Madras High Court
The Management vs The Labour Court on 26 August, 2025
Author: R.Vijayakumar
Bench: R.Vijayakumar
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
ORDER RESERVED ON : 11.06.2025
ORDER PRONOUNCED ON : 26.08.2025
CORAM:
THE HONOURABLE MR.JUSTICE R.VIJAYAKUMAR
W.P.(MD).Nos.8623, 8624, 8625, 8626, 8627, 8628 and 8629 of 2017
and 5939, 5940, 5941 and 5942 of 2018
and
WMP(MD).Nos.6542, 6544, 6545, 6547,
6549, 6551 and 6553 of 2017
WP(MD).No.8623 of 2017:
The Management, Fuse off Call Centre
Through the Superintending Engineer
Kanyakumari Electricity Distribution Circle
Tamil Nadu Generation and Distribution
Corporation Limited (TANGEDCO)
Nagercoil ....Petitioner
Vs
1.The Labour Court
Thirunelveli
2.M/s.Selvin Gnana Rose
Pallam Senamvilai
Bethelpuram
Kanyakumari District
3.C.Pravin Subash ...Respondents
Prayer: : This Petition filed under Article 226 of the Constitution of India, to
issue a Writ of Certiorari, to call for the records in pursuant to the impugned
order passed by the 1st respondent in I.D.No.34 of 2016 dated 02.03.2017 and
quash the same.
1/32
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
For Petitioner :Mr.Anand Gopalan
For M/s.T.S.Gopalan & Co.
For Respondents : Labour Court -R1
:No appearance for R2
:Mr.R.Thangasamy for R3
COMMON ORDER
These writ petitions have been filed challenging the common award
passed by the Labour Court, Tirunelveli in I.D.Nos.34, 35, 36, 38, 39, 41 and
42 of 2016 dated 02.03.2017.
2.The Labour Court has passed an award of reinstatement with
backwages in I.D.Nos.35, 36 and 39 and has awarded compensation of
Rs.1,00,000/- in I.D.Nos.34, 38, 41 and 42. Challenging these awards, 7 writ
petitions have been filed by the management.
3.The workmen have filed four writ petitions challenging the award of
the Labour Court wherein the prayer for reinstatement has been rejected and
an order of compensation has been passed in lieu of reinstatement.
(A).Factual Matrix:
4.Seven workmen were initially appointed in the fuse-off call centre of
Tamil Nadu Generation and Distribution Corporation in Nagercoil City on
24.03.2008. Their duty was to receive complaints about fuse-off from the
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
consumers, make entries in the registers and make necessary arrangements to
attend the complaints. The workmen were appointed as call attenders. A
contractor was selected through a tender process floated by the Corporation
to man the call centre.
5.In the year 2014, the Corporation decided to engage its own
employees and accordingly, terminated the contract which has resulted in
disengagement of the call attenders. Challenging the disengagement, the call
attenders have raised industrial dispute before the Labour Court seeking
reinstatement, continuity of service and backwages. The Labour Court has
passed an award granting compensation in four cases in lieu of reinstatement.
6.In other cases, reinstatement has been ordered with backwages. The
management as well as the call attenders have preferred the above said writ
petitions challenging the order of reinstatement and the payment of
compensation alone respectively. The Labour Court in its common award has
rendered the following findings.
a)The Corporation supervised the work of the call
attenders and they alone allotted the works. 12 call attenders
worked for 24 hours in 3 shifts, each 4 call attenders
attending one shift.
b)The contract did not specify any mode of supply of
man power and therefore, it is only a camouflage to pay
salary to the call attenders.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
c)The call attenders got leave or permission only from
the officials of the Corporation. Only the Corporation
officials allotted the work and supervised the work.
d)The Government has issued G.O.Ms.No.950
(Labour and Employment) Department, dated 08.08.1990
invoking Section 10 of the Contract Labour (Regulation and
Abolition) Act, 1970 prohibiting the appointment of contract
labourers in fuse-off call centre. The present call attenders
have been appointed after 2008 onwards. Therefore, the
appointment of the present call attenders through a
contractor is illegal.
e)Neither the principal employer nor the contractor
have registered themselves under Contract Labour
(Regulation and Abolition) Act. Except the payment of
salary through the contractor, in all other respects the
Corporation was the direct employer. Therefore, the call
attenders are directly employed by the corporation.
f)The official of the Corporation has admitted in his
cross examination that one company by name 'Koral' was
engaged by the Corporation to give training to the
employees. The training was given to the employees on 21,
22, and 23 of March 2008. However, a contractor was
engaged for supply of man power only from 24.03.2008.
Therefore, the call attenders should only be treated as direct
employees of the Corporation. In such circumstances, the
contract for supply of man power is nothing, but sham and
nominal and it is a camouflage.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
g)When the Corporation had engaged the contract
employees after it was abolished by the State Government,
the contract is illegal. Hence, relying upon the judgment of
the Hon'ble Supreme Court reported in AIR 2001 SC 3527
( Steel Authority of India and others Vs. National Union
Water Front Workers and others), the Labour Court had
held that the absorption of call attenders is not automatic.
However, the Labour Court is empowered to decide the right
of reinstatement.
h)The termination is illegal and is in violation of
Section 25F of the Industrial Disputes Act. The officials
from the management had deposed that they are not
maintaining the attendance registers even though they are
covered under the Shops and Establishments Act. Since a
statutory body had failed to produce records, adverse
inference has to be drawn to the effect that all the call
attenders have completed 240 days of continuous service
and they were retrenched without following the statutory
procedure. Therefore, the order of dismissal was set aside.
i) The three call attenders who had worked for more
than six years were granted relief of reinstatement with full
backwages. Four call attenders who have completed 3 to 4
years of service were awarded a compensation of Rs.
1,00,000/-.
j)As far as two call attenders namely R.G.Sridevi and
Mr.S.Baskaran are concerned, their writ petitions were
dismissed on the ground that they have produced false
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
certificates.
(B)In the light of the said factual matrix of the award of the
Labour Court, the counsels appearing on either side made the following
submissions:
7)The learned counsel appearing for management has submitted that
the Government had issued a notification on 08.08.1990 invoking Section 10
of the Contract Labour (Regulation and Abolition) Act 1970. Under the said
notification, the contract labour system was abolished in Tamil Nadu
Electricity Board in fuse-off call along with other processes.
8.When the said notification was issued, the call centres were not
started. In fact, the call centres were started only 01.04.2008. Therefore, the
prohibition contemplated under the said Government Order would not be
applicable to the employees of the fuse-off call centre which was started on
01.04.2008. In such circumstances, arranging a contractor for supply of man
power or engaging staff through the said contract cannot be said to be illegal.
When the Corporation decided to abolish the contract system, it had
terminated the services of the contractors. In such circumstances, the call
attenders can never be considered to be a direct employees of the
Corporation. Only the contractor was their immediate employer.
9.The learned counsel appearing for the petitioner, relying upon the
judgment of the Hon'ble Supreme Court reported in AIR 2001 SC 3527 (Steel
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
Authority Of India Ltd. & Ors. -vs- National Union Water Front Workers &
Ors), especially paragraph No.122(3), contended that there cannot be any
automatic absorption of contract labour after issuance of notification under
Section 10(1) of CLRA Act. Therefore, the Labour Court ought not to have
passed an award of reinstatement with regard to some of the employees.
When the call attenders were only contractual employees and they were not
appointed to a sanctioned post, the labour Court had erred in granting
reinstatement.
10.On termination of the contract, the contractor can engage these call
attenders in some other establishment. Only if disengagement is found to be
illegal, the question of payment of compensation would arise. When the
contractual employees got disengaged due to termination of contract, the
employees cannot allege that they were illegally terminated by the principal
employer. In such circumstances, the order of reinstatement or the order of
payment of compensation as against the principal employer are not legally
sustainable.
11.The learned counsel appearing for the management had relied upon
a judgment of the Hon'ble Supreme Court reported in 1999 (2) LLN 497
(Radhey Shyam and another Vs. State of Haryana and another) to contend
that Section 2-A applies only to the disputes and the differences relating to
discharge, dismissal, retrenchment or termination of service of an individual
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
workmen. Therefore, the contractual employees cannot invoke Section 2-A
and approach the Labour Court.
12.The learned counsel for the management had also relied upon a
judgment of Madras High Court reported in 2012 SCC Online Mad 1914
( Augutine Vs. The Presiding Officer, II Additional Labour Court, Chennai
and others) to contend that when admittedly the workman has been
employed through the contractor, the claim as against the principal employer
cannot be justified. He further submitted that unless there is pre-existing
relationship of the employer-employee, Section 2A of the Industrial Dispute
Act cannot be invoked.
13.The learned counsel for the management also relied upon a
judgment of the Hon'ble Supreme Court reported in 2014 (9) SCC 407
(Balwant Rai Saluja and another Vs. Air India Ltd., and others) to contend
that when the appointment, payment of salary and the power to take
disciplinary action were vested with the contractor, the call attenders can
never be considered to be a direct employees of TANGEDCO.
14.The learned counsel appearing for the management has also relied
upon a judgment of the Hon'ble Supreme Court reported (2014) 7 SCC 190
(Hari Nandan Prasad and another Vs. Employer I/R to Management of
Food Corporation of India and another) to contend that the Labour Court
has not taken into consideration the qualification, length of service or
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
availability of post, but has proceeded to grant order of reinstatement with
continuity of service and backwages.
15.In the present case, there was no order of appointment and salary
was not paid by the Corporation. In fact, there is no evidence that any
disciplinary action was initiated by the Corporation as against the call
attenders. Therefore, the learned counsel appearing for the management
prayed for allowing the writ petitions filed by the Management and to set
aside the order of the Labour Court.
16.Per contra, the learned counsel appearing for the workmen
submitted that the workmen were appointed on 24.03.2008. They possessed
S.S.L.C qualification with computer knowledge and they were appointed to
the sanctioned posts. They received fuse-off call complaints from the
consumers and forwarded the same to the concerned field staff who rushed to
the spot. This function is permanent and essential one.
17.The learned counsel for the workmen had further submitted that
only the officials of TANGEDCO maintained a shift register, attendance
register etc. They were initially given training on 21.03.2008, 22.03.2008 and
23.03.2008 and the contractor was engaged only with effect from 24.03.2008.
Therefore, the appointment of the contractor is only a paper arrangement for
disbursement of salary. In all respects, the call attenders were direct
employees of TANGEDCO. The contract for engaging supply of man power
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
is prohibited after notification issued by the Government. Therefore, the
contract is sham and nominal and it is only a camouflage to deny the benefits
under the labour laws.
18.The learned counsel had further contended that though all the call
attenders have completed more than three years, all of a sudden, they were
retrenched on 15.04.2015 on the alleged ground that the contract system has
been abolished. However, the management continued with the call centres
with regular employees. On completion of 480 days, the call attenders are
entitled to permanent status, but without regularising their services, they were
retrenched and therefore, the retrenchment is illegal.
19.The learned counsel for the workmen had further stated that since
the contract is sham and nominal, the workmen should be considered to be
direct employees of TANGEDCO. Therefore, in case of illegal retrenchment,
they are entitled to be reinstated with backwages. He further submitted that
since the employees are direct employees, the petition filed under Section 2-A
of Industrial Disputes Act challenging the order of illegal termination is
maintainable.
20.The learned counsel for the workmen had further submitted that
though the call attenders had worked for more than three years, the
employees' provident fund was not detected from their salary. This only
reveals the unfair labour practice adopted by TANGEDCO. Therefore, the
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
Labour Court has rightly broken the veil and the call attenders are direct
employees of TANGEDCO. Since the contract was found to be a camouflage,
the contract labourers have to be treated as employees of the principal
employer and the services of the call attenders have to be regularised in the
establishment concerned. As per Section 10(1) of the Contract Labourers
(Regulation and Abolition) Act, 1970, after a particular process prohibited
from employing the contract labourers, the principal employers should given
preference to the erstwhile contract labourers after granting it regularisation
and and other academic qualification.
21.The learned counsel for the workmen relied upon Paragraph Nos.
122(5) and (6) of the judgment of the Hon'ble Supreme Court reported in
AIR 2001 SC 3527 (Steel Authority Of India Ltd. & Ors. -vs- National
Union Water Front Workers & Ors) and contended that as per the said
judgement, the call attenders should be given preference in case of any
recruitment by TANGEDCO. He had further submitted that the Labour Court
had erred in not granting reinstatement in respect of four employees even
though they have completed 480 days of service within a period of 24
months. He further submitted that it is discriminated on the part of the Labour
Court to treat the similarly placed employees in two different methods and all
the call atttenders are entitled to be reinstated with full backwages.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
22.The learned counsel for the workmen has relied upon the following
judgements;
a) (2010) 3 MLJ 127 (SC) (Harjinder Singh Vs. Punjab
State Warehousing Corporation);
b)2011 LIC 2799 ( Devinder Singh Vs.Municipal Council,
Sanaur);
c)2013 (1) LLN 318 (SC) (Assistant Engineer, Rajasthan
Dev.Corporation and another Vs. Gitam Singh)'
d) (2013) 10 SCC 324 (Deepali Gundu Surwase Vs. Kranti
Junior Adhyapak Mahavidyalaya and others);
e)(2014) 7 SCC 190 ( Hari Nandan Prasad Vs.Food
Corporiation of India);
f)(2014) 6 SCC 434 (Iswarlal Mohanlal Thakkar Vs.
Paschim Gujarat VIJ Co.Ltd.,)
23.Relying upon the judgements of the Hon'ble Supreme Court cited
supra, the workmen prayed for allowing the writ petitions filed by the
workmen and for dismissing the writ petitions filed by the management.
24.Heard both sides and perused the material records.
(C)Discussion:
25(a).Whether a contract labour system in the process of fuse off
call centre has been abolished by way of an notification under Section 10
of Contract Labour (Regulation and Abolition) Act, 1970?
26.The Government of Tamil Nadu has issued a notification under
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
Contract Labour (Regulation and Abolition) Act, in G.O.Ms.950, (Labour &
Employment) Department dated 08.08.1990. Under the said notification, the
process of fuse-off call in the Tamil Nadu Electricity Board has been listed as
one of the processes in which the contract labour system has been abolished.
The said notification has been issued under Section 10 Contract Labour
(Regulation and Abolition) Act, 1970.
27.It is the contention of TANGEDCO that the fuse-off call centre was
established in the year 2008. Therefore, the employees of the call centres
were not covered under the notification dated 08.08.1990. Only the field
workers who visited the consumer's place for rectification of the defects are
covered and not the call centre employees.
28.The Executive Engineer of TANGEDCO has been examined as
MW1. During her cross examination, she has deposed that the fuse-off call
process starts when a consumer makes a call to the call centre and it ends
when the line man rectifies the defects. Therefore, it is clear that the process
of fuse of call starts as soon as a call received by a call attenders. Earlier, the
consumer used to reach TANGEDCO office to register their complaints. After
call centres was opened through a phone call, complaints are received by the
call centres and the line-man are informed about the defects. Hence, it is clear
that though the call centres were established in the year 2008, the
Government notification of the year 1990, prohibiting the employment of
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
contract labour in the fuse-off process covers call attenders also. In view of
the matter, submissions of the learned counsel appearing for the management
that the call centres employees are not covered by the said notification cannot
be countenanced.
(b) The status of contract entered into between TANGEDCO and
the contractor for supply of man power :
29.The Government of Tamil Nadu had abolished the contract labour
system in fuse-off call process in the year 1990 itself in TANGEDCO.
However, TANGEDCO has entered into a contract with private respondents
in the industrial dispute on 24.03.2008 for a period of one year. Every year, a
different contractor was engaged. The contract system got abolished on
14.04.2015. The call attenders were disengaged with effect from 15.04.205
itself.
30.The contract having been entered into in violation of the statutory
provision, is clearly an illegal contract. Neither the TANGEDCO nor the
contractor have got registered themselves under CLRA Act. The Executive
Engineer of TANGEDCO who was examined as MW1. During her cross
examination, she has specifically admitted that the training was given to the
call attenders by TANGEDCO between 21.03.2008 to 23.03.2008. The first
contract was entered into between TANGEDCO and the contractor only on
24.03.2008. Therefore, it is clear that even before a contractor was engaged
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
for supply of man power, TANGEDCO had recruited the workmen and has
also given a training to them through a private agency namely 'Koral'. Hence,
it is clear that the call attenders were not supplied by the contractor after he
was engaged by TANGEDCO. It seems to be a paper work for the purpose of
disbursement of salary alone.
31.The contractor was examined as MW2. During his cross
examination, he had deposed that he is not aware of the names of 12
employees. In his chief examination, he had deposed that during the contract
held, he had not maintained attendance register or wage register. He had
further deposed that the call attender will not seek leave for not attending
duty. The deposition of the contractor would establish that the contract has
been entered into only as a ruse to avoid conferment of benefits of the
workmen under labour law and to camouflage the violation of notification
issued under CLRA Act.
32.The Executive Engineer of TANGEDCO has admitted that during
her cross examination that provident fund is not deducted from the salary of
the employees.
33.The Labour Court after relying upon the above oral and
documentary evidence, has rightly arrived at a finding that the contract is
sham and nominal and it is a camouflaged to circumvent one of the
notification issued under Section 10 of the Contract Labour (Regulation and
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
Abolition) Act, 1970.
(c).Status of workmen when the contract is sham and nominal:
34.The Hon'ble Supreme Court in a judgment reported in AIR 2001 SC
3527 (Steel Authority Of India Ltd. & Ors. -vs- National Union Water
Front Workers & Ors) in Paragraph No.122(5) has held as follows:
“122(5). On issuance of prohibition notification under
S.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 of 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 regularise the services of the contract labour
in the concerned establishment subject to the conditions as may be
specified by it for that purpose in the light of para 6 hereunder.”
35.The Hon'ble Supreme Court in a judgment reported in (1999) 3
SCC 601 (Secretary, H.S.E.V., Vs. Suresh and others) in Paragraph No.20
has held as follows:
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
“20.It has to be kept in view that this is not a case in which
it is found that there was any genuine contract labour system
prevailing with the Board. If it was a genuine contract system, then
obviously, it had to be abolished as per Section 10 of the Contract
Labour Regulation and Abolition Act after following the procedure
laid down therein. However, on the facts of the present case, it was
found by the Labour Court and as confirmed by the High Court
that the so called contractor Kashmir Singh was a mere name
lender and had procured labour for the Board from the open
market. He was almost a broker or an agent of the Board for that
purpose. The Labour Court also noted that the Management
witness Shri A.K. Chaudhary also could not tell whether Shri
Kahsmir Singh was a licensed contractor or not. That workmen
had made a statement that Shri Kashmir Singh was not a licensed
contractor. Under these circumstances, it has to be held that
factually there was no genuine contract system prevailing at the
relevant time wherein the Board could have acted as only the
principal employer and Kashmir Singh as a licensed contractor
employing labour on his own account. It is also pertinent to note
that nothing was brought on record to indicate that even the Board
at the relevant time, was registered as principal employer under
the Contract Labour Regulation and Abolition Act. Once the Board
was not a principal employer and the so called contractor
Kashmir Singh was not a licensed contractor under the Act, the
inevitable conclusion that had to be reached was to the effect that
the so called contract system was a mere camouflage, smoke and a
screen and disguised in almost a transparent veil which could
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
easily be pierced and the real contractual relationship between the
Board, on the one hand, and the employees, on the other, could be
clearly visualised.”
36.A cumulative reading of the judgments of the Hon'ble Supreme Court
will clearly indicate that the contract being not only sham and nominal but
also illegal, the call attenders should be treated as direct employees of
TANGEDCO.
(d) Validity of termination of call attenders:
37.This Court has arrived at a finding that the call attenders are direct
employees of TANGEDCO. They were paid salary on monthly basis.
However, the allotment of shift, work, supervision and grant of leave was
with TANGEDCO officials. When the call attenders are deemed to be the
direct employees of TANGEDCO, their retrenchment/termination without
following Section 25F of Industrial Dispute Act is illegal. TANGEDCO
cannot contend that they are employees of the contractor and therefore, their
services were coterminous with termination of the contract. When the
contract itself has been found to be sham and nominal and camouflaged to
circumvent the prohibition notification issued under CLRA Act, such a
contention on the side of the management cannot be countenanced.
(e) Jurisdiction of the Labour Court:
38.The learned counsel appearing for the management had contended
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
that the call attenders were contract labourers and therefore, there was no
employer employee relationship between them and TANGEDCO. In such
circumstances, even assuming that there was an illegal
retrenchment/termination, they cannot invoke Section 2-A of the Industrial
Disputes Act.
39.The Hon'ble Supreme Court in a judgment reported in (1995) 5
SCC 27 ( Gujarat Electricity Board, Thermal Power Station, Ukai Gujarat
Vs. Hind Mazdoor Sabha and others) in Paragraph Nos.53(ii),(iv), 60 and 67
has held as follows:
(ii) if the contract is sham or not genuine, the workmen of
the so called contractor can raise an industrial dispute for
declaring that they were always the employees of the principal
employer and for claiming the appropriate service conditions.
When such dispute is raised, it is not a dispute for abolition of the
labour contract and hence the provisions of Section 10 of the Act
will not bar either the raising or the adjudication of the dispute.
When such dispute is raised, the industrial adjudicator has to
decide whether the contract is sham or genuine. It is only if the
adjudicator comes to the conclusion that the contract is sham, that
he will have jurisdiction to adjudicate the dispute. If, however, he
comes to the conclusion that the contract is genuine, he may refer
the workmen to the appropriate Government for abolition of the
contract labour under Section 10 of the Act and keep the dispute
pending. However, he can do so if the dispute is espoused by the
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
direct workmen of the principal employer. If the workmen of the
principal employer have not espoused the dispute, the adjudicator,
after coming to the conclusion that the contract is genuine, has to
reject the reference, the dispute being not an industrial dispute
within the meaning of Section 2 (k)of the ID Act. He will not be
competent to give any relief to the workmen of the erstwhile
contractor even if the labour contract is abolished by the
appropriate Government under Section 10 of the Act.
(iv) Even after the contract labour system is abolished, the
direct employees of the principal employer can raise an industrial
dispute for absorption of the ex-contractor's workmen and the
adjudicator on the material placed before him can decide as to
who and how many of the workmen should be absorbed and on
what terms.
60.The next contention of the learned counsel that the
reference with regard to the abolition of the contract labour was
not maintainable after the coming into force of the Act has been
sufficiently answered by us earlier while discussing and recording
our conclusions on the position of law in that behalf. Even on
facts, we have pointed out that the present reference was not for
the abolition of contract labour but for a declaration that the
workmen were in law the employees of the appellant-Board. The
industrial adjudicator has undoubtedly no jurisdiction to abolish a
genuine labour contract in view of the provisions of Section 10 of
the Act. However, it is not correct to say that the reference for the
abolition of the contract, itself stands barred. It is the terms of the
reference which will determine the jurisdiction of the industrial
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
adjudicator to enetertain and decide the reference. The dispute as
to whether the labour contract is genuine or not can be agitated
by the workmen and the industrial adjudicator has jurisdiction to
examine the controversy. If the contract is held to be genuine, the
dispute if it is espoused by the direct workmen of the principal
employer can be kept pending by the industrial adjudicator and
the workmen may be referred by him to the appropriate
Government for the abolition of the contract. If the appropriate
Government abolishes the contract, the industrial adjudicator can
thereafter grant futher relief, if claimed, viz., of the absorption of
the workmen of the erstwhile contractor in the principal
establishment. If, however, the appropriate Government does not
abolsih the contract, the industrial adjudicator may reject the
reference, as stated earlier. It is not, therefore, correct to say that
the reference of an industrial dispute seeking to abolish the
contract is per se barred, as contented by the learned counsel.
67.It is also not correct to say that the Act is a complete
Code by itself and, therefore, the industrial Tribunal has no
jurisdiction to give a direction to the principal employer to absorb
the workmen in question. We have already pointed out that the Act
is silent on the question of the status of the workmen of the
erstwhile contractor once the contract is abolished by the
appropriate Government. Hence, as far as the question of
determination of the status of the workmen is concerned, it
remains open for decision by the industrial adjudicator. There is
nothing in the Act which can be construed to have deprived the
industrial adjudicator of the jurisdiction to determine the same. So
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
long as, therefore, the said jurisdiction has not been taken away
from the industrial adjudicator by any express provision of the Act
or of any other statute, it will have to be held that the said
jurisdiction which, as pointed out above, has been recognised even
by the decisions in Dimakuchi and Standard Vacuum cases (supra)
continues to exist. In the exercise of the said jurisdiction, the
industrial adjudicator can certainly make a contract between the
workmen of the ex-contractor and the principal employer and
direct the principal employer to absorb such of them and on such
terms as the adjudicator may determine in the facts of each
case.......”
40.In the light of the judgment of the Hon'ble Supreme Court, it is
clear that once the Labour Court arrives at a finding that the contract is sham
and nominal, it will have jurisdiction to adjudicate the dispute for a
declaration that the workmen are always the employee of the principal
employer and for claiming appropriate service conditions. The Labour Court
has also jurisdiction to consider whether the contract is genuine or not. It has
got jurisdiction to grant further relief relating to absorption of workmen of
erstwhile contractor in the principal establishment. Therefore, the Labour
Court is not deprived of its power in determining the status of workmen of
the erstwhile contractor once the contract is abolished. Hence, the
contentions of the learned counsel appearing for the management with regard
to the jurisdiction of the Labour Court in entertaining a petition under
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
Section 2-A of the Industrial Disputes Act are liable to be rejected.
(f) Absorption, reinstatement and compensation:
41.Once the labour Court has arrived at a finding that the contract is
sham and nominal and the employees are the direct employees of the
management and their termination is illegal, can there can be any direction
to absorb them into service.?
42.The Hon'ble Supreme Court in a judgment reported in AIR 2001
SC 3527 (Steel Authority Of India Ltd. & Ors. -vs- National Union Water
Front Workers & Ors) in Paragraph Nos.122(3), (5) and (6) has held as
follows:
“122(3).Neither S.10 of the CLRA Act or any other
provision in the Act, whether expressly or by necessary
implication, provides for automatic absorption of contract labour
on issuing a notification by appropriate Government under sub-
section(1) of S.10 prohibiting employment of contract labour, in
any process, operation or other work in any establishment.
Consequently the principal employer cannot be required to order
absorption of the contract labour working in the concerned
establishment.
(5).On issuance of prohibition notification under S.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
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
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 of 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 regularise the services of the contract labour
in the concerned establishment subject to the conditions as may be
specified by it for that purpose in the light of para 6 hereunder.”
(6).If the contract is found to be genuine and prohibition
notification under S.10(1) of CLRA Act in respect of the concerned
establishment has been issued by the appropriate Government,
prohibiting employment of contract labour in any process,
operation or other work of any establishment and where in such
process, operation or other work of the establishment the principal
employer intends to employ regular workmen he shall give
preference to the erstwhile contract labour. If otherwise found
suitable and if necessary, by relaxing the condition is to maximum
age appropriately taking into consideration the age of the workers
at the time of their initial employment by the contractor and also
relaxing the condition as to academic qualifications other than
technical qualifications.
43.In view of the judgment of the Hon'ble Supreme Court, merely
because the contract is sham and nominal and it is in violation of the
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
prohibition notification issued under Section 10 of CLRA Act, the call
attenders cannot be automatically absorbed as employees of TANGEDCO.
However, they are entitled to be reinstated in service only as a temporary
employee of TANGEDCO. There is no dispute whatsoever that the call
centre has become a permanent feature and it is part and parcel of
TANGEDCO as contemplated in Paragraph No.122(6) of the judgment of
the Hon'ble Supreme Court reported in SAIL case (AIR 2001 SC 3527).
There shall be given preference as and when the vacancies arise subject to
the age relaxation, considering their initiate date of appointment as a
contract employee. Therefore, the award of the Labour Court directing
reinstatement of the employees is hereby confirmed.
44.The call attenders though were not permanent employees of
TANGEDCO their retrenchment/termination can be considered to be in
violation of Section 25-F of Industrial Disputes Act.
45.The Hon'ble Supreme Court in a judgment reported in (2014) 7
SCC 177 (Bharat Sanchar Nigam Limited Vs. Bhurumal ) in Paragraph
Nos.33 to 35 has held as follows:
“33.It is clear from the reading of the aforesaid judgments
that the ordinary principle of grant of reinstatement with full back
wages, when the termination is found to be illegal is not applied
mechanically in all cases. While that may be a position where
services of a regular/permanent workman are terminated illegally
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
and/or malafide and/or by way of victimization, unfair labour
practice etc. However, when it comes to the case of termination of a
daily wage worker and where the termination is found illegal
because of procedural defect, namely in violation of Section 25-F of
the Industrial Disputes Act, this Court is consistent in taking the
view in such cases reinstatement with back wages is not automatic
and instead the workman should be given monetary compensation
which will meet the ends of justice. Rationale for shifting in this
direction is obvious.
34. Reasons for denying the relief of reinstatement in such
cases are obvious. It is trite law that when the termination is found
to be illegal because of non-payment of retrenchment compensation
and notice pay as mandatorily required under Section 25-F of the
Industrial Disputes Act, even after reinstatement, it is always open
to the management to terminate the services of that employee by
paying him the retrenchment compensation. Since such a workman
was working on daily wage basis and even after he is reinstated, he
has no right to seek regularization (See: State of Karnataka vs.
Umadevi) Thus when he cannot claim regularization and he has no
right to continue even as a daily wage worker, no useful purpose is
going to be served in reinstating such a workman and he can be
given monetary compensation by the Court itself inasmuch as if he
is terminated again after reinstatement, he would receive monetary
compensation only in the form of retrenchment compensation and
notice pay. In such a situation, giving the relief of reinstatement,
that too after a long gap, would not serve any purpose.
35. We would, however, like to add a caveat here. There may
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
be cases where termination of a daily wage worker is found to be
illegal on the ground it was resorted to as unfair labour practice or
in violation of the principle of last come first go viz. while
retrenching such a worker daily wage juniors to him were retained.
There may also be a situation that persons junior to him wee
regularized under some policy but the concerned workman
terminated. In such circumstances, the terminated worker should not
be denied reinstatement unless there are some other weighty reasons
for adopting the course of grant of compensation instead of
reinstatement. In such cases, reinstatement should be the rule and
only in exceptional cases for the reasons stated to be in writing,
such a relief can be denied.”
46.The Hon'ble Supreme Court in a judgment reported in (2001) 10
SCC 606 ( Deep Chandra Vs. State of Uttar Pradesh and another) had held
as follows:
“1. This appeal is directed against an order made by the
High Court quashing the award made by the Labour Court. A
dispute was raised by the appellant on the ground that though
he had put in more than 240 days in each year of service from
the year 1982 to 1988, he had been retrenched without
following the procedure prescribed under Section 25F of the
Industrial Disputes Act. The Tribunal, therefore, on
adjudication came to the conclusion that termination of service
of the appellant is bad and in particular noticed that persons
who had been employed subsequent to the appellant have been
continuing in service, whereas the services of the appellant had
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
been put to an end to. In the circumstances the Labour Court
made an award granting the reinstatement with back-wages and
other consequential benefits that may flow from it. A Writ
petition was filed against the order before the High Court.
2. The High Court approached the matter rather strangely
as it went at a tangent to consider not only whether the casual
worker's services can be put to an end to but if the award made
by the Labour Court would make him permanent employee, so
on and so forth. The High Court lost sight of the point in issue
that is, when an employee had put in service for more than 240
days in each year for several years whether his services can be
put to an end to without following the procedure prescribed
under Section 25F of the Industrial Disputes Act. If there has
been violation thereof such an employee will have to be
reinstated in his original service on the same terms and
conditions in which he was working earlier. If this is the
position in law, we fail to understand as to how the High Court
could have interfered with the award made by the Labour Court.
We set aside the order made by the High Court and restore the
award made by the Labour Court. The appeal is allowed
accordingly.”
47.This Court has already arrived at a finding that the call attenders
have been illegally retrenched without following the procedure contemplated
under Section 25-F of the Industrial Disputes Act. Thereafter, they have to be
reinstated as direct temporary employees of TANGEDCO. The TANGEDCO
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
was not able to establish before the Labour Court that none of the disengaged
employees have completed 240 days of continuous service in the calender
year before disengagement. All the disengaged employees have completed
three years or more at the time of said disengagement. In such circumstances,
the Labour Court was not right in discriminating between the employees on
the basis of years of service put in by them.
48.That apart, this Court has already arrived at a finding that
TANGEDCO had engaged these call attenders in violation of notification
issued under Section CLRA Act under a sham and nominal contract. Besides
that, employees provident fund has not been deducted from any one of the
employees resulting in unfair labour practice. In such circumstances, as found
by the Hon'ble Supreme Court in Paragraph No.35 of the judgment reported
in (2014) 7 SCC 177, terminated workers cannot be denied reinstatement
adopting a course of grant of compensation instead of reinstatement. No
exceptional circumstances have been pointed out for denying the relief of
reinstatement.
49.The Hon'ble Supreme Court in a judgment reported in AIR 2001 SC
3527 in paragraph No.122(6) has held that when a contract is prohibited
under Section 10 of the CLRA Act, the principal employer shall give
preference to the erstwhile contract labour, if otherwise found suitable and if
necessary, by relaxing the condition is to maximum age limit taking into
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
consideration the age of the workers at the time of their initial appointment
by the contractor. The call attenders have been given training by
TANGEDCO before their appointment and they have worked for more than
three years. In such circumstances, there cannot be any dispute with regard to
their technical qualification in handling the calls and computer operations.
50.In view of the above said deliberations, this Court passes the
following orders.
a) WP(MD).Nso.5939, 5940, 5941 and 5942 of 2019 filed by the
workmen stand allowed directing the management to reinstate the workmen
with continuity of service with 25% backwages.
b)As far as WP(MD)Nos.8623, 8624, 8625, 8626, 8627, 8628 and
8629 of 2018 filed by the management are concerned, the award of
reinstatement stands confirmed. However, the direction for payment of full
backwages is hereby modified as payment of 25% of backwages.
51.Accordingly, all the writ petitions stand allowed to the extent as
stated above. No costs. Consequently, connected miscellaneous petitions are
closed.
26.08.2025.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
Internet : Yes/No
Index : Yes/No
NCC : Yes/No
msa
To
1.The Presiding Officer,
Labour Court
Tirunelveli
2.The Section Officer
V.R.Section
Madurai Bench of Madras High Court
Madurai
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
W.P(MD).Nos.8623 to 8629 of 2017 and 5939 to 5942 of 2018
R.VIJAYAKUMAR, J.
msa
Pre-delivery order made in
W.P.(MD).Nos.8623, 8624, 8625, 8626,
8627, 8628 and 8629 of 2017 and 5939,
5940, 5941 and 5942 of 2018 and
WMP(MD).Nos.6542, 6544, 6545, 6547,
6549, 6551 and 6553 of 2017
26.08.2025
https://www.mhc.tn.gov.in/judis ( Uploaded on: 26/08/2025 06:20:37 pm )
