Gujarat Electricity Board,Thermal Power Station, Ukai, Guja Vs. Hind Mazdoor Sabha & Ors [1995] INSC 266 (9 May 1995)
1995 Latest Caselaw 262 SC

Gujarat Electricity Board, Thermal Power Station, Ukai, Guja Vs. Hind Mazdoor Sabha & Ors [1995] INSC 266 (9 May 1995)

Sawant, P.B. Sawant, P.B. Majmudar S.B. (J) Sawant, J.

CITATION: 1995 AIR 1893 1995 SCC (5) 27 JT 1995 (4) 264 1995 SCALE (3)498

ACT:

HEAD NOTE:

WITH CIVIL APPEAL NOS.5498-02, 5503 & 5504 OF 1995 [Arising out of SLP Nos.9310-14, 9315 and 13520/91]

Leave granted in all the petitions.

These four groups of appeals raise common questions of law relating to the abolition of contract system of labour. Civil appeals C.A.NO.5497 & 5504/95 arising out of SLP [c] Nos. 2613 of 1991 and 13520 of 1991 are filed by the managements, viz., Gujarat Electricity Board and M/s. Bihar State Cooperative Milk Producers' Federation Ltd. respectively, while civil appeals 5498- 02/95,5503/95 arising out of SLP [c] Nos.9310-14 of 1991 and 9315 of 1991 are filed by the employees' unions, viz., Delhi Officers and Establishment Employees' Union and New Delhi General Mazdoor Union respectively, both against the same management, viz., Standing Conference of Public Enterprises [SCOPE] & Anr.

2. For the sake of convenience, we will first deal with the facts in Civil Appeal 5497/95 arising out of SLP [C] No.2613 of 1991 and the questions of law as they arise there from. C.A.5497/95 @ SLP [C] No.2613 of 1991

3. The appellant-Board runs a Thermal Power Station at Ukai in Gujarat where it generates and distributes electricity to the consumers. At the relevant time besides the direct workmen, the Board deployed through various contractors 1500 skilled and unskilled manual labourers to carry on the work of loading and unloading of coal and for feeding the same in the hoppers and for doing the cleaning and other allied activities in its power station. It appears that these workmen hailed from the adivasi area and many of them had lost their land on account of the construction of the Thermal Power Project of the Board with the result that the employment in the power station was the only means of livelihood left for them. The contractors, according to the respondent-Union, exploited these workmen by flouting labour laws. Ultimately, the workmen organised themselves into a trade union. But on that count they were victimised and on 16th November, 1981, the services of a thousand of these workmen were abruptly terminated. The Union, therefore, filed a writ petition in the High Court praying for direction to reinstate the workmen and for implementing and enforcing the Factories Act, the Employees' Provident Fund Act, the Payment of Wages Act and other labour enactments.

The High Court by its order of 16th December, 1981 appointed one Shri Israni as a Court Commissioner to make detailed enquiries regarding the allegations made in the writ petition and also to try to resolve the dispute between the parties. The Commissioner held talks with the concerned parties and also associated the officers of the Labour Department of the Government with the said talks. It was agreed by and between the parties, viz., the Board and the contractors on the one hand and the workmen on the other, that all the workmen whose names and numbers were mutually agreed to, be allowed to enter the power station for work from 4th January, 1982 and that a settlement under Section 2 [p] of the Industrial Disputes Act, 1947 [for short the `ID Act'] be duly executed in that behalf. It was further agreed that the remaining disputes between the parties, viz., those relating to the revision of wages of the workmen, their rights and privileges arising out of the Factories Act, Employees' Provident Fund Act, Maternity Benefits Act and the Workmen's Compensation Act as well as the disputes with regard to the workmen's contention that they were the employees of the Board, be referred for adjudication by a joint reference under Section 10 [2] of the ID Act.

Accordingly, a joint application was made to the Assistant Commissioner of Labour under Section 10 [2] of the ID Act requesting him that the disputes mentioned therein be referred for adjudication to the Industrial Tribunal and consequently the reference from which the present proceedings arise was made. The terms of the reference were as follow:

(1) Whether the workers whose services are engaged by the contractors, but who are working in the Thermal Power Station of Gujarat Electricity Board at Ukai, can legally claim to be the employees of the G.E.B.? (2) If yes, whether such employees can claim the following rights which the other employees of Gujarat Electricity Board are already enjoying? a. weekly off. b. sick leave, c. C.L., d. Earned or Privilege Leave, e. Maternity Leave & other benefits to female employees, f. Gratuity, 9. Provident Fund, h. Bonus and i. Wage scales, etc.,

(3) If they are not held to be the employees of Gujarat Electricity Board, what are their rights in respect of the matters mentioned in [2] above, against their respective employers?

[4] Whether such employees prove that during the year 1979, 1980 and 1981, they or any of them were made to work overtime. If yes, what would be due to them on that account and from whom?

(5) Whether such employees are entitled to revision of their present wages? If yes, what should be their revised wages and from which date?

(6) Whether the said employees prove that so far as their services are concerned, there have been breaches of any of the provisions of the Factories Act, Employees Provident Fund Act, Maternity Benefits and Workmen's Compensation Acts. If yes, what relief can be legally given to them in that respect and from which date?"

4. Before the Tribunal, the Union filed the statement of claim as well as an application for interim relief. Both the Board and the contractors submitted their reply to the application for interim relief. The Tribunal gave its award being Award Part I dated 30th April, 1982 giving interim relief whereby the Board was directed to pay wages to the workmen at the rate of Rs.9.40 per day from 1st April, 1982 till the disposal of the main reference. Under the said Award, the Board was directed to give to the workmen leave with wages and weekly off in accordance with the provisions of the Factories Act, and maternity benefits as per the provisions of the Maternity Benefits Act.

To the main reference, written statements were filed both by the Board and the contractors. The Board also filed application stating therein that in the meanwhile some of the contractors who were engaged and who were parties to the reference were no longer working with it and that new contractors were engaged in their place. The Tribunal joined the new contractors as parties to the dispute. Likewise, the Union also made an application for joining some of the contractors as parties and they were joined as parties to the reference. Some contractors filed applications for decision on the preliminary point raised in their written statement that since demand nos. 1 and 2 in the reference amounted to a demand for abolition of contract labour system the Tribunal had no jurisdiction to entertain the said demand and that the said point should be heard first. This application was rejected by the Tribunal.

After recording evidence and hearing the parties, the Tribunal by its award came to the conclusion that quite a number of skilled and unskilled employees were employed in the Thermal Power Station for unloading of coal wagons, breaking of coal, feeding them in hoppers, stacking, cleaning earth work, fabrication jobs etc., that the labourers were the local advasis and they were not given any leave or other facilities before 1982 except the wages which were very meagre, that workmen were doing all types of unskilled jobs which they were asked to do and that they were rotated in different jobs. Further, while the contractors had changed, the workmen continued to work and the workmen were working for periods ranging from 5 to 8 years. The contractors had not maintained any records and were not providing any facilities whatsoever. The contractors had no licence under the Contract Labour [Regulation and Abolition] Act, 1970 [hereinafter referred to as the 'Act'] and that no releevant original certificate of registration or licence had been vrought on record. The registration certificate and four licences produced by the Board were ignored by the Tribunal on the ground that they were only copies and nothing had been produced in support of their authenticity. The Tribunal also held that ever otherwise, these documents were not relevant since the registration certificate produced pertained to the contractors who were not concerned in the present case while the licences produced were for a period subsequent to the date of the reference. The Tribunal relied on the decisions of the High Courts of Madras and Karnataka, viz., The Workmen of Best & Cromption Industries Ltd. v. The Management of Best & Cromption Engineering Ltd., Madras & ors. [1985 (1) LLJ 492 and Food Corporation of India Loading and Unloading Workers' Union v. Food Corporation of India [1987 (1) LLJ 407] respectively and held that the workmen concerned in the reference could not be the workmen of the contractors. The Tribunal then proceeded to analyse the position of each of the seven contractors involved in the reference, and held, on the basis of the evidence concerning the said contractors and the workmen working undet them, that the workmen of all the seven contractors should be deemed to be the workmen of the Board. The Tribunal also gave consequential direction for payment of arrears of wages to the worrkmen by adjusting the advances which were given to them by the interim directions of the Tribunal. Against the said award of the Tribunal, the Board preferred a writ petition before the High Court.

The High Court by its decision under challenge before us, held, among other things, that there was no demand for abolition of contract labour system as contended by the Board and hence the preliminary objection raised by the Board that the Tribunal had no jurisdiction to consider the question of the abolition of contract labour system in view of the provisions of the Act, had no merit in it. The High Court held that the Tribunal was called upon to decide as to whether the workers who were engaged for working in the Thermal Power Station were employees of the Board or of the contractors. Hence the Tribunal was required to examine the reality behind the facade after piercing the veil. The High Court also held, negativing the contention to the contrary, that the Tribunal had not based its finding on the sole ground that there were no valid licences for certain periods for certain contractors issued under the provisions of the Act. The Tribunal had decided the question on overall consideration of the facts and circumstances and on the grounds apart from the absence of valid licences. One of the factors taken into consideration by the Tribunal was the continuous nature of work.

5. Before us the main contention advanced on behalf of the appellant-Board is that after the coming into force of the Act, it is only the appropriate Government which can abolish the contract labour system after consulting the Central Board or the State Board, as the case may be and no other authority including the industrial adjudicator has jurisdiction either to entertain such dispute or to directs its abolition. It is also contended on behalf of the Board that in any case neither the appropriate Government nor the industrial adjudicator has the power to direct that the workmen of the erstwhile contractor should be deemed to be the workmen of the principal employer and such a direction is contrary to the provisions of the Act.

The Central Government or the industrial adjudicator as the case may be, can only direct the abolition of the contact labour system as per the provisions of the Act but the Act does not permit either of them to declare the erstwhile workmen of the contractor to be the employees of the principal employer. It is also contended that if the contract is genuine as evidenced by the registration certificate granted to the principal employer and the licence issued to the contractor, then it would have to be held that the workmen concerned are in effect the workmen of the contractor and not the workmen of the principal employer and hence no dispute can be raised under the ID Act by such workmen for any relief since it is only the workmen present or past who can raise such a dispute under the ID Act for relief against their employer. On the other hand, it is contended on behalf of the workmen that the Act does not prevent or prohibit the raising of a dispute under the ID Act for abolition of the contract labour system. Where the contract is genuine, the workmen of the principal employer can raise the dispute for abolition of the contract labour system. Where it is not genuine, the workmen of the so called contractors themselves can raise a dispute for a declaration that they are in fact the employees of the principal employer. In either case, on the basis of the well-known factors laid down by the judicial decisions to establish the relationship of the employer and the employee between the parties, the Tribunal or the Court, as the case may be, will have jurisdiction to declare the contract labourers as the direct employees of the principal employer and grant consoquential reliefs.

6. In view of the aforesaid contentions, the questions that fall for consideration in this appeal, which are common to all the appeals are, as follows:

[a] Whether an industrial dispute can be raised for abolition of the contract labour system in view of the provisions of the Act? [b] If so, who can raise such dispute? [c] Whether the Industrial Tribunal or the appropriate Government has the power to abolish the contract labour system? and [d] In case the contract labour system is abolished, what is the status of the erstwhile workmen of the contractors?

6. We may first refer to the relevant provisions of the Act.

The Statement of Objects and Reasons accompanying the Bill provided as under:

"The system of employment of contract labour lends itself to various abuses. The question of its abolition has been under the consideration of Government for a long time. In the second Five Year Plan, the Planning Commission made certain recommendations, namely, undertaking of studies to ascertain the extent of the problem of contract labour, progressive abolition of the system and improvement of service conditions of contract labour where the abolition was not possible. The matter was discussed at various meetings of Tripartite Committees at which the State Governments were also represented and general consensus of opinion was that the system should be abolished wherever possible or practicable and that in cases where this system could not be abolished altogether, the working conditions of contract labour should be regulated so as to ensure payment of wages and provision of essential amentities.

2. The proposed Bill aims at abolition of contract labour in respect of such categories as may be notified by appropriate Government in the light of certain criteria that have been laid down, and at regulating the service conditions of contract labour where abolition is not possible. The Bill provides for the setting up of Advisory Boards of a tripartite character, representing various interests, to advise Central and State Governments in administering the legislation and registration of establishments and contractors. Under the Scheme of the Bill, the provision and maintenance of certain basic welfare amenities for contract labour, like drinking water and first-aid facilities, and in certain cases rest-rooms and canteens, have been made obligatory. Provisions have also been made to guard against details in the matter of wage payment." As the preamble of the Act points out, the Act has been placed on the statute book for two purposes, viz., [i] to regulate the employment of contract labour and [ii] to provide for its abolition in certain circumstances and for matters connected therewith. It is thus clear that the Act does contemplate the total abolition of contract labour but its abolition only in certain circumstances and to regulate the employment of contract labour in certain establishments.

The object as well as the provisions of the Act also show that the Parliament while realising the need for abolishing the contract labour system in certain circumstances also felt the need to continue it in other circumstances by properly regulating the same. The Act came into force on and from 5th September, 1970. It applies to [a] every establishment in which 20 or more workmen are employed or were employed as contract labour on any day of the preceding 12 months and [b] to every contractor who employs or employed on any day of the preceding 12 months 20 or more workmen. Liberty is given to the appropriate Government to apply the provisions of the Act to any establishment employing such number of workmen less than 20 as may be specified in the notification. The provisions of sub-section [5] of Section 1 of the Act make it clear [a] that the Act will not apply to establishments in which work only of an intermittent or casual nature is performed and [b] if question arises whether work performed in an establishment is of an intermittent nature, the appropriate Government shall decide that question after consultation with the Central Advisory Board or the State Advisory Board as the case may be and that "ics decision shall be final". The explanation to the said sub-section [5] makes it clear that the work performed in an establishment shall not be deemed to be of an intermittent nature [i] if it was performed for more than 120 days in the preceding 12 months or [ii] if it is of a seasonal character and is performed for more than 60 days in a year. Section 2 [a] gives definition of 'appropriate Government'. Section 2 [e] defines 'establishment' to mean [a] any office or department of the Government or a local authority and [b] any place where any industry, trade, business, manufacture or occupation is carried on. Section 2 [g] defines 'principal employer'.

Section 2 [i] defines 'workmen'as under:

"[i] "workmen" means any person employed in or in connection with the work of any establishment to do any skilled, semi- skilled or un-skilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied, but does not include any such person [A] who is employed mainly in a managerial or administrative capacity;

or [B] who, being employed in a supervisory capacity draws wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature; or [C] who is an out-worker, that is to say, a person to whom any articles and materials are given out by or on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or business of the principal employer and the process is to be carried out either in the home of the out-workers or in some other premises, not being premises under the control and management of the principal employer." Sections 3 and 4 require the Central and the State Government to constitute respectively Central and State Advisory Contract Labour Boards. Section 7 requires every principal employer of an establishment to which the Act applies, to make an application in the prescribed form to the registering officer for registration of the establishment.

Section 8 provides for revocation of the registration if the registration of any establishment has been obtained by misrepresentation or supression of any material fact or if for any other reason, the registration has become useless or ineffective. Section 9 of the Act speaks of the effect of non-registration. It states that no principal employer of an establishment shall employ contract labour in the establishment after the time fixed for the purpose. Section 10 then provides as follows:

"10, Prohibition of employment of contract labour. [1] Notwithstanding anything contained in this Act, the appropriate Government may, after consultion with the Central Board or, as the case may be, a State Board, prohibit, by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any establishment.

[2] Before issuing any notification under sub-section [1] in relation to an establishment, the appropriate Government shall have regard to the conditions of work and benefits provided for the contract labour in that establishment and other relevant factors, such as - [a] whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occuption that is carried on in the establishment;

[b] whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment:

[c] whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto;

[d] whether it is sufficient to employ considerable number of whole-time workmen.

Explanation. - If a question arises whether any process or operation or other work is of perennial nature, the decision of the appropriate of the appropriate Government thereon shall be final." Section 12 provides for the licensing of the contractors and states that no contractor shall undertake or execute any work through contract labour except under and in accordance with the licence issued. It also provides that the licence issued may contain such conditions including any particular conditions as to hours of work, fixation of wages and other essential amenities in respect of contract labour as the appropriate Government may deem fit to impose, in accordance with the rules, if any, made under Section 35.

Section 13 provides for the grant of licences in the prescribed form and the application for licence has to contain the particulars regarding the location of the establishment, the nature of process, the operation or work for which contract labour is to be employed and such of the particulars as may be prescribed. The licensing officer on receipt of the application has to make investigation, and the licence if granted is valid for the period specified therein and may be renewed from time to time for such period and on such conditions as may be prescribed. The following conditions are prescribed by Rule 25 [2]:

[i] the licence shall be non- transferable;

[ii] the number of workmen employed as contract labour in the establishm ent shall not, on any day, exceed the maximum number specified in the licence;

[iii] save as provided in these rules, the fees paid for the grant, or as the case may be, for renewal of the licence shall be non-refundable;

[iv] the rates of wages payable to the workmen by the contractor shall not be less than the rates prescribed under the minimum wages Act, 1948 for such employment where applicable and where the rates have been fixed by agreement, settlement or award, not less than the rates so fixed;

[v] (a) in cases where the workmen employed by the contractor perform the same or similar kind of work as the workmen directly employed by the principal employer of the establishment, the wage rates, holidays hours of work and other conditions of service of the workm en of the contract shall be the same as applicable to the workmen directly employed by the principal employer of the establishment on the same or similar kind of work;

Provided that in the case of any disagreement with regard to the type of work the same shall be decided by the Chief Labour Commission [Central];

(b) in other cases the wage rates, holidays, hours of work and conditions of service of the workmen of the contract shall be such as may be specified in this behalf by the Chief Labour Commission [Central].

Section 14 states that if the licensing officer is satisfied either on a reference made to him in this behalf or otherwise, that among other things, the holder of a licence has obtained the licence by misrepresentation or suppression of any material fact or has without reasonable cause failed to comply with the conditions subject to which the licence has been granted or has contravened any provision of the Act or the Rules made thereunder, he can cancel the licence. The cancellation is without prejudice to any other penalty to which the holder of the licence may be liable under the Act. Section 20 casts an obligation on the principal employer to provide any amenity required to be provided under the Act to the contract labour and permits the principal employer to recover all expenses from the contractor incurred by him for providing the amenities.

Section 21 likewise makes the contractor responsible for payment of wages to each worker employed by him, and every employer to nominate a representative to be present at the time of the disbursement of the wages. In case the contractor fails to make the payment within the prescribed period or makes short payment, the principal employer is made liable to make payment of wages in full or the unpaid balance as the case may be and the principal employer is permitted to recover the amount so paid, from the contractor. Sections 22 to 27 of Chapter VI prescribe penalties for contravention of the provisions of the Act.

Section 29 of Chapter VII requires every principal employer and every contractor to maintain such registers and records giving such particulars of contract labour employed, the nature of work performed by the contract labour, the rates of wages paid to the contract labour and such other particulars in such form as may be prescribed. Section 30 makes the laws and agreements inconsistent with the Act, ineffective while saving the more beneficial service conditions of the contract labourers. Section 31 empowers the appropriate Government to grant exemption to any establishment or class of establishments or any class of contractors from complying with the provisions of the Act or the rules made thereunder on such conditions and restrictions as may be prescribed.

7. Under the Act the Government has in exercise of power granted by Section 35 of the Act made Contract Labour [Regulation and Abolition] Rules, 1971 [hereinafter referred to as the 'Rules'] which have come into force from 10th February, 1971. Rule 17 [1] prescribes a form, viz., Form I, for application, referred to in Section 7 [1], for registration of the establishment, to be made by the principal employer for employing contract labour. The form shows that the employer has to furnish, among other things, information with regard to [i] nature of work carried on in the establishment, [ii] particulars of contractors and contract labour, viz., [a] names and addresses of contractors, [b] nature of work in which the contract labour is employed or to be employed, [c] maximum number of contract labour to be employed on any day through each contractor, [d] estimated date of commencement of each contract labour under each contractor and [e] estimated date of termination of employment of contract labour under each contractor. Rule 18 [1] provides for Form II of the certificate of registration to be granted under Section 7 [2] of the Act. The certificate of registration has to contain [i] the name and address of the establishment, [ii] the maximum number of workmen to be employed as contract labour in the establishment, [iii] the type of business, trade, industry, manufacture or occupation which is carried on in the establishment, [iv] the names and addresses of contractors, [v] nature of work in which contract labour is employed or is to be employed and [vi] other particulars relevant to the employment of contract labour. Rule 18 [3] requires the registering officer to maintain a register in a form showing the particulars of establishment in relation to which certificate of registration has been issued and the register of establishment has, in addition, to show the total number of workmen directly employed by the employer.

Rule 18 [4] requires that any change in the particulars specified in the certificate of registration has to be intimated by the employer to the registering officer within 30 days from the date of the change and the particulars of and the reasons for such change. Rule 20 provides for an amendment of the certificate of registration pursuant to the change intimated by the employer under Rule 18 [4] which amendment has to be granted by the registering officer only after satisfying himself that there has occurred a change.

Rule 21 provides for an application for a licence to be made by the contractor in Form IV. The form requires information with regard, among other things, to

[i] name and address of the contractor, [ii] particulars of establishment where contract labour is to be employed such an

[a] name and address of the establishment,

[u] type of business, trade, industry, manufacture or occupation which is carried on in the establishment,

[c] number and date of certificate of registration of the establishment under the Act and

[d] name and addresses of employer; and [iii] particulars of contract labour such as

[a] nature of work in which contract labour is or is to be employed in the establishment,

[b] duration of the proposed contract work giving particulars of the proposed date of commencing and ending of the contract work

[c] name and address of the agency or manager of contractor at the work site

[d] maximum number of contract labour proposed to be employed in the establishment on any date.

Rule 21 [1] also requires certificate in Form V by the principal employer that he has engaged the applicant- contractor as a contractor in his establishment and that he undertakes to be bound by all the provisions of the Act and the Rules. Rule 25 prescribes the form and the terms and conditions on which licence is issued to the contractor. The conditions on which the licence is issued include the condition that the licence shall be non-transferable and the number of workmen employed as contract labour in the establishment shall not on any date exceed the maximum number specified in the licence and that the rates of wages payable to the workmen by the contractor shall not be less than the rates prescribed under the Minimum Wages Act, 1948 for such employment, and where the rates have been fixed by agreement, settlement or award, the same shall not be less than the rates so fixed. In cases where the workmen employed by the contractor perform the same or similar kind of work as the workmen directly employed by the employer of the establishment, the wage rates, holidays, hours of work and other conditions of service of the workmen of the contractor shall be the same as applicable to the workmen directly employed by the employer. In other cases, the wage rates, holidays, hours of work and conditions of service of the contractor's workmen shall be such as may be specified in that behalf by the Chief Labour Commissioner [Central].

While specifying the wage rates, holidays etc. the Chief Labour Commissioner has to have regard to the wage rates, holidays etc. obtaining in similar employments. The licensee-contractor has to notify any change in the number of workmen or the conditions of work. Rule 27 states that every licence granted to the contractor shall remain in force for 12 months from the date it is granted or renewed.

Rule 29 provides for renewal of licences. Rule 32 provides for the grant of temporary certificate of registration and licences where the contract labour is not estimated to last for more than 15 days. Rule 75 requires every contractor to maintain in respect of each registered establishment a register in Form XIII. This form mentions details to be given in respect, among others, of the name and address of the principal employer and of the establishment, the name and address of the contractor and the nature and location of work, the name and surname of each workmen and their permanent home address, the date of commencement of employment, the signature or thumb-impression of workmen, the date of termination of employment and reasons for termination. Rule 76 requires that every contractor shall issue an employment card in form XIV to each worker within three days of the employment of the worker. Rule 77 requires that every employer shall issue service certificate to each of the workmen.

8. The provisions of the Act and of the Rules show, among other things, that every principal employer engaging a contractor and every contractor engaging the contract labour in the establishment, has to obtain for the purpose, registration certificate and the licences respectively from the authority under the Act. The nature of work for which the contract labour is engaged, the maximum number of the contract labour proposed to be engaged, the period for which such labour is to be employed, the names and addresses of the workmen so employed have also to be furnished to the authority. The workmen have to be paid minimum wages and where there are agreements, settlements etc. the wages which are agreed to there under have to be paid. Further, if the contract labour is employed for doing the same type of work as is done by the direct employees of the principal employer, wages have to be paid and facilities given to the contract labour as are paid or given to the direct employees of the principal employer. Any change in the nature of employment or the number of the workmen to be employed and the period for which they are to be employed etc. has to be intimated to the authority concerned.

If any amenity is required by the provisions of the Act to be provided for the benefit of the contract labour, viz., canteens, rest rooms, drinking water, latrine, urinals, washing facilities and first aid facilities, and is not provided by the contractor within the time prescribed therefor, it is the principal employer who is required to provide the same within such time as may be prescribed. The principal employer can, however, recover the expenses of providing such facilities from the contractor's account or as a debt payable by the contractor. Further, the principal employer is required to nominate the representative duly authorised by him to be present at the time of the disbursement of wages by the contractor to the labour, and such representative is required to certify the wages paid to the labour. It is the principal employer who has to ensure the payment of wages to the contract labour and in case the contractor fails to make payment of wages within the prescribed period or makes short payment, it is the principal employer who is made liable to make the payment of wages in full or the unpaid balance due, as the case may be.

He can recover the amounts so paid from the contractor's account or as a debt payable by the contractor.

The contractor is also required to obtain a licence before undertaking or executing any work through contract labour and he can execute such work only in accordance with the licence issued to him. The application for licence has to indicate the location of the establishment, the nature of process, operation or work for which contract labour is to be employed and other particulars, prescribed under the Rules. The licence issued has to contain conditions relating to the hours of work, fixation of wages and essential amenities.

The contravention of any provision of the Act including contravention of any condition of the licence granted to the contractor is made a penal offence.

Further, under Section 10 of the Act, the authority to prohibit employment of contract labour in any process, operation or other work in any establishment has been vested in the appropriate Government which has to exercise it after consulation with the Central Board or the State Board as the case may be. Before issuing the notification prohibiting the contract labour, the appropriate Government has to have regard to the conditions of work and benefits provided for the contract labour in the establishment and other relevant factors such as

[a] whether the process, operation or other work is incidental to or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment,

[b] whether it is of a perennial nature, i.e., whether it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in the establishment,

[c] whether it is done ordinarily through direct workmen in that establishment or an establishment similar thereto, and

[d] whether it is sufficient to employ considerable number of whole-time workers.

The explanation to that section makes the decision of the appropriate Government final with regard to the question whether the process, operation or other work is of pernnial nature. The effect of non-registration of an establishment under the Act is that the establishment cannot employ contract labour. So also, the effect of non-licensing of the contractor is that the contractor is precluded from undertaking or executing any work through contract labour.

It is against the background of these provisions of the Act and in the light of the decisions of this Court which are cited before us that we have to answer the questions raised in these appeals.

9. On the basis of the provisions of Section 10, it is contended that no industrial dispute can be raised to abolish contract labour in any process, operation or other work in any establishment. The contention is two-fold. In the first instance, it is argued that the said section gives exclusive authority to the appropriate Government to prohibit contract labour and that too after following the procedure laid down therein. Before taking the decision to prohibit, the appropriate Government has to (i) consult the Central Board or the State Board, as the case may be; (ii) have regard to the conditions of work and benefits provided for the contract labour in that establishment; and (iii) have regard to other relevant factors such as

(a) whether the process, operation or the connected work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment;

(b) whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment;

(c) whether it is done ordinarily through direct workmen in that establishment or an establishment similar thereto;

(d) whether it is sufficient to employ considerable number of whole time workmen. The other contention is that the decision of the appropriate Government in that behalf is final and the decision is not liable to be challenged in any Court including before the industrial adjudicator.

10. In support of the first contention, reliance was placed on the following decisions of this Court :

In Vegoils Pvt. Ltd. v. The Workmen [(1972) 1 SCR 673], the facts were that the appellant, a private limited company carried on the business of manufacturing edible oils, soaps and certain by products, and employed about 700 permanent workmen for the purpose. However, for loading and unloading seed and oil cake bags and for feeding hoppers in the solvent extraction plant, it employed labour through a contractor. The direct workmen raised an industrial dispute claiming, inter alia, that the work of loading and unloading seed bags as well as that of feeding hoppers was of a perennial nature and hence the contract labour in respect of the said work should be abolished. The industrial Tribunal held that the work of feeding the hoppers could not be said to be intermittent and sporadic as claimed by the company and that it was closely connected with the principal activity of the appellant. The Tribunal also recorded a finding that in similar plants in the region, the work of feeding the hoppers was carried on by permanent workmen.

Hence, the Tribunal held that the company should carry out this work through permanent workmen. As regards loading and unloading of seed and cake bags, the Tribunal held that these activities were also closely connected with the main industry and the work was of a permanent character. Although the comparable units in the same region carried on the working of loading and unloading through contract labour, the Tribunal held that since the contract labour has to be discouraged, the appellant must employ only permanent workmen for doing the said job as well. The Tribunal then referred to the Act, [i.e., the Contract Labour (Regulation and Abolition) Act] as well as to a State enactment, viz., Maharashtra Mathadi Hamal and Other Manual Workers [Regulation of Employment and Welfare] Act, 1969 and observed that these two enactments also supported its view.

In appeal before this Court, the company, apart from questioning the Tribunal's decision on merits, challenged the jurisdiction of the Tribunal to consider the question of the abolition of contract labour in view of the provisions of the two Acts. This Court held that the Tribunal acquired jurisdiction to entertain the dispute in view of the reference made by the State Government on April 17, 1967. On that date, neither the Central Act nor the Maharashtra Act had been passed. Even during the proceedings before the Tribunal, the company raised no objection after the passing of the two enactments that the Tribunal had no longer jurisdiction to adjudicate upon the dispute. Under these circumstances, the Tribunal had to adjudicate upon the points referred to it having due rgard to the principles laid down by the courts particularly this Court governing the abolition of contract labour. The Court further held that the Act had received the assent of the President before the passing of the Tribunal's award while the State Act had come into force before the passing of the award. Though the contention that the Tribunal lost jurisdiction to consider the question of contract labour in view of these enactments could not be accepted, it was held that this Court would be justified when dealing with the appeal, to give effect particularly to the provisions of the Act having due regard to the clearly expressed intention of the legislature in the said Act regarding the circumstances under which contract labour could be abolished. The Court also held that even according to the evidence of the company's witnesses it was clear that the feeding of hoppers in the solvent extraction plant was an activity closely and intimately connected with the main activity of the appellant, and that excepting for a few days, this work had to go on continuously throughout the year. It could not also be said that by employing contract labour for the purpose, the appellant would be enabled to keep down the costs on the ground that there would not be sufficient work for all the workmen if permanent labour was employed. Further, the award of the Tribunal abolishing the contract labour in respect of feeding the hoppers was fully justified because it was in accordance with the principles laid down by this Court which were substantially incorporated in clauses [a] to [d] of Section 10 [2] of the Act and upheld the direction of the Tribunal in that regard.

However, this Court held that the Tribunal's direction to the company not to engage any labour through a contractor for the work of loading and unloading after May 1, 1971 must be set aside. Since the Act had come into force on 10th February, 1971 and under Section 10 of the Act the jurisdiction to decide matters connected with the prohibition of contract labour was vested in the appropriate Government, it is only the appropriate Government that can prohibit contract labour by following the procedure and in accordance with the provisions of the Act. The Court also held that the Industrial Tribunal in the circumstances had no jurisdiction, though its award was dated 20th Noveember, 1970, to give a direction in that respect which becomes enforceable after the date of the coming into operation of the Act. Further under clause [c] of Section 10 [2] of the Act, one of the relevant factors to be taken into account when contract labour regarding any particular type of work is proposed to be established, is whether that type of work is done ordinarily through direct workmen in the establishment or an establishment similar thereto. In the case before the Court, similar establishments employments employed contract labour for loading and unloading but the evidence also showed that the work of loading and unloading required varying number of workmen.

It will thus appear from this decision firstly, that an industrial dispute can be raised by the direct workmen of the establishment for abolition of the contract labour system. Secondly, although on the date the dispute was raised the Act was not in force, and hence the dispute with regard to the abolition of the contract labour system had to be decided by the Tribunal, since the Act came into force at the time of the decision, the dispute had to be decided in accordance with the provisions of the Act. Hence on and after the coming into force of the Act, no direction could be given by the Industrial Tribunal to abolish the contract labour system, since the jurisdiction to give directions with regard to the proibition of contract labour is vested in the appropriate Government.

In B.H.E.L. Workers' Association Hardwar & Ors. etc. etc. v. Union of India & Ors. etc. etc. [(1985) 2 SCR 611] the matter came to this Court by way of a writ petition filed by the workmen under Article 32 of the Constitution.

It was contended by the workmen's Association that out of 16000 and odd workmen working within the premises of the respondent-Company, as many as a thousand workers were treated as contract labour and placed under the control and at the mercy of contractors and though they did the same work as workers directly employed by the company, they were not paid the same wages nor were their conditions of service the same as that of the directly employed workers. It was further alleged that the management paid to the contractors, and in turn, the contractors paid salary to them, after deducting substantial commission, and the wages paid to them did not bear comparison to the wages paid to those directly employed by the company. Hence it was alleged that the rights of the contract workers were infringed under Articles 14 and 19 [1] (f) [ sic. - g? ] of the Constitution and a declaration was sought from the Court that the system of contract labour prevalent in the respondent-company was illegal, the contract employees were the direct employees of the respondent-company and entitled to equal pay as the workmen directly employed. The respondent-company opposed the petition by contending that if the petitioners had any genuine grievance, they could avail themselves of the rights secured to them under the Act, Minimum Wages Act, Equal Remuneration Act, etc. for seeking appropriate relief. It was further contended on behalf of the company that certain jobs though required to be done within the plant area, could more conveniently and efficiently be done on a job contract basis, and this was actually due to the introduction of a new technology for expansion of production programme with foreign collaboration. The jobs themselves were entrusted to contractors and it was not appropriate to say that the contractors merely supplied the labour. They were required to do the total job and payment was made on the basis of the quantum of work involved and not on the basis of the workers employed by the contractor. This Court dismissed the writ petition by holding that the Act does not provide for the total abolition of contract labour, but for its abolition only in certain circumstances, and for the regulation of the employment of contract labour in certain establishments. The Act is not confined to private employers only. The definition of 'establishment' under Section 2 [e] and of 'principal employer' under Section 2 [g] expressly include the Government or any of its departments. The Court further held that no invidious distinction can be made against contract labour. Contract labour is entitled to the same wages, holidays, hours of work, and conditions of service as are applicable to workmen directly employed by the principal employer of the establishment on the same or similar kind of work. They are entitled to recover their wages and their conditions of service in the same manner as workers employed by the principal employer under the appropriate Industrial and Labour Laws. If there is any dispute with regard to the type of work, the dispute has to be decided by the Chief Labour Commissioner [Central]. The Parliament has not abolished contract labour but has provided for its abolition by the Central Government in appropriate cases under Section 10 of the Act. It is not for the court to enquire into the question and to decide whether the employment of contract labour in any process, operation or other work in any establishment should be abolished or not. This is a matter for the decision of the Government after considering the matters required to be considered under Section 10 of the Act. Whether the work done by the contract labour is the same or similar to that done by the workmen directly employed by the principal employer of any establishment, is a matter to be decided by the Chief Labour Commissioner under the proviso to Rule 25 [iii] [iv] (a) of the 1971 Rules.

The Court further held that it was not possible in an application under Article 32 to embark upon an enquiry whether the thousand and odd workmen working in various capacities and engaged in multifarious activities did work identical with work done by the workmen directly employed by the company and whether for that reason, they should not be treated as contract labour but as direct employees of the company. There are other forums created under other statutes designed to decide such and like questions. The Court further observed that the counse] wanted this Court to abolish the employment of contract labour by the State and by all public sector undertakings which was not possible since that would be nothing but the exercise of legislative activity with which function the court is not entrusted by the Constitution. While holding thus, the Court, however, directed the Central Government to consider whether the employment of contract labour should not be prohibited under Section 10 of the Act in any process, operation or other work of the BHEL. The Court also directed the Chief Labour Commissioner to enquire into the question whether the work done by the workmen employed by the contractors is the same type of work as that done by the workmen directly employed by the principal employer in the BHEL, Hardwar.

In Catering Cleaners of Southern Railway etc. v. Union of India & Ors. etc. [(1987) 2 SCR 164], the petitioners who were catering cleaners of the Southern Railway had filed a representative writ petition on behalf of about 300 and odd catering cleaners working in the catering establishments at various Railway junctions of the Southern Railway and in the pantry cars of long-distant trains running under the control of the Southern Railway. Since a long time, they were agitating for the abolition of the contract labour system under which they were employed to do the cleaning work in the catering establishments and pantry cars and for their absorption as direct employees of the principal employer, viz., the Southern Railway. Although the contract labour labour system had been abolished in almost all the railways in the country, the Southern Railway persisted in employing contract labour for doing the work in question. Since several representations made by them to the authorities proved fruitless, they approached this Court under Article 32 of the Constitution to direct the respondent-Union of India and others to exercise their power under Section 10 [1] of the Act and to abolish the contract system and further to direct the Railways to regularise the services of the existing catering cleaners and to extend to them the service benefits then available to other categories of employees in the catering establishments. The Railway administration opposed the writ petition contending that it had not been found possible to abolish the contract labour because the nature of the cleaning work in the catering units of the Southern Railway, was fluctuating and intermittent. The Court referred to the report of the Parliamentary Committee which had held that the job of cleaning in Railway catering units was of a permanent nature and the work if entrusted to the direct employees would only marginally increase the cost. The Committee had recommended the employment of cleaners directly by the Railways to avoid their exploitation. The Court also referred to the decision of this Court in Standard Vacuum Refining Co. of India Ltd. v. Its Workmen & Ors. [(1960) 3 SCR 466]. After analysing the provisions of the Act, the Court held that on the facts, it appeared to it to be clear that the work of cleaning catering establishments and pantry cars was necessary and incidental to the industry or business of the Southern Railway, that the work was of a perennial nature, that it was done through direct workmen in most Railways in the country and that the work required the employment of sufficient number of whole-time workmen and thus the requirement of clauses [a] to [d] of Section 10 [2] of the Act were satisfied. In addition, the Court found that there was a factor of profitability of the catering establishments which as stated in the report of the Parliamentary Committee, was making a profit of Rs.50 lakhs per annum.

However, even on these findings, the Court held that the writ petitioners could not invite the Court to issue a mandamus directing the Central Government to abolish the contract labour system because under Section 10 of the Act, Parliament had vested in the appropriate Government the power to prohibit the employment of contract labour in any process, operation or any other work in any establishment.

The appropriate Government is required to consult the Central Board or the State Board as the case may be, before arriving at its decision. The decision, of course, is subject to the judicial review. Hence, the Court would not be justified in issuing a mandamus prayed for unless and until the Government failed or refused to exercise the power vested in it under Section 10 of the Act. In the circumstances, the appropriate order to make according to the Court, was to direct the Central Government to take suitable action under Section 10 of the Act in the matter of prohibiting the employment of contract labour and the Government should do it within six months from the date of the order. The Court further observed that without waiting for the decision of the Central Government, the Southern Railway was free of its own motion to abolish the contract labour system and to regularise the services of the employees in the work of cleaning catering establishments and pantry cars. The Court further observed that the administration of the Southern Railway should refrain until the decision of the Central Government from employing contract labour. The Court also directed that the work of cleaning catering establishments and pantry cars should be done departmentally by employing those workmen who were previously employed by the contractors on the same wages and conditions of work as were applicable to those engaged for the same work by the Southern Railway.

In Dena Nath & Ors. v. National Fertilisers Ltd. & Ors. [(1992) 1 SCC 695], the question involved was whether, if the principal employer does not get registration under Section 7 and/or the contractor does not get licence under Section 12 of the Act, the labour engaged by the principal employer through the contractor is deemed to be the direct employees of the principal employer or not. On this point there was a conflict in the decisions of High Courts of Delhi, Calcutta, Punjab and Kerala on the one hand and of the High Courts of Madras, Bombay, Gujarat and Karnataka on the other. The view taken by the former High Courts was that the only consequence of the non-compliance of the provisions of Sections 7 and 12 of the Act was that the principal employer and the contractor as the case may be, are liable for prosecution under the Act whereas the view taken by the latter High Courts was that in such a situation the contract labour became the direct employees of the principal employer. After noticing the decision of this Court in Standard Vacuum Refining Co. case [supra] and going through the genesis of the Act, the Court held that it is not for the High Court to enquire into the question and decide whether the contract labour in any process, operation or any other work in any establishment should be abolished or not.

It is a matter for the appropriate Government to decide after considering all the matters as required by Section 10 of the Act. The Court further held that the only consequence provided under the Act where either the principal employer or the labour contractor violates the provisions of Section 7 or 12 as the case may be, is the penalty as envisaged under Sections 23 and 25 of the Act. Merely because a contractor or an employer has violated a provision of the Act or the Rules, the Court cannot issue any mandamus for deeming the contract labour as having become the employees of the principal employer. The Court referred to the decisions of the Karnataka and the Gujarat High Courts [the latter is under challenge in the present proceedings] and observed that it would not like to express any opinion on the same since they were under challenge in this Court but would place on record that it did not agree with the observations of the Madras High Court regarding the effect of the non-registration of the principal employer or the non-licensing of the labour contractor nor with the view of the Bombay High Court which was under consideration before it. The Court further stated that it was of the view that the decisions of the Calcutta and Delhi High Courts were correct and approved of the same.

11. These decisions in unambiguous terms lay down that after the coming into operation of the Act, the authority to abolish the contract labour is vested exclusively in the appropriate Government which has to take its decision in the matter in accordance with the provisions of Section 10 of the Act. This conclusion has been arrived at in these decisions on the interpretation of Section 10 of the Act.

However, it has to be remembered that the authority to abolish the contract labour under Section 10 of the Act comes into play only where there exists a genuine contract.

In other words, if there is no genuine contract and the so called contract is sham or a camouflage to hide the reality, the said provisions are inapplicable. When, in such circumstances, the concerned workmen raise an industrial dispute for relief that they should be deemed to be the employees of the principal employer, the Court or the industrial adjudicator will have jurisdiction to entertain the dispute and grant the necessary relief. In this connection, we may refer to the following decision of this Court which were also relied upon by the counsel for the workmen.

In The Standard-Vacuum Refining Co. of India Ltd. v. Its workmen and others. [supra], an industrial dispute was raised by the workmen of the appellant-company with respect to the contract labour employed by the company with respect to the contract labour employed by the company for cleaning maintenance work at the refinery including the premises and plants belonging to it. The workmen made a demand for abolition of the contract system and for absorbing workmen employed through the contractor into the regular service of the company. The matter was referred for adjudication to industrial Tribunal. The company objected to the reference on the ground

[1] that it was incompetent inasmuch as there was no dispute between it and the respondents and it was not open to them to raise a dispute with respect to the workmen of some other employer, viz., the contractor, and

[2] in any case, it was for the company to decide what was the best method of carrying on its business and the Tribunal could not interfere with that function of the management. The Tribunal held that the reference was competent. It was of the opinion that the work which was being done through the contractor was necessary for the company to be done daily, that doing this work through annual contracts resulted in deprivation of security of service and other benefits of the workmen of the contractor and hence the contract system with respect to that work should be abolished. In appeal, this Court held that the dispute raised was an industrial dispute within the meaning of section 2 [k] of the Industrial Disputes Act because

[i] the respondent-workmen had a community of interest with the workmen of the contractor,

[ii] they had also substantial interest in the subject- matter of the dispute inasmuch as the class to which they belonged was substantially affected thereby, and

[iii] the company could give relief in the matter.

The Court further held that the work in question was incidental to the manufacturing process and was necessary for it and was of a perennial nature which must be done every day. Such work is generally done by workmen in the regular employment of the employer and there should be no difficulty in having direct workmen for that kind of work. The matter would be different if the work was of intermittent or temporary nature or was so little that it would not be possible to employ full time workmen for the purpose. While dealing with the contention that the Tribunal should not have interfered with the management's manner of having its work done in the most economical and convenient way that it thought proper, and that the case in question was not one where the contract system was a camouflage and the workmen of the contractors were really the workmen of the company, the Court held that it may be accepted that the contractor in that case was an independent person and the system was genuine and there was no question of the company carrying on the work itself and camouflaging it as if it was done through contractors in order to pay less to the workmen. But the fact that the contract in the case was a bona fide one would not necessarily mean that it should not be touched by the industrial Tribunals. If the contr