere under Article 220 if wrong tests had been employed. Gajendragadkar, J. (as he then was) observed: "In dealing with the question raised by the appellant, we would, therefore, take the facts found by the Tribunal to be correct. The status of the three workmen has to be inferred as a matter of law from facts found, and there can be little doubt that if the question involved is one of drawing a legal inference as to the status of a party from facts found, that is not a pure question of fact. If the inferno drawn by the Tribunal in regard to the status of the three workmen involved the application of certain legal tests, that necessarily becomes a mixed question of fact and law...."

(29) This view arrived at in Lloyd's Bank case by the Supreme Court is similar to the one expressed in Shree Meenakshi Mills vs. Cit . Therein Venkataram Ayyar, J. explained (p.57,58) "WHAT can be the principle on which a question of fact becomes transformed into a question of law when it involves an inference from basic facts? ............ In between the domains occupied respectively by questions of fact and of law, there is a large area in which both these questions run into each other, forming so to say, enclaves within each other. The questions that arise for determination in that area are known as mixed question of law and fair."

(30) At p. 65, after reviewing the entire case law, Indian and English, Venkatrama Ayyar laid down the proposition that an inference drawn from basic facts can be a pure question of fact. But where the inference which is to be drawn from basic facts depends upon legal principles, it becomes a mixed question of law and fact and will be reviewable if the finding is arrived at by applying wrong principles of law. In the present case, the basic facts have been found by the Industrial Tribunal but if the further inference as to the existence of the legal relationship of master and servant to be drawn from these basic facts depends on principles of law, then the finding becomes a mixed question of law and fact. The finding is amenable for judicial review under Article 226. In fact the classic judgment of Venkatram Ayyar, J. in Shri Meenakshi Mills has been followed in M/s Sir Shadi Lal Sugar and General Mills Ltd. and another vs. Commissioner of Income Tax, Delhi and Commissioner of Income-tax, Bombay vs. H. Holck Larsen .

(31) We shall now refer to the basic facts arrived at by the Tribunal which led it to hold that the workmen were not the employees of the Mills. The learned Single Judge has set out these basic facts arrived at by the Tribunal. We have already extracted them. So far as the workmen and their relationship with the Mills is concerned, the following basic facts are relevant: (1) The canteen is being (and, we may say, is to run) on no profit no loss basis. (2) The space for running the canteen as well as furniture and utensils are provided by the Management. (3) Electricity and Water bills of the canteen are paid by the Management. (4) The uniforms to the workmen are given by the Trust but the amount of the price of the uniforms was debited to the management. (5) Earlier the canteen was, in fact, being run by the management and the Trust took the work of running the canteen in 1956. (6) Above all, under Section 46 of the Factories Act, 1948, the canteen is today a statutorily compulsory canteen that has to be run by the Mills for otherwise the Mill Management is liable for prosecution.

(32) The learned Single Judge divided the discussion of the legal principles/tests into the following headings (1) Supervision and control, (2) Organisational test (3) Economic test and (4) Other circumstances. These tests were laid down in the above cases and hence the reasoning of the learned Judge cannot be faulted.

(33) On the question of supervision and control, he observed that though a trust was formed, the condition was that all the seven trustees must be workmen or officers in the employment of the Mills - (Four to be elected by the workmen of the Mills and three to be nominated by the directors of the Mills). In other words, all the seven trustees were employees of the management. Again the trust property consisted of (i) the amount which was lying at the credit of the Employees Benefit Fund and Sickness Insurance Fund of Mill employees, (ii) Contributions by the management, (iii) sums realised by fine on employees of Mills, (iv) interest or income from the funds of the Trust, (v) all unclaimed monies of employees of Mills, (vi) other sums transferred by management to the trustees. The learned Single Judge rightly observed that the funds of the trust were received from the management of the Mills or the Mills employees and the trust was dependent on the above monies only. It was therefore, he held, in no better position than a department or a branch of the management for performing certain activities. There is no separate contract between the Mills and the Trust engaging the latter as an independent contractor. Supervision and control by the Trust, therefore, was for and on behalf of the management. In other words, it actually vested in the management. The supervisory test was therefore applied correctly by the learned Single Judge.

(34) As to the organisational test, the management was the 'occupier' under Section 2(n) of the Factories Act, and was therefore statutorily bound to provide a canteen under Section 46 of the Factories Act. Therefore, they were part of the organisation. This view of the learned Single Judge conforms to the recent decision in Parimal Chandra Raha's case Jt 1995 (3) Sc 288.

(35) As to the economic test, clause 9 of the Trust deed shows that the substantial part of the trust funds come from the management and if the management stopped its contribution, the canteen has to be closed for want of funds. The learned Judge rightly applies the economic test.

(36) In addition, the learned Single Judge relied upon the fact that the canteen was being run in the premises of the management, the furniture and utensils for running the canteen were being provided by the Mills. The electricity and water bills were paid by the Mills. No rent is charged by the Mills from the Trust. The uniforms for the canteen workers were supplied by the Mills. The canteen was being run on no profit no loss basis. In fact, the trust was itself a creation of the Mills. These facts are also clearly relevant. The learned Single Judge also observed that in the light of these tests, the earlier awards or settlements between the parties did not come in the way.

(37) Unfortunately, the Industrial Tribunal did not apply the above legal principles to the basic facts found by it while the learned Single Judge chose to apply these tests. In particular, the learned Single Judge rightly applied the 'organisational test' which has now been adumbrated by the Supreme Court in Parimal Chandra Raha's case Jt 1995 (3) Sc 288. It was there laid down by Sawant J., on an exhaustive review of the law, that if under Section 46 of the Factories Act, 1948 it was mandatory for the Mills to have a canteen, it is a statutory canteen, and the canteen becomes part of the establishment of the Mills. That is how, in law, the canteen workers became the employees of the Mills. Inasmuch as the learned Judge has applied this and other correct tests, he was under Article 226 clearly justified in interfering with the inference drawn by the Tribunal from the basic facts. The appeal is therefore liable to be dismissed.

(38) It is sad that 35 workers of the statutory canteen which caters to 5000 workers of the Mills managed by Dcm have been struggling for the last 25 years to get over the preliminary objection raised by the Dcm under the Industrial Dispute Act. After all these few workmen are claiming parity of pay with the corresponding employees of the Mills, skilled, semi-skilled or unskilled.

(39) For the reasons given above, appeal of the management is dismissed.