W.P No. 12443 of 1988 · Andhra Pradesh High Court

In all these cases, common questions of law and fact arise for consideration, therefore they are being disposed of by this common order. Petitioner in all these writ petitions is M/s Hindustan Steel Works Construction Limited, represented by its Group General Manager, Administrative Building, Visakhapatnam Steel Plant, Visakhapatnam. First respondent is Industrial Tribunal-cum-Labour Court, Ramnagar, Visakhapatnam, second respondent is workman and third respondent is Visakhapatnam Steel Plant, represented by its Chairman-cum- Managing Director, Visakhapatnam Steel Plant, Visakhapatnam. It appears, respondent-workmen raised individual claims under Section 2-A(2) of Industrial Disputes Act, 1947 before first respondent. It was their case that they worked for more than (11) years with the petitioner company and have put in more than 240 days of continuous service in a year (preceding the date of removal).

While that being so, the workmen were removed from service on the pretext that the construction work in the Visakhapatnam Steel Plant was over, though the work continued inasmuch the works in the Steel Plant, which the petitioner undertook to serve, are perennial in nature. Therefore, the question of removing workmen does not arise. Earlier some of them had filed W.P.No.12443 of 1988 before this Court and the said Writ Petition was disposed of directing the workmen to raise industrial dispute before the Labour Court. According to the respondent- workmen, since they had put in more than 240 days service in a calendar year preceding the date of removal, termination of their service is contrary to the provisions of Section 25-F of the I.D. Act. Therefore, the removal order passed by the management is arbitrary and illegal. Petitioner-management filed a detailed counter before the Labour Court stating that there was no relationship of employer and employee between the petitioner and respondent-workmen.

Petitioner-company went on assigning works to contractors on job to job basis and the workmen came to be employed by such contractors and ultimately the workmen themselves formed into an association or society, as the case may be, and cornered the job work for being executed by the workers themselves as members of such societies. Thus, the management maintained that while the society of which the workman happened to be a member was the contractor, the workman as a member of such society happened to be the contract labourer. In some cases, it is the case of management that the workman himself was a contractor. The management also resisted the claim of workman stating that as a matter of fact, the construction work of Visakhapatnam Steel Plant and commissioning of the Plant etc., came to be concluded and therefore the works of petitioner had tapered down and the man power engaged by petitioner company turned out to be surplus and therefore, the avoidance of workman was justified.

On behalf of workman, Ex.W1-identity card was marked and on behalf of management, M.Ws.1 to 3 were examined and documents Ex.M1 to M155 were marked. After a detailed consideration of the entire material placed before it, the Labour Court came to the conclusion that there was a relationship of employer and employee between the petitioner-management and the workman and the workman had put in more than 240 days of continuous work, thus the termination of their services was contrary to Section 25-F of the I.D. Act and amounts to unfair labour practice and therefore while declaring the termination as arbitrary and illegal, directed reinstatement of workmen with continuity of service and back wages till the date of reinstatement. Aggrieved thereby, the present writ petitions are filed. According to the petitioner, it is a company incorporated under the Companies Act, 1956, having its registered office at Calcutta and entire shares of the company are held by Government of India and it is a Public Sector Undertaking engaged in construction of Steel Plants, Dams, Bridges and various other projects of national importance and it functions as a contractor undertaking works at various places in the country.

Visakhapatnam Steel Plant, third respondent herein, entrusted certain construction works in their Plant. Petitioner entered into an agreement with third respondent in January 1982 for execution of Civil Engineering works in Blast Furnace Zone and Site Levelling works at Visakhapatnam Steel Plant. For executing the works undertaken by petitioner, it has to distribute the works among various sub-contractors as the same is permitted by Visakhapatnam Steel Plant which is the principal employer. Petitioner entered into contracts with individuals as well as three societies which are formed at the instance of group of workers. Work orders were issued to different individuals or societies as and when a particular work was to be executed. Petitioner company did not appoint any workman. The work orders were issued to individuals or societies and it is the responsibility of the societies to execute the work and receive payments from the petitioner as and when the work was completed.

The works undertaken by the petitioner, which is the principal contractor or the works undertaken by the societies which are sub-contractors are not of perennial nature. The particular work undertaken by the petitioner was completed in the year 1992. In the meanwhile, some of the workers filed W.P.Nos.8307 of 1993 and 12443 of 1993 before this Court seeking to declare them as employees of petitioner company and direct the company to pay all the attendant benefits including pay on par with its regular employees. The said writ petitions were disposed by a common order dated

30.11.1993 directing the workmen to approach the Labour Court for adjudication of the factual position as to existence of relationship of master and servant between the parties. After a lapse of about one year and nine months, the workers filed 54 Applications under Section 2-A(2) of I.D. Act before the Labour Court, Visakhapatnam seeking a direction to the company to order reinstatement with back wages and continuity of service and attendant benefits. The company filed elaborate counter contesting the applications. Out of the said 54 Applications, 48 Applications were disposed of by separate orders dated 12.3.1999. The Labour Court, on a wrong appreciation of evidence on record and principles laid down in the decided cases, erroneously held that there was a relationship of employer and employee between petitioner company and the workmen and that the petitioner has not followed the mandatory provisions of Section 25-F of I.D. Act and that cessation of service of workmen amounts to retrenchment, which is illegal termination of service and therefore directed the petitioner company to reinstate the workmen with continuity of service and other benefits.

It is the contention of the learned counsel for petitioner-company that the Labour Court was more obsessed by the general principles enunciated by the Courts and dealt with the dispute on mere surmises and conjectures ignoring the peculiar nature of relationship between Visakhapatnam Steel Plant, which is the principal employer, the petitioner-company which is the main contractor and the societies which are sub-contractors. The workers themselves formed into registered societies for their own advantage with a view to eliminate intermediaries and the petitioner company which entered agreement with Visakhapatnam Steel Plant for execution of different works issued work orders to the societies from time to time and the societies executed the works and received payments from the petitioner company after completion of particular work. Petitioner company never engaged the respondent-workmen nor paid any wages at any time.

The Labour Court failed to see that the very basis for filing petitions under Section 2-A(2) of I.D. Act was that the workmen were appointed by the company in 1982 and they were terminated in December 1993, and the Management has not adduced any evidence to substantiate their case. Further, Labour Court erred in opining that non-compliance of either Section 7 or Section 12 of Contract Labour (Regulation and Abolition) Act, 1970 is fatal to the company’s case. For such non-compliance, the workmen cannot be deemed to be the employees of the company. There was no relationship of employer and employee since Visakhapatnam Steel Plant is the principal employer and the petitioner company is only a contractor. Further, section 2(oo) (bb) of I.D. Act was not properly appreciated by the Labour Court and further failed to see that the said provision has application to the facts of the present case, therefore the workman cannot complain violation of Section 25-F of the I.D. Act.

The engagement of workmen was for a limited tenure i.e. till the completion of particular work, therefore disengagement on completion of work cannot be complained as termination. Further, petitioner company is in financial crisis and has been taking steps to reduce its manpower by introducing voluntary retirement schemes etc., which are in vogue and if the workmen are allowed to work, it would result in irreparable loss and grave hardship to the company. Therefore, the award passed by the Labour Court is arbitrary, illegal and liable to be set aside. In support of his contentions, learned counsel relied upon the decisions in STEEL AUTHORITY OF INDIA LIMITED VS. NATIONAL UNION WATER FRONT WORKERS [1] and GAMMON INDIA VS. UNION OF INDIA [2] . Per contra, the learned counsel appearing for respondent- workmen supported the impugned awards passed by the Labour Court and stated that absolutely there was no legal or factual infirmity committed by the Labour Court calling interference of this Court under Article 226 of the Constitution of India.

Therefore, the writ petitions are liable to be dismissed. I have given my earnest consideration to the respective submissions made by the learned counsel on either side and perused the impugned awards and other material made available on record. At the outset, it may be noticed that these are the cases where application of provisions of Contract Labour (Regulation and Abolition) Act does not arise. It is the admitted case of petitioner-management that it is the principal contractor by itself and it had entrusted the execution of Civil Engineering works in Blast Furnace Zone and Site Levelling works at Visakhapatnam Steel Plant to the workmen (i.e. sub-contractors), who in turn, to avoid intermediaries have formed into a society and executed the work. It is not a case where the petitioner engaged some one for supply of contract labour to Visakhapatnam Steel Plant and therefore, the Visakhapatnam Steel Plant was the principal employer and petitioner was only a labour supply contractor.

This is a case where the petitioner-management entrusted a portion of the contract entrusted to it by the Visakhapatnam Steel Plant. The respondents did not work for one or two months or one or two years. They were engaged continuously and uninterruptedly for (11) long years. What the workmen were doing, was nothing but executing a portion of contract entrusted to the petitioner management and to avoid intermediaries, the workmen formed themselves into a society for the purpose of execution of sub-contract. The concept of ‘contractor’ ceases to have any meaning in a case of this type for the simple reason that the relationship between the management and the so called ‘contractor’ selling his labour is merely two dimensional and Contract Labour (Regulation and Abolition) Act has no application to such a fact situation. Further, Visakhapatnam Steel Plant is not the principal employer at all. There was absolutely no relationship of that nature between the workmen and the Steel Plant.

The relationship between the Visakhapatnam Steel plant and petitioner was due to privity of contract. The relationship between the petitioner and workmen is principal contractor (employer) and sub-contractor (employee). Therefore, the Contract Labour (Regulation and Abolition) Act has no application to the cases on hand. In this background, the question that arises for consideration is whether there exists any relationship of employer and employee between petitioner and the workmen. While examining this aspect, Labour Court found that all the workmen were engaged in connection with the work relating to the petitioner-company. The relationship of petitioner and the societies was only that of a contractor and sub- contractor and nothing more and nothing less. It is only for their own advantage, the workers formed into a group in the name and style of Societies and the society alone offered to execute some of the works of the petitioner-management, purely on sub-contract basis.

Further, it was noticed the management never obtained any registration/licence as principal employer. Whether it was one of the workers societies or one of the individuals, it is rather inexplicable, as to how an individual serving the management can ever become a labour contractor. It is not the case of the management that the individual in question in some of the cases in this batch was a material contractor. What all that has to be seen in this kind of cases is how consistently and continuously and since how long this so called ‘contractor’ has been serving the management and the un-tenability of other aspects suggestive of the absence of employer-employee relationship. The Labour Court further examined various mandatory provisions virtually, embodying the record of rights of the workmen. It is not the case of the management, just as it is not its case that it ever obtained any Registration under Section 7 of the Act, that it ever followed the Rules 17, 18, 21(2), 72, 73, 74 ad 82(a) of the Contract Labour (Regulation and Abolition) Central Rules, as a principal employer vis-à-vis this so called contract labourer and contractor.

Likewise, it is not the case of management that it ever had occasion to use the statutory forms Form-I, Form-V, Form-VI-B, Form-XII, and Form-XXV of the said rules, which alone would have lent credibility to the theme of the management that it engaged a labour contractor and the respondent workmen are contract labour. The management also failed to show to the Court the discharge of its vicarious responsibility in making P.F., E.S.I. contributions etc., for the benefit of the so-called contract labourer if really it were their principal employer. The sum total of all these omissions especially of the mandate in Sections 7 and 9 cannot but have the sure effect of precluding or shutting out the management from insisting upon projecting its relationship with the workman as that of principal employer with a contract labour. This is certainly a case of direct relationship of employer-employee and the spoke of a contractor sought to be put by the management in the wheel of its direct relationship with the workman is liable to be brushed aside.

Further, even according to the management, a group of workers formed themselves into a society and executed various jobs for the benefit of management and continued to do so for years together. The management wants to paint that society as the labour contractor and its members as the contract labour. The society did not have any cut back from the lump sum paid to the society for distribution amongst its members. It is rather difficult to accept this peculiar arrangement even if it is true as a labour contract within the meaning of Section 2(b) of Contract Labour (Regulation and Abolition) Act, 1970. The fact remains that it is the management that had been enjoying the services of the workman and making payment towards the cost of his labour, may be, through the society of which he happened to be a member. In my opinion working as a group or as a member of a trade association or society cannot obliterate the individual relationship of the workman with the actual employer, so as to portray such society as the contractor and its members as the contract labourers.

Therefore, the real employer is petitioner company, but not the so-called society of the workmen or the individuals. As a matter of fact, the management itself in its counter before the Labour Court stated that “number of works were awarded to workers, as such, workers have formed into societies with a view to reap certain advantages to eliminate intermediaries”. Thus, it cannot be said that there was no relationship of master and servant between petitioner-company and workmen. The petitioner cannot escape its status of an employer by showing finger at Visakhapatnam Steel Plant as principal employer. As noticed above, the Contract Labour (Regulation and Abolition) Act has no application to this case, therefore examining the aspect of principal employer does not arise. Admittedly, petitioner company is a contractor and it had engaged some workers to execute civil engineering works and site leveling works for (11) long years dubbing them as sub-contractors.

Once it is found that the respondent- workmen are the employees of petitioner-management, who worked for more than (11) years continuously, their services could not have been terminated without following the provisions of Section 25-F of the I.D. Act. This is a simple case of termination of respondent-labour by the employer and it has to be seen whether there was a relationship of master and servant or not. It was strenuously contended on behalf of petitioner-management that the piece-rated work was given to respondent-workmen through work orders, therefore non-allotment of work to respondent-workmen after completion of project cannot be said to be termination of their service and the provisions of Section 2(oo) (bb) of the I.D. Act have to be invoked and in the light of these provisions, the respondent-workmen are to be treated only as ‘contract labour’ and therefore, there was no termination as contemplated under the law.

The learned counsel for petitioner, in this regard, relied upon the judgment in S. M. NILAJKAR VS. TELECOM. DISTRICT MANAGER, KARNATAKA [3] and invited the attention of the Court to paragraphs 10, 11, 12 and 13, which reads as under: “Section 2 (oo) and 25F of the Act, relevant for our purpose, provide as under: 2. Definitions : In this Act, unless there is anything repugnant in the subject or context, xxx xxx xxx xxx [ (oo) "retrenchment" means the termination by the the employer and employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include- (a) voluntary retirement of the workman; or (b) retirement of the workman on reaching the age of superannuation if the contract of the workman employment between concerned contains a stipulation in that behalf; or [ (bb) termination of the service of a workman as a result of the non- renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or] (c) termination of the service of a workman on the ground of continued ill-health;]" "25F. Conditions precedent to retrenchment of workmen.-Noworkman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until - (a) the workman has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice, (b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay [for every completed year of continuous service] or any part thereof in excess of six months; and (c) notice in the prescribed manner the appropriate government [or such authority as may be specified by the appropriate government by notification in the official gazette]. is served on "It is common knowledge that the government as a welfare State floats several schemes and projects generating employment opportunities, though they are short lived.

The objective is to meet the need of the moment. The benefit of such schemes and projects is that for the duration they exist, they provide employment and livelihood to such persons as would not have been able to secure the same but for such schemes or projects. If the workmen employed for fulfilling the need of such passing-phase-projects or schemes were to become a liability on the employer-State by too liberally interpreting the labour laws in favour of the workmen, then the same may well act as a disincentive to the State for floating such schemes and the State may opt to keep away from initiating such schemes and projects even in times of dire need, because it may feel that by opening the gates of welfare it would be letting-in onerous obligations entailed upon it by extended application of the labour laws. Sub-clause (bb) in the definition of retrenchment was introduced to take care of such like-situations by Industrial Disputes (Amendment) Act, 1984 with effect from 18.

8. 1984. 'Retrenchment' in its ordinary connotation is discharge of labour as surplus though the business or work itself is continued. It is well-settled by a catena of decisions that labour laws being beneficial pieces of legislation are to be interpreted in favour of the beneficiaries in case of doubt or where it is possible to take two views of a provision. It is also well-settled that the Parliament has employed the expression "the termination by the employer of the service of a workman reason whatsoever" while defining for any "retrenchment", which is suggestive of the legislative intent to assign the term 'retrenchment' a meaning wider than what it is understood to have in common parlance. There are four exceptions carved out of the artificially extended meaning of the term 'retrenchment', and therefore, termination of service of a workman so long as it is attributable to the act of the employer would fall within the meaning of 'retrenchment' de hors the reason for termination.

To be ex-cepted from within the meaning of 'retrenchment' the termination of service must fall within one of the four excepted categories. A termination of service which does not fall within the categories (a), (b), (bb)and (c) would fall within the meaning of 'retrenchment'. The termination of service of a workman engaged in a scheme or project may not amount to retrenchment within the meaning of sub-clause (bb) subject to the following conditions being satisfied :- (i) that the workman was employed in a project or scheme of temporary duration; (ii) the employment was on a contract, and not as a daily-wager simplicitor, which provided inter alia that the employment shall come to an end on the expiry of the scheme or project; and (iii) the employment came termination of the scheme or project and consistently with the terms of the contract. (iv) the workman ought to have been apprised or made aware of the abovesaid terms by the employer at the commencement of employment.” to an end simultaneously with Learned counsel for the petitioner further relied upon the decision in STEEL AUTHORITY OF INDIA LTD. VS. UNION OF INDIA [4] , wherein the apex Court held as under: “11. The industrial dispute was raised by two Unions, namely, Visveswaraya Iron and Steel Ltd. Workers Association, Bhadravathi and Visveswaraya Iron and Steel Ltd. Contract Employees' Union, Bhadravathi.

The award dated 13. 07. 1999 was confined to only one issue, namely, Issue No. 6 framed by the Labour Court. The said issue was determined by the Labour Court pursuant to or in furtherance of the order of the High Court passed in Writ Petition No. 26874 of 1995. While determining the said question, the Labour Court framed seven issues by an order dated 31. 12. 1998, some of which are :" (i) Whether the 1st party proves that they were employed by the 2nd party Management in the job of permanent and perennial in nature. (ii) Whether the 2nd party Management proves that the 1st party workmen were employed under different contractors in the job of permanent and perennial in nature in various departments of the Management. (iii) Whether the 2nd party proves that system of contract labour in respect of the nature of the workers involved in this Reference was not abolished in the 2nd party Industry and that this Reference is not sustainable. "

The Labour Court opined: "the plain reading of the first point in dispute to be decided by this Court is that "are the contract workers employed in the nature of contract work, justified in demanding absorption as regular permanent employees of the management VISL, Bhadravathi (hereinafter called the Management ). Therefore the point in dispute pre- supposes that the 1 party Union Employees are the contract workers employed in the nature of contract work under certain contractors and whether such contract workers are to be absorbed by the Management. The fact that the Union Employees who seek their absorption by the Management are the contract workers is further very much evident from the averments made in the claim statement preferred on behalf of the 1 party Union. Para 1 of the claim statement reads that they are Management against whom the present reference is made by labourers of the contract representing the Government.