Mangalore Ganesh Beedi Works. Vs. Union of India [1974] INSC 18 (31 January 1974)
RAY, A.N. (CJ) RAY, A.N. (CJ) KHANNA, HANS RAJ MATHEW, KUTTYIL KURIEN BHAGWATI, P.N.
ALAGIRISWAMI, A.
CITATION: 1974 AIR 1832 1974 SCR (3) 221 1974 SCC (4) 43
CITATOR INFO :
RF 1977 SC1825 (51) R 1978 SC1410 (4) R 1987 SC 447 (9) RF 1992 SC 573 (6)
ACT:
Beedi and Cigar Workers (Condition of Employment) Act, 1966--Ss. 3, 4, 2(g)(a), 2(g)(h), 2(m), 26, 27 and 31--Constitutional validity of--Constitution of India, 1950--Arts. 14, 19(1)(g)--Legislative competence--Act if falls within Entry 24 List II or Entries 22, 23 and 24 of List III, Seventh Schedule--Rules laying down the maximum percentage of Beedis which can be rejected, validity of--Sec. 37(3) if unworkable.
Interpretation--Reports of Commissions and Committees--Admissibility in evidence about the prevailing system and conditions of industry.
HEADNOTE:
The beedi industry is widespread in the country. Three systems are adopted for the manufacture of beedis. First, the factory system in which the workers gather and work in a factory under the supervision of the manufacturer who is the owner of factory. Secondly, the contract system of employment wherein the proprietor gives the middleman quantities of beedi leaves and tobacco. The contractor manufactures beedis by employing directly labourers or by distributing material amongst the home workers. The third system is that of the out workers. They roll beedis out of tobacco and beedi leaves supplied by the proprietor without the agency of middle man.
The special feature of the industry is the manufacture of beedis through contractors and by distributing work in private dwelling houses where the workers take raw-material given by the employers of contractors. The relationship between employers and employees is not well defined. The application of the Factories Act has always met with difficulties. The labour in the industry is unorganised and is not able to look after its own interests. The industry is highly mobile. The attempts of some of the states to legislate in this behalf have not been successful. Anxiety has been expressed by several committees and commissions, appointed by the Central Government and some of the State Government, to introduce some regulation in the employer-employee relationship and to obtain certain benefits to the employees which have been denied to them. They have reported extremely unsatisfactory and unhealthy working conditions, long hours of work with low wages and unrestricted employment of women and children. It was found that the contract and home work systems enriched the proprietor at the expense of the workers and also deprived the workers of the bargaining power in regard to conditions of about.
It is in this background that the Beedi and Cigar Workers (Conditions of Employment) Act, 1966, came into existence.
The Act was passed to provide for the welfare of workers in Beedi and 'Cigar establishments and to regulate the conditions of their work and for matters connected therewith.
The petitioners and the appellants, proprietors of beedi factories and owners of trade markand some home workers.
impeached the constitutionality of the Act. They contended;
(i) being a legislation for regulating beedi and cigar industry it fell under Entry 24 List II of the Seventh Schedule and therefore Parliament had no legislative competence to enact the measure; (ii) Sections 3 and 4 of., Act which required licence in respect of industrial premises violated Arts. 19(1) (g)and14 since they conferred unfettered powers on the licensing authority without the requisite safeguards; (iii) the provisions 2-954 SCI/74 222 of section 2(g)(a), 2(g)(b) and 2(m) read with section 2(c) and (f) created a totally artificial and fictional definition of employer and thereby imposed vicarious liabilities upon a manufacturer of and trader in beedies in respect of diverse matters which entailed civil and criminal liabilities and thereby imposed unreasonable restrictions on the manufacturers in their right to carry on trade and business; (iv) sec. 26 and 27dealing with leave and wages during leave period cast unreasonable burden and imposed obligations which were not capable of fulfillment and thus violated Art. 19(1)(f) and (g), and, in any event. the sections were unenforceable with regard to home workers and therefore violated Art. 19(1)(f) and (g) so far as the same were applied to home workers; (v) Sec. 31 which provided for one month’s wages in lieu of notice of dismissal was an unreasonable restriction; (vi) Rule 37 of the Maharashtra Rules and rule 29 of the Mysore Rules, dealing with rejection of substandard beedies, framed under s. 44 of the Act. imposed unreasonable restriction on the beedi and cigar manufacturers; and (vii) Sec. 37(3) which made provision for maternity benefits to women employed in an establishment was. unworkable.
HELD : (Per Ray, C.J., Khanna, Mathew, and Bhagwati, JJ) :
Parliament has legislative competence for enacting the law and the provisions of the Act are valid and do not offend any provision of the Constitution.
Previous material in the shape of reports of commissions to review the working of the industry is admissible in evidence about the prevailing system and conditions of industry.
State of Madras v. Rajagopalan, [1955] 2 S.C.R. 541, referred to.
(i)The Act does not fall within entry 24 List II or entries 7 and 52 in List I. The true nature and character of the legislation is for enforcing better conditions of labour amongst those who are engaged in the manufacture of beedis and cigars. It, therefore, falls within entries 2, 23 and 24 in List III. The Act, in pith and substance is for welfare of labour. [233H, 234E] (ii)Sections 3 and 4 of the Act are not violative of Arts.
19(1)(g) and 14. These sections do not confer unfettered powers on the licensing authority without the requisite safeguards. The power to grant or refuse a licence is sufficiently controlled by necessary guidance. There are safeguards preventing the abuse of power. The right of appeal is a great safeguard. There is machinery as well as procedure for determining the grant or refusal of a licence.[235B-C] (iii)The provisions of Sections 2(g)(a), 2(g)(b) and 2(m) are constitutionallyvalid and do not impose any unreasonable restriction on the manufacturer or trade-mark holder. There cannot be any question of unreasonableness in cases where the manufacturers or trade-mark holders themselves employ labour, because, there is direct relationship of master and servant. When the contractors engaged labour for the principal employer the liability arises by reason of contract labour engaged for or on behalf of principal employer. Where the contractor engages labour for the manufacturer it is not unreasonable restriction to impose liability on the manufacturer for the labour engaged by the manufacturer through the contractor. When the contractor engages labour for and on his own behalf and supplies the finished product to the manufacturer he will be the principal employer in relation to such labour and the manufacturer will not be responsible for implementing the provisions of the Act with regard to such labour employed by the contract. It will be a question of fact in each case as to who is the person for whom the contract labour is engaged. If an independent Contractor employs labour for himself the liability will attach to him as the principal employer and not to the manufacturer. The Act thus fastens liability on the person who himself engages labour or the person for whom or on whose behalf labour is engaged or where a person has ultimate control over the affairs of the establishment by reason of advancement of money or of substantial interest in the control of the affairs of the establishment [237D. F; 241A] , 223 (iv)The provisions of sections 26 and 27 are applicable to home workers and workers in industrial premises and are also capable of being made applicable without any reasonable restriction on the employers. As a matter of fact it is found that home workers can turn out 700 to 1000 beedies a day. The minimum wages prescribed by various states for these home workers are between Rs. 2 to Rs. 4.30 for rolling 1000 beedis. It will, therefore, not cause unreasonable financial burden on account of leave wages. The home workers will get wages for the leave period corresponding to the number of beedies manufactured by him for a particular employer. The hours of work will be immaterial because if he works for less number of hours he will obtain lesser payment. There will be no difficulty in computing wages for the annual leave period. The home worker will get leave wages corresponding to his actual earnings just as the worker in the industrial premises will get leave wages corresponding to his full-time earning. The basis of calculation of wages in the case of home workers is the daily average of his total full time earnings for the days he has worked during the month immediately preceding his leave. [248C-D] (v)The provisions contained in s. 31 cannot be said to be unreasonable restrictions. Section 2(rr) of the Industrial Disputes Acts defines wages. Some aid can also be had from the definition of wages in the Payment of Wages Act that wages include leave wages. Therefore, the word 'wages' in sec. 31 of the Act will mean wages which are calculated under s. 27 of the Act. The calculation can be made both in respect of workers in industrial premises and home workers in establishments. [248G] (vi)The rules are valid on the ground that the maximum limit of 5 per cent for the rejection of Beedis is based on experience in the industry, and, secondly, the employer can reject more than 5 per cent by raising a dispute before the appropriate authority. Rules about rejection and fixing maximum limit of 5 per cent are reasonable and fair. The rules are intended to eliminate exploitation of illiterate, workers who are mostly women. [250A] (vii)The reasonableness of section 37(3) has not been challenged. There is no difficulty with regard to the working of the Maternity Benefits Act, 1961, in regard to maternity benefits to women employer in an establishment.
[252D] Chintaman Rao & Anr. v. The State of Madhya Pradesh, [1958] S.C.R. 1340; Birdhichand Sharma v. First Civil Judge Nagpur
Ltd. v. Union of India & Anr. [1961] 1 S.C.R. 860, distinguished.
Shanker Balaji Waji V. State of Maharashtra, [1962] Supp. 1 S.C.R. 249, held inapplicable.
Dewan Mahideen Saheeb v. United Bidi Workers Union Salem [1964] 7 S.C.R. 646 Chintaman Rao's case; Silver Jubilee Tailoring House & Ors, Chief Inspectors of Shops and Establishment & Anr. referred to.
Syed Saheb & Sons v. State of Mysore [1972] Mysore Law Journal 450, approved.
Abdul Azeez Sahib and Sons, etc. v. The Union of India, [1973] II M.L.J. 126 Chetabhai Purshottam Patel. Beedi Manufacturers of Bhandara & Ors v. Stale of Maharashtra, [1972] 1 L.L.J. 130: Chirukandeth Chandrasekharan v. Union of India [1972] 1 L.L.J. 340, and Civil Appeals Nos. 1972 and 1968 of 1971 .(Andhra Pradesh), over ruled.
ALAGIRISWAMI, J, (concurring) : The Act is the result of a compromise between the Original intentions of the Government and the modifications they had to make in the proposed measure as a result of concessions intended to bring home workers within the scope of the Act. The original intention was not to permit beedi rolling in private homes which will involve thousands of labourers in thousands of far-fiung homes and the difficulty of applying the 224 provisions of the measure to them The result is an Act, which is likely to give rise to many difficulties in its actual working. It is obvious on a reading in of the measure that its purpose is to rope in every possible person who could be brought in as an employer. But the result of the definitions in the Act is that everybody would be a principal employer and contractor and every labour will be contract labour. [252H] Clause 2(g)(b) is intended to cover cases where a person runs business Benami. There can be no objection to such a provision. But merely because a person lends or advances money or supplies goods he cannot be called an employer.
The words in cl.2(g)(b) "who has by reason of his advancing money, supplying goods or otherwise a substantial interest in the control of affairs of any establishment" should be struck down. When section 26 provides that every employee in an establishment should be allowed in a calendar year leave with wages at the rate of 1 day for every 20 days of work performed by him during the previous calendar year it leads to real difficulty. The question is what is the wage which has to be paid to him during the period of leave. A home worker might work for 1 hour on one day, 8 hours on another day and not at all for a number, of days. What would be the wages payable to him ? The difficulty of applying the Maternity Benefit Act is again apparent. How can the provisions be applied to women who cannot be said to be employed continuously for a certain period before the confinement? Under section 31, no employer shall dispense with the services of an employee who has been employed for a period of 6 months or more except for a reasonable cause and without giving such employees at least one month's notice or wages in lieu of such notice. It is not clear as to who will be the employer competent to dispense with the services of the employee. [254A, 255C, 256B] While Courts should give effect to the intentions of the legislature it can be done only if that is possible without doing violence to the actual language of the statute. The various definitions plainly seek to rope in everybody who has anything to do with the manufacture of beedies and while trying to give effect to the penal provisions in the statute considerable difficulties will ,.rise. There will on the one hand be the actual occupier of the industrial premises.
There will be on the other hand a person who might have advanced money to him and supplied goods to him and therefore may be substantially interested in its control.
The actual occupier himself might be a contractor and in that case he as well as a person on whose behalf beedis are manufactured would be liable. Who in that case, would be actually liable ? [254c] The objection is not to any of the provisions on the grounds of unreasonableness or unconstitutionality. Nobody can dispute the need for setting right the evils. But, good intentions should not result in. a legislation which would become ineffective and lead to a lot of fruitless litigation over the years. It has to be held in agreement with the majority of the High Courts that sections 26. 27, 31 and 37(3) do not apply to the home workers. It would be good in the interest of all concerned if the Act is amended as early as possible to remove all the lacunas and the difficulties pointed out. The difficulties have arisen because of an attempt blindly to apply the provisions which will be quite workable if they are applied to conditions where the Factory Act would be applicable. [256F] & CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1553, 16141618, 1769 of 1971 and 1131-1133 and 1440 of 1972.
[From the Judgment and Order dated the 24th June, 1971 of the Mysore High Court at Bangalore in Writ Petitions Nos.
806, 837, 1152, 1486, 1592, 1638, 1896, 159, 4152 and 310 of 1970 and 1456 of 1971]. Civil Appeals Nos. 2516-2523, 2560, 2569, 2661-2164 of 1972 and 66-69, 72-75, 1307 854-856, 857859, 1203 'and 1204 of 1973.
225 (From the Judgment and Order dated the 8th September, 1972 of the Madras High Court in Writ Petitions Nos. 227, 422, 2631 of 1969, 2692, 2693, 2695 2696, 2698 of 1968, 2680, 2683, 2688, 2689, 2691, 3477, 3478 of 1968, 531, 849, 1065 of 1969, 2681, 3480 of 1968, 40, 169 of 1969, 2854, 2856, 2855 of 1968, 468 of 1969, 2847, 2849, 2850, 2853 of 1968, 3268 of 1968, 211, 231, 276 of 1969, 2701, 2797 of 1968, 212 of 1969, 2684 and 2763 of 1968).
Writ Petitions Nos. 127-132 of 1972.
(Under Article 32 of the Constitution for the enforcement of fundamental rights).
Civil Appeals Nos. 307-311 of 1972.
(Appeals by Special Leave from the Judgment and Order dated the 30th November, 1971 of the Bombay High Court in Special Civil Application Nos. 2501 of 1968, 785, 2848, 2845 and 2846 of 1969).
Civil Appeal No. 585 of 1971.
(From the Judgment and order dated the 14th/15th October, 1970 of the Gujarat High Court at Ahmedabad in Special Civil Application No. 872 of 1968).
Civil Appeals Nos. 1864-1873 of 1971 and 173 of 1973.
(From the Judgment and order dated the 16th/17th July, 1970 of the Bombay High Court (Nagpur Bench at Nagpur) in Special Civil Applications Nos. 391 to 393 of 1969, 409 of 1968, 451, 453, 513, and 514 of 1969 and 453 of 1969).
Civil Appeals Nos. 1972-1988 of 1971.
(From the Judgment and Order dated the 26th August, 1970 of the Andhra Pradesh High Court at Hyderabad in Writ Petitions Nos. 2587, 2818, 3007, 3009, 3058, 3156 3254, 3618, 3776, 3824, 3825, 3826, 4364, 4553, 5013, 5174 of 1968 and 1235 of 1969).
Mr. Soli Sorabjee with M/s M. Ramachandran, Salindra Swarup, J. B. Dadachanji, O. C. Mathur & Ravinder Narain for the Appellant (in CAs. 1553/71) & for Petitioners.
M/s M. Ramachandran, Salindra Swarup, J. B. Dadachanji, O. C. Mathur & Ravinder Narain for the Appellant (in CA 1769/71).
Mr. K. N. Bhat, for the Appellant (in CA. 1614/71).
M/s D. V. Patel (in C.A. 1615) and S. V. Gupte (in C.A. 1616) with M/s M. Ramachandran, T. S. Pai and A. S. Nambiar for the Appellants (in CAs. 1615 & 1616/71).
M/s T. S. Pai, M. Ramachandran and A. S. Nambiar for the Appellants (in CAs. 1617-1618/71).
Mr. K. K. Venugopal with Mr. A. S. Nambir for the Appellants (in CAs. 2661-64/72, 66-69/73 and 857-859, 1203 & 1204/73):
226 Mr. Vineet Kumar for the Appellant (in CAs. 1131-1133 & 1440/ 72 and for Appellants (in CA 585/71).
Mr. K. K. Venugopal with Mrs. S. Gopalakrishnan for the Appellant (in CAs. 2516-23/72).
Mr. K. K. Venugopal with K. R. Nambiar for the Appellant in CAs. 2560-69/72 & 72-75/73).
Mr, Niren De with Mr. P, Paramashwara Rao for Respondent No. 1.
Mr. Niren De with M/s R. N. Sachthey and S. P. Nayar for Respondent No. 1 (in CAS. 1614,1616-1618/71, 1131-1133 & 1440/72 and for Respondent No. 2 (in CA 1615/71).
Mr. M. Veerappa, for Respondent No. 1 (in CAs. 1553, 1614, 1616, 1.769) and for Respondents No. 1, 3, 4 and 5 (in CA.
1615), for Respondent Nos. 2 to 5 (in CAs. 1617-18) for Respondent (in CAs. 1131, 1132 & 1440), for respondent Nos.
2-3 (In CA. 1133) and for Respondent No. 2 (In WPs. 127128/72).
Mr. S. Govind Swaminadhan with Mr. A. V. Rangam and Miss A Subhashini for Respondent No. 2 (in CAs. 2516-23 2560-69, 266164, 66-69, 72-75, 854-59 & 1203-1204) and for Respondent (in CA. 1307/73).
Mr. K. S. Ramamurthy with Mr. A. T. M. Sampath for the Appellant (in CA. 1307).
M/s. K. S. Ramamurthy and Mr. Y. S. Chitale with M/s T. S. Pai and A. S. Nambiar for the Petitioner in (WP. 127).
Mr. Y. S. Chitale with M/s M. Ramchandran, T. S. Pai and A. S. Nambiar for the Petitioner (in WP. 128).
M/s M. Ramachandran, T. S. Pai and A. S. Nambiar for the Petitioner (in WP. 129).
Mr. A. S. Nambiar for the Petitioner (in WP. 130).
Mr. Niren De with M/s P. Parameshwara Rao, R. N. Sachthey, and S. P. Nayar for the Appellants (in CAs. 1972-88/71) and for Respondent No. 1 (in WP. 127-128).
Mr. D. V. Patel with Mr. P. H. Parekh and Mrs. Sunanda Bhandare for the Appellants (in CA. 307-311/72).
Mr. Niren De and Mr. M. C. Bhandare (for the State of Maharashtra in CA. 307 & 31 1) with M/s R. N. Sachthey and S. P. Nayar for Respondents Nos. 1-4 (in CAs. 307-308).
Mr. Niren De with Miss S. Chakravarthy and Mr. R. H. Dhebar (for the State of Gujarat, M/s R. N. Sachthey and S. P. Nayar for Respondent Nos. 1-3 (in CA. 585).
Mr. Niren De (For Union of India in CA. 1864/71), Mr. M. C. Bhandare, (for the State of Maharashtra in CAs. 1864-1873), with M/s 227 R.N. Sachthey, and S. P. Nayar for the Appellants (in CA. 1864 to 1873/71) and for Respondent No. 2 (in CA. 173/73).
Mr. M. N. Phadke with Mr. Rameshwar Nath for Respondents Nos. 1-2 (in CA. 1871) and for Appellant (in CA. 173).
Mr. Rameshwar Nath, for Respondents No. 1 (in CAs. 186469), and for Respondents Nos. 3, 5-9, 11-13, 15-17 and 20 (in CA. 1871).
Mr. M. Krishna Rao with Mr. B. Kanta Rao for Respondent No. 7.
M/s Narayan Netter and Ram Shesh for the Interveners---Dharwar Distt. Beedi Workers' Union, Hubli and Anr. (in CA. 1553).
Mr. R.P. Kapoor for Mr. I. N. Shroff for Intervener-State of Madhya Pradesh (in CA. 1769).
M/s S. R. Bommai, J. B. Dadachanji and P. C.Bhartari for Intervener-Puttappa Veerappa etc. (in CA. 1553).
Mr. Rameshwar Nath for Intervener (in CA. 1864).
The Judgment of A. N. RAY, C.J., H. R. KHANNA, K. K. MATHEW and P. N. BHAGWATI, JJ. was delivered by RAY C.J. A.
ALAGIRISWAMY, J. gave a separate Opinion.
RAY, C.J. The provisions of the Beedi and Cigar Workers (Condition of Employment) Act, 1966 referred to as the Act are impeached as unconstitutional in these petitions and appeals.
Broadly stated, the Act is challenged on, these grounds.
First, Parliament has no legislative competence to enact this measure. It is a legislation for regulating beedi and cigar industry. Therefore, it falls under Entry 24 in State List II. Second, the restrictions imposed by the Act violate freedom of trade and business guaranteed under Article 19(i) (g). The Act imposes unreasonable burdens in cases where a manufacturer or trade mark holder of beedi has no master and servant relationship and no effective control on independent contractors or home-workers. The manufacturer or trade mark holder is rendered liable as the principal employer of contract labour. Third, section 4 of the Act imposes conditions which are arbitrary, excessive extraneous.
Fourth, Section 7(i) (c) regarding entry into industrial premises, sections 26, 27 regarding annual leave with wages, section 31 regarding one months's wages in lieu of notice, section 37 regarding application of Maternity Benefits Act, 1961 and the rules for rejection of beedis are unconstitutional. These provisions are unreasonable restrictions on the freedom of trade and business.
The petitioners and the appellants are of two characters.
The majority are proprietors of beedi factories and owners trade mark registered under the Trade Marks Act in relation to beedis. Some are home workers.
The beedi industry is widespread in this Country, The manufacture of beedi is done in stages. The tobacco is blended often with some other ingredient. A small quantity of it is put on the beedi leaf which 228 is previously wet to render it flexible to prevent any crushing of leaf and is also cut to size. The beedi leaf is then rolled keeping the tobacco within it and its ends are then closed. The beedis thus rolled are collected and warmed or roasted after which they are ready for packing, labelling and sale. Where the proprietor owns a trade mark, the trade mark labels are affixed to the. individual beedis as also on the packets.
The work of wetting and cutting of the wrapper leaves is one of the items of work in the process. Power is seldom employed for the purpose' The industry depends entirely upon human labour. If more than 20 workers are employed in a particular place for the manufacture of beedis, the provisions of the Factories Act, 1940 will apply to the premises.
Three systems arc adopted in the manufacture of beedis.
First, is the factory system. There the manufacture is an owner of the factory. Workers gather and work under his supervision as his employees. Second is the contract system of employment. That is the most prevalent form. Under this system, the proprietor gives to the middlemen quantities of beedi leaves and tobacco. The contractor on receiving the materials manufactures beedis (i) by employing directly labourers and manufacturing beedis or (ii) by distributing the materials amongst the home workers, as they are called, mostly women who manufacture beedis in their own homes with the assistance of other members of their family including children. The third system is that the outworkers. They roll beedis out of the tobacco and beedi leaves supplied by the proprietor himself without the agency of middlemen. The beedis thus-supplied whether by the outworkers or contractors are roasted, labelled and packed by the proprietor and sold to the public.
Under these systems, the contractor engages labourers less than the statutory number to escape the application of the Factories Act. There is a fragmentation of the place of manufacture of beedis with a view to evading the factory legislation. Sometimes there is no definite relationship of master and servant between the actual worker and the ultimate proprietor. Branch managers of contractors are often men of straw. The proprietor will not be answerable for the wages of the outworkers because there is no Privity of contract between them. A large body of actual workers are illiterate women who could with impunity be exploited by the proprietors, and contractors. There is in this background an indiscriminate and undetectable employment of child labour. The contractor being himself dependent on the proprietor has little means to have any organized system.
Women and infirm can earn something by rolling beedis. The dependence of these people particularly the women shows that they have little bargaining power against powerful proprietors or contractors.
A typical contractor agrees with the proprietor to purchase tobacoo and to pay for it at the ruling rate and to supply the proprietor with such quantity of beedis as will be fixed by the proprietor. He also undertakes not to use, any tobacoo other than that supplied by the 229 proprietor. The proprietor has the authority to send his representative to inspect the place or places of manufacture. The contractor undertakes not to enter into any agreement of similar nature with any Other concern to make beedis' The agreement. Stipulates that the, contractor will be the sole employer answerable in regard to the disputes raised by the workers.
There was a Royal Commission on Labour in India in 1931.
The findings were these. The making of beedi is an industry widely spread over the country. It is partly carried on in the home but mainly in the workshops in the bigger cities and towns. Every type of building is used, but small workshops is there that the graver problems mainly raise.
Many of these places are small airless boxes. semi basements with lamp and floors. Sanitary conveniences and arrangements for removal of refuses are practically absent.
Payment is by piece rate. The hours are unregulated. Many smaller workshops are open day and night. There are no intervals for meals. There are no weekly holidays.
In 1944, the Government of India appointed a Committee under the Chairmanship of Shri D. V. Rege to investigate conditions of industrial labour. The report referred to the contract system whereby the factory owner engaged a large number of middlemen supplied them with raw materials and purchased finished products from them. The report found that unhealthy working conditions, long hours of work, employment of women and children, deduction from wages and the sub-contract system of Organisation required immediate attention. It was desirable to abolish outworker system and to encourage establishment of big industries if protective labour legislation was to be enforced with success.
In 1946, the Government of Madras appointed a Court of Inquiry into labour conditions in beedi, cigar, snuffcuring and tanning industries. There were 90,000 workers depending on beedi industry ill Madras. of these, 26,500 workers were women. Employment of children in the Industry was universal. 2/5th of the total workers were children. Home workers were predominant. There were full time workers but they were paid less than fair wages. Working conditions were extremely unsatisfactory from the standpoint of floor space, sanitation, ventilation and lighting.
In 1954, the Government of India appointed Shri Natraj Inspector of Factories to assess the situation with a view to affording maximum legislative protection to the workers.
The Report was as follows. Although the number of workers engaged in the manufacture of beedi exceeded one lakh, only 17,544 were employed in factories. The contract and home work systems enriched proprietor at the expense of the worker and also deprived the latter of his bargaining power in regard to conditions of labour. The poverty as well as illiteracy of the workers was taken advantage of by the employers. There were long hours of work with low wages, deplorable working conditions and unrestricted employment of 'women and children.
230 The entire beedi industry was unorganised and scattered over the entire state, employing a large force of women. It called for radical reforms in the organisation. There was reluctance of the manufacturer to provide certain amenities to the workers such as rest sheds, canteens, creches, ambulance room, etc. Under the indirect employment system conditions obtaining in the industry were still worse. The middlemen contractors did not observe any higher standards in the premises than in those under the manufacturers. The Payment of Wages Act applied to factories, but it was difficult to detect violations of the Act because the prescribed registers were not maintained. The Madras Maternity Benefit Act which applied to factories was rendered practically ineffective as far as petty industry was concerned because there was no record to prove that women were employed. The Report stated that the employers succeeded in organised circumvention of all existing legislation by resorting to splitting up of their factories into smaller units run by contractors who bad no knowledge in respect or working places.
The conditions in working places were bad. The Report suggested licensing of premises to fix responsibility of the employer for maintenance of minimum standards of ventilation, lighting and sanitation in working places.
The employment of women and children, wages and wage structure in the industry were all considered by the Committee.
The Committee recommended solution of unhealthy working conditions under miserable environments, long working hours with its attendant evils, unregulated employment of women and children and deduction from wages. The contract of home work system of employment was found to be designed solely for the promotion of trade but not the industry of which the labour forms the integral part. It was, therefore, expected that the beedi industry should carry the labour along with it as it developed and was organised in such manner that it discharged its social and moral responsibilities towards the workers.
It is in this background that the Act came into existence.
In State of Madras v. Rajagopalan, [1955] 2 SCR 541 this Court held that the previous material in the shape of Reports of Commissions of review the working of the industry was admissible in evidence about the prevailing system and conditions of industry.
The Beedi and Cigar Workers (Conditions of Employment) Act, 1966 is an Act to provide for the welfare of the workers in beedi and cigar establishments and to regulate the conditions of their work and for matters connected therewith. The special feature of the industry was the manufacture of beedis through contractors and by distributing work in the private dwelling house, where the workers took raw materials given by the employers of contractors. The relationship between employers and employees was not well defined. The application of the factories Act met with difficulties. The labour in the industry was unorganised and was not able to look after its own interests. The industry was highly mobile. The attempt of some of the States to legislate in this behalf was not successful. The necessity for central 231 legislation was felt. A bill was mooted to provide for the regulation of the contract system of work, licensing of beedi and cigar industrial premises and matter like health, hours of work, spread over, rest periods, over time, annual leave with pay, distribution of raw materials etc. The anxiety was expressed by several Committees to introduce some regulation in the employer-employee relationship and to obtain certain benefits to the employees which were denied to them.
The so-called contractor or the employer as styled by the employees has been a matter of some concern to the employees as well as to the State. There were certain good and bad points about the systems that were prevalent in the manufacture of beedi. The contractor was very often a man of straw. He was said to be the creation of the principal employer who put him forward on many occasions as a screen to avoid his own responsibility towards the employees.
Another broad grievance was that there was double checking and rejection of beedis or double chhat, out of which the second chhat at the principal employer's place was invariably in the absence of the employee. This chhat was alleged to be most irrational and depending upon the whim of the employer. As far as the house work system was concerned there was an advantage to the employee with some kind of disadvantage to the employer. Persons who could spare time in their houses but could not move out for the purpose of employment got ready employment and could supplement their income from agriculture or other sources. They were in a position to work as and when leisure was available and like a factory employee there was no rigour of attending the factory or work at stated time and for stated number of hours. It appeared that pilfering was a vice of this industry. By pilfering tobacco which is the most valuable ingredient, the employees were able to earn some income by again rolling it into beedis and selling them.
The relationship between the proprietor, middlemen and outworkers came up for consideration in this Court in Chintaman Rao & Anr. v. The State of Madhya Pradesh [1958] SCR 1340. The proprietor of a beedi factory was prosecuted under the Factories Act for noncompliance with the provisions of that Act. The proprietor pleaded that the workers were not under his employment. The contention was that the sattedars who were found in the factory were independent contractors and not workers. The management issued tobacco and sometimes beedi leaves to sattedars who manufactured beedis, in their own factories or by an arrangement with a third party. The sattedars collected the beedis thus made and supplied to the factories for a consideration. It was held that the sattedars were independent contractors and not the agents. The enforcement of factory and labour legislation could be rendered impossible by adopting the simple device of disintegrating what normally will be a factory. The legislature wanted to regulate the contract system. The legislation did not want to stop the contract system. The provisions in the Act recognised the contractor as a part and parcel of the beedi industry. The contractor is referred to where the terms 'contract labour' or 'principal employer' of 'employer' have been defined. Several functions which the employer has to perform are also performed by the contractor. He delivers tobacco and leaves to the home worker and collects the rolled beedis 232 after application of chhat. He makes payment to them.
Therefore, the contractor has been retained as an integral part though the attempt is to eliminate the vices which crept into the industry.
The Madras High Court in M/s. K. Abdul Azeez Sahib and Sons, Four Horse Beedi Manufacturers, Vellore--4 and Ors. v.
The Union of India (1973) 11 M.L.J. 126 held the definitions of employer and principal employer in Section 2 (g) (a) and 2(m) of the Act to be-valid but held that sections 26 and 27 of the Act are wholly unenforceable against the trade mark holders whether with reference to home workers or with reference to employees working in any industrial premises.
The Madras High Court held that since a worker in a beedi industry is not required to work regularly for any prescribed period of hours in a day or even day after day for any date specified period, from the very nature of the case, the provisions in the Maternity Benefit Act, 1961 are unworkable with regard to such home workers, and, therefore, they will have no application to them. The Madras High Court held that section 7(1)(c), 7(2), 26, 27, 31, and 37 (3) in so far as they relate to home workers are ultra vires and illegal and unenforceable against trade mark holders in beedis and contractors in the manufacture of beedis. The Madras High Court held that section 7(1) (c), 7(2), 26 and 27 are ultra vires and illegal and unenforceable against the petitioner who are manufacturers of cigar or cigar rollers.
The Bombay High Court in M/s. Chotabhai Purshottam Patel, Beedi Manufacturers of Bhandara & Ors. v. State of Maharashtra by Secretary, Industries and Labour Department, Sachivalaya, Bombay & Ors. (1972) 1 L.L.J., 130 held that the provisions of section 2(g) (a) and 2 (m) of the Act are invalid to be in excess of the requirements of the situation because if the principal employer is faced with the proposition of bearing all the civil and criminal responsibilities of omission and commission of contractors under him the inevitable result will be that the manufacturer will give up the Gharkata system and may think of some other system less onerous under the Act. The Bombay High Court also said that the words "in relation to other labour" contained in section 2(g) (b) are to be deleted.
The Bombay High Court further held that the provisions of sections 26 and 27 of the Act will not apply to home workers at all.
The Mysore High Court in P. Syed Saheb & Sons. v. State of Mysore (1972) Mysore Law Journal 450 held that sections 3 and 4 of the Act are constitutional and not violative of Articles 14 and 19 (1) (g) of the Constitution. Section 3 of the Act prohibits establishment of an industrial premises without obtaining a licence granted under the Act. Section 4 of the Act provides for the procedure for the issue, renewal and cancellation of a licence. The Mysore High ,Court further held that sections 26 and 27 of the Act are not unreasonable restrictions and it is possible to find out whether a home worker has qualified himself for annual leave and it is possible to make up for the lost wages. The Mysore High Court also held that section 31 ,of the Act is valid and Rule 29 does not impose unreasonable restriction by compelling the employer to accept beedis when they are sub233 standard and the sub standard beedis and cigars exceed 5 per cent. If' the employer finds that the sub standard beedis and cigars are above 5 per cent then he has to refer the matter to the Inspector.
The Kerala High Court in Chirukandeth Chandrasekharan v. Union of India (1972) 1 L.L.J. 340 held that the provisions of sections 2 (g) (a), 2 (m) 3, 4, 21, 26 and 27 of the Act impose unreasonable restrictions on business or trade and are violative of-Article 19(1) (g) of the Constitution. The Kerala High Court held that the words "in relation to other labour" occurring in section 2(g) (b) have also to, be deleted. The Kerala High Court held sections 3 and 4 to be valid. The Kerala High Court held that sections 26 and 27 will not apply to home workers. The Kerala High Court struck down rule 29 of the Kerala Rules on the ground that imposition of 5 per cent on the maximum amount of rejection is an arbitrary percentage. Kerala Rule 29 stated that no employer shall ordinarily reject more than 2-5 per cent.
The provision states that therecan be rejection up to 5 per cent for reasons recorded in writing. This imposition of 5 per cent limit in the proviso was construed by the Kerala High Court to be unreasonable in as much as the quality of beedis would go down if the workers are assured that more than 5 per cent will not be rejected.
The Andhra Pradesh High Court in Civil Appeals Nos. 1972 and 1988 of 1971, held that sections 3 and 4 of the Act offend Articles 14 and 19 (1) (g) of the Constitution and are, therefore, void. The Andhra Pradesh High Court came to the conclusion that the provisions contained in sections 3 to 27 of the Act do not apply to home workers. The High Court held that the Act is applicable to an independent contractor where he is employing labour for and on his own behalf.
There he is the principle employer. No artificial relationship of master and servant arises as a result of the operation of the definitions in section 2 (g) (a) (b) and 2 (m) of the Act. The Gujarat High Court, in Civil Appeal No. 585 of 1971, upheld the provisions of the Act to be constitutional.
The first contention on behalf of the petitioners and the appellants is that the Act of 1966 is invalid on the ground of lack of legislative competence. The High Courts of Madras, Kerala, Gujarat, Mysore and Andhra Pradesh have rightly held the Act to have constitutional competence.
Counsel on behalf of the petitioners contended that entry 24 in list II is the only legislative Entry for the piece of Legislation. Entry 24 speaks of industries subject to the, provisions of Entries 7 and 52 of list I. Entry 7 in List I speaks of Industries declared by Parliament by law to be necessary for the purpose of defence or for the projection of war. Entry 52 in List I speaks of Industries the, control of which by the Union is declared by Parliament by law to be expedient in the public interest. The legislation in the present cast does not fall within Entry 24 in List II or Entries 7 and 52 in List Entry 24 in List III speaks of Labour including conditions of work, provident funds, employers' lability, workmen's compensation, invalidity and old agepensions and maternity benefits. The Act is for welfare of labour. It is not an Act for industries. The true nature and character of the legislation shows that it is for, enforcing better 234 conditions of labour amongst those who are engaged in the manufacture of beedis and cigars.
The scheme of the Act relates to provisions regarding health and welfare, conditions of employment, leave with wages, extension of benefits by applying other Act to Labour. To illustrate section 28 of the Act extends benefits of the Payment of Wages Act to, industrial premises, Section 31 of the Act provides for security of service, Section 37 of the Act extends the benefit of Industrial Standing Orders Act, 1946. Again, section 37 (3) of the Act makes provisions of the Maternity Benefit Act applicable to every establishment.
Section 38(1) of the Act applies the safety provisions contained in Chapter IV of the Factories Act to industrial premises. Section 39(1) of the Act makes the Industrial Disputes Act, 1947 applicable to matters ,arising in respect of every industrial premises. Section 39(2) of the Act provides that disputes between an employee and an employer in relation to issue of raw materials, rejection of beedis and cigars, payment of wages for the beedis and cigars rejected by the employer, shall be settled by such authority as the State Government may specify. An Appeal is provided to the appellate authority whose decision is final. Section 39(1) of the Act applies to industrial premises. Section 39(2) of the Act applies to every establishment.
The Act speaks of licensing of industrial premises. The benefits under the Act are extended to both industrial premises and establishments. Establishments mean also places where home workers work.
The pith and substance of this Act is regulation of conditions of employment in the beedi and cigar industry.
The Act deals with particular subject matter as regards the establishments and industrial premises. These matters are regulation of conditions of employment in the industry and the industrial relations between the employer and the employee. Entries 22 to 24 in List III are wide enough to cover this piece of labour welfare measure. Entry 22 deals with labour welfare. Entry 23 deals with social security, employment and unemployment. Entry 24 deals with welfare of labour including conditions of work, provident funds, employer's liability, workmen's compensation, invalidity and old age pensions and maternity benefits. The Act is valid and falls within Entries 22, 23, and 24 of List III.
Sections 3 and 4 of the Act were challenged as violative of Article 19(1)(g) and Article 1.4 on account of procedural unreasonableness and conferment of unfettered powers on the licensing authority without the requisite safeguards. These two sections require licence in respect of industrial premises. The provisions are applicable both to trade mark holders as well as contractors. There is no difficulty with regard to manufacturers to obtain licence in respect of industrial premises. If contractors are employers of labour for and on their own behalf, the contractors will have to obtain licences for manufacture of beedis in industrial premises. The relevant authorities have to refer to certain matters in the grant of refusal of a licence. These matters as set out in section 4 of the Act are (a) suitability of the place of premises which is proposed to be used for the manufacture of beedi or cigar or both (b) the previous experience of the applicant, (c) the 235 financial resources of the applicant including his financial capacity to meet the demands arising out of the provision of the laws for the time being in force relating to the welfare of labour (d) whether the application is made bonafide on behalf of the applicant himself or any ,other person and (e) welfare of the labour for the locality in the interest of the public generally and such other matters as may be prescribed. The licensing authority is required to communicate his reason in writing when he refuses to grant a licence. Section 5 of the Act provides an appeal to the appellate authority against such order. The power to grant or refuse a licence is sufficiently controlled by necessary guidance. There are safeguards preventing the abuse of power. The right to appeal is a great safeguard. The various matters indicated in section 4 in regard to the grant of licence indicate not only the various features which are to be considered but also rule out any arbitrary act. There is machinery as well as procedure for determining the grant of refusal of a licence. The application for grant of a licence is to be determined on objective consideration as laid down in the section. There is neither unfairness nor unreasonableness in sections 3 and 4 of the Act.
The validity of the Act was challenged on the principal ground that the Act imposed unreasonable restrictions on the manufacturers in their right to carry on trade and business in the manufacture of beedis and cigars. The unreasonable restriction was said to be the imposition of vicarious liability on the manufacturers for acts and omissions in case of independent contractors through whom they get beedis and cigars and over whose employees they do not have any control and with whom they do not come in contract. The.
provisions of section 2(g) (a) and 2(m) read with sections 2(e) and (f) of the Act are said to create a totally artificial and fictional definition of employer and thereby to cast vicarious liabilities upon a manufacturer of and trader in beedis in respect of diverse matters which entail civil and criminal liabilities. Liabilities are imposed on manufacturer or trader in beedis in respect of home workers whom it is said, they cannot control. The home workers are in thousands. It is impossible for a manufacturer to have any idea of the identity of the persons rolling beedis or the premises where they work. Raw materials are delivered to workers to do the work of rolling the beedis himself and not having done by any other person. It is, therefore, said there is no rational basis for imposing vicarious liability.
Though liabilities and obligations are great in relation to contract labour there is said to be no corresponding creation of rights which normally exist in employer in respect of his employees. The cumulative effect and impact of the various provisions of the Act imposing liability on the manufacturer is said to render it impossible for the manufacturer or trader to carry on his business. From a commercial point of view, the restrictions are said to be drastic and unreasonable.
The Act defines in section 2(e) contract labour meaning any person engaged or employed in any premises by or through a contractor with or without the knowledge of-the employer in any manufacturing process. Section 2(f) of the Act defines employee to mean a person employed directly or through any agency whether for wages or not in236 any establishment to do any work skilled and unskilled and includes (i) any labour who is given raw materials by an employer or a contractor for being made into beedi and cigar or both at home (hereinafter referred to in this Act as 'home worker' and (ii) any person not employed by an employer or a contractor but working with the permission of, or under agreement with, the employer or contractor.
Section 2(g) of the Act defines "employer" to mean (a) in relation to contract labour the principal employer, and (b) in relation to other labour, the person who has the ultimate control over the affairs of any establishment or who has, by reason of his advancing money, supplying goods or otherwise, a substantial interest in the control of the affairs of any establishment, and includes any other person to whom the affairs of the establishment are entrusted, whether such other person is called the managing agent, manager, superintendent or by any other name. Section 2(m) of the Act defines 'principal employer' to mean a person for whom or on whose behalf any contract labour is engaged or employed in an establishment. Section 2(h) of the Act defines ,establishment' to mean any place or premises including the precincts thereof in which or in any part of which any manufacturing process connected with the making of beedi or cigar or both is being or is ordinarily, carried on and includes an industrial premise.. Section 2(i) of the Act defines 'industrial premises' to mean any place or premises in which any industry or manufacturing process connected with the making of beedi or cigar or both is being or is ordinarily, carried on with or without the aid of power.
These definitions indicate these features. First, there are workers in industrial premises and workers in establishment.
Second, the Act recognizes home workers. Third, the Act recognises contract labour by or through contractor.
Fourth, any person who is given raw materials by an employer or a contractor is an employee. Again, any person though not employed by an employer or a contractor but working with the permission or under agreement with the employer or a contractor is an employee. Fifth, in relation to contract labour the principal employer is a person for whom and on whose behalf labour is engaged or employed in an establishment. Sixth, the employer in relation to other labour is a person who has ultimate control over the affairs of any establishment or who has by reason of advancing money, supply goods or otherwise a substantial interest in the affairs of any establishment.
The two classes of employers are broadly defined as the employer and the principal employer. The first kind is the manufacturer who directly employs labour. Such a manufacturer becomes, an employer within the meaning of Section 2(g) (b) of the Act by engaging labour. The second class of employer is the principal employer who through a contractor as defined in section 2(a) of the Act engages labour which is known as contract labour. This labour is engaged by or on behalf of the manufacturer who becomes the principal employer. The third category of employer is a contractor' who engages labour for executing work for and on his own behalf. Such a contractor may undertake work from a manufacturer or a trade markbolder but he 237 becomes the principal employer in relation to contract labour on the ground that the labour is engaged for and on his own behalf. The fourth class of employer is where a contractor becomes what is known ,is sub-contractor, of a contractor. A contractor in such a case would ask the subcontractor to engage labour for and on behalf of the contractor. In such a case the contractor would be the principal employer because the sub-contractor is engaging contract labour for and on behalf of the contractor who is the principal employer. The fifth class of employer is where a person by reason of advancing money or supplying goods or otherwise having a substantial interest in the control of any establishment becomes the employer of labour.
To illustrate, a mortgagee in possession of an industrial premises, a hypothetic of goods manufactured in industrial premises or in any establishment, a financier in relation to a manufacturer or a contractor or a sub-contractor may become employer by reason of such consideration mentioned in the Act.
In cases where the manufacturer or trade mark holder himself' employs labour there is direct relationship of master and servant and therefore liability is attracted by reason of that relationship. There cannot be any question of unreasonableness in such a case. In the second category the manufacturer of trade mark holder engages contract labour through a contractor and he becomes the principal employer. Though such labour may be engaged by a contractor with or without the knowledge of the manufacturer or trade mark holder, this contract labour is engaged for the principal employer who happens to be the trade mark holder or the manufacturer. The liability arises by reason of contract labour engaged for or on behalf of the principal employer. In the third category, the contractor becomes the Principal employee because the contractor engages labour for or on his own behalf. Where the contractor engages labour for the manufacturer it. is not unreasonable restriction to impose liability on tile manufacturer for the labour engaged by the manufacturer through the contractor. It is important to notice that the Act fastens liability on the person who himself engages labour or the person for whom and on whose behalf labour is engaged or where a person has ultimate control over the affairs of the establishment by reason of advancement of money or of substantial interest in the control of the affairs of the establishment.
Therefore, the manufacturers or trade mark borders have liability in respect of workers who are directly employed by them or who are employed by them through contractors.
Workers at the industrial premises do not present any problem. 'the manufacturer or trade mark holder will observe all the provisions of the Act by reason of employing such labour in the industrial premises. When the manufacturer engages labour through the contractor the labour is engaged on behalf of the manufacturer, and the latter has therefore liability to such contract labour. It is only when the contractor engages labour for or on his own behalf and supplies the finished product to the, manufacturer that he will be the principal employer in relation to such labour and the manufacturer will not be responsible for implementing 3--954SCI/74 238 the provisions of the Act with regard to such labour employed by the contractor. if the right of rejection rests with the manufacturer or trade mark holder, in such a case the contractor who will prepare beedis through the contract labour will find it difficult to establish that he is the independent contractor. If it is a genuine sale transaction by the contractor to the manufacturer or trade mark holder it will point in the direction of an independent contractor.
This Court in Dewan Mohideen Sahib v. United Bidi Workers' Union Salem, [1964] 7 S.C.R. 646 said that the so called independent contractor in that case was supplied with tobacco and leaves and was paid certain amounts for the wages of the workers employed and for his own trouble. The so called independent contractor was merely an employee or an agent of the appellant in that case. The so called independent contractor had no independence at all. The proprietor could at his own choice supply raw material or refuse to do so. The contractor had no right to-.insist on supply of raw materials to him. The work was distributed between a number of so called, independent contractors, who were told to employ not more than 9 persons at one place to avoid regulations under the Factories Act. This Court held that the relationship of master and servant between the appellant and the employees employed by I the independent contractor was established in that case. If it is found that manufacturers or trade mark holders are not responsible on the ground that the person with whom 'they are dealing are really independent contractors then such independent contractors will have to be considered as principal employers within the meaning of the Act.
The contention on behalf of the petitioners and the appellants is that in common law a person cannot be made responsible for actions of an independent contractor and that he should not be penalised for the contravention of any law by an independent contractor is to be examined in view of the language employed in defining the expressions contract labour, contract, establishment, employer and principal employer. It was particularly said that when home workers wore given tobacco and leaves directly by the manufacturers the home workers would not be under their control and the manufacturers should not be made responsible for providing any amenities or leave facilities for those home workers.
This Court in Silver Jubilee Tailoring House & Ors. v. Chief Inspector of Shops and Establishments & Anr. (Civil Appeal 'No. 1706 of 1969 decided on 25th September, 1973) discussed the question as to whether employer employee relationship existed between the tailoring house and the workers in that case. The definition of a person employed in that case was a person wholly or principally employed therein in connection with the business of the shop. The workers were paid on piece rate basis. They attended the shops if there was work. The rate of wages paid to the workers was not uniform. The rate depended upon the skill of the worker and the nature of the work. The workers were given cloth for stitching. They were told bow the stitching was to be done.
If they did not stitch it 239 according to the instructions, the employer rejected the work. The worker was asked to restitch. If the work was not done according to the instruction no further work was given to a worker. A worker did not have to make an application for leave if he did no,' come to the shop on a day. if there was no work, the employee was free to leave the shop. All the workers worked in the shop. Some workers could take cloth for stitching to their homes.
Mathew, J. speaking for the Court referred to the decisions of this Court and English and American decisions and cameto these conclusions. First, in recent years the control test as traditionally formulated has not been treated as an exclusive test. Control is an important factor. Second, the organisation test, viz., that the workers attend the shop and work there is a relevant factor. If the employer provides the equipment this is some indication that the contract is a contract of service. If the other party provides the equipment this is some evidence that he is an independent contractor. No sensible inference can be drawn from the factor of equipment where it is customary for servants to provide for their own equipment. Little weight can today be put upon the provisions of tools of minor character as opposed to plant and equipment on a large scale. Third, if the employer has a right to reject the end product if it does not conform to the instructions of the employer and direct the worker to restitch it, the element of control and supervision as formulated in the decisions of this Court is also present. Fourth, a person can be a servant of more than one employer. A servant need not be under the exclusive control of one master. He can be employed under more than one employer. Fifth, that the workers are not obliged to work for the whole day in the shop is not very material. In the ultimate 'analysis it would depend on the facts and circumstances of each case in determining the relationship of master and servant.
The present legislation is intended to achieve welfare benefits and amenities for the labour. That is why the manufacturer or trademarks holder becomes the principal employer though he engages contract labour through the contractor. He cannot escape liability imposed on him by the statute by stating that he has engaged the labour through a contractor to do the work and therefore he is not responsible for the labour. The Contractor in such a case employs the labour only for and on behalf of the principal employer. The contractor being an agent of the principal employer for manufacturing beedis is amenable to the control of principal employer. That is why the statute says that even if the contract engages labour without the knowledge of the employer the principal employer is answerable for such labour because the labour is engaged for or on his behalf.
The act and the Rules thereunder prescribe maintenance of log books and registers. Where the manufacturer or the trade mark holder engages labour directly, the manufacturer maintains registers and lo books. Where the manufacturer engages contract labour through a contractor the manufacturer will require the contract or to maintain such log books of the contract labour and through such books and registers win keep control over not only the contractors but also the labour.
240 The principal employer is the real master of the business.
He has real control of the business. He is held liable because he exercises supervision andcontrol over the labour employed for and on his behalf by contractor. The benefits of the welfare measure reach the workmen only by direct responsibility of the principal employer. The basis of the welfare measure is in the interest of the workers with regard to their health, safety and wages including benefits of leave and family life. The Bombay High Court and the Kerala High Court struck down the provisions contained in sections 2(g) (a) and 2(m) of the Act in regard to the principal employer being liable for con
