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Judgment
Veeraswami, J.—This petition is to quash an order of the first Respondent the Additional Commissioner for Workmen''s Compensation,
Madras, directing the Petitioner in this Court to pay Respondents 2 to 42 a total sum of Rs. 75-311 as wages due for three festival holidays.
Respondents 2 to 42 who will here after be called as workmen, are some of the workers employed in the Petitioner''s concern. It is a cigar factory
located in George Town, Madras. Admittedly these workmen have been rolling cigars for the factory for some years past. The workmen claimed
wages for three holidays, 14th, 15th and 26th of January 1961, being Pongal, Kannu Pongal and Republic Day under the provisions of the Madras
Industrial Establishments (National and Festival Holidays) Act, 1958, and applied to the first Respondent u/s 15(2) of the Payment of Wages Act
for an order. The first of the Acts was enacted to provide for the grant of national and festival holidays to persons employed in industrial
establishments in the State of Madras. Section 3 of this Act directs that every employee shall be allowed in each calendar year, among other things,
five holidays for such festivals as the inspector may, in consultation with the employer and the employees, specify in respect of any industrial
establishment. Section 5(1) says that, notwithstanding any contract to the contrary, every employee shall be paid wages for each of the holidays
allowed to him u/s 3. The Act defines an employee to mean any person employed in any industrial establishment to do any skilled or unskilled,
manual, supervisory, technical or clerical or work for hire or reward, whether the terms of employment be express or implied. Employer is also
defined as meaning, when used in relation to an industrial establishment, a person who has the ultimate control over the affairs of the industrial
establishment, and where the affairs of any industrial establishment are entrusted to any other person (whether called a managing agent,
superintendent or by any other name) such other person. Industrial Establishment for purpose of this Act, means, inter alia any factory as defined in
clause (m) of Section 2 of the Factories Act, 1948. In the Factories Act, factory is defined as any premises including the precincts thereof where a
certain specified number of workers are working or, were working on any day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on with the aid of power. A worker means a person employed, directly or through any agency whether for
wages or not, in any manufacturing process. Section 15(2) of the Payment of Wages Act provides for an application to the prescribed authority for
a direction to refund to the workmen or persons employed the amount wrongfully deducted. The workmen in this case asserted before the first
Respondent that they were employed under the Petitioner within the meaning of these statutory provisions and are workmen entitled to the benefits
of holiday wages and that, inasmuch as the wages were not paid to them for three holidays, the first Respondent should direct payment of the
wages corresponding to those holidays. The Petitioner resisted the application before the first Respondent, on the ground that they were not
workmen within the meaning of any of these enactments. The first Respondent overruled the objection, held they were workmen and ordered the
application. In doing so, he applied the tests enunciated in some of the judicial decisions to the facts of the case and found that they established the
relationship of employer and employee between the Petitioner and the workmen and that they were, therefore, workmen. It is this view of the first
Respondent that is canvassed in the writ petition.
The fact as found by the first Respondent on the basis of the evidence recorded before him on both sides are these. The Petitioner runs a cigar
factory at No. 18, Anna Pillai Street George Town, Madras. Until recently, a bell used to ring at 7-30 a.m. daily when the workmen were
expected to report for duty. If they came after 9-30 a.m. they would be deemed to have come late. Tobacco used to be entrusted to these
workmen, which they rolled into cigars in the premises of the factory. The workmen had a brief recess in the noon and re-assembled for duty until
5-30 p.m. daily. Before they went out of the premises of the factory, the workmen delivered the rolled cigars to the checking officer of the factory,
who, on an examination of the cigars, rejected those which did not conform to the required standard. The rejected cigars would have to be redone
by the workmen concerned to the satisfaction of the checking officer. The factory maintained an attendance register and marked the attendance of
the workmen. The workmen were also subjected to disciplinary action, suspended or dismissed after show cause notices. The factory was
enforcing regular attendance, and those who did not regularly attend were exposed to disciplinary action. If the workmen reported to duty late,
after a certain hour, they would be given no work for the day. As a matter of fact, there were instances of punishments meted out to the workmen.
There was a dismissal of workmen which led to an industrial dispute. That was referred to for adjudication. Differences between the management
and the workmen on certain matters relating to the industry formed the subject matter of a settlement once u/s 12(3) of the Industrial Disputes Act.
Preceding the settlement, there would appear to have been a strike on the part of the workmen which eventually led to the industrial dispute and its
reference for adjudication. The workmen were, no doubt, paid on piece-rate basis. But the management was paying bonus to the workmen out of
the profits earned. The management was also granting leave to the workmen with wages subject to limits. It was true there were no standing orders
for the factory relating to the disciplinary action which the management could take against the workmen. But the practice of the factory established
that in former occasions the management did exercise such jurisdiction over its workmen. The first Respondent, on these facts was of the opinion
that the workmen were under a contract of employment under the management and were subject to the control and supervision of the
management, in respect of the manner of work they were called upon to do.
Mr. Srinivasagopalan for the Petitioner strenuously contends that the view of the first Respondent is wholly wrong. He submits that the workmen
were free to come and go as they liked; there was no compulsion for the workmen to work in the factory. They were paid wages only on the
quantum of work they turned out. The other facts noticed above were merely external trappings of the industry, with a view to convince the
authorities under the Factories Act that they were conforming to its provisions, and that they cannot be pressed into service to spell out the
relationship of master and servant between the management and its workmen. Learned Counsel further contends that the essential test of such a
relationship, namely control by the management of not merely as to what work should be done but how it should be done is not satisfied. He would
say that the mere fact that at the end of day the rolled cigars are collected from the workmen and the cigars which do not conform to the required
standard are rejected is not sufficient to satisfy the test, and that practically there is no occasion for control or superintendence by the management
of or over the workmen in their actual work of rolling cigars. In support of this contention, learned Counsel has placed considerable reliance on
Shankar Balaji Waje v. State of Maharashtra (1962) 1 S.C.R. 249 (Supp).
The question as to what constitutes the relationship of master and servant has been the subject of numerous decisions not only of the Supreme
Court but also of the High Courts in the country. The common law concept of master and servant has remarkably given way to modern notions of
industrial relations and has suffered a process of slow erosion, so that the common law tests of the relationship no longer seem to be applicable as
they did once.
As pointed out by the House of Lords in Short v. J. and W. Henderson Ltd. (1946) 62 T.L.R. 427, 429, the common law concept involved the
elements of (a) the master''s power of selection, (b) the payment of wages or other remuneration, (c) the master''s right to control the method of
doing the work and (d) the master''s right of suspension or dismissal. But Lord Thankerton in that case, with reference to these elements observed:
Modern industrial conditions have so much affected the freedom of the master in cases in which no one could reasonably suggest that the employee
was thereby converted into an independent contractor that, if and when an appropriate occasion arises, it will be incumbent on this House to
reconsider and to restate these indicia. For example, (a), (b) and (d) and probably also (c), are affected by the statutory provisions and rules which
restrict the master''s choice to men supplied by the labour bureaux, or directed to him under the Essential Work provisions and his power of
suspension or dismissal is similarly affected. These matters are also affected by trade-union rules which are at least primarily made for the
protection of wage-earners.
Even so, through the decided cases, run certain underlying principles which still serve as tests of the existence of the relationship of master and
servant. Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra, arose under the Industrial Disputes Act, and the question there was,
whether certain agarias working in the salt works at Kuda in the Rann of Cutch were workmen within the meaning of the term as defined in the
Industrial Disputes Act, 1947. The Supreme Court noticed a number of English cases and other authorities, and stated:
The principle which emerges from these authorities is that the prima Jade test for the determination of the relationship between master and servant
is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the
servant is to do but also the manner in which he shall do his work or to borrow the words of Lord Utwatt at page 23 in Mersey Docks and
Harbour Board v. Coggins and Griffith (Liverpool) Ltd. and Anr. (1947) 1 A.C. 1. The proper test is whether or not the hirer had authority to
control the manner of execution of the act in question.
The nature or extent of control which is requisite to establish the relationship of employee and employee must necessarily vary from business to
business and is by its very nature incapable of precise definition.
On the facts, the operations of the salt works were seasonal in character, and the agarias worked with their families on the patta lands allotted to
them. They were free to engage extra labour but it was they who made the payments to these labourers, and the chemical works had nothing to do
with the same. The salt manufacturer or the management did not prescribe any hours of work, and did not maintain any muster roll nor did they
control how many hours in a day and for how many days in a month the agarias should work. There were no rules as regards leave or holidays.
They were free to go out of the works as they liked, provided they made satisfactory arrangements for the manufacture of salt. Referring to these
features, the Supreme Court further stated (page 157):
The essential condition of a person being a workman within the terms of its definition is that he be employed to do the work in that industry, that
there should be, in other words, an employment of his by the employer and that there should be the relationship between the employer and him as
between the employer and employee or master and servant. Unless a person is thus employed there can be no question of his being workman
within the definition of the term as contained in the Act.
The Supreme Court, after accepting the opinion of the Industrial Tribunal that the supervision and control exercised by the management
extended to all stages of manufacture of salt from beginning to end, concluded (at page 166).
In the instant case the agarias are professional labourers. They themselves personally work along with the members of their families in the
production of salt and would, therefore, be workmen. The fact that they are free to engage others to assist them and pay for them would not in
view of the above authorities, affect their status as workmen.
On that view, the decision of the Industrial Tribunal that the agarias were workmen within the definition of the term contained in Section 2(a) of
the Industrial Disputes Act was upheld by the Supreme Court, It is noticeable in the judgment of the Supreme Court, that, though it regarded the
question whether the workers concerned were workmen within the definition of the Act to be one of fact, nevertheless it proceeded upon the basis
that the finding would have to be examined to see whether the proper tests to arrive at it, had been applied. A similar question arose but this time
under the Factories Act in Chintaman Rao and Another Vs. The State of Madhya Pradesh, . That was a case of a bidi factory, and the question
the Supreme Court had to decide was, whether certain persons known as sattedars engaged in the supply of bidis were independent contractors
or workers as defined in the Factories Act. Subba Rao J., who spoke for the Supreme Court, referred to the definition of a worker under the Act
and the making of bidis as a manufacturing process, and proceeded to consider whether a sattedar was a person employed directly or through
agency within the meaning of the definition employed. While considering the question, his Lordship observed:
The concept of employment involves three ingredients:
(1) employer, (2) employee and (3) the contract of employment. The employer is one who employs, i.e., one who engages the services of other
persons. The employee is one who works for another for hire. The employment is the contract of service between the employer and the employee
where under the employee agrees to serve the employer subject to his control and supervision.
The learned Judge then distinguished a contractor from a workman by contrasting a contract for service with a contract of service, and found,
on the facts before him, that the sattedars were not employed by the factory but were independent contractors. The test applied by the Supreme
Court in this case was the one which Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra, had laid down, namely:
The correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and
supervision by the employer.
It is true Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra, was under the Industrial Disputes Act, but their Lordships in
Chintaman Rao and Another Vs. The State of Madhya Pradesh, thought that there was no reason why the test laid down in the other case in the
context of the definition of workmen under the Industrial Disputes Act could not be invoked or applied for ascertaining whether a person was a
worker under the Factories Act. Shri Birdhichand Sharma Vs. First Civil Judge Nagpur and Others, , on facts appears to be nearest to this case,
and arose again under the Factories Act. Here again, the same test was applied, but, I think, it is instructive to notice the facts and then see how,
with reference to them, the decision was arrived at that workers there were workers within the meaning of the Factories Act and not independent
contractors. The Appellant before the Supreme Court was the management, and the Respondents 2 to 4 before it, who were working in the
factory, had applied for leave for fifteen days and did not go to work for that period. The management did not pay their wages for these days, and
those Respondents in consequence, applied under the Payment of Wages Act, for payment to them of wages which had been withheld. Whether
they were entitled to wages for the leave period turned upon the question whether they were workmen within the meaning of Section 2(1) of the
Factories Act. The workers worked in the factory premises and were not at liberty to work at their homes. They had to do the work within certain
hours which were the factory hours, though, it would appear, they were not bound to work for the entire period and could go away whenever they
liked. Their attendance was noted in the factory, and they could come and go away at any time they. like, but if any of the workers came after
midday he was not supplied with tobacco and was thus not allowed to work. There were standing orders in the factory according to which the
workmen who remained absent for eight days without leave could be removed. Payment to workmen was made in piece-rates depending on the
amount of work turned out but the management had the right to reject such bidis as did not conform to the standard. The Supreme Court, on these
facts, held that Respondents 2 to 4 before it were workers. Before arriving at this conclusion, the Supreme Court referred to Dharangadhara
Chemical Works Ltd. Vs. State of Saurashtra, and Chintaman Rao and Another Vs. The State of Madhya Pradesh, and distinguished the facts
before them from those in the second case as totally different. One important difference they found was that in Shri Birdhichand Sharma Vs. First
Civil Judge Nagpur and Others, , 166 the Respondents had to work in the premises of the factory and were not at liberty to carry the work to their
homes. It is also noteworthy that, though the workmen were not bound to work for the entire period and could go away at any time they like, the
Supreme Court did not consider that that fact in any way affected the status of the workmen as such. In this case again, the Supreme Court
accepted the test of control and supervision as enunciated in the two earlier cases. An argument was addressed to the Supreme Court that there
was little control or supervision by the management in that case. The management only had the right to reject such bidis as did not conform to the
standard. Referring to this, the Supreme Court held:
Taking the nature of the work in the present case it can hardly be said that there must be supervision all the time when bidis are being prepared and
unless there is such a supervision there can be no direction as to the manner of work. In the present case, the operation being a simple one, the
control of the manner in which the work is done is exercised at the end of the day when bidis are ready, by the method of rejecting those which do
not come up to the proper standard. In such a case, it is the right to supervise and not so much the mode in which it is exercised which is
important. In these circumstance we are of opinion that Respondents 2 to 4 who work in this factory cannot be said to be independent contractors.
The limited freedom which Respondents 2 to 4 have of coming and going away whenever they like or of absenting themselves (presumably without
leave) is due to the fact that they are piece-rate workers but the mere fact that a worker is a piece-rate worker would not necessarily take him out
of the category of a worker within the meaning-of Section 2(1) of the Factories Act.
In support of the view that they were workmen, the Supreme Court further relied on the circumstances that if the worker did not reach the
factory before midday he was given no work, he was to work at the factory and could not work elsewhere, he could be removed if he was absent
for eight days continuously and finally his attendance was noted and bidis prepared by him were liable to be rejected if they did not conform to the
standard. Shankar Balaji Waje v. State of Maharashtra (1962) 1 S.C.R. 249, 258, 260 Supp is again under the Factories Act, and in this case,
the concept of employment was explained with reference to what had been observed by that Court in Chintaman Rao and Another Vs. The State
of Madhya Pradesh, In this case, with reference to the facts before them, the Supreme Court held:
The mere fact that the person rolling bidis has to roll them in a particular manner can hardly be said to give rise to such a right in the management as
can be said to be a right to control the manner of work. Every worker will have to turn out the work in accordance with the specifications. The
control of the management, which is a necessary element of the relationship of master and servant, is not directed towards providing or dictating
the nature of the article to be produced or the work to be done, but refers to the other incidents having a bearing on the process of work the
person carries out in the execution of the work. The manner of work is to be distinguished from the type of work to be performed. In the present
case, the management simply says that the labourer is to produce bidis rolled in a certain form. How the labourer carries out the work is his own
concern and is not controlled by the management, which is concerned only with getting bidis rolled in a particular style with certain contents.
On that view, they held that the workers there were not workers within the meaning of the Factories Act. The Supreme Court was of the
further opinion that, though piece-rate workers could be workers within the definition of workers in the Factories Act, they must be regular
workers and not workers who came and worked according to their sweet will, and that every worker must have, under his contract of service, an
obligation to work either for a fixed period or between fixed hours. What appears to have weighed finally with Supreme Court in that case is the
principle to be found in the following observation:
The whole conception of service does not fit in well with a servant who has full liberty to attend to his work according to his pleasure and not
according to the orders of his master.
But Subba Rao J., in his dissenting judgment, adhered to his earlier view in Chintaman Rao and Another Vs. The State of Madhya Pradesh,
and considered that the workmen there answered all the three ingredients, namely, employer, employees and the contract of employment and were
therefore workmen within the meaning of the Act. Management of D.M.U.S. and Ors. v. Secretary, J.B.W. Union and Anr. (1964) 9 F.L.R. 86
once again had to consider what constituted employer and employee relationship. That was a case also of bidi rolling. After reviewing the earlier
decisions, the Supreme Court reiterated the test of the right of control and supervision as one of the governing tests to determine the relationship.
In view of the above judgments, I do not think it necessary to notice the decisions of High Courts including this Court, which with respect, do
not take the matter further. It has now to be taken to be well-established that the right of the management to control the workmen not only in
respect of what work is to be done but how it should be done, the manner in which it should be executed, is the main test to find whether in a given
case there exists the relationship of master and servant, employer and employee, management and workmen in industrial establishments. Through
the cases decided by the Supreme Court lies, at the foundation, this basic test, though the facts in each of those cases are rather not similar and it
might even seem that one or two decisions are somewhat not reconcilable with each other if only the facts are borne in mind. But as held in those
cases, the question whether the relationship, exists in a case is one of fact, and so long as the test is properly understood and applied, the finding
arrived at on that basis should hold good. As I mentioned Shri Birdhichand Sharma Vs. First Civil Judge Nagpur and Others, is very similar to the
case before me and is practically on all fours. But Mr. Srinivasagopalan tried to distinguish it by pointing out that in that case there were standing
orders which provided that, if the workmen were absent without leave, the management would be entitled to take disciplinary action against them.
It is true that there are no standing orders in this case but that, in my opinion is not sufficient to distinguish the present case from Shri Birdhichand
Sharma Vs. First Civil Judge Nagpur and Others, . One of the facts found by the first Respondent is that, though there were no standing orders in
the concern of the Petitioner, the practice followed showed that, as a matter of fact, attendance was insisted upon, an attendance register was
maintained and if anyone absented himself, disciplinary action was taken against him and in one or two instances the workmen who absented
himself without leave was either suspended or dismissed. In fact, the further finding of the first Respondents is that the workmen were paid leave
wages and even profit bonus. While the test of control and supervision is satisfied, the other circumstances also point to the relationship of master
and servant. The circumstances of this case as I said are similar to those which the Supreme Court had to consider in Shri Birdhichand Sharma Vs.
First Civil Judge Nagpur and Others, , and the observations the Supreme Court made in relation to them entirely apply to the circumstances here.
While the test of control and supervision is the governing test, its application may vary with the varying situations that may call for solution. The
applicability of the tests will depend upon exigencies, nature and manner of the work to be executed. In a case like this where control or
supervision is only called for at the stage of delivery of rolled cigars by the workmen, the test will have to be applied with reference to those
circumstances. The true test, I think, will be the right to exercise such control or supervision as the nature of work may admit or allow. That test is
clearly satisfied in this case.
Agreeing with the first Respondent, I hold, therefore, that Respondents 2 to 42 are workmen entitled to wages for the three holidays. The
petition is dismissed, but with no costs.
The Court is obliged to Mr. N. Thyagarajan, who appeared for Respondents 2 to 42 as amicus curiae.