"27. In the month of April 2011 we were given
work to the Madhu Enterprises with regard to loading
and unloading and also the helper job to its workmen.
20. Referring to the above paragraphs he submits that
all the first party workmen were working under the second
party production unit, supervised by the second party.
Further the agreement was with regard to the loading,
unloading filling, cleaning etc, and also helper job to its
regular workmen was entered into between the second
party with Madhu Enterprises. Under such circumstances
the decisions cited by the learned counsel for the second
party to test the employee and employer relationship as
per the decision reported in 2004(3) SCC 514 will not come
to their aid.
21. The first party workmen proved the workman ship
with reference to the decision cited supra particularly the
decision reported in AIR 1978 SC 1410, LLR 2011 SC 1079,
LLR 1999 SC 433, 1994 LLR 634 SC, AIR 1970 SC 823
which definitely come to the aid of the first party. Hence, in
the light of decision cited supra by the learned counsel for
the first party and also on scrutinizing the evidence on
record, I come to the conclusion that the first party
workmen have proved that they are the workmen working
under the second party le., Leotech and the first party also
proved that there exists the relationship of master and
servant between them with the second party. Hence, I
answer this reference issue No.1 in the negative and Addl.
Issue No.1 in the affirmative.
22. REFERRED ISSUE NO.2 AND ADDL.ISSUE
NO.2: Since these two issues are interconnected with
regard to the workmanship. Hence, they are taken together
for discussion just to avoid repetition of facts. Referred
Issue No.2 is with regard to the refusal of employment and
Addl. Issue No.2 is with regard to whether the second party
justified the alleged acts of refusal of employment to all the
first party workmen While recording my findings on Issue
No.1 and Addl. issue No. 1, I have categorically discussed
with regard to the relationship between the first party
workmen with the second party management as employee
and employer. Now this Court will have to find out as to
whether the second party management rightly refused
employment to all the first party workmen. What are the
reasons for refusal of employment is culled out from the
mouth of one of the management witnesses examined as
M.W.2 viz., K.Divakarn who in his cross-examination at
paragraph No.28 has deposed as under:
23. So, this is the main reason for termination of the
services of all the first party workmen from the
employment of the second party management. Further as
to know whether all the first party workmen being the
permanent workers of the second party is concerned, the
learned counsel for the first party drawn my attention to
the cross-examination of M.W.2 which is in paragraph
No.29 who in his cross-examination deposed as under:
"I came to know that the I party workmen raised the
dispute before the Labour Department" Further admission
of M.W.2 with regard to the service of all the first party
workmen with the second party management from the date
of engaging Madhu Enterprises is taken into consideration,
their service was more than 240 days. So, the evidence of
M.W.2 rebound to the contentions taken by the second
party management to the effect that agreement entered
into between the second part management with the Madhu
Enterprises was with regard to loading, unloading and
helper to the permanent workers of the second party
management. When the very agreement entered into
between the second party and Madhu Enterprises goes to
show that the workmen were taken to do loading,
unloading and also to work as helpers to the permanent
employees of the second party management. But the work
assigned to all the first party workmen is as that of the
permanent workers working under the second party
management. The only intention in terminating the services
of the first party was with regard to demanding higher
wages.
24. An attempt has been made by the second party
placing reliance on the attendance register and also wage
register. As already stated above, the work done by all the
first party workmen under the second party management is
permanent in nature and the very document maintained by
the Madhu Enterprises are nothing but to benefit the
second party management by adopting unfair labour
practice. It is very interesting to note down that the second
party management examined one Mahadevegowda as
M.W.1 who is the partner of M/s Madhu Enterprises and
and he gave evidence in favour of the second party. This
goes to show that he is interested in helping the second
party management for the reason best known to him.
Hence, I come to the conclusion that the first party
workmen satisfactorily proved that the second party
management refused employment to them and the second
party management did not justify in dismissing all the first
party workmen from its employment. Accordingly said
issues are answered."
10. Both the management as well as the workmen
approached this Court, in separate Writ Petition Nos.31261/2016
and 57652/2017, calling in question the award of the Labour Court
in its entirety by the appellant-management and to a portion of
judgment to the extent of declining the full backwages by the first
party-workmen.
11. The learned Single Judge by his order dated 10.04.2023
dismissed both the petitions and confirmed the order passed by the
Labour Court. The learned Single Judge framed four points for
consideration, and answered the same in paragraph nos.11 to 15.2,
which reads as follows:
"11. The points that arise for determination are:
1. Whether the labour Court would be justified to examine
whether a labour contract is a sham or camouflage in all
cases where a reference is made as regards termination of
services of contract labour, or would the labour Court be
restricted by the terms of reference and be ineligible to
examine the genuineness or the validity of a labour contract?
2. In the event of the labour contract being held to be a
sham and camouflage, would the workmen, as a matter of
right be entitled to reinstatement, continuity of service, and
consequent benefits, including full back wages?
3. Whether the award passed by the labour Court suffers
from any legal infirmity requiring interference at the hands of
this Court?
4. What Order?
12. I answer the above points as under:
13. ANSWER TO POINT NO.1: Whether the labour Court
would be justified to examine whether a labour contract is a
sham or camouflage in all cases where a reference is made
as regards termination of services of contract labour, or
would the labour Court be restricted by the terms of
reference and be ineligible to examine the genuineness or the
validity of a labour contract?
13.1. The contention of Sri.K.R.Anand, learned counsel for the
employer is that the Labour Court has travelled beyond the
reference. Unless there being any reference made as regards
whether the agreement entered into between the employer
and the contractor being a sham transaction, the Labour
Court could not have ventured into this aspect and pronounce
on the same, which could not have been done and therefore,
is contrary to the Judgments of the Hon'ble Apex Court in the
cases of Oshiar Prasad, Sindhu Resettlement
Corporation Limited, Jaipur Udyog Ltd and Delhi Cloth
and General Mills co. Ltd.
13.2. In the present matter, the employer claims that the
workers were engaged by and were employees of the
contractor, whereas the workers claim that though they were
employees of the contractor, they were under the day-to-day
supervision and instructions of the employer and as such, the
contractor was not their employer. The employer had made
use of the methodology of appointing a contractor to reduce
its financial burden inasmuch as the employer is paying
Rs.76/- per day to the workmen on its rolls, whereas Rs.56/-
is paid insofar as the contract employees were concerned.
This amount of Rs.56/- per day is inclusive of the amounts
payable to the contractor, it is in that background that upon
the termination of the contract of the contractor resulted in
the denial of employment to the workers engaged through the
contractor that a dispute was raised which went through
conciliation and failed and thereafter referred to the industrial
tribunal by the appropriate government.
13.3. It is that background that it is required to be considered
by this Court while answering the above question. The
reference being made as regards a few of the workmen, the
appropriate government referred the matter on the points of
reference viz., whether the refusal of employment to the
workmen was proper or not? What is the compensation to be
paid to such workmen? The main question which had been
referred to was whether the workmen were to establish that
they were employed by the employer?
13.4. What is not in dispute is that the workmen were
engaged by the contractor, in furtherance of which the
workmen were discharging their duties at the factory of the
employer. The only question is whether the workmen were
directly working with the employer or for the contractor?
13.5. The evidence on record which has been dealt with by
the labour Court categorically indicates that the instructions
were being issued by the employer, the targets were set by
the employer and it is only the supply of labour which was
made by the contractor to the employer. The aspect of
determining whether the workmen were employees of the
employer or that of the contractor would therefore require
examination of the contract between the employer and the
contractor in order to come to a decision on the above point.
Thus, unless the contract is one which cannot be said to be
sham or camouflage, the workmen would continue to be
those engaged by the contractor and not by the employer.
However, if the contract is said to be sham and camouflage a
conclusion could be arrived at that the workmen were
employees of the employer. Thus this aspect of whether the
contract was sham and camouflage is in my considered
opinion an integral part of the question to determine whether
the aggrieved workmen were the direct employees of the
employer or the contractor. Thus, the decision relied upon by
Sri.K.R.Anand in Sindhu Resettlement Corpn. Ltd's case
(supra6) that unless the issue was specifically raised before
the government and the government referred the same to the
Industrial Tribunal, the Tribunal cannot advert to the same
would not be applicable.
13.6. Similarly, the decisions in Jaipur Udyog Ltd. (supra7),
Delhi Cloth & General Mills Co. Ltd. (supra8), which have
been pressed into service to contend that the present workers
being the workmen employed by contractor, those workmen
could not raise the dispute against the present employer are
not applicable since the contract is a sham and camouflage.
The decision in Oshiar Prasad's case (supra¹) relied upon
by Sri.K.R.Anand that a labour contract having been
terminated, the workmen could not seek for regularization
would also not be applicable since the very termination of the
contract appears to be for the purpose of getting rid of the
contract labour who have been working in perennial jobs for a
long time with the employer.
13.7. The decision in Mahendra Prasad Jakhmola's case
(supra2) relied upon by the learned counsel to contend that
mere supervision would not make a contract worker, a worker
of the employer is not applicable for the reason that in the
present case, it is not just supervision, but also allotment of
work fixing of targets for each of the contract workmen was
made by the employer. Whether the salary is paid directly by
the principal employer to the workmen or through contractor,
in my considered opinion, would not make much of a
difference if the engagement of the workmen is made through
a contractor as a camouflage. It is only when a contractor has
been hired who in turn deputes workmen for a specific period
of time to conduct non-perennial work, that the decision in
Bharatlals' case (supra4) relied upon by Sri.K.R.Anand
would be applicable and not in a situation where a workmen
having been engaged for a long period of time though a
contractor to provide services for the employer.
13.8. The last contention of Sri.K.R.Anand in this regard is
that so long as the contract labour is permitted and there is
no embargo under Section 10 of the CLRA, any employer can
make use of contract labour and that labour cannot seek for
regularization is also in my considered opinion not a
proposition to be applied to the present case.
13.9. The engagement of contract labour being permitted
merely on account of no prohibition under Section 10 of CLRA
being made would not entitle an employer to use the said
process for its own benefit in reducing its burden and or
depriving the workmen of their just wages. In the event of a
notification under Section 10 being issued, it is very clear that
no contract labour could be used. If any workmen are
engaged through a contractor then they would get the
preference for being considered for appointment as and when
there is a vacancy which arises. Even otherwise, though no
notification under Section 10 is issued if the employer were to
terminate a contract with a contractor and the employer were
to engage new labour, it would be the duty of the employer to
provide employment to those workmen as and when vacancy
arises, as also for the employer not to engage any other
workmen other than the contract workers for the said post
without offering the same to the contract workers. Thus,
whether a notification is issued under Section 10 of CLRA or
not, the right of the workmen to raise industrial dispute of
they being denied work would still continue.
13.10. The Judgments relied upon by Sri.A.J.Srinivasan in the
case of National Union Waterfront Workers (supra10) and
Vinod Kumar Sharma (supra¹¹) would be applicable
inasmuch as 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 and this
determination would be a preliminary determination for the
purpose of adjudicating the dispute between the principal
employer and the workmen.
13.11. Considering the above, I answer point No.1 by holding
that the labour Court would be justified to examine whether
the labour contract is a sham and camouflage in all cases
where references are made as regards termination of service
of contract labour since this would be a preliminary question
to be answered before examining whether the termination is
proper or not, whether the denial of work is proper or not and
thereafter to examine whether the workmen have to be
reinstated or not.
14. ANSWER TO POINT NO.2: In the event of the labour
contract being held to be a sham and camouflage,
would the workmen, as a matter of right be entitled to
reinstatement, continuity of service, and consequent
benefits, including full back wages?
14.1. Whenever a labour contract is held to be sham and
camouflage, the workman who is denied work by either
termination of the contract with the contractor or by
termination of services of the workman himself, on a dispute
being raised, the labour Court would have to consider
whether such workman would be entitled for reinstatement,
continuity of service, consequential benefits including full
backwages or not. There is no strict rule applicable to this nor
is a straight jacket formula applicable. These aspects would
have to be considered by the labour Court on merits of
individual cases.
14.2. In the event of a labour contract being held to be sham
and camouflage, there would be a right vested with the
workmen to be offered employment. In the event of the
employer seeking to engage any other person for the very
same job or engaging another contractor to deliver the same
services by engaging contract labour, until and unless such
action is sought to be taken by the employer, there is no
vested right in the workmen to be reinstated automatically.
But the aspect of whether the workmen would be entitled for
reinstatement, continuity of service and consequential
benefits, being dependent on the above the factual matrix
would have to be determined by the labour court before
ordering any of the above.
15. ANSWER TO POINT NO.3: Whether the award
passed by the labour Court suffers from any legal
infirmity requiring interference at the hands of this
Court?
15.1. As regards awardal of back wages, the labour Court has
awarded 50% of the back wages and denied full back wages
to the workmen, I am of the considered opinion that the said
order meets ends of justice. Though the workmen were
prevented from discharging their work on account of the
stand taken by the employer, the fact remains that the
workmen have not carried out any work for the employer and
the employer has not derived any benefits from the said
workers. Thus, awardal of 50% back wages, in my considered
opinion, would in the present case serve the interest of
justice.
15.2. In view of my answer to Points NO.1 and 2, the labour
Court having rightly come to a conclusion that the labour
contract entered into to reduce the burden of the employer,
the workmen being supervised by the employer, the targets
being set by the employer, the workmen reporting to the
employer rather than the contractor having been taken into
consideration by the labour Court in a proper perspective, I
am of the considered opinion that the said order does not
suffer from any legal infirmity requiring interference at the
hands of this Court."
12. The subject matter of this intra-court appeal is challenge
to the order of dismissal of writ petition by the appellant /
management whereby the learned Single Judge has confirmed the
order passed by the Labour Court.
SUBMISSIONS:
13. Heard Sri.K.Kasturi, learned Senior Counsel appearing for
Sri.Anand K.R., learned counsel for the appellant-management and
Sri.A.J.Srinivasan, learned counsel appearing for the respondents-
workmen. Perused the records and orders impugned in this appeal.
14. The main limb of argument of Sri.K.Kasturi, learned
Senior Counsel is that, there is no jural relationship of employer and
employee between the appellant and the respondents - workmen.
The workmen were engaged through a labour contractor by name
M/s.Madhu Enterprises and the work is not perennial in nature. Out
of 16 workers engaged through contract labour, 11 of them settled
their claims with the M/s.Madhu Enterprises. Subsequent to
termination of the labour agreement with the M/s.Madhu Enterprises
only 5 i.e., the respondents-workmen herein raised dispute which
resulted in reference. Out of five workers, one worker by name
Sri.Vijayakumar herein settled his dispute with M/s.Madhu
Enterprises on 23.07.2018 on receiving of Rs.36,000/- from his
employer. The said settlement dated 23.07.2018 between
respondent No.1 and M/s.Madhu Enterprises was also produced as
Annexure-R1 to the statement of objections filed to the writ petition
filed by the respondent-workmen challenging the part of the award
passed by the labour court. This fact also throws light on the specific
defense of the appellant-management that the respondent-workmen
are not employees of the appellant and there is no relationship of
employer-employees between the parties.
15. The learned Senior Counsel further argues that both the
labour court and the learned Single Judge have erred in concluding
that, in the absence of pleading and proof by the respondents
against the contract labour, which is a bedrock to hold that though
the employees were employed through contract, it is sham and
camouflaged one with the sole object to deprive the workmen the
legal rights granted under the Beneficial Acts such as ID Act, ESI
Act, etc., and amounts to unfair trade practice. This according to
Mr.Kasturi, learned Senior Counsel, is not the requirement of
pleadings and law. The workmen were required to plead and prove
that the contract was actually sham and camouflaged. He stated in
the absence of pleadings, the sham and camouflage could not have
been gone into, the labour has erred in coming to such a conclusion.
To base his argument learned Senior Counsel has taken us through
the claim petition filed by the workmen, wherein they have except
stating they are employees directly employed by the appellant and
there is no relationship between them and labour contractor i.e.,
M/s.Madhu Enterprises have not pleaded contract as sham and
camouflaged.
16. The learned Senior Counsel appearing for the appellant
relied on the following decisions to base his arguments:
1. 1992 F.J.R. Volume No.80 Page No.149 Karnataka High
Court - Steel Authority of India Limited vs. Steel
Authority of India Ltd. Contract Workers Union;
2. [2008] 14 SCC - Page 589 - Steel Authority of India
Ltd., and another vs. State of West Bengal and others;
3. [2006] Vol. 12 - SCC - Page 233 - Steel Authority of
India Ltd., vs. Union of India and others;
4. 1985-II-LLJ-Page-SC [3J] - The Workmen of the Food
Corporation of India vs. M/s Food Corporation of India
[Page No.9 at Para 12];
5. 2001-II-LLJ-Page-1087 SC [5J] - Steel Authority of
India Ltd. and others vs. National Union Water Front
Workers and others [Page No.1131 Para 119];
6. 2009-13-SCC-Page-374 [2J] - International Airport
Authority of India vs. International Air Cargo Workers'
Union and another;
7. WA No.1685/2018 [L-TER] - KAR HC Order dated
21/10/2024 - The Management of M/s Stumpp, Schule
& Somappa Springs Pvt. Ltd., vs. Mr.U.Mallikarjuna;
8. 1992 - II LLJ - Page No.201 High Court of Judicature,
Madras [Larger Bench - 3 Judges] - Godrej & Boyce
Manufacturing Co. Ltd., Madras vs. Principal Labour
Court, Madras and another;
9. 1996 - I LLJ - Page No.420 High Court of Karnataka
[2J] - Vysya Bank Ltd vs. General Secretary, All India
Vysya Bank Employees' Union and others;
10. 2001-II LLJ - Page No.910 - High Court of Jharkhand
[2J] - Employer, Management of Central Mine Planning
& Design Institute Ltd., vs. Union of India and others;
11. 2010 - LLR - Page No.126 Calcutta High Court [2J] -
Carrit Moran & Company Pvt. Ltd., vs. State of West
Bengal & others;
12. 2010 - LLR - Page No.126 Calcutta High Court [2J] -
Carrit Moran & Company Pvt. Ltd. vs. State of West
Bengal & others;
13. 1986 - II LLJ - SC - Page No.217 [2J] - Bharat Singh
vs. Management of New Delhi Tuberculosis Centre,
New Delhi & others;
14. 1987 - II LLJ - Page No.210 - High Court of Judicature
Bombay [2J] - Elpro International Ltd. vs. K.B.Joshi &
Others;
15. 2021 [3] - KAR. L. J. - Page No.314 High Court of
Karnataka - The Karnataka State Building & Other
Construction Workers' Welfare Board, Bengaluru vs.
Mohan Kumar K.B. & Others;
16. 2005 - 5 SCC - Page No.337 [2J] - Viveka Nanda
Sethi vs. Chairman, J&K Bank Ltd., & Others;
17. LAWS [BOM] - 2003 - 4 - Page No.85 - Engineering &
Ancillary Manufacturers vs. Salimkhan;
18. 2004 - I LLJ - Page No.1023 - High Court of Delhi -
Birdhi Chand Naunag Ram Jain vs. P.O.Labour Court
No.IV & others;
19. 2022 - LLR - Page No.162 - Punjab & Haryana High
Court [DB] - Dhanpati vs. State of Haryana and
others;
20. 2001 - 89 FLR - Page No.458 - High Court of
Karnataka - Prakash & Others vs. Superintending
Engineer (Elec) & Others;
21. 2015 - LLR - Page No.92 - High Court of Karnataka
[DB] - Mallikarjuna vs. Associated Cement Co. Ltd.,
Gulbarga & others.
17. Refuting the submission of learned Senior Counsel,
Sri.A.J.Srinivasan learned counsel appearing for the respondents -
workmen vehemently submitted, by taking us through various
documents to show and contend that the work for which the
respondents - workmen were engaged was in production line and
targets were fixed by the appellant, as such they are perennial in
nature; that apart they are under the direct supervision of the
appellant-management. The agreements at Exhibits-M7 and M8
states about the employment of unskilled workers for filling, loading
and unloading, which are perennial nature of work. They were
working even prior to the contract i.e., form the year 2004 till the
illegal termination. He relied on the cross-examination of MW-1 as
well as MW-2. His specific contention is MW-2 at para No.23 of his
evidence has clearly admitted that the workmen worked in the
Production Unit, target was fixed for their work and the agreement
entered into between the appellant and the labour contract was for
supply of unskilled labourers for filling, loading and unloading,
whereas the work assigned to them are at Production Line which
work is perennial in nature. He stressed upon paragraph No.24 of
the cross examination of MW-2 wherein the witness has admitted
that they have not challenged the order passed by the Government
for referring the matter to the Labour Court and there is an
admission that the appellant supervised the work of the workmen.
That apart, he has stressed upon the cross-examination of MW-2 at
para No.28 wherein he has admitted that the contract labourers
have demanded higher wages and hence we have terminated
them1.
18. To buttress his arguments, learned counsel for the
respondents-workmen has relied on various judgments which are as
follows:
1. 2001 (II) LLJ Pg 1087 - SAIL Vs. National Union Water Front
Workers at para (Pg.1132, Pa. 119(5), (Pg.1136, para 139)
2. 2011 LLR 1079 Pg 1079 - Bhilwara Dugdh Utpadak Sahakari
Vs Vinod Kumar Sharma at para 4, 5 and 6
3. 1999(I) LLJ SC Pg 1086 - Secretary, Harayana State
Electricity Board Vs Suresh at para 17, 20
4. 2003 (II) LLJ Pg 92 - Employers in relation to the
Management of Angarpathra Colliery of Bharat Coking Coal
Ltd. At para 13, 16 and 17
5. ILR KAR 2000 Pg 4536 (para 20, 21) - Chief General Mgr RBI
vs P.O at para 20 and 21
(emphasis supplied)
6. 1978(4) SCC Pg 257 - Hussainbhai vs Alath Factory Thezhilali
Union Kozhikode & Ors at para 5 and 6
7. 1985(I) LLJ 492 Pg 505 - end of Para 15 - Workmen of Best
& Crompton Industries Ltd. Vs The Management & Ors.
8. AIR 1962 SC Pg 517 - Shankar Balaji Waje vs The State of
Maharashtra end portion of page 107 and 108
9. Laws (SC) 2014 (4) Pg 88 - Bhuvnesh Kumar Dwivedi vs. M/s
Hindalco para 23
10. (2015) 2 Supreme Court Cases Pg 317 - Sudharshan Rajpoot
Vs Uttar Pradesh State Road Transportation Corporation at
paras 16, 17 and 26
11. (2000) 4 Supreme Court cases Pg 245 - Indian Overseas
Bank Vs I.O.B. Staff Canteen Workers Union at para 18 and
12. Civil Appeal in SLP No.5580/2024 dt. 20-12-2024 - Jaggo Vs
Union of India & others at para 10, 12, 13, 22, 23, 24 and 25
13. 2025 SCC Online SC 221 Civil Appeal No.8157/2024 - Shripal
and another Vs Nagar Nigam, Ghaziabad at paras 12, 13, 15,
16 and 17
14. 2024 Civil Appeal Nos.4092-4093/2024 dt. 12-03-2024 -
Mahanadi Coalfields Ltd Vs Brajrajnagar Coal Mines Workers
Union para 20 and end of para 22
15. (1999) 6 Supreme Court Cases 439 - Indian Petrochemicals
Corporation Ltd and another Vs Shramik Sena and others at
para 25
16. 1955 SCC Online SC 1 :(1955) I SCR 1427: AIR 1955 SC 404
- Shivnandan Sharma Vs Punjab National Bank Ltd end
portion of para 14 and 15.
ANALYSIS:
19. Having heard the learned counsel for the parties the
short issue, which arises for our consideration in this appeal is:
"Whether the award passed by the Labour Court, as well
as the order passed by the learned Single Judge
confirming the same, by dismissing the writ petition in
the peculiar facts and circumstances of the case, suffers
from errors and perversity and requires interference at
the hands of this Court?
20. At the outset, it is to be noted that, all along, it is the
specific and definite contention of the respondents-workmen that
they are employees directly employed by the appellant-
management and they were never under the employment of
M/s.Madhu Enterprises. Even in the claim petition filed by the
workmen, they restricted the plea. They have never stated that they
were engaged through contractor. It was their case that they were
working in Production Line and their work is perennial in nature;
that they worked for more than 240 days and they are workers of
the appellant-management.
21. The averments by the respondents-workmen in the claim
petition are very much important to throw light to hold that contract
is a sham and camouflaged as observed by the learned Single Judge
while answering point No.1. For easy reference the contents of the
claim petition from paragraph Nos.3 to 13 are extracted, to show it
was not the case of the workmen that the contract is sham and
camouflaged.
"3. It is submitted that the 2nd party management is
engaged in the manufacture of plastic hardened components
since many years and it making huge profits during each year
on account of the hard work of the workmen. It has employed
about 60 workmen in different capacities.
4. It is submitted that the 1st party concerned workmen
along with other workmen of the 2nd party management
formed a branch of Karnataka Workers Union, much against
to the wishes of the 2nd party management. In fact, the 2nd
party management and the earlier HMS leaders hand-in-glove
with each other was not doing any acts which are benefitted
to the workmen in general. It was a stood union in the hands
of the 2nd party management. Under such circumstances, the
Karnataka Workers Union was formed much against to the
wishes of the 2nd party management with a view to fight for
better benefits and to contest the unfair acts of the 2nd party
management. Since the 1st party concerned workmen were
also active members of the union, the 2nd party management
had developed most adamant and hostile attitude towards
them. In fact, the 1st party concerned workmen were
continuously pressurizing and persuading the 2nd party
management for Better service condition, better wages and
confirmation of their services on par with their colleagues who
were doing similar nature of jobs.
5. The various service conditions, such as, name.
designation, date of appointment, salary, age etc..etc.. are
clearly mentioned in the following table:
Sl.No. Name Designation Date of Salary Age
Appointment
Rs.
1. Vijayakumar Moulding Operator 26/11/2004 3,450/- 46
2. M.H.Ashok Drilling Operator 1/3/2004 3,400/- 44
3. Gangadhar M.R. Moulding Operator 15/6/2004 2,950/- 26
4. Shekar H.K. Office Boy 5/5/2005 2,800/- 23
5. M. Murali Moulding Operator 25/10/2002 3,050/- 31
6. The 1st party concerned workmen are the members the
Karnataka Workers Union since beginning and they were
taking active role in the legal and legitimate trade union
activities.
7. It is submitted that all the 1st party concerned workmen
were discharging, permanent and perennial nature of jobs
since beginning, which are directly connected to production
process. However, the 2nd party management was not paying
the statutory minimum wages as per the provisions of the
Minimum Wages Act Notification. Added to this, the 2nd party
management was not paying the wages to these workmen on
par with other permanent workmen who were doing similar
nature of jobs. Even the various benefits also were not
granted on par with the permanent workmen. These 1st party
workmen were repeatedly persuading the 2nd party
management for better wages and service conditions as per
the Minimum Wages Act and also on par with the other
permanent workmen. Hence, the 2ndparty management had
developed most adamant and hostile attitude towards the 1st
party concerned workmen and was trying to victimize them.
8. When the facts stoodthus, to the utter shock and surprise
of the concerned 5 workmen, the 2nd party management
illegally refused employment to all of them with effect from
19/4/2011 without giving any valid and justified reasons.
Immediately, all the concerned workmen have given a written
representation dated 21/4/2011 to the 2nd party
management by registered post with acknowledgment due
requesting for immediate reinstatement. But, the 2ndparty
management has failed to act. Hence, the 1st party
concerned Workmen submitted a conciliation petition
dt.19/5/2011 to the jurisdictional conciliation officer
requesting his intervention in the matter. Unfortunately the
2nd party management has taken most untenable and
unjustified contentions before the conciliation officer that the
said concerned workmen are not their direct employees and
they were working with the contractor M/s.Madhu Enterprises
etc. This contention of the 2ndparty management is totally
illegal, unjust, unfair and not sustainable in law. The 1st party
concerned workmen were never the employees of any
contractor, much less, M/s Madhu Enterprises as falsely
contended by the 2nd party management at any point of
time. They were all working directly with the 2nd party
management since beginning and the said contention of the
2nd party management is nothing but a created and
concocted story with a pre-determined intention to justify
their illegal action of refusal of employment. The same is
contrary to law and not sustainable in law. The 1st party
union has given a reply to that effect vide rejoinder dated
26/8/2011. In fact, all the other workmen who were working
along with the 1st party concerned workmen are still working
in the 2nd party management directly. All the concerned 5
workmen have been working directly under the 2nd party
management from the date of their employment itself and
they have all working continuously doing permanent nature of
jobs. Hence, it is not fair and proper on the party of the 2nd
party management to term them as contract workmen or
workmen working under contractor etc. The said conclusion of
the 2nd party management has no legs to stand. The 1st
party concerned workmen are not concerned to any such
contractor at any time as contended.
9. It is submitted that the efforts of the conciliation officer did
not yield any results solely due to the adamant, hostile and
non co-operative attitude of the 2nd party management.
Hence, conciliation ended in failure. The failure report was
submitted to Government. Hence, this reference for
adjudication.
10. The action of the 2nd party management in illegally
refusing employment to the 5 concerned workmen with effect
from 19/4/2011 being otherwise for misconduct, tantamounts
to retrenchment as defined under Section-2(oo) of the
Industrial Disputes Act, 1947, for which, the 2ndparty
management has not complied with the mandatory
requirements under Section-25F clauses (a) and (b) of the
Industrial Disputes Act, 1947 which are conditions precedent
for retrenchment.
11. The action of the 2nd party management is a clear case
of unfair labour practice as defined under Section-2(ra) to the
1983 amended Industrial Disputes Act which are enumerated
under Section-V Schedule to the said act as well as an act of
victimization.
12. Due to the illegal and arbitrary action of the 2nd party
management, the 1st party concerned workmen are facing
great hardship and themselves and their family members are
suffering from mental agony having no other alternative
means of livelihood they are not employed anywhere, forced
to take loans for survival. The concerned workmen are
punished for no fault committed by them; as they continued
to practice union activities, much against to the wishes of the
2nd party management.
13. In any view of the matter, all the 1st party concerned
workmen were the direct workmen of the 2nd party
management, appointed, supervised, controlled and paid by
the 2ndparty management directly. Since they were all
seeking for their confirmation and higher salary on par with
their colleagues, the 2nd party management has victimized
them by creating false and created stories."
22. It is clear from the above that, it was not at all the case
of the respondents before Labour Court that though they were
engaged through Labour Contractor, it was sham and camouflaged
and as a tool used by the management to deprive the valuable
rights of the workmen granted under various statutes.
23. That apart, even in the evidence there is no such cross
examination of either MW-1 or MW-2 to show that the contract was
a sham and camouflaged. All along, even in their examination-in-
chief and the cross-examination of the management witnesses, the
only case of the workmen was that they were under direct
employment of the management and they were never engaged by
the labour contractor i.e., M/s.Madhu Enterprises. However, to
substantiate their claim of direct employment, they have not
produced any document. We are alive to the objective of the ID Act,
that it prevents unfair labour practice.
24. As seen from the issues framed by the Labour Court
referred to above, there was no issue before the Labour Court even
to show that the Labour Court had adjudicated on the contract
labour so as to hold that it was sham and camouflaged. Absolutely,
there is no evidence placed by the respondent-workmen to show
that they are the employees under the appellant. Whereas all the
documents produced stand against them, to show that they are on
the Muster Roll of M/s.Madhu Enterprises i.e., the contractor. Even
their ESI and PF were paid by M/s.Madhu Enterprises, to the
concerned department under the specific individual identity number
provided by the department. All the workmen unequivocally admits
in their cross-examination that their names are found in the Muster
rolls of M/s.Madhu Enterprises. There are permanent workers on
role in the appellant-management and the names of the
respondent-workmen are not on the Muster Rolls of appellant-
management. That apart even they are not members of the Union
i.e., Hind Mazdoor Sabha which is recognized union by the
management. On the other hand, the other permanent workmen in
the appellant - management are members of the said Union. The
respondents even admit that they have received the payment by
M/s.Madhu Enterprises and subscribed their signatures on the
register maintained by M/s.Madhu Enterprises.
25. The law is well-settled by the Hon'ble Apex Court in the
case of Steel Authority of India Limited vs. Union of India2
wherein in paragraph No.24 the following has been stated:
"24. When, however, a contention is raised that the contract
entered into by and between the management and the
contractor is a sham one, in view of the decision of this Court in
Steel Authority of India Ltd.1 an industrial adjudicator would be
entitled to determine the said issue. The industrial adjudicator
would have jurisdiction to determine the said issue as in the
event if it be held that the contract purportedly awarded by the
management in favour of the contractor was really a camouflage
or a sham one, the employees appointed by the contractor
would, in effect and substance, be held to be direct employees
of the management."
2006 (12) SC 233
26. The labour court has erred without framing any issue on
the contract awarded by the management to M/s.Madhu Enterprises
to hold it as a sham and camouflaged without there being pleadings
and without holding any enquiry. The said finding of the Labour
Court suffers from serious perversity.
27. It is germane to mention that the conclusion of the
learned Single Judge is at variance with the stand of the
respondents-workmen in their claim petition before the labour court
in as much as, at paragraph Nos.3 to 13 which we have extracted
above, as well as in the cross-examination of the workmen, it is
unequivocally admitted that they are on the Muster Roll of
M/s.Madhu Enterprises, their ESI and PF dues were paid by
M/s.Madhu Enterprises and they have received their wages by
subscribing their signatures on the register of M/s.Madhu
Enterprises. Hence, for the learned Single Judge to say that the
Labour Court is justified to examine the contract as sham and
camouflaged and they are the employees under the appellant-
management is a misplaced finding.
28. It is a settled position of law that it is for the workmen to
plead and prove that they were engaged through contractor, as a
tool to deprive the workman of statutory rights conferred upon them
under the various provisions of the statutes and to contend such a
contract is sham and camouflaged. In the absence of such a
pleading and proof and in view of manifest admission during the
cross-examination of the workmen that they are on the Muster roll
of the contractor and received all their wages through the
contractor. The Full Bench of Hon'ble Apex Court in the case of
Steel Authority of India Ltd. vs. National Union Waterfront
Workers3 at paragraph No.125(5) held as under:
"125. xxx xxx xxx
(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 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 there under. 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
(2001) 7 SCC 1
conditions as may be specified by it for that purpose in the light
of para 6 hereunder".
29. As could be seen from the records the claim of workmen
framed or set up was that they were permanent employees
employed directly by the appellant. The respondents - workmen
have not placed even a single document to show that they were
working since 2004, under the appellant-management. In their
claim petition itself especially, at paragraph No.7 they have taken
several contentions such as the second party management was not
paying the statutory minimum wages as per the provisions of the
Minimum Wages Act, Added to this, the second party - management
was not paying wages to these workmen on par with other workmen
who were doing similar type of job. Even the benefits are not given
at par with other workmen. Till 2011 they had not raised any
grievance against such discrimination before authorities. They have
not made any representation to the appellant - management. Had
there been such a situation encountered by them they would have
definitely made some representation and complained to the
concerned authority. However, nothing is forthcoming from the
records. In these circumstances, the case put forth by the
respondents is highly unbelievable.
30. Another limb of argument put forth by the respondents -
workmen is that they are working under the supervision of the
appellant. A Co-ordinate Bench of this Court in the case of The
Management of M/s Stumpp, Schule & Somappa Springs Pvt.
Ltd., vs. Mr.U.Mallikarjuna, in Writ Appeal No.1685/2018,
decided on 21.10.2024, referring to the judgment of the Hon'ble
Apex Court in paragraph No.21 has held that, even if the workmen
were working under the supervision of the appellant they shall not
become employees of the Principal employer i.e., appellant, the
same reads as under:
"21. It follows, the contractors were the employers of the
respondent. The ESI and PF contribution made by the appellant would
not be relevant / conclusive to hold the appellant was employer. This
is for the reason under the provisions of the Act of 1970, the principal
employer is under an obligation to ensure that ESI and PF
Contributions are made by the contractor; failure on the part of his
employer (contractor), the liability shall shift on the Principal
employer i.e., the appellant herein. In that regard, the finding of the
learned Single Judge in paragraph No.18 is contradictory and is not
sustainable in law. Further, the Supreme Court in the same Judgment
has also in paragraph No.28.3, on the working of the contract labour
under the supervision of the Principal employer, has stated as under:
"28.3. The next ground referred is that the contract labour
were working under the direct supervision and control of
officers of IAAI. This is not in fact disputed. The contract
labour were engaged in handling cargo, that is loading,
unloading and movement of cargo in the Cargo Complex of
IAAI. Naturally, the work had to be done under the
supervision of the officers of IAAI. Merely because the
contract labour work is under the supervision of the officers of
the principal employer, it cannot be taken as evidence of
direct employment under the principal employer. Clause 17 of
the Contract Agreement required a supervisor to be employed
by the society also. Exercise of some control over the
activities of contract labour while they discharge their duties
as labourers, is inevitable and such exercise is not sufficient
to hold that the contract labour will become the direct
employees of the principle employer".
So, it is clear that, even if the respondent was working under
the supervision of the appellant, he shall not become the employee of
the Principal employer i.e., the appellant."
31. Additionally, as per the admissions in the cross-
examination given by the respondents - workmen, the salary was
being paid to them by the contractor. The Hon'ble Apex Court in the
case of International Airport Authority of India vs.
International Air Cargo Workers Union4 clearly held that one of
the test to determine who is employer is as to who is paying the
salary to the workmen / claimant. At paragraph No.38, wherein the
following has been stated:
"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 workers a direct
(2009) 13 SCC 374
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."
32. The judgments referred by the respondents - workmen
are distinguishable on the facts of the case, as in almost all there
was a contention that, the contract between the management and
the contractor is sham and camouflage and the same has been
proved. However, in the peculiar facts of this case neither there is
any pleading nor any proof by placing any document to show that
the contract was sham and camouflaged, designed by the
management to avoid its liability towards workmen under various
statues. It is trite law that court shall not subscribe its view which is
alien to the facts pleaded and proof submitted by the parties -
litigants. In the absence of any proof regarding the employment and
the pleadings regarding the contract labour as sham and
camouflaged, it becomes very hard for this Court to accept the
reasons rendered by the labour court and confirmed by the learned
single judge.
33. Hence, we are of the view that the impugned order
passed by the labour court, as well as the order of the learned
Single Judge confirming the same are liable to be set-aside. For the
reasons stated supra, we pass the following:
ORDER
i) Writ Appeal No. 715/2023 is allowed.
ii) Order dated 10.04.2023, passed by the learned Single
Judge in Writ Petition No.31261/2016, is set-aside.
iii) Consequently, the award dated 18.02.2016, passed by the
Principal Labour Court, Bengaluru in Reference No.14/2012
is also set-aside.
iv) Writ Appeal No.749/2023 stands closed for statistical
purpose.
v) No costs.
Sd/-
(V KAMESWAR RAO)
JUDGE
Sd/-
(T.M.NADAF)
JUDGE
JJ
List No: 1, Sl.No.64
CT: BRS
