[Cites 6, Cited by 0]

Madhya Pradesh High Court

Shri Bada Sarafa Cotton Association ... vs Balkrishna on 1 December, 2025

         NEUTRAL CITATION NO. 2025:MPHC-IND:34818




                                                                1                             MP-4788-2021
                              IN     THE      HIGH COURT OF MADHYA PRADESH
                                                     AT INDORE
                                                          BEFORE
                                            HON'BLE SHRI JUSTICE ALOK AWASTHI
                                                 MISC. PETITION No. 4788 of 2021
                             SHRI BADA SARAFA COTTON ASSOCIATION THR. SECRETARY
                                           SHRI RAMNIWAS BHARANI
                                                    Versus
                                                 BALKRISHNA
                           Appearance:
                                   Shri Kaustubh Fadnis, Advocate for the petitioner.

                                   Shri Anil Ramkar, learned counsel for the respondent [R-1].

                                                          Heard on : 07.10.2025
                                                         Delivered on : 01.12.2025

                                                                    ORDER

The petitioner, a society registered under the Societies Registration Act, 1973 (for short, 'the 1973 Act'), has invoked the supervisory jurisdiction of this Court under Article 227 of the Constitution of India challenging the ex parte award dated 05.03.2025 passed by the Presiding Officer, Labour Court, Indore in Case No. 22/2019, whereby the respondent-

workman has been directed to be reinstated with full back wages and litigation costs of ₹2,000.

2. The brief facts of the case leading to the filing of this petition are that the petitioner is a society registered under the provisions of the Societies Registration Act, 1973 (hereinafter referred to as 'The Act, 1973'), in the name and style of Shri Bada Sarafa Cotton Association and has been engaged

NEUTRAL CITATION NO. 2025:MPHC-IND:34818

2 MP-4788-2021 in the cotton business since 21.06.1952. A copy of the registration certificate dated 21.06.1952 is filed as proof thereof.

3. The respondent was working as a watchman from 15.07.1997 on a monthly wage of Rs. 1,880. From 23.10.2014, the petitioner stopped paying salary to the respondent without assigning any reason, and removed him from service without serving any notice or written communication.

4. The respondent filed an application before the Labour Court, alleging that, before terminating the respondent, the petitioner applied pressure and force and used malicious, casteist, and abusive language and prayed that the outstanding salary, gratuity, and PF be paid to him; that his termination be declared illegal and improper; therefore he be reinstated in service with continuity and back wages at his previous salary.

5. Since the petitioner remained absent before the Labour Court despite service of notice, the matter was decided ex-parte, and the petitioner was directed to reinstate the respondent in service and pay full back wages from the date of termination to the date of reinstatement. The petitioner was further directed to pay ₹2,000 as litigation costs to the respondent. Being aggrieved, the petitioner has preferred this petition.

6. Learned counsel for the petitioner submitted that the petitioner is a society registered under the provisions of 'the Act, 1973', in the name and style of Shri Bada Sarafa Cotton Association and has been engaged in the cotton business since 21.06.1952. The petitioner is not any industry and does not fall under the definition of industry as per the Industrial Dispute Act, the learned Labour Court has erred in deciding the matter in accordance with

NEUTRAL CITATION NO. 2025:MPHC-IND:34818

3 MP-4788-2021 The Industrial Dispute Act 1947 (for short 'the Act, 1947') considering the Petitioner as an industry whereas the Petitioner is a society registered under 'the Act, 1973'. The Petitioner does not fulfill the requirement of an industry as mentioned under Section 2(7) (j) of the Act, 1947.

7. Counsel further contended that the Petitioner and the (defendant) society against whom case no. 22/2019 has been filed by the Respondent are different entities. Name of present petitioner (Shri Bada Sarafa Cotton Association, Indore) and that of the Respondent party (Cotton Association) in Case No. 22/2019 before the learned Labour Court are different. Petitioner did not receive any notice about the case and was not provided any opportunity of hearing, hence the impugned order is violative of principles of natural justice. Moreover, the respondent was never in employment of the petitioner therefore there arises no question of employer - employee relation between petitioner and Respondent.

8. Counsel relied upon the judgment of Hon'ble Supreme Court in the case of Steel Authority of India Ltd. v. National Union Water Front Workers, (1998) 2 SCC 213 in support of his contentions and submitted that even otherwise, the Labour Court mechanically directed reinstatement without any finding that the respondent was a direct employee or that any sham contract existed, contrary to the Constitution Bench judgment in Steel Authority of India Ltd (Supra). Counsel prayed that the present Petition be allowed and the impugned order passed by the learned Labour Court dated 05.03.2021 may kindly be set aside thereby dismissing the application filed

by the respondent under Section 10 of 'the Act, 1947' and the matter may be

NEUTRAL CITATION NO. 2025:MPHC-IND:34818

4 MP-4788-2021 the matter may kindly be remanded back to the learned Labour Court for fresh hearing on merits.

9. Per contra learned counsel for the respondent opposed the prayer and submitted that learned trial Court has already considered all the issues raised by the petitioner herein and held that based on the analysis of the evidence presented the employer relationship exists between the parties. The defendant/petitioner violated the conditions precedent for retrenchment under Section 25(f), therefore, the respondent's/plaintiff's termination is invalid and unjustified and hence set aside. The respondent/plaintiff is entitled to reinstatement and full back pay from the date of termination to the date of reinstatement. Counsel further contended that though the name of the petitioner has been mistakenly mentioned as "Cotton Association" however, in para 16 of the impugned order it has been clearly referred to as "Manager, Bada Sarafa Cotton Association". The impugned order is in accordance with law and does not warrant any interference.

10. After hearing learned counsel for the parties, I have perused the record.

11. The Labour Court has mechanically directed reinstatement with full back wages, which is impermissible in law in the absence of any finding that the contract was sham or camouflage. As held by the Constitution Bench in Steel Authority of India Ltd. (Supra) in paras 104, 105), which reads as under:-

104. The inevitable conclusion, therefore, is that on issuance of prohibition notification under Section 10(1) of the CLRA Act prohibiting employment of contract labour in a given establishment, the necessary corollary is that the contract labour

NEUTRAL CITATION NO. 2025:MPHC-IND:34818

5 MP-4788-2021 employed in the establishment for the job or the work which is prohibited, ceases to be so employed through the contractor but the prohibition does not make them the employees of the principal employer. The principal employer cannot be forced to employ them as its regular employees. The remedy of the contract labour is to approach the industrial adjudicator for an appropriate relief on the basis that the contract labour system was a camouflage and in fact they were the employees of the principal employer. The industrial adjudicator may, in an appropriate case, direct the principal employer to absorb them as regular employees. There is no automatic absorption.

105. We, therefore, hold that the view taken in Air India Statutory Corporation case [(1997) 9 SCC 377] that on issuance of notification under Section 10(1) of the CLRA Act prohibiting contract labour in a given establishment, the contract labour automatically becomes the employees of the principal employer is not correct. The said view is overruled. The contract workmen do not become the employees of the principal employer by reason of the notification issued under Section 10(1) of the Act. The remedy of the contract workmen is to approach the industrial adjudicator for adjudication of their claim that the contract labour system was sham and nominal and that they were in fact the employees of the principal employer. The industrial adjudicator may, in an appropriate case, direct the principal employer to absorb them as regular employees. There is no question of automatic absorption.

there is no automatic absorption of contract labour upon prohibition or termination. The respondent-workman was required to raise an industrial dispute and prove that he was a direct employee.

12. In the case at hand the petitioner is a society registered under the 1973 Act engaged in cotton trade since 1952. Its activities are co-operative and non-profit in nature. It does not carry on any systematic activity with the cooperation of employer and employees for production, supply or distribution of goods or services with a profit motive. The definition of "industry" under Section 2(j) of the ID Act, even after the 1982 amendment (which remains inoperative), excludes institutions run by societies without profit motive and without organized labour. [Ref: Bangalore Water Supply &

NEUTRAL CITATION NO. 2025:MPHC-IND:34818

6 MP-4788-2021 Sewerage Board v. A. Rajappa, (1978) 2 SCC 213 - triple test not satisfied]. The Labour Court failed to frame any issue on jurisdiction and proceeded assuming the petitioner to be an "industry".

13. In the cause title of the impugned order, the defendant/petitioner is described as "Cotton Association, Indore". In para 16 of the impugned award, it is referred to as "Manager, Bada Sarafa Cotton Association, Indore". This contradiction is fatal. The petitioner has placed on record its registration certificate and MOA showing its full name as "Shri Bada Sarafa Cotton Association". No evidence exists that "Cotton Association" is its abbreviated or registered trade name. The impugned ex-parte order is unsustainable and liable to be set aside."

14. Accordingly, the impugned order dated 05.03.2025 passed by the Labour Court, Indore in Case No. 22/2019 is hereby quashed and set aside. The matter is remanded back to the labour Court by restoring the case No. 22/2019 to the file of the Labour Court, Indore with the following directions in the light of the judgment of Steel Authority of India Ltd. (Supra) and Bangalore Water Supply & Sewerage Board (Supra):