Madras High Court
The Regional Secretary vs The Central Government Industrial on 23 January, 2025
Author: D.Bharatha Chakravarthy
Bench: D.Bharatha Chakravarthy
2025:MHC:364
W.P.No.27750 of 2010
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 23.01.2025
CORAM :
THE HON'BLE MR.JUSTICE D.BHARATHA CHAKRAVARTHY
W.P.No.27750 of 2010
and M.P.No.1 of 2010
The Regional Secretary,
All India General Insurance Employees Congress,
Old No.8, New No.4, Esplanade,
U.I.L. Building, Chennai - 600 108. .. Petitioner
Versus
1. The Central Government Industrial,
Tribunal-cum-Labour Court,
rep. by its Presiding Officer, Shastri Bhavan,
Haddows Road, Chennai - 600 006.
2. The Regional Manager,
United India Insurance Co. Ltd.,
Dr.Nanjappa Road, Regional Office,
Coimbatore - 641 018. .. Respondents
Prayer : Writ Petition filed under Article 226 of the Constitution of India,
pleased to issue a Writ of Certiorarified Mandamus after calling for the
records relating to the award, dated 11.06.2010 in I.D.No.74 of 2007 on the
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1/42
W.P.No.27750 of 2010
file of the 1st respondent Tribunal filed and marked as Ex.'A' and quash the
same and issue a consequential direction to the 2nd respondent that the
concerned workman D.Pakkirisamy is a workman under the Industrial
Disputes Act, 1947 and that he should be regularized as a Caretaker with
effect from 01.11.1986 and paid the difference in back wages etc., and also
continuity of service.
For Petitioner : Mr.N.Stalin
For Respondents : R1-Labour Court
: Mr.K.K.Sivasshanmugam, for R2
ORDER
This Writ Petition is filed challenging the award of the Central
Government Industrial Tribunal-cum-Labour Court, Chennai, dated
11.06.2010 made in I.D.No.74 of 2007. By the said award, the Labour Court
rejected the claim of the workman that his services be regularised.
2. The brief background of this Writ Petition is that the management is
a General Insurance Company, a public sector undertaking. It has a guest
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house in Coimbatore. By the agreement dated 09.09.1986, the services of
the workman, D.Packiriswamy, was engaged as a Caretaker by the
management. An agreement was established, in which, the Caretaker was to
provide the services specified and would be entitled to remuneration as
detailed in the agreement. Consequently, the workman, Packiriswamy,
functioned as the Caretaker. Following his appointment, his basic pay was
revised to Rs.875/- and the applicable D.A. began to be paid from
01.01.1989. Periodically, his pay and allowances were adjusted. The
contract was also formalized in writing for various periods.
3. Regarding a similarly situated caretaker, C.Gnanam, who was
employed at another general insurance company, the New India Assurance
Company, the workman raised a dispute concerning regularization in
I.D.No.20 of 1997. This dispute was successful, and ultimately, C.Gnanam's
services were regularized by the New India Assurance Company. The
workman claims that, despite his duties being regular and perennial and
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having worked for about 21 years with the hope of being regularized, the
management did not provide him with the same treatment. Meanwhile,
several other staff members in subordinate positions, such as Daftary,
Electrician, Lift Man, Driver, and Watchman, were regularized. Although
the petitioner received wages equivalent to those of regular sub-staff, along
with periodic annual increments and other allowances — including salary
arrears and revisions — the formal order for the workman’s regularization
was not granted. Under these circumstances, the workman, through the
petitioner trade union, raised a dispute under Section 2(k) of the Industrial
Disputes Act, 1947 (hereinafter referred to as the 'I.D Act'). Conciliation
efforts failed, and the appropriate Government subsequently referred the
matter for adjudication by the Tribunal in the order, dated 01.11.2007, which
outlined the following terms:
"Whether the demand of All India General Insurance
Congress for regularization of Sri D.Packiriswamy by the
management of United India Insurance Co. Ltd. is just and
fair? If not, to what relief is the concerned workman
entitled?"
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Thereafter, the Claim Petition is filed by the workman on the above
lines.
4. The claim is resisted by the management. It is the primary case of
the management that the management is a public sector undertaking. Any
recruitment can only be in a sanctioned post. The procedure for recruitment
should be followed by public advertisement and also by following the rules
of reservation and following the recruitment rules. As far as the post of
Caretaker is concerned, there is no such post in the respondent organisation.
The maintenance of the guest house is not the regular activity or the
mainstream activity of the management. While so, given the peculiar job
work involved in the house-keeping as well as the maintenance of the guest
house and providing meals, etc., to the guests in the guest house at
Coimbatore, it was thought fit to engage the services as an independent
contractor/agency. It is 'contract for work' and not 'contract of work'. Only
for remuneration, since otherwise, the work done by the agency cannot be
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gauged, in the contract, it was mentioned that the remuneration payable to
the sub-staff cadre will be paid to the workman.
5. On a reading of the clauses of the agreement, it would be clear that
it is only a 'contract for work' like work's contract as that of an independent
agency/contractor, and there is no employer-employee relationship. There is
no sanctioned post. Therefore, there cannot be any regularisation of the
workman. With the end of the contract period, the agency will come to an
end. With the above pleadings in the background, the Labour Court took up
the matter for enquiry. On behalf of the workman, one T.P.Kannan was
examined as W.W.1 and the workman, D.Packiriswamy, was examined as
W.W.2. Exs.W-1 to W-21 were marked. On behalf of the management, one
R. Govindarajan was examined as M.W.1 and Exs.M-1 to M-9 were marked.
The Labour Court, thereafter, considered the case of the parties. It
considered the decisions of the Hon'ble Supreme Court of India in U.P.
Power Corporation Ltd. and Anr. Vs. Bijli Mazdoor Sangh and Ors. ,
(2007) 5 SCC 755
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Chandrasekhar Azad Krishi Evam Prodyogiki Vishwavidyalaya Vs. United
Trades Congress and Anr. . Thereafter, it had adverted to the case of the
workman.
6. It found that the workman was not engaged as a workman but as an
independent agency under an agreement. When necessitated by the
business, a guest house was provided for management for stay, and it is
intended to be run through an independent contractor. It is in that capacity
that the workman was engaged. The termination of the petitioner as a
contractor cannot be held to be sham or nominal. When there was no post at
all, there is no question of any recruitment to the said post or engagement of
the person as a workman. There is no malice or unfair labour practice that
can be attributed to the management. In that view of the matter, when the
Caretaker remained only as an independent agency, his claim for
regularisation cannot be entertained and dismissed the claim of the
workman. Aggrieved thereby, the workman side is before this Court and the
(2008) 2 SCC 552
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Writ Petition is filed by the petitioner trade union.
7. Mr.N.Stalin, learned Counsel for the workman would submit that in
this case, the finding of the Labour Court that the workman is only an
independent agency is erroneous. Taking this Court through the various
documents such as payment voucher slips, etc., the learned Counsel would
submit that the workman was treated as sub-staff all along. His
remuneration consisted of basic pay, Dearness Allowance, etc. Even the
washing allowance and other benefits, which are granted to the regular
workman such as supply of uniform, umbrella, canvass shoes etc., were all
extended to the workman involved in the present case also. When all along,
the petitioner was treated only as an employee and even the revision of pay
scale etc., which are made to the regular sub-staff, having been extended to
the petitioner, the petitioner is deemed to be an employee under the
management and the Labour Court ought not to have held that there was an
independent agency. Therefore, he would submit that the claim of the
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workman ought to have been allowed by the Labour Court.
8. The learned Counsel would submit that only because the Labour
Court dismissed the Claim Petition by the award, after the award, on
25.04.2011, the petitioner was eased out from service. Therefore, he is also
entitled to reinstatement and back wages. The petitioner attained the age of
superannuation of 60 years in the year 2022, and therefore, all the benefits
that are available to the permanent workman should be ordered to be paid to
him. He would submit that after putting in a lengthy service from
09.09.1986 to 25.04.2011, i.e., for 25 years, the workman was left high and
dry without any benefit whatsoever.
9. Countering the submissions that are made, he would submit that
this is not a case of any illegal appointment. He would rely upon paragraph
No.44 of the judgment of the Hon'ble Supreme Court of India in Secretary,
State of Karnataka and Ors. Vs. Umadevi and Ors. to contend that such
CDJ 2006 SC 310
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employees like that of the petitioner who has put in long and continued
service should be granted the benefit of regularisation. The learned Counsel
would further rely upon the judgment of the Hon'ble Supreme Court of India
in Jaggo Vs. Union of India and Ors. (S.L.P.(C). No.5580 of 2024), more
fully relying upon paragraphs Nos.25 to 27 of the said judgment. In the said
judgment, the Hon'ble Supreme Court of India took note of the fact that
India is also a member of the International Labour Organisation, which had
advocated for employment stability and fairness of the treatment of the
workers.
10. In paragraph No.25, the Hon'ble Supreme Court of India took note
of the fact that the organisations, including the Public Sector Organisations,
are using outsourcing as a shield to replace the workman at their will and
perpetuate the exploitation. Thereafter, the Hon'ble Supreme Court of India
considered the import of the judgment in Umadevi's case (cited supra) in
paragraph No.26. It concluded that quite often, the judgment in Umadevi's
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case (cited supra) has been misapplied to deny the genuine benefit of
regularisation which accrues for employees that of the workman in the
present case who worked for a long number of years. The Hon'ble Supreme
Court of India decried the distorted application of the judgment in its true
spirit and effectively weaponising it against the employees who rendered
indispensable services over decades.
11. Taking the attention of this Court to paragraph No.27, the learned
Counsel would submit that the said dictum would squarely apply to the
instant case and would submit that the claim of the workman should be
allowed. It is his case that if the Labour Court allowed the claim of the
workman, he would not have been eased out from service with effect from
25.04.2011, and as such, the subsequent relieving of the workman would not
render the claim infructuous, and all the benefits should be granted.
12. Per contra, Mr.K.K.Sivasshanmugam, learned Counsel for the
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management would submit that in the counter to the Claim Petition, firstly, it
has been categorically mentioned in paragraph No.10 of the counter
statement as to the nature of the regular posts that are available in the
management. The post of Caretaker is not available. The activity of running
the guest house is not the regular activity of the management, and it is only
the peripheral activity necessitated due to the travel of the officers of the
Company. In cases of peripheral activity such as housekeeping of the guest
house, outsourcing cannot be said to be an unfair exercise. Considering the
nature of work, it is a necessary exercise, especially when there is no
sanctioned post. In view thereof, by a specific agreement only, the person
was engaged.
13. On a perusal of the agreement, it can be seen that he has to
perform the works of housekeeping and other maintenance of the guest
house as an independent agency. Only regarding the quantum of
remuneration, by way of consideration, instead of a specific amount, it was
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mentioned that the remuneration that will be available for sub-staff will be
periodically paid and that is accepted by the person concerned. In view
thereof, the mere payment of the salary available to the sub-staff by itself
will not create any master-servant relationship. The relationship is that of
the principal and agency. Therefore, the claim of the workman cannot be
countenanced.
14. This apart, he would submit that even paragraph No.44 of the
judgment in Umadevi's case (cited supra), the distinction was only drawn
between irregular and illegal appointment. If the appointment is made
without even a post, then that will only become an illegal appointment.
Therefore, the judgments that are relied upon by the learned Counsel for the
petitioner in Umadevi's case (cited supra) as well as in Jaggo's case (cited
supra) will not apply to the instant case. When there is no post at all, the
Court under Article 226 of the Constitution of India cannot create a post and
order that the workman should be regularised with the said post. The prayer
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of the workman cannot be countenanced. Further, the workman, upon
expiry of the contract, was also disengaged with effect from 25.04.2011.
Thereafter, he also did not choose to challenge his termination. Therefore,
there is no question of granting any relief at this point in time.
15. The learned Counsel would also rely upon the judgment of the
Hon'ble Supreme Court of India in Oshiar Prasad and Ors. Vs. The
Employers in relation to Management of Sudamidh Coal Washery of
M/s.BCCL, Dhanbad, Jharkhand (Civil Appeal No.1389 of 2015), more
specifically, would rely upon paragraph No.28 of the said judgment.
16. The learned Counsel would further take a preliminary objection
concerning the maintainability of the Writ Petition by the trade union. Even
though trade unions can represent the workmen in the Industrial Forum,
when further Writ Petition is filed, especially when it relates to only one
single workman, the trade union cannot maintain the Writ Petition. In
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support thereof, the learned Counsel would rely upon the judgment of this
Court in Bharathidasan University Vs. State of T.N. Madras High Court
(W.P.(MD).No.3846 of 2012), more specifically relying upon paragraph
No.15(vii), whereupon, the Court took into consideration the position of law
as laid down in the earlier judgments and held that the Writ Petition, filed by
the trade union, is not maintainable. Even regarding the Writ Petition of the
present kind, the learned Single Judge of the Allahabad High Court in the
judgment reported in Industrial Employees Union Vs. State of Uttar
Pradesh and Ors. , held that the Writ Petition filed by the trade union is not
maintainable. Therefore, both on the maintainability as well as on merits,
the Writ Petition is bound to fail, and no relief can be granted to the
workman.
17. I have considered the rival submissions made on either side and
perused the material records of the case.
AIR 1960 ALL 738
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18. The following questions arise for determination in this case:-
(i) Whether the Writ Petition, filed by the petitioner trade union, is
maintainable or not?
(ii) If so, whether, in the instant case, the award of the Labour Court,
holding that the instant transaction is 'contract for work' and not 'contract of
work' and is only an independent agency, is sustainable?
(iii) If the award of the Labour Court is not sustainable, then to what
relief will the workman be entitled?
Question No.i:-
19. The instant Writ Petition is filed challenging the award of the
Labour Court made in I.D.No.74 of 2007. The award arises out of a dispute
raised under Section 2(k) of the I.D Act. It is essential to extract Section
2(k) of the I.D Act, which is as follows:-
"2. Definitions.—
.
.
.
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(k) "industrial dispute" means any dispute or
difference between employers and employers, or between
employers and workmen, or between workmen and
workmen, which is connected with the employment or
non-employment or the terms of employment or with the
conditions of labour, of any person;"
20. It is further relevant to extract Section 2(qq) of the I.D Act which
reads as follows:-
"2. Definitions.—
.
.
.
(qq) “trade union” means a trade union registered
under the Trade Unions Act, 1926 (16 of 1926);;"
21. Section 36 of the I.D Act reads as follows:-
"36. Representation of parties.—(1) A workman
who is a party to a dispute shall be entitled to be
represented in any proceeding under this Act by—
(a) any member of the executive or office
bearer of a registered trade union of which he is a
member;
(b) any member of the executive or other
office bearer of a federation of trade unions to which
the trade union referred to in clause (a) is affiliated;
(c) where the worker is not a member of any
trade union, by any member of the executive or
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other office bearer of any trade union connected
with, or by any other workman employed in the
industry in which the worker is employed and
authorised in such manner as may be prescribed.
(2) An employer who is a party to a dispute shall
be entitled to be represented in any proceeding under this
Act by—
(a) an officer of an association of employers
of which he is a member; (b) an officer of a
federation of association of employers to which the
association referred to in clause (a) is affiliated;
(c) where the employer is not a member of
any association of employers, by an officer of any
association of employers connected with, or by any
other employer engaged in, the industry in which the
employer is engaged and authorised in such manner
as may be prescribed.
(3) No party to a dispute shall be entitled to be
represented by a legal practitioner in any conciliation
proceedings under this Act or in any proceedings before a
Court.
(4) In any proceeding before a Labour Court,
Tribunal or National Tribunal, a party to a dispute may be
represented by a legal practitioner with the consent of the
other parties to the proceedings and with the leave of the
Labour Court, Tribunal or National Tribunal, as the case
may be."
Therefore, from the provisions of the I.D Act, it would be clear that
the question of filing the Writ Petitions directly for other prayers is different
from filing a Writ Petition concerning the award of the Labour Court or the
Industrial Tribunal.
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22. When the workman is entitled to be represented by the trade union
in the Industrial Forum and when the trade union is the petitioner in the
Industrial Dispute, naturally, when the Writ Petition is to be filed challenging
the award of the Labour Court, then, the Writ Petition by the trade union is
maintainable.
23. As far as the judgments which are relied on by the learned Counsel
for the petitioner, the same do not arise out of the challenge to the award,
whereunder, the concerned trade union, which is the petitioner. As far as the
judgment of the Allahabad High Court is concerned, I am not in the
agreement of the same, given the express provisions contained in the I.D Act
and when the award of the Tribunal or the Labour Court has to be challenged
before the Court, the same principles, which apply to the Industrial Forum,
will also apply. Therefore, I reject the contention of the learned Counsel for
the petitioner management, and I answer the question that the writ petition is
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maintainable.
Question No.ii:-
24. The question of whether a particular relationship between the
workman and the management is 'contract for work' or 'contract of work' is
no longer res integra. The Hon'ble Supreme Court of India in
Dharangadhra Chemical Works Ltd., Vs. State of Saurashtra and Ors. ,
held in paragraph No.15 as follows:-
"15. The correct method of approach, therefore,
would be to consider whether having regard to the
nature of the work there was due control and
supervision by the employer or to use the words of
Fletcher Moulton, L.J., at p. 549 in Simmons v. Heath
Laundry Co. [(1910) 1 KB 543 (CA)] :
"In my opinion it is impossible to lay down
any rule of law distinguishing the one from the
other. It is a question of fact to be decided by
all the circumstances of the case. The greater
the amount of direct control exercised over
the person rendering the services by the
person contracting for them the stronger the
grounds for holding it to be a contract of
service, and similarly the greater the degree
of independence of such control the greater
the probability that the services rendered
1956 SCC OnLine SC 11
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are of the nature of professional services
and that the contract is not one of service"."
25. In Shri Chintaman Rao and Anr. Vs. The State of Madhya
Pradesh , the Hon'ble Supreme Court of India, in paragraph No.9 of the
judgment, held as follows:-
"9....There is, therefore, a clear-cut distinction
between a contractor and a workman. The identifying
mark of the latter is that he should be under the control
and supervision of the employer in respect of the
details of the work."
26. In Silver Jubilee Tailoring House and Ors. Vs. Chief Inspector
of Shops and Establishments and Anr.7, the Hon'ble Supreme Court of
India, in paragraph Nos.28 and 29, held as follows:-
"28. It is exceedingly doubtful today whether the
search for a formula in the nature of a single test to tell a
contract of service from a contract for service will serve
any useful purpose. The most that profitably can be done
is to examine all the factors that have been referred to in
the cases on the topic. Clearly, not all of these factors
would be relevant in all these cases or have the same
weight in all cases. It is equally clear that no magic
formula can be propounded, which factors should in any
1957 SCC OnLine Raj 38
(1974) 3 SCC 498
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case be treated as determining ones. The plain fact is that
in a large number of cases, the Court can only perform a
balancing operation weighing up the factors which point in
one direction and balancing them against those pointing in
the opposite direction. [See Atiyah, PS. “Vicarious
Liability in the Law of Torts”, pp. 37-38]
29. During the last two decades the emphasis in the
field has shifted and no longer rests so strongly upon the
question of control. Control is obviously an important
factor and in many cases it may still be the decisive
factor. But it is wrong to say that in every case it is
decisive. It is now no more than a factor, although an
important one. [See Argent v. Minister of Social
Security and Another, (1968) 1 WLR 1749 at 1759] ."
27. In Kishore Lal Vs. Chairman, Employees' State Insurance
Corporation , the Hon'ble Supreme Court of India, in paragraph No.8, held
as follows:-
"8. ...There is a distinction between a “contract of
service” and a “contract for service”. A “contract for
service” implies a contract whereby one party undertakes
to render service e.g. professional or technical service, to
or for another in the performance of which he is not
subject to detailed direction and control and exercises
professional or technical skill and uses his own knowledge
and discretion, whereas a “contract of service” implies
relationship of master and servant and involves an
obligation to obey orders in the work to be performed and
as to its mode and manner of performance. A contract of
service is excluded for consideration from the ambit of
(2007) 4 SCC 579
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definition of “service” in the Consumer Protection Act,
whereas a contract for service is included..."
28. In Sushilaben Indravadan Gandhi and Anr. Vs. New India
Assurance Company Limited and Ors. , the Hon'ble Supreme Court of
India, in paragraph Nos.13, 14 and 32, deals with the said question and they
are extracted as hereunder:-
"13. This Court has in a series of judgment
indicated the tests to be followed in order to determine, in
the context of the Industrial Disputes Act and the Factories
Act, as to whether different kinds of persons who supply
goods or services could be said to be “in the employ” of
the employer. Thus, in Dharangadhra [Dharangadhra
Chemical Works Ltd. v. State of Saurashtra, 1957 SCR
152 : AIR 1957 SC 264] , the question posed before the
Court was whether the salt manufactured by a class of
professional laborers, known as agarias, from rain water
that got mixed with saline matter in the soil, could be said
to be in pursuance of contracts of service with the
appellant, as a result of which they would then be entitled
to be treated as workmen under the Industrial Disputes
Act. After setting out the definition of “workman” under
Section 2(s) of the said Act, this Court referred to the
earliest test laid down to distinguish between a contract of
service and a contract for service, namely, that whereas in
the latter case, the master can order or require what is to be
done, in the former case, he can not only order or require
what is to be done, but also how it shall be done.
14. After referring to a number of English
(2021) 7 SCC 151
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judgments, the Court then held, giving the example of a
ship's master, a chauffeur, and a reporter on the staff of a
newspaper as against a ship's pilot, a taxi man and a
newspaper contributor, that the test would be whether
work is done as an integral part of the business of the
employer, in which case it would be a contract of service,
or whether it was done as an accessory to such business, in
which case it would be a contract for service. Other tests
that were laid down were as to whether the master had the
power to select the servant, whether he paid wages or
other remuneration, whether the master had the right to
control the method of doing the work, and whether the
master had the right to suspend or dismiss the employee.
Ultimately, the true test, according to the judgment, was
held to be as follows : (Dharangadhra case
[Dharangadhra Chemical Works Ltd. v. State of
Saurashtra, 1957 SCR 152 : AIR 1957 SC 264] , SCR p.
160)
“The principle which emerges from
these authorities is that the prima facie test for
the determination of the relationship between
master and servant is the existence of the right
in the master to supervise and control the work
done by the servant not only in the matter of
directing what work the servant is to do but
also the manner in which he shall do his work,
or to borrow the words of Lord Uthwatt at p.
23 in Mersey Docks & Harbour Board v.
Coggins & Griffith (Liverpool) Ltd.
[Mersey Docks & Harbour Board v.
Coggins & Griffith (Liverpool) Ltd., 1947
AC 1 (HL)] , AC at p. 23:“The proper test is
whether or not the hirer had authority to
control the manner of execution of the act in
question”.
14. The nature or extent of control
which is requisite to establish the relationship
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of employer and employee must necessarily
vary from business to business and is by its
very nature incapable of precise definition. As
has been noted above, recent pronouncements
of the Court of Appeal in England have even
expressed the view that it is not necessary for
holding that a person is an employee, that the
employer should be proved to have exercised
control over his work, that the test of control
was not one of universal application and that
there were many contracts in which the master
could not control the manner in which the
work was done (vide observations of
Somervell, L.J. in Cassidy v. Ministry of
Health [Cassidy v. Ministry of Health,
(1951) 2 KB 343 : (1951) 1 All ER 574 (CA)]
, and Denning, L.J. in Stevenson, Jordan &
Harrison Ltd. v. MacDonald & Evans
[Stevenson, Jordan & Harrison Ltd. v.
MacDonald & Evans, (1952) 1 TLR 101
(CA)] ).”
...
32. A conspectus of all the aforesaid judgments
would show that in a society which has moved away
from being a simple agrarian society to a complex
modern society in the computer age, the earlier simple
test of control, whether or not actually exercised, has
now yielded more complex tests in order to decide
complex matters which would have factors both for
and against the contract being a contract of service as
against a contract for service. The early “control of the
employer” test in the sense of controlling not just the work
that is given but the manner in which it is to be done
obviously breaks down when it comes to professionals
who may be employed. A variety of cases come in
between cases which are crystal clear — for example, a
master in a school who is employed like other employees
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of the school and who gives music lessons as part of his
employment, as against an independent professional piano
player who gives music lessons to persons who visit her
premises. Equally, a variety of cases arise between a ship's
master, a chauffeur and a staff reporter, as against a ship's
pilot, a taxi driver and a contributor to a newspaper, in
order to determine whether the person employed could be
said to be an employee or an independent professional.
The control test, after moving away from actual control
of when and how work is to be performed to the right
to exercise control, is one in a series of factors which
may lead to an answer on the facts of a case slotting
such case either as a contract of service or a contract
for service. The test as to whether the person employed
is integrated into the employer's business or is a mere
accessory thereof is another important test in order to
determine on which side of the line the contract falls.
The three-tier test laid down by some of the English
judgments, namely, whether wage or other
remuneration is paid by the employer; whether there is
a sufficient degree of control by the employer and other
factors would be a test elastic enough to apply to a
large variety of cases. The test of who owns the assets
with which the work is to be done and/or who
ultimately makes a profit or a loss so that one may
determine whether a business is being run for the
employer or on one's own account, is another
important test when it comes to work to be performed
by independent contractors as against piece-rated
labourers. Also, the economic reality test laid down by
the US decisions and the test of whether the employer
has economic control over the workers' subsistence,
skill and continued employment can also be applied
when it comes to whether a particular worker works
for himself or for his employer. The test laid down by
the Privy Council in Lee Ting Sang v. Chung Chi-
keung [Lee Ting Sang v. Chung Chi-keung, (1990) 2
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AC 374 (PC)] , namely, is the person who has engaged
himself to perform services performing them as a
person in business on his own account, is also an
important test, this time from the point of view of the
person employed, in order to arrive at the correct
solution. No one test of universal application can ever
yield the correct result. It is a conglomerate of all
applicable tests taken on the totality of the fact
situation in a given case that would ultimately yield,
particularly in a complex hybrid situation, whether the
contract to be construed is a contract of service or a
contract for service. Depending on the fact situation of
each case, all the aforesaid factors would not necessarily
be relevant, or, if relevant, be given the same weight.
Ultimately, the Court can only perform a balancing act
weighing all relevant factors which point in one
direction as against those which point in the opposite
direction to arrive at the correct conclusion on the facts
of each case."
29. In Union Public Service Commission Vs. Girish Jayanti Lal
Vaghela and Ors. , the question is dealt with by the Hon'ble Supreme Court
of India, in paragraph No.6 and the same is extracted hereunder:-
"6. The problem of defining what is an employer
and employee relationship and what is an independent
entrepreneurial dealing frequently arises before the courts.
Difficulty arises in defining what is a “contract of service”
and what is “contract for service”. In Cassidy v. Ministry
of Health [(1951) 1 All ER 574 : (1951) 2 KB 343 (CA)]
after referring to some earlier decisions, it was held that in
(2006) 2 SCC 482
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a “contract for service” the master can order or require
what is to be done, while in the other case (a contract of
service) he cannot only order or require what is to be
done but direct how it shall be done. The House of
Lords in Short v. J.W. Henderson Ltd. [(1946) 174 LT
417 : 115 LJPC 41 (HL)] laid down the attributes of
employer-employee relationship which have been
followed in later decisions. In this case the appellant, who
was a dock labourer, sustained injuries by accident and
claimed compensation against the respondents under the
Workmen's Compensation Act, 1925. The respondents
contended that the appellant was not a workman within the
meaning of Section 3(1) of the said Act but was a member
of a joint stevedoring adventure. The House laid down
the following four indicia of contract of service,
namely, (a) the master's power of selection of his
servant; (b) the master's responsibility of payment of
wages or other remuneration; (c) the master's right of
suspension or dismissal; and (d) the master's right to
control the method of doing the work. It was also
observed that a contract of service may still exist if
some of these elements are absent altogether, or,
present only in an unusual form and that the principal
requirement of a contract of service is the right of the
master in some reasonable sense to control the method
of doing the work, and that this factor of
superintendence and control has always been treated
as critical and decisive of the legal quality of the
relationship."
30. On consideration of the above judgments, the fact that the activity
is not a core business activity of the respondent organisation is a point that is
in favour of the management. But it can be seen that the kind of control and
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supervision exercised on the workman is only that of an employee. It is not
that the guest house was simply entrusted to him to look after. Every action
is as per the direction of the management. Thus, on consideration of the
control theory, the only conclusion that can be reached is that the workman
is only an employee. Further, the payment made to the workman had no
nexus to any output or the work he performed but related only to the wage
period, that is, monthly salary.
31. In this regard, though the original contract was not filed by the
parties, the subsequent contract between the same workman and the
management is produced before the Labour Court as well as this Court and
on a perusal of the contract, dated 01.01.2004, it can be seen that the
Caretaker shall perform the works which are mentioned in column (a) to (k)
of the said agreement. The don'ts of the Caretaker are mentioned in columns
(a) to (e). The relevant portion, concerning the Company's obligations, reads
thus:-
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"The Company shall:
a) reserve the right to demand and take a caution deposit
an amount not exceeding Rs.2,000/- from the person
appointed as Care-taker in terms of this agreement which
amount shall be returnable without interest or adjustable
against any unpaid dues or damages payable by the Care-
taker within 30 days of termination of this Agreement.
b) pay monthly compensation to the care-taker at rates
fixed as per the instructions of the Head Office from time
to time for duties performed as per their agreement.
c) allow the care-taker and one more person (helper) to
stay with him in the transit camp.
d) reserve the right to terminate the services of the care-
taker by giving one month's notice or vice versa.
However, in the event of the conduct or actions of the
care-taker not being found satisfactory, the company shall
have the right to terminate this service contract of the care-
taker without any notice.
To this effect the parties have signed this Agreement on
the day, month and year first above written."
It is expressly stated that the Caretaker services are engaged. The
monthly compensation is to be paid as fixed by the Head Office from time to
time. There was no consideration which was expressly fixed. The main
aspect, which should be present in a 'work's contract' or a 'contract of work',
is absent. The subsequent conduct of the parties i.e., the remuneration is
paid as that of a sub-staff, is also to be noted.
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32. The salary slip of the petitioner, for example, for the month of
December 2004, clearly mentions as follows:-
Cross Reference
No. Date
Basic 4965-00
Dearness Allowance 2055-51
C.C.A 124-13
Wash 75-00
7219-64
H.R.A (Recovery) 496-50
6723-14
Rounded off 6723-00
Therefore, it can be seen that there is a basic pay, Dearness
Allowance, C.C.A, Washing Allowance are paid and since the workman was
allowed to reside in the guest house itself, the House Rent Allowance is
deducted and the balance pay scale was paid.
33. Admittedly, on a perusal of the communication, dated 09.03.1988,
it can be seen that the various other benefits such as supply of uniform,
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umbrella, canvass shoes etc., were extended to the workman. A perusal of
the communication, dated 08.07.1991, it can be seen that on par with the
permanent sub-staff, the scale of pay with notional increment etc., are fixed.
Even the pay revisions are periodically granted, and the arrears are paid to
the workman. The most important factor is that the services were engaged
continuously without going for any further tender or inviting anybody else.
From 09.09.1986 until the award was passed, no other steps were taken by
the management and the workman was continuously engaged for more than
25 years even until the decision which came in the award. Therefore, taking
into account the method of engagement, the payment of remuneration, the
continuity of service, etc., I hold that the relationship between the parties is
in the nature of an employer-employee relationship and not that of an
independent agency, and I am unable to agree with the findings of the
Labour Court.
34. The findings of this Court are only in line with the judgment of the
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Hon'ble Supreme Court of India in Jaggo's case (cited supra). It is essential
to extract paragraphs Nos.21, 23, 24 and 25 of the said judgment, which
reads as follows:-
"21. The High Court placed undue emphasis on the
initial label of the appellants' engagements and the
outsourcing decision taken after their dismissal. Courts
must look beyond the surface labels and consider the
realities of employment: continuous, long-term service,
indispensable duties, and absence of any mala fide or
illegalities in their appointments. In that light, refusing
regularization simply because their original terms did not
explicitly state so, or because an outsourcing policy was
belatedly introduced, would be contrary to principles of
fairness and equity.
...
23. The International Labour Organization (ILO),
of which India is a founding member, has consistently
advocated for employment stability and the fair treatment
of workers. The ILO's Multinational Enterprises
Declaration (International Labour Organization - Tripartite
Declaration of Principles concerning Multinational
Enterprises and Social Policy) encourages companies to
provide stable employment and to observe obligations
concerning employment stability and social security. It
emphasizes that enterprises should assume a leading role
in promoting employment security, particularly in contexts
where job discontinuation could exacerbate long-term
unemployment.
24. The landmark judgement of the United State in
the case of Vizcaino v. Microsoft Corporation [97 F.3d
1187 (9th Cir.1996)] serves as a pertinent example from
the private sector, illustrating the consequences of
misclassifying employees to circumvent providing
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benefits. In this case, Microsoft classified certain workers
as independent contractors, thereby denying them
employee benefits. The U.S. Court of Appeals for the
Ninth Circuit determined that these workers were, in fact,
common-law employees and were entitled to the same
benefits as regular employees. The Court noted that large
Corporations have increasingly adopted the practice of
hiring temporary employees or independent contractors as
a means of avoiding payment of employee benefits,
thereby increasing their profits. This judgment underscores
the principle that the nature of the work performed, rather
than the label assigned to the worker, should determine
employment status and the corresponding rights and
benefits. It highlights the judiciary's role in rectifying such
misclassifications and ensuring that workers receive fair
treatment.
25. It is a disconcerting reality that temporary
employees, particularly in government institutions, often
face multifaceted forms of exploitation. While the
foundational purpose of temporary contracts may have
been to address short-term or seasonal needs, they have
increasingly become a mechanism to evade long-term
obligations owed to employees. These practices manifest
in several ways:
•Misuse of "Temporary" Labels: Employees engaged
for work that is essential, recurring, and integral to the
functioning of an institution are often labeled as
"temporary" or "contractual," even when their roles mirror
those of regular employees. Such misclassification
deprives workers of the dignity, security, and benefits that
regular employees are entitled to, despite performing
identical tasks.
•Arbitrary Termination: Temporary employees are
frequently dismissed without cause or notice, as seen in
the present case. This practice undermines the principles
of natural justice and subjects workers to a state of
constant insecurity, regardless of the quality or duration of
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their service.
•Lack of Career Progression: Temporary employees
often find themselves excluded from opportunities for skill
development, promotions, or incremental pay raises. They
remain stagnant in their roles, creating a systemic disparity
between them and their regular counterparts, despite their
contributions being equally significant.
•Using Outsourcing as a Shield: Institutions increasingly
resort to outsourcing roles performed by temporary
employees, effectively replacing one set of exploited
workers with another. This practice not only perpetuates
exploitation but also demonstrates a deliberate effort to
bypass the obligation to offer regular employment.
•Denial of Basic Rights and Benefits: Temporary
employees are often denied fundamental benefits
such as pension, provident fund, health
insurance, and paid leave, even when their
tenure spans decades. This lack of social security
subjects them and their families to undue
hardship, especially in cases of illness,
retirement, or unforeseen circumstances."
Therefore, the employers, more specifically, the public sector
employers, cannot create such contracts as a subterfuge to extend the normal
benefits to the employee and to deny him the security of tenure and the
benefits of labour welfare legislations. The workman had put in a long
number of years of service.
35. It is also to be further noted that under identical circumstances, in
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respect of a similar Company namely, United India Insurance Company,
where, both are General Insurance Company and the services of both the
General Insurance Companies being governed under the General Insurance
Business (Nationalisation) Act, 1972, whereby, similar Caretaker claimed
regularisation, which claim was allowed by the Labour Court and was also
upheld by this Court. Pursuant to which he was also granted benefit by the
said Company, is also taken into account.
36. Accordingly, I answer the question that there existed an employer-
employee relationship between the petitioner and the management, and it
cannot be termed as ‘contract for work’ or that of an agency.
Question No.iii:-
37. The first contention of the learned Counsel for the management
that the workman has been eased out from the services from 25.04.2011 and
that he has not questioned the termination is considered. If the Labour Court
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accepted the Claim Petition and ordered permanency, there was no way that
the workman would have been eased out from the services from 25.04.2011.
Therefore, the contention that the termination should be separately
questioned cannot be accepted. However, the fact that the workman was
eased out from the services from 25.04.2011 is to be kept in mind for the
nature of relief that should be granted. It is seen that the workman has put in
service from 09.09.1986 up to 25.04.2011 for 25 years. After 25 years, he
was simply sent out high and dry without any benefits being paid, which is
also kept in mind.
38. The contention of the learned Counsel for the management that
there is no regular post to accommodate the petitioner is also borne in mind.
The petitioner has also since pending the Writ Petition attained the age of
superannuation, which is also kept in mind. Therefore, while keeping in
mind all the above factors and considering the overall facts and
circumstances of the case, I am of the view that in this case, instead of
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reinstatement with back wages and above benefits, compensation can be
ordered. By considering the dictum of the Hon'ble Supreme Court of India
in O.P. Bhandari Vs. Indian Tourism Development Corporation Ltd., and
Ors. that an amount of compensation should be enough to get at least 50%
of the last drawn wages as interest per month and also considering the later
judgment of Hon'ble Supreme Court of India in Workmen Vs. Bharat Fritz
Werner Private Limited and Anr. that some amount should be added for
the loss of employment also, I am of the view that in this case, an award of
compensation of a sum of Rs.7,00,000/- to the petitioner will be fair and
appropriate.
The Result:
39. In view thereof, this Writ Petition is allowed on the following
terms:-
(i) The award of the Labour Court made in I.D.No.74 of 2007, dated
(1986) 4 SCC 337
(1990) 3 SCC 565
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11.06.2010, stands set aside;
(ii) It is held that the petitioner is a workman and there is an
employer-employee relationship between the workman and the management
and in lieu of reinstatement with back-wages, a compensation of a sum of
Rs.7,00,000/- is ordered to be paid by the management within 12 weeks
from the date of receipt/production of a web-copy of this order without
waiting for a certified copy of this order;
(iii) There shall be no order as to costs. Consequently, the connected
miscellaneous petition is closed.
23.01.2025
Neutral Citation : yes
grs
To
1. The Central Government Industrial,
Tribunal-cum-Labour Court,
rep. by its Presiding Officer, Shastri Bhavan,
Haddows Road, Chennai - 600 006.
2. The Regional Manager,
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United India Insurance Co. Ltd.,
Dr.Nanjappa Road, Regional Office,
Coimbatore - 641 018.
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D.BHARATHA CHAKRAVARTHY, J.
grs
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23.01.2025
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