Balwant Rai Saluja& ANR. Etc. Etc. Vs. Air India Ltd. & Ors. [November 13, 2013]
2013 Latest Caselaw 785 SC

Balwant Rai Saluja & ANR. etc. Vs. Air India Ltd. & Ors.

[Civil Appeal Nos.10264-10266 of 2013 @Special Leave Petition (C) Nos. 24946-24948 of 2011]

CHANDRAMAULI KR. PRASAD, J.

Leave granted. Air India Limited was constituted under the Air Corporations Act, 1953. By virtue of Section 3 of the Air Corporations (Transfer of Undertakings and Repeal) Act, 1994, Air India has vested in Indian Airlines Limited. It has Ground Services Department at Indira Gandhi International Airport, Delhi. Respondent No. 2 is Hotel Corporation of India, which is a Government Company incorporated under the Companies Act. The authorized share capital of the Hotel Corporation of India, hereinafter referred to as the Corporation, is Rupees 10 crores, divided into 10 lakhs equity shares of Rs. 100/- each.

The Corporation is a wholly owned subsidiary of Air India and its entire share capital is held by Air India and its nominee. Excepting 6 shares, 4,99,994 shares have been subscribed by Air India and rest by its nominees. Air India controls the composition of the Board of Directors and appoints Directors in consultation with the Government of India. The power to remove the Directors from office before the expiry of the term is vested with Air India, in consultation with the Government of India, so also the power to fill up the vacancies caused by death, resignation, retirement or otherwise. General management of the Corporation is vested in the hands of the Managing Director. Notwithstanding that, Air India is conferred with the power to issue such directions or instructions as it may think fit in regard to the finances and the conduct of the business and affairs of the Corporation.

Duty has been cast upon the Corporation to comply with and give effect to such directions and instructions. The main objects for which the Corporation is incorporated are large and include carrying the business of hotels, motels, restaurants, cafés, kitchens, refreshment rooms, canteens and depots etc. in general and its incidental and ancillary objects are establishment of catering and opening hotels, which would tend to promote or assist in Air India's business as an international air carrier. Respondent No. 3, Chef Air Flight Catering, hereinafter referred to as 'Chef Air', is one of the units of the Corporation. Section 46 of the Factories Act, inter alia, confers power on the State Government to make rules requiring a specified factory where more than 250 workers are ordinarily employed, to provide and maintain a canteen for the use of the workers.

In exercise of the aforesaid power, Rules 65to 71 have been incorporated in the Delhi Factory Rules, 1950, hereinafter referred to as 'the Rules'. Rule 65(1) was to come into force in respect of any class or description of factories on such dates as the Chief Commissioner may by notification in the Official Gazette appoint. Rule65(2) of the Rules, inter alia, contemplates that the occupier of every factory notified by the Chief Commissioner, where more than 250 workers are ordinarily employed, shall provide in or near the factory an adequate canteen in accordance with the standard prescribed in those Rules. In pursuance of the provisions of sub-rule (1) of Rule 65 of the Rules, the Lieutenant-Governor of the Union Territory of Delhi, by notification in the Official Gazette, dated 21st of January, 1991, directed that Rules 65 to 70of the Rules shall apply to the factories specified in the said Rules with effect from the date of publication of the notification in the Official Gazette.

It included M/s. Air India Ground Services Department, Indira Gandhi International Airport, Delhi (Engineering Unit). The workmen working in Air India Ground Services Department Canteen, hereinafter referred to as 'the Canteen', raised an industrial dispute and the competent Government made a reference to the Central Government Industrial Tribunal as to whether the demand of the workmen employed by Chef Air to provide canteen service to be treated as deemed employees of the management of Air India is justified and, if so, what relief the workmen are entitled to? The workmen laid their claim and, according to them, they were employed by Air India on casual basis in the Canteen and their employment was through Chef Air, which is a unit of the Corporation.

According to the workmen, the Corporation has entered into a contract with Air India to run and maintain the canteen and for that purpose, they were initially appointed for a period of 40 days and said period used to be extended from time to time and in this way each of them had completed service for 240 days in a year. According to the workmen, they were called for interview on several occasions but had not been selected and on the contrary, persons junior to them have been regularized. The workmen have further alleged that Air India had entered into a contract with the Corporation to deny the workmen their legitimate right by circumventing the various provisions of the Contract Labour (Regulation and Abolition) Act,1970. According to them, they were performing duties of a permanent and perennial nature required by Air India but were being paid wages less than the regular employees.

Case of the workmen further is that issuance of letters of appointment for 40 days with artificial break in service is anun fair labour practice and on the aforesaid grounds they sought regularization of the services with back wages in Air India. Air India resisted the claim of the workmen, inter alia, stating that they were not their employees and relationship of employer and employee does not exist between them. According to them, Chef Air is a unit of the Corporation engaged in various businesses including establishing and running of canteens. According to Air India, the Canteen is being run and maintained by the Corporation on the basis of a fixed subsidy per employee provided by them. It is a specific assertion of Air India that they have no control over the workmen and that their conditions of service are governed by the Rules and Regulations of the Corporation.

Air India has admitted that the infrastructure of the Canteen was provided by them but its management is in the hands of the Corporation. Air India has further pointed out that letters of appointment, token numbers, ESI cards etc. have been issued to the workmen by the Corporation and, hence, the prayer for regularizing their services by Air India is misconceived. Air India has denied that the Canteen in question is a statutory canteen and was employing more than 250 workers. On the basis of the materials placed on record, the Central Government Industrial Tribunal, hereinafter referred to as "the Tribunal", came to the conclusion that the Corporation is 100% subsidiary of Air India and the Canteen in question is a statutory Canteen established for the welfare of more than 2,000 workers. The Tribunal also came to the conclusion that the Canteen is established within the premises of Air India and the Corporation carries on its business under the control and administration of Air India.

According to the Tribunal, the running of the Canteen by the Corporation in respect of the statutory duty of Air India cannot be said to be its independent act. Accordingly, the Tribunal observed that hiring of employees for running the statutory canteen by the Corporation is a camouflage and the workmen employed in the Canteen are deemed employees of Air India. Thus, the Tribunal held the demand of the workers to be justified and finding that the workmen have been terminated from their services during the pendency of the dispute held that the termination is illegal and, accordingly, set aside the termination of their employment and directed reinstatement with 50% back wages. Assailing the aforesaid award of the Tribunal, Air India preferred writ petition before the High Court.

The learned Single Judge held that Air India is the sole holder of the shares of the Corporation but it is a separate legal entity which is independent of its shareholders. The authority to issue directions does not merge the identity of the Corporation with the shareholder. The learned Single Judge accordingly held as follows: "........Thus, in my view the mere fact of HCI being a 100% subsidiary of Air India and the aforesaid peculiar Articles of Association would not be decisive of whether the employees aforesaid of HCI and working in the canteen of Air India are to be treated as employees of Air India or not." As regards the grievance of the workmen that Air India had devised to employ the workmen through a unit of the Corporation to defeat their rights, the learned Single Judge observed as follows:

"19. One thing which emerges is that in the present case, no motive to defeat any rights of the employees, in Air India entering into a contract with Chef Air (a unit of HCI) for operating its canteen, even if it be a statutory canteen have been established. It was not as if by employing workmen in HCI instead of in Air India, the workmen were being made employees of a weaker entity against whom they can claim no rights. After all HCI is also a Government of India company as Air India is." The learned Single Judge further came to the conclusion that the Corporation was not incorporated for the sole purpose of operating the Canteen for Air India but was set up as a legal entity to carry on business in diverse fields. According to the learned Single Judge, Air India engaged the Corporation which has expertise in the field to run and operate the Canteen and that will not make the workmen employees of Air India.

The learned Single Judge ultimately held as follows: "23. HCI in the present case is seen as one such expert. It has been providing flight catering services to Air India and other airlines besides carrying on other allied businesses. As aforesaid, HCI was not incorporated merely to run the canteen of Air India so as to keep the employees of the said canteen, managed through the medium of HCI, at arm's length from Air India. HCI is a business entity in its own right and no mala fides have been established in Air India entrusting the operation and management of the canteen aforesaid to HCI. As aforesaid, in spite of repeated asking, no prejudice is shown to have been caused to the workmen in them being the employees of the HCI instead of Air India.

Of my own I can only gauge that may be as employees of Air India they may be entitled to a free flight once in a while and which they may not be entitled to as an employee of HCI. However, that is hardly determinative of the matter in controversy. Again it is not as if Air India is attaining to offload its canteen employees to an entity which is sick or near the stage of being closed down. HCI is informed to be a running concern." Accordingly, it set aside the award passed by the Tribunal. The workmen, aggrieved by the same, preferred an appeal before the Division Bench of the High Court. The Division Bench framed the following question for its consideration:

"11. The core issue that emanates for consideration is whether in the obtaining factual matrix it can be held that the employees of the canteen established by Air India in its premises and run by the HCI be treated as regular employees of Air India. Before we advert to the factual canvas, we think it appropriate to refer to the citations in the field, cull out the principles and analyse whether they are applicable to the material brought on record." The Division Bench of the High Court analysed the facts, referred to the various decisions of this Court and ultimately came to the conclusion that the Corporation is a separate entity and not a part of Air India as found by the Tribunal. It endorsed the finding of the learned Single Judge that merely because the Articles of Association confer power on Air India to issue such directions or instructions as it may think fit in regard to conduct of the business and affairs of the Corporation and make it obligatory for the Corporation to carry on the direction of Air India, would not merge the identity of the shareholders with the Corporation.

The Division Bench ultimately affirmed the decision of the learned Single Judge and, while doing so, observed as follows: "20. On the basis of the aforesaid enunciation of law, the factual matrix is required to be tested. As is manifest, there is no material on record to show that the respondent - Air India had any role in the appointment of the employees in the canteen. No administrative or disciplinary action could be taken by the respondent against the canteen workers. The respondent had itself not undertaken the obligation to run the canteen but had only provided facility so that its employees could avail the canteen facilities. It is not a case where the employees of the canteen were enlisted under a welfare fund scheme, provident fund scheme and medical scheme of the respondent - management. The responsibility to run the canteen was absolutely with the HCI and it was totally a contractual relationship between the two. Air India had no say in the selection or other affairs of the canteen workers."

Mr. Jayant Bhushan, Senior Advocate appearing on behalf of the appellants submits that the obligation to provide for the Canteen is with Air India and, therefore, the workmen are entitled to be treated as their employees and Air India their employer. It is further contended that Air India has a large role to play in the operation and management of the Canteen and, in the circumstances, the veil of the contract has to be lifted and this Court is competent to do so to arrive at the truth. In support of the submission reliance has been placed on a large number of decisions of this Court. I do not have the slightest hesitation in accepting this broad submission of Mr. Bhushan and, hence, I deem it unnecessary to refer to all those decisions. It is well settled that the court can lift the veil, look to the conspectus of factors governing employment, discern the naked truth though concealed intelligently.

The court has to be astute in piercing the veil to avoid the mischief and achieve the purpose of law. It cannot be swayed by legal appearance. The court's duty is to find out whether contract between the principal employer and the contractor is sham, nominal or merely a camouflage to deny employment benefits to the workmen. Once the veil is pierced, the control of Air India is writ large over the Corporation, submits Mr. Bhushan. He points out that the Corporation is a wholly owned subsidiary of Air India which controls the composition of the Board of Directors and appoints and removes Directors in consultation with the Government of India. According to him, the general management of the Corporation is vested in its Managing Director.

Notwithstanding that, Air India is conferred with the power to issue directions or instructions as it may think fit in regard to the finances and the conduct of the business and affairs of the Corporation and, hence, the workmen employed by the Corporation are, in fact, the employees of Air India. Mr. C.U. Singh, however, submits that notwithstanding the aforesaid power vested in Air India, the Corporation is still a separate legal entity. The fact that its entire share is held by Air India or Air India has the power to appoint the Board of Directors, issue directions etc., will not denude the legal status of the Corporation as a Government company. The fact that the Canteen required to be provided by Air India is being run by the Corporation through one of its units Chef Air will not make Air India its principal employer.

He points out that in order to determine the principal employer one is required to see as to who is paying the salary, who is supervising the work, the role played in selection and appointment of the workmen, disciplinary control over them and whether such employees are covered under the welfare scheme of Air India etc. He points out that the responsibility to run the Canteen is with the Corporation and, hence, Air India cannot be treated as its principal employer. According to him, the Corporation is a separate legal entity and even though Air India is a holding company, the Corporation shall still be a separate legal entity. Further, the Corporation is not subservient to Air India but is a servant to its Memorandum of Association and Articles of Association.

In support of the submission, reliance has been placed on a decision of this Court in the case of Heavy Engineering Mazdoor Union v. State of Bihar, (1969) 1 SCC765. Paragraph 5 of the judgment reads as under: "5. It is true that besides the Central Government having contributed the entire share capital, extensive powers are conferred on it, including the power to give directions as to how the company should function, the power to appoint directors and even the power to determine the wages and salaries payable by the company to its employees. But these powers are derived from the company's memorandum of association and the articles of association and not by reason of the company being the agent of the Central Government.

The question whether a corporation is an agent of the State must depend on the facts of each case. Where a statute setting up a corporation so provides, such a corporation can easily be identified as the agent of the State as in Graham v. Public Works Commissioners, 1901 (2) KB 781, where Phillimore J. said that the Crown does in certain cases establish with the consent of Parliament certain officials or bodies who are to be treated as agents of the Crown even though they have the power of contracting as principals. In the absence of a statutory provision, however, a commercial corporation acting on its own behalf, even though it is controlled wholly or partially by a Government Department, will be ordinarily presumed not to be a servant or agent of the State.

The fact that a minister appoints the members or directors of a corporation and he is entitled to call for information, to give directions which are binding on the directors and to supervise over the conduct of the business of the corporation does not render the corporation an agent of the Government. (See The State Trading Corporation of India Ltd. v. The Commercial Tax Officer, Visakhapatnam, 1964 (4) SCR 99 at 188, per Shah, J. and Tamlin v. Hannaford, 1950 (1) KB 18 at 25, 26). Such an inference that the corporation is the agent of the Government may be drawn where it is performing in substance governmental and not commercial functions. (Cf. London County Territorial and Auxiliary Forces Association v. Nichol's., 1948 (2) All ER 432." (underlining mine) Mr. Singh has also drawn my attention to a Constitution Bench judgment of this Court in the case of Steel Authority of India Ltd. v. National Union Waterfront Workers, (2001) 7 SCC 1, in which it has been held as follows: "41. ..........The President of India appoints Directors of the Company and the Central Government gives directions as regards the functioning of the Company.

When disputes arose between the workmen and the management of the Company, the Government of Bihar referred the disputes to the Industrial Tribunal for adjudication. The union of the workmen raised an objection that the appropriate Government in that case was the Central Government, therefore, reference of the disputes to the Industrial Tribunal for adjudication by the State Government was incompetent. A two-Judge Bench of this Court elaborately dealt with the question of appropriate Government and concluded that the mere fact that the entire share capital was contributed by the Central Government and the fact that all its shares were held by the President of India and certain officers of the Central Government, would not make any difference.

It was held that in the absence of a statutory provision, a commercial corporation acting on its own behalf, even though it was controlled, wholly or partially, by a government department would be ordinarily presumed not to be a servant or agent of the State......." I have considered the rival submissions and find substance in the submission of Mr. Singh and the authorities relied on do support his contention. The Corporation undisputedly is a Government Corporation incorporated under the Companies Act. It is a legal entity altogether different from its shareholders. In my opinion, the fact that Air India or its nominee are the shareholders of the Corporation and in the management of business and finances, it is subject to the directions issued by Air India in terms of the Memorandum of Association and Articles of Association shall not merge the Corporation's identity in shareholders.

In my opinion, the Corporation is a separate legal entity, not subservient to Air India but a servant to its Memorandum of Association and Articles of Association. Mr. Bhushan, then submits that the Corporation may be a separate legal entity but Air India's control over the affairs of the Canteen makes it the principal employer. He points out that many of the articles for running the Canteen were purchased by Air India and, in fact, grievances pertaining to running of the Canteen were entertained by it. These, according to the learned counsel, clearly show that Air India is the principal employer. I have bestowed my consideration to the aforesaid submission, but find no substance in the same. Few of the well recognized tests to find out the real relationship are whether the principal employer:

1) pays the salary to the workmen instead of the contractor,

2) controls and supervises the work of the employees,

3) has role in selection and appointment of the employees, and

4) acts as a disciplinary authority over the conduct and discipline of the employees. Reference in this connection can be made to a decision of this Court in the case of Haldia Refinery Canteen Employees Union and Others v. Indian Oil Corporation Ltd. & Ors. (2005) 5 SCC 51, wherein it has been held as follows:

"16......It has nothing to do with either the appointment or taking disciplinary action or dismissal or removal from service of the workmen working in the canteen. Only because the management exercises such control does not mean that the employees working in the canteen are the employees of the management. Such supervisory control is being exercised by the management to ensure that the workers employed are well qualified and capable of rendering proper service to the employees of the management."

(underlining mine)

In the case of International Airport Authority of India v. International Air Cargo Workers' Union, (2009) 13 SCC 374, this Court echoed the same view and observed as follows: "38. The tests that are applied to find out whether a person is an employee or an independent contractor may not automatically apply in finding out whether the contract labour agreement is a sham, nominal and is a mere camouflage. For example, if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lies with the contractor. 39. The principal employer only controls and directs the work to be done by a contract labour, when such labour is assigned/allotted/sent to him.

But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, worker being the employee of the contractor, the ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor." This Court has taken the same view in General Manager, (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon v. Bharat Lal, (2011) 1 SCC 635, in which it has been held as follows:

"10. It is now well settled that if the industrial adjudicator finds that the contract between the principal employer and the contractor to be a sham, nominal or merely a camouflage to deny employment benefits to the employee and that there was in fact a direct employment, it can grant relief to the employee by holding that the workman is the direct employee of the principal employer. Two of the well-recognised tests to find out whether the contract labourers are the direct employees of the principal employer are: (i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee. In this case, the Industrial Court answered both questions in the affirmative and as a consequence held that the first respondent is a direct employee of the appellant."

Bearing in mind the principles aforesaid, when I proceed to consider the facts of the present case, I find that Air India does not fulfill the test laid down so as to treat it as the principal employer. It is not the case of the workmen that it is Air India which pays their emoluments instead of the Corporation. Air India has neither any role in selection and appointment of the workmen nor it controls and supervises their work. It is further not their case that Air India is their disciplinary authority over their conduct and discipline. In my opinion, Air India, by giving subsidy at a specified rate or for that matter purchasing few articles for the Canteen on its behalf and further bringing to the notice of the Corporation the complaint in regard to the functioning of the Canteen, will not make it the principal employer.

As has rightly been observed by the High Court, the Corporation is a Government company like Air India and the workmen in no way will be prejudiced if they continue to be the employees of the Corporation. In my opinion, there does not seem to be any mala fide or oblique motive in Air India entering into a contract with Chef Air, a unit of the Corporation for operating its Canteen. Certainly, it is not to defeat the rights of the workmen. Mr. Bhushan, lastly submits that the workmen were engaged in the Canteen provided by Air India in compliance of Rule 65(2) of the Rules framed in exercise of powers under Section 46 of the Factories Act.

According to him, the workmen of a statutory canteen have to be treated as employees of such establishment whose obligation is to provide for the Canteen. In the case in hand, according to Mr. Bhushan, the obligation to provide for the Canteen is with Air India and, therefore, the workmen are entitled to be treated as their employees and Air India their employer. In support of the submission reliance has been placed on a decision of this Court in the case of M.M.R. Khan v. Union of India, 1990Supp SCC 191, and my attention has been drawn to Paragraph 39 of the judgment which reads as follows: "39. The result, therefore, is that the workers engaged in the statutory canteens as well as those engaged in non-statutory recognised canteens in the railway establishments are railway employees and they are entitled to be treated as such.

The Railway Board has already treated the employees of all statutory and 11 Delhi based non-statutory recognised canteens as railway employees w.e.f. October 22, 1980. The employees of the other non-statutory recognised canteens will, however, be treated as railway employees w.e.f. April 1, 1990. They would, therefore, be entitled to all benefits as such railway employees with effect from the said date, according to the service conditions prescribed for them under the relevant rules/orders." Reliance has also been placed on a Constitution Bench decision of this Court in the case of Steel Authority of India Ltd. (supra) referred toby the learned counsel for Air India also and my attention has been drawn to paragraph 107 thereof, which records as follows: "107. An analysis of the cases, discussed above, shows that they fall in three classes:

(i) where contract labour is engaged in or in connection with the work of an establishment and employment of contract labour is prohibited either because the industrial adjudicator/court ordered abolition of contract labour or because the appropriate Government issued notification under Section 10(1) of the CLRA Act, no automatic absorption of the contract labour working in the establishment was ordered;

(ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case the contract labour working in the establishment of the principal employer were held, in fact and in reality, the employees of the principal employer himself. Indeed, such cases do not relate to abolition of contract labour but present instances wherein the Court pierced the veil and declared the correct position as a fact at the stage after employment of contract labour stood prohibited;

(iii) where in discharge of a statutory obligation of maintaining a canteen in an establishment the principal employer availed the services of a contractor the courts have held that the contract labour would indeed be the employees of the principal employer."

According to Mr. Bhushan, the Constitution Bench judgment clinches the issue. I do not find any substance in the submission of Mr. Bhushan and the authorities relied on are clearly distinguishable. In my opinion, the obligation to provide Canteen is by itself not decisive to determine the status of workmen employed in the Canteen. Reference in this connection can be made to a decision of this Court in Workmen of the Canteen of Coates of India Ltd. v. Coates of India Ltd. & Ors. (2004) 3 SCC547 wherein it has been held as follows: "4........It is sufficient for us to state that some requirement under the Factories Act of providing a canteen in the industrial establishment, is by itself not decisive of the question or sufficient to determine the status of the persons employed in the canteen."

(underlining mine)

The aforesaid submission has squarely been dealt with by this Court in the case of Hari Shankar Sharma v. Artificial Limbs Manufacturing Corpn., (2002) 1 SCC 337, and this Court in no uncertain terms has held that as an absolute proposition of law it cannot be said that "whenever in discharge of statutory mandate a canteen is set up or other facilities provided by the establishment, the employee of the canteen or such other facility become the employee of that establishment". Relevant portion of the judgment reads as follows:

"5. The submission of the appellants that because the canteen had been set up pursuant to a statutory obligation under Section 46 of the Factories Act therefore the employees in the canteen were the employees of Respondent 1, is unacceptable. First, Respondent 1 has disputed that Section 46 of the Factories Act at all applies to it. Indeed, the High Court has noted that this was never the case of the appellants either before the Labour Court or the High Court. Second, assuming that Section 46 of the Factories Act was applicable to Respondent 1, it cannot be said as an absolute proposition of law that whenever in discharge of a statutory mandate, a canteen is set up or other facility is provided by an establishment, the employees of the canteen or such other facility become the employees of that establishment.

It would depend on how the obligation is discharged by the establishment. It may be carried out wholly or substantially by the establishment itself or the burden may be delegated to an independent contractor. There is nothing in Section 46 of the Factories Act, nor has any provision of any other statute been pointed out to us by the appellants, which provides for the mode in which the specified establishment must set up a canteen. Where it is left to the discretion of the establishment concerned to discharge its obligation of setting up a canteen either by way of direct recruitment or by employment of a contractor, it cannot be postulated that in the latter event, the persons working in the canteen would be the employees of the establishment.

Therefore, even assuming that Respondent 1 is a specified industry within the meaning of Section 46 of the Factories Act, 1946, this by itself would not lead to the inevitable conclusion that the employees in the canteen are the employees of Respondent 1." Now referring to the authority of this Court in the case of M.M.R. Khan (supra), the same is clearly distinguishable. In this case, it has been held that the workmen engaged in the statutory canteens as well as those engaged in non-statutory recognized canteens are railway employees and they have to be treated as such. This Court came to the aforesaid conclusion as, on fact, it was found that though the workmen were employed in the canteen through the device of a labour contract, they were essentially working under the control and supervision of the railway establishment.

Further, the provision for running and operating the canteen was in the Establishment Manual of the Railways. Under these circumstances, this Court came to the conclusion that the workmen engaged in the statutory canteens were, in fact, the railway employees. No such facts exist in the present case. In the Steel Authority of India Ltd.(supra), the Constitution Bench observed that the authorities of this Court show that they fall in three classes including the aforesaid class but it has not endorsed the said view. In fact, the decisions which I have referred to in the earlier paragraphs of this judgment negate this contention. I have tested the case of the workmen on the touchstone of the principles laid down by this Court and find that they do not satisfy those tests so as to hold that Air India is the principal employer. Having found no substance in any of the submissions made on behalf of the appellants, I do not find any merit in these appeals and they are dismissed accordingly, but without any order as to costs.

............................................J. (CHANDRAMAULI KR. PRASAD)

NEW DELHI,

NOVEMBER 13, 2013

Balwant Rai Saluja & ANR. Etc. Etc. Vs. Air India Ltd. & Ors.

[Civil Appeal Nos.10264-10266 of 2013 arising out of SLP (C) Nos. 24946-24948 of 2011]

V. GOPALA GOWDA, J.

1. Leave granted.

2. I have gone through the judgment of my learned brother Judge in these civil appeals, in which my learned brother Judge has concurred with the impugned judgment. However, I am in respectful disagreement with the opinion of my learned brother and I am recording my reasons for the same. These appeals have been filed by the appellants challenging the judgment and order dated 2nd May, 2011 passed in L.P.A. Nos.388 of 2010,390 of 2010 and 391 of 2010 confirming the judgment and order dated 8thApril, 2010 of the learned single Judge of the Delhi High Court passed in WP Nos.14178 of 2004, 14181/2004 and 14182 of 2004, wherein the learned single Judge has set aside the common award dated 5th May, 2004 of the Central Government Industrial Tribunal (for short 'CGIT') passed in Industrial Disputes case Nos. 97, 98 and 99 of 1996.

The CGIT recorded that the concerned workmen of Chef air, a unit of Hotel Corporation of India (for short HCI) with which Air India had entered into a contract to provide canteen services at its establishment, are entitled to be treated as being employees of it and consequently held that they are entitled to the relief sought for by them. The said judgment of CGIT was set aside by the Division Bench of the Delhi High Court in LPA Nos.388 of 2010, 390 of 2010 and 391of 2010 vide its judgment dated 2nd May, 2011 after adverting to certain relevant facts, legal contentions and cases like M.M.R. Khan & Ors. v. Union of India & Ors.[1], and some other decisions of this Court and concurred with the finding of facts and reasons recorded by the learned single Judge in setting aside the award and consequently dismissed the appeals of the concerned workmen. That is how these Civil Appeals are filed by the workmen urging various factual and legal contentions in support of their claims with a request to set aside the impugned judgments and orders of the Division Bench and the learned single Judge of the Delhi High Court in the aforesaid Letter Patent Appeals and the writ petitions.

3. Since my learned brother Judge has referred to certain facts and legal contentions to decide the points that arose for consideration of this Court, I also refer to certain relevant necessary facts and rival legal contentions urged on behalf of the parties with a view to answer the contentious points that would arise in these appeals to answer the same.

4. Three industrial disputes case Nos. 97, 98 and 99 of 1996 were registered by CGIT pursuant to the order of references made by the Central Government in the Ministry of Labour vide its order No.L-11012/23/96-IR(Coal-I) dated 23.10.96 for adjudication on the points of dispute referred to it in relation to the workmen mentioned in the respective orders of references made by it and in relation to other industrial disputes namely ID Case Nos. 107/96 and 108/96 which are individual cases of industrial disputes filed by the concerned workmen since their services were illegally terminated by the employer Air India during pendency of the industrial disputes referred to supra in relation to the absorption of the services of the concerned workmen by the Management of Air India before the CGIT without obtaining the approval from the CGIT, despite the order dated 04.12.1996 passed by CGIT wherein an undertaking was given by the Management of Air India that neither it will change the contractor Chef air without permission of/intimation to the Tribunal nor will it take any action against the workmen listed in the reference order made to the CGIT for an adjudication of their dispute. Despite the same, the services of the concerned workmen in the Industrial disputes in case ID Nos.97, 98 and99/1996 were terminated.

The action of the Management of Air India in terminating the services of the concerned workmen in the complaint ID Nos.107 and 108/1996 is in contravention of Section 33(2)(b) of the Industrial Disputes Act, 1947 (in short 'I.D. Act'). Therefore, the complaints were filed by the said workmen under Section 33(A) of the I.D. Act to adjudicate the existing industrial dispute between the concerned workmen and the Management of Air India regarding their illegal order of termination during the pendency of the industrial disputes referred by the Central Government which are registered as reference Nos.97, 98 and 99 of 1996 with regard to the absorption of the services of the contract labour employees, employed by the HCI on behalf of M/s Air India and made them to work in the Chef air.

The aforesaid canteen is the statutory canteen in terms of the definition of Section 46 of the Factories Act, according to the appellants herein and they requested the CGIT for answering the points of dispute which was referred to in the order of references made by the Central Government in ID Nos.97 to 99, to treat them as the deemed employees of the Management of Air India and also to set aside the orders of termination passed against individual concerned workmen and requested the CGIT to pass an order of reinstatement with all consequential benefits including the award of back-wages.

5. In support of their respective claims and counter claims on behalf of the workmen and the Management of Air India, they filed their statements respectively in the cases referred to supra before the CGIT. In the claim petition, the workmen contended that the canteen which is being run by the Air India through HCI through Chef air has engaged the concerned workmen in these cases as contract employees in various capacities and they have been working in the canteen run by the Management of Air India through Chef air ranging from 3 to 20 years on the date of references made by the Central Government to the CGIT which in turn is run by its subsidiary Company HCI. Delhi State Government in exercise of its power under Section 46 of the Factories Act, 1948 framed Rules 65 to 70 called Delhi Factories Rules of1950 (hereinafter referred to as 'the Rules').

A Notification was issued by the Lt. Governor of the Union Territory of Delhi under Rule 65(2) of the Rules stating that the Rules of the Factories Act shall apply to the factories specified in the Schedule to the said notification. In the Schedule to the notification, the description of the factory at serial No.9- M/s. Air India Ground Services Deptt. IGI, Air Port Delhi (Engineering Unit) F.D.1725 is one of the specified factories, the same is marked as -Ex.P. 4 in the Industrial dispute cases before the CGIT.

6. Rule 65 states for providing canteen, Rule 66 speaks of Dining Hall, Rule 67 provides Equipment, Rule 68 for fixing the prices to be charged, Rule 69 deals with Accounts and Rule 70 deals with Managing Committee to manage the affairs of the statutory canteen. The relevant Rules will be adverted to in the reasoning portion of my judgment while answering the relevant contentious points that will be framed shortly.

7. 7. Strong reliance was placed upon the Rules and the Notification referred to supra by the learned senior counsel Mr. Jayant Bhushan interalia contending that the canteen is being run by the Air India through HCI by Chef air where the concerned workmen have been working in different capacities for number of years such as cook, ground cleaning staff, servicing, washing staff etc. etc. The HCI employed them on contract basis as canteen workers though they have been discharging their duties which are in perennial nature. Then action of the Management of Air India in employing the concerned workmen on contract basis is an unfair labour practice as defined under Section 2(ra)of the I.D. Act enumerated in the Vth Schedule to the Act, which provision was inserted by way of an amendment by Act No. 46 of 1982 w.e.f. 21.8.1984at serial No. 10 to the Vth Schedule which states that "to employ workmen as casual or temporary workers and to continue them as such for years with the object to deprive them of the status and privileges of permanent workmen is an unfair labour practice on the part of the employer".

It is further stated that Management of Air India has employed more than 2000employees in its factory and therefore notification issued by the Lt. Governor of Delhi on 21st January, 1991 applying Rules 65 to 70 of Rules1950 to the said establishment framed under Section 46 of the Factories Act will be applicable to the canteen in question run by the HCI on behalf of Air India. It is the case pleaded and proved before the CGIT by the concerned workmen and it has recorded the finding in this regard in their favour by placing reliance upon three judge bench decision of this Court in the cases of M.M.R. Khan (supra), Parimal Chandra Raha & Ors. v. Life Insurance Corporation of India and Ors.[2], and another decision of this Court in Basti Sugar Mills Ltd. v. Ram Ujagar & Ors.[3] in support of the legal contention urged on behalf of the workmen that employees of statutory canteens i.e. canteens which are required to be compulsorily provided to its workmen in the factory as per Section 46 of the Factories Act are employees of the establishment not only for the purpose of Factories Act but also for all other purposes.

In the case of Parimal Chandra Raha referred to supra, this Court has held that for canteen workers of contractor who runs the canteen, it must pass the relevant test to determine on the facts as to whether providing canteen to its workmen by a factory was obligatory on its part. In Basti Sugar Mills Ltd.'s case, this Court has held that the work of removal of press mud was given to the contractor and the workmen in that case were employed by the contractor to do that work, the contractor terminated their services on completion of the work. The stand taken in the said case by the establishment was that they had nothing to do with the workmen. The workmen in the case approached this Court for relief against the termination of their services.

This Court held that the workmen were employed in the industry to do manual work for reward and therefore it is held that the Company was their employer, as the workmen were employed by the contractor with whom the Company had contracted in the course of conducting its business for execution of the said work of removal of the press mud which is ordinarily part of the industry. Further reliance was placed by the learned counsel upon the decision of this Court in Union of India & Ors. v. M. Aslam & Ors.[4]wherein this Court has held that for the unit run canteens of Army, Navy and Air Forces, the employees of such canteens are entitled to service benefits as government servants.

Finding of fact was recorded by the CGIT in favour of the concerned workmen while answering the points of dispute referred to it by the Central Government with reference to the factual legal aspects and evidence on record from the aforesaid cases. This finding is found fault with by the Single Judge and Division Bench of the Delhi High Court and they had set aside the finding recorded by CGIT. Strong reliance was placed by the Delhi High Court upon the plea taken by Air India and HCI with regard to the fact that though HCI is subsidiary Company of the Air India, it is governed by its own Memorandum and Articles of Association as existed in the Companies Act and is governed by the provisions of the said Act. HCI is an independent legal entity from that of the Air India.

The learned single Judge while accepting the factual and legal contentions urged on behalf of Air India, has referred to paragraph17 of his judgment and stated with reference to the Memorandum and Articles of Association, and observed that the general management of business of HCI vests with its Board of Directors, no doubt, the same is subject to the directions, if any, that will be issued from time to time from Air India with regard to the finance and conduct of its business affairs. However, the composition of the Board of Directors of HCI is constituted by Air India in consultation with the Government of India. In view of the said reason, it cannot be said that the concerned contract employees employed by HCI to do work in the canteen are employees of Air India in the face of the first principle of Corporate law with reference to Salomon v. Salomon & Co.Ltd.[5], wherein it was held that Company is a person all together different from its shareholders though Air India is the sole holder of the shares of the HCI.

The HCI is a legal entity independent of its shareholders with reference to Section 46 in Chapter V of the Factories Act under the heading "welfare". The mandatory provision is provided to maintain a canteen in the establishment, which is a measure for the welfare of the workers, the statutory obligation on the part of the industrial establishment to provide and maintain a canteen in the factory. If it is found that the operation of such canteen has been entrusted to such an expert, it cannot be said that the employees deployed by such expert in such canteen becomes employees of the factory/establishment. Further, it is held by him that HCI was not incorporated merely to run the canteen of Air India so as to keep the employees of the canteen maintained by it at arm's length from Air India.

The HCI is a business entity on its own rights and no malafide have been established by the concerned workmen in the Management of Air India in entrusting the operation and management of its canteen to the HCI and no prejudice is shown to have been caused to the concerned workmen being the employees of the HCI instead of Air India, except that they may be entitled to a free flight once in a while from it, which they may not be entitled to get as workmen of the HCI. Therefore, he has held that it is hardly determinative of the matter in controversy and thereafter he has referred to the judgments of this Court in Indian Petrochemicals Corporation Ltd. & Anr. v. Shramik Sena & Ors.[6], Steel Authority of India Ltd. & Ors. v. National Union Waterfront Workers & Ors.[7], International Airport Authority of India v. International Air Cargo Workers' Union & Anr.[8], in support of his conclusion laid down by applying the test laid down in those cases to the fact situation and held that there is no relationship of employer and employee and hence no existing industrial dispute would arise within the meaning of Section 2(k)of the I.D. Act between the concerned workmen and the Management of Air India.

Therefore, he has quashed the award of the CGIT which was affirmed by the Division Bench of the Delhi High Court in the aforesaid L.P.As by accepting the reasons recorded by the learned single Judge and also after extracting certain relevant paragraphs from the decisions of this Court in the cases of M.M.R. Khan, Parimal Chandra Raha, Indian Petrochemicals Corporation Ltd., (all referred to supra) Hari Shanker Sharma and Ors. v. Artificial Limbs Manufacturing Corporation and Ors[9]. The Division Bench of Delhi High court has concurred with the finding and reasons recorded by the learned single Judge in the impugned judgment and dismissed the letter patent appeals of the concerned workmen. The correctness of the said judgment and order are impugned in these civil appeals by the concerned workmen reiterating their factual and legal contentions as has been adverted to before the CGIT and the High Court in the writ petition and the appeals. Therefore, the same need not be adverted to once again in this judgment with a view to avoid repetition.

8. It is contended by the learned senior counsel Mr. Jayant Bhushan on behalf of the concerned workmen, placing strong reliance upon Section 46 of the Factories Act and notification of the year 1991 referred to supra issued by Lt. Governor of the Union Territory of Delhi upon the Rules 65 to70 of the Rules that the Management of Air India is enumerated at serialNo.9 in the Schedule to the said notification. Therefore, the Management of Air India was required to provide a statutory canteen to its workmen in its industrial establishment and the learned senior counsel also placed strong reliance upon the Memorandum and Articles of Association of HCI particularly clause 33 in Chapter XIII to substantiate his contentions that the control and directions that will be issued from time to time with regard to running of the canteen and managing the canteen is on the Management of Air India to HCI wherein, the Management of Air India was the occupier.

The learned senior counsel has further placed strong reliance upon the findings recorded by the CGIT in its award in answer to the points of disputes referred to it holding that the concerned workmen were employed by HCI to work in the statutory canteen of the Management of Air India and placed strong reliance upon the judgment of this Court in State of U.P. & Ors. v. Renusagar Power Co. & Ors.[10], which is followed by two other judgments of this Court in Delhi Development Authority v. Skipper Construction Co. (P.) Ltd. & Anr.[11], Kapila Hingorani v. State of Bihar[12], wherein this court has laid down the legal principles by following the judgment of Salomon v. Salomon (supra) with a view to find out as to whether the contract employment of the concerned workmen by the HCI on behalf of the Management of Air India is a sham or a camouflage.

The CGIT has pierced the veil with reference to the existing factual situation and found that the concerned workmen had been working in the statutory canteen required to be established and managed by the Management of the Air India as per Rule 65(2) of the Rules and the HCI is a subsidiary Company of the Air India as it holds 100% share holding and therefore, the Air India has got the control and supervision of its business under clause 33 of the Memorandum and Articles of Association. Therefore he has requested this Court to set aside the findings of fact recorded by the learned single judge, which are concurred with by the Division Bench in the impugned judgment and order as it is vitiated not only on account of erroneous finding for non consideration of the proved facts and legal evidence on record but also suffers from error of law as has been laid down by this Court in catena of cases referred to supra upon which the learned senior counsel has placed strong reliance in support of the case of the concerned workmen in these appeals.

9. Further he has placed strong reliance upon the judgment of this Court in M.M.R. Khan's case particularly paragraphs 25, 27 and 30 in support of the proposition of law wherein this Court has held that rules framed by the State Government of Delhi under Section 46 of the Factories Act are obligatory on the part of the Railway Administration to provide and maintain statutory canteen. In pursuant to the above rules and notifications, this Court has held that canteens were incidental and connected with the manufacturing process and is subject to the manufacturing process. The nature of the canteen is deemed to be the statutory, since it is a necessary concomitant of the manufacturing activity and further railway establishment has recognized the obligation of the Railway Administration by the Act which makes provision for meeting the cost of the canteen though Railway Administration to employ any staff committee or cooperative society for the management of the canteen. The legal responsibility for the proper management of such canteen rests not with such agency but solely with the Railway Administration.

With reference to paragraph 27 of the said decision and also having regard to the undisputed fact of the case in hand that the Chef air unit of the HCI in which canteen is being run is situated in the premises of the Air India and that it is also the statutory duty of the Air India under Rules 65(2) and65(4) of the Delhi Factories Rules, that the canteen building should be situated not less than fifty feet from any latrine, urinals, boiler house, coal stacks, ash dumps and any other source of dust, smoke or obnoxious fumes etc. and that the manager of the factory shall submit for the approval of Chief Inspector of plans and site plan as provided under sub-rule (3) of Rule 65 and further that the construction of the canteen building is in accordance with Rules 65, 66, 67 and 70 which would clearly go to show that the said canteen is established by Air India to discharge its welfare statutory obligation to its workmen/employees as provided under the Factories Act and Rules framed under by the State government of Delhi.

Also, the managing committee constituted under the Rules should consult from time to time regarding the quality and quantity of food stuff to be prepared and served in the canteen to its workmen/employees and for other purposes. Therefore, he has contended that the legal principles laid down by this Court in M.M.R. Khan's case with all fours are applicable to the present fact situation. Hence, it is contended by the learned senior counsel that the findings and reasons recorded by the learned single Judge and the Division Bench in the impugned judgments after setting aside the finding of facts recorded in the award on this aspect of the matter by CGIT in answer to the points referred to it is not only erroneous but also suffers from error in law and is liable to be set aside and the common award passed by CGIT should be restored.

10. Another ground urged by the learned senior counsel is that the High Court failed to appreciate the fact that the canteen has been in existence since 1945. It is a deemed statutory canteen under Section 46 of the Factories Act vide notification of 1991 referred to supra. Therefore, the CGIT has come to the right conclusion and held that the canteen is incidental to and running the canteen and the work of the workmen is subject to the supervision and control of Air India. It is further contended that the Division Bench of the Delhi High Court has erroneously applied the judgments in Indian Petrochemicals Corporation Ltd., Parimal Chandra Raha and referred to para 22 of M.M.R. Khan's case, Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State of Tamil Nadu & Ors.[13], Haldia Refinery Canteen Employees Union & Ors. v. Indian Oil Corporation & Ors.[14], and Hari Shanker Sharma (supra) to set aside the findings of the CGIT and concurred with the finding of learned single Judge.

Therefore, the learned senior counsel has urged this Court for quashing of the impugned judgments of both the learned single judge and the Division Bench since the same are not only based on erroneous reasoning but also suffer from error in law in view of the clear pronouncement of law laid down by this Court in the three Judge Bench decision of this Court in the case of M.M.R. Khan(supra) on the question of providing and maintaining statutory canteen to its workmen/employees in support of his contentions that the employment of contract employees by Air India through HCI to run the statutory canteen in its premises is a sham and camouflage to deprive the legitimate statutory and fundamental rights of the concerned workmen.

Therefore, he submits that the CGIT was justified in lifting the veil or piercing the veil from the nature of employment to provide and maintain the statutory canteen by Air India through HCI and the finding by CGIT is supported by plethora of judgments of this Court referred to supra. It is further submitted by him that there is direct control and supervision on the functioning of the canteen and its employees by Air India being a statutory canteen which is required to be maintained by it in conformity with Rules 65 to 70 of the Delhi Factories Rules 1950 and under Section 46 of the Factories Act and notification has been rightly issued enlisting the Management of Air India in the Schedule to the said notification for providing and maintaining the statutory canteen which notification has not been questioned by Air India.

Therefore, the decisions of the Supreme Court referred to supra regarding piercing the veil for the purpose of finding out the real facts and to give effect to the object and intendment of the statute while recruiting the workmen on contract basis which is in violation of the statutory provisions of the Industrial Disputes Act has been rightly arrived at by the CGIT on proper appreciation of pleadings and evidence on record to answer the points in the affirmative. Therefore, the learned senior counsel has requested this Court to interfere with the impugned judgments and for restoration of the award passed by the CGIT.

11. Mr. C.U. Singh, learned senior counsel for the respondent sought to justify the impugned judgment of the Division Bench of the Delhi High Court in affirming the judgment of the learned single Judge by placing strong reliance upon the decisions of this Court in Dena Nath & Ors. v. National Fertilisers & Ors.[15], and Steel Authority of India (supra). It is contended by the learned senior counsel for the respondent that the Division Bench after adverting to the rival legal contentions has elaborately referred to the decision of M.M.R. Khan's case and the various other decisions referred to in the impugned judgment rightly concurred with the findings and reasons recorded by the learned single judge in reversing the findings and reasons recorded in the Award by the CGIT on the points of dispute referred to it by the Central Government for its adjudication.

On appreciation of facts pleaded and evidence on record, keeping in view the fact that the concerned workmen are employed in the canteen by the HCI which is the statutory Corporation, therefore, the Management of Air India has no power of recruitment, disciplinary control on the employees and no control and supervision on functioning of the workmen of the canteen. Therefore, the High Court has rightly arrived at the conclusion and held that there is no relationship of master and servant or employer and employee between the concerned workmen of the canteen and the Air India. The HCI is an independent legal entity which has been carrying on with its business strictly in conformity with the Memorandum and Articles of Association and therefore he contends that there is no need for this Court to interfere with the impugned judgments.

Further, he has urged that the canteen in which the concerned workmen were employed by HCI is not a statutory canteen and the finding recorded by the CGIT on the points of dispute by placing reliance upon the Notification of 1991 and that Air India has employed more than 2000 employees and that the said canteen is the statutory canteen and that there is an obligation on the part of the Management of Air India to cater the food stuff to its workers and employees, is an erroneous finding and also suffers from error in law. Therefore, the said finding has been rightly set aside by the learned single Judge, the same is affirmed by the Division Bench of the Delhi High Court by concurring with decision of the learned single judge. Hence, he further contends that there is no questions of law much less the questions of law framed by the workmen in the appeals involved which require to be considered and answered by this Court in exercise of its jurisdiction. Hence he has prayed for dismissal of these appeals.

12. On the basis of rival factual and legal contentions, the following questions of law would arise for consideration:

1. Whether the canteen which is run through HCI from its Chef air unit by the Management of Air India, is the statutory canteen of it under Rules 65 to 70 of the Delhi Factories Rules of 1950?

2. Whether engaging the contract workmen in the canteen situated in the premises of Air India through HCI amounts to sham and camouflage by Air India to deprive the legitimate statutory and fundamental rights of the concerned workmen as provided under the provisions of the Industrial Disputes Act and the Constitution and can this Court pierce the veil to find out and ascertain the real and correct facts as to whether they are the workmen of Air India?

3. Whether the findings and reasons recorded by the CGIT on the points of disputes in the common award dated 5th May, 2004 in ID Nos. 97, 98, 99, 107 and 108 of 1996 are legal and valid?

4. Whether the findings recorded by the learned single Judge in CWP No.14178, 14181 and 14182 of 2004 which are concurred with by the Division Bench in LPA Nos.388, 390 and 391 of 2010 suffer from erroneous reasoning and error in law and warrant interference by this Court?

5. What award the concerned workmen are entitled to? Answer to Point Nos. 1 and 2:

13. First two points are answered together by assigning the following reasons since they are i