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Judgment
A.R. Lakswaanan, J.—The above writ appeal is directed against the order of S. M. Abdul Wahab, J. dated September 9, 1996, passed in
W.P. No. 6220 of 1987, directing the writ petitioners 2 to 21 to approach the Labour Court, for the relief prayed for, viz, to absorb the workmen
engaged through the contractor in the loading, unloading etc., operation in the installations of the Bharat Petroleum Corporation Ltd. at Tondiarpet,
Madras-81, as its direct employees.
The short facts that are necessary for disposal of this writ appeal are as follows :
(1) In this case, we are concerned with the Tondiarpet Installation, which is involved in the present writ petition. It engaged in storage and
distribution of petroleum products to its dealers and customers in southern region. In this case, we are presently concerned only with petroleum
products called lubricants, wherein the contract labourers of the writ petitioner union is working and are not concerned with other bulk products
such as petrol, diesel, etc.
(ii) The Management has entered into an agreementlarrangement with a third party establishment called ''Leo Oils Private Ltd.'' situated at No.
112, Cross Road in Tondiarpet. This third party which has technical expertise is engaged in blending of lubricants on behalf of the company. The
base oil is received from Indian Oil Lube Blending Plant, Korukupet, Madras. The 1st respondent has also entered into an agreementlarrangenient
with the said third party. This agreement stipulates that the third party company should fill the blended lubricants into large Darrels.
(iii) For the purpose of supply of empty barrels to the said third party, the Management has entered into an agreement with a contractor to
transport the empty barrels from Tondiarpet Installation of Bharat Petroleum Corporation to, the premises of M/s. Uo Oils Private Limited, and
after the barrels have been filled, to bring them back to the Tondiarpet Installation.
(iv) The Lubricants section at Tondiarpet has the facility for filling the lubricants into small containers of half litre, one litre and five litres capacities.
This operation is done by the permanent employees of the Corporation.
(v) The Management has also entered into an agreement with a third party to manufacture tims/barrels, and to supply them at the Tondiarpet
Installation. The said agreement with the said suppliers also stipulates that the loading and unloading of the manufactured tins and barrels should be
done by the said supplier himself. The work of supply of barrels and tins fluctuates depending on the actual need of Tondiarpet Instal lation, and is,
therefore, of intermittent nature.
(vi) Once the lubricants are filled in containers, they are then distributed to the I st respondent''s various depotslinstallations in Southern region
comprising the States of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu. For the purpose of transportation of these lubricants, the 1st
respondent has entered into agreements with various third parties, details of whom are given in annexure-2, to the counter affidavit filed by the 1st
respondent in the writ petition.
(vii) According to the 1st respondent, even the activity entrusted to the companies in annexure-2 fluctuates and the number of lorries used for this
purpose every day varies depending upon the requirements. Conserluently, it is presumed that the number of workmen brought 40 in by the third
parties listed out in annexure-2 obviously varies.
(viii) It is also stated that in so far as the companies mentioned in annexures 1 and 2, the 1st respondent Corporation has no control nor
supervasion over any of die workmen engaged by the said parties, and the, Management has no knowledge as to who they are or their identity or
any other particulars relating to their employment.
(ix) Certain odd jobs also arise in the Tondiarpet Installation relating to stacking, destacking, shifting, mounting barrels for decantation, loading of
full barrels/lubricants or grease cases into dealers/customers lorries or bullock cart. This t)W of work has been entrusted to a contractor called
5h&am Transports"".
(x) Thus, the practice was that the 23 workmen would make themselves available at the gate and whatever work entrusted to the 3rd respondent-
K. Palani, would be carried out by the workmen out of the list of 23 and the remaimng workmen were engaged by the companies mentioned in
annexures 1 and 2, depending upon their individual requirements and they would be paid directly by these persons/companies.
(xi) Even then, it is stated, that there were occasions when not all 23 of them would obtain work every day, because of the fluctuating nature of the
work. At about the time, when writ petition was filed. the Ist respondent-Management terminated its contract with Mr. K. Palani, and entered into
a fresh contract with Shiram Transports for the jobs for the purpose of transportation and bringing back of barrels from Leo Oil Pvt. Ltd. and also
for stacking, destacking, shifting, mounting of barrels etc. According to the Management, this contract is currently in existence with the
Corporation.
(xii) While so, the writ petitioner union anagement of the 4 leading for ab- employees of Installation, as and when vacancies arise. It is also alill ed
that the contractor has not mainegasic records, such as muster rolls, tained the wage register, etc. pertaining to these 23 men.
(xiii) It appears that the workers also filed a suit in Madras City Civil Court, in O.S. No. 972 of 1987, praying for a declaration that these s(men
are the regular employees of the 1st respondent Corporation, inasmuch as the contractor did not possess any licence for employment of contract
labourers till October 30, 1986, and that the work carried on by these men are of perennial nature and incidental to the main functions of the
establishment of the Ist respondent. The said suit, it appears, is still pending in the said Court.
(xiv) Since there has been no response from the Management, the writ petitioners filed W.P. No. 6220 of 1987, for a mandamus, directing the
Respondents 1 and 2 to absorb the 23 workmen now engaged through the 3rd respondent contractor K. Palani, in the loading, unloading etc.
operation in the Installations of the 1st respondent-Bharat Petroleum Corporation Ltd. at Tondiarpet, as direct employees.
The writ petition was resisted by the I st respondent Management by filing a detailed counter affidavit.
We have heard the arguments of Mr. N. Paramasivan, leaned counsel appearing for the appellants and Mr. Sanjay Mohan, learned counsel
appearing for the Ist respondent Management.
Mr. Paramasivan, leamed counsel appearing for the appellants cited a decision reported in 1995 11 LLJ 790 (Gujarat Electricity Board,
Thermal Power Station, Ukai v. Hind Mazdoor Sabha And Others). Mr. Sanjay Mohan, learned counsel appearing for the lst respondent-
Management has cited a very new ruling of the Supreme Court, reported in 1997 1 LLJ 1113 (Air India Statutory Corporation v. United Labour
Union And Others). Our attention was also drawn to the relevant provisions of the Act, at the time of hearing.
Before dealing with the rival submissions of the respective parties, certain facts have to be noted for the purpose of understanding the case well.
(a) The 1st respondent Corporation has registered itself as a Principal Employer in tenns of 1 the Contract Labour Regulation and Abolition Act,
1972, and this registration is still valid, ''Me I st respondent has complied with its statutory requirements in so far as the Contract Labour Act is
concerned. It is also submitted by the counsel that the facilities for drinking water, first aid box and canteen facilities have always 5 been extended
to these contractor''s workmen also.
(b) The 1st respondent Management is also coniplying with the statutory requirements under the ESI Act and in so far as all the 23 individuals are
concerned deductions are made from the benefits payable to the third parties.
(c) According to the Management, it would be impossible to absorb the services of 23 individuals concerned, as prayed for, since the nature of
work itself is such. It is also brought to our notice that the writ petitioner Union, by their letter dated August 28, 1986, presented a Charter of
Demands, demanding equal wages and welfare benefits as well as absorption. Conciliation took place in the matter and it ended in failure, and
possibly because of the pendency of the writ petition. No further action has been taken in this regard.
(d) The writ petition came up before S. M. Abdul Wahab, J. who by his order dated September 9, 1996, dismissed the writ petition, by holding
that the dispute has to be adjudicated only by the Labour Court with reference to the nature of the contract, and therefore, the learned Judge made
it clear that it is open to the newly impleaded party to raise an industrial dispute at an early date and have a disposal. Permission was also granted
to them to approach the Government, if so advised.
The arguments advanced before the learned single Judge were reiterated by the counsel appearing for either side, before us.
The Judgment reported in Gujarat Electricity Board''s case (supra) was also cited before the learned single Judge. The Learned Judge, on a
reading of paragraph 18 of the said decision held that the said decision is not at all in support of the contention of the counsel for the newly
impleaded petitioners, and that in view of the provisions of Section 10 of the Act, it is only the appropriate Government, which has the authority to
abolish the genuine labour contract in accordance with the provisions of the said Section, and no Court including the Industrial s Adjudicator had
jurisdiction to do so. In the light of the above decision and the contentions raised by learned counsel for the Management, the learned single Judge
was of the view, that the dispute has to be adjudicated only by the Labour uourt.
Aggrieved by the said decision, the above writ appeal has been filed.
Mr. N. Paramasivan, learned counsel appearing for the appellants submitted that the Supreme Court in Gujarat Electricity Board''s case
(supra) has deprecated the practice of Public Sector undertaking employing contract Law bour and has recommended that they should on their
own discontinue the contract Labour and absorb them their direct employees. As the workmen had already waited in agony for over nine years for
the final disposal of the writ petias tion, directing them to seek relief through Ubour Court at this distance of time would cause further hardship to
the workmen. It is, therefore, argued that the order of learned single Judge has to be set aside, and a direction to be issued to the Respondents 1
and 2 to absorb the workmen through contractor in the loading and unloading operation in the installation of the 1 st Respondent-Bharat Petroleum
Corporation Ltd. at Tondiarpet, as direct employees.
We are unable to countenance the contentions of the learned counsel for the appellants. Section 10 of the Contract Labour Act, 1970, reads
as follows :
Prohibition of Employment of Contract Labour :- (1) Notwithstanding anything contained in this Act, the appropriate Government may after
consultation with the Central Board or, as the case may be, a State Board, prohibit, by notification in the official Gazette, employment of contract
labour in any process, operation or other work in any establishment.
(2) Before issuing any notification under sub-section (1) in relation to an establishment, the appropriate Govermnent shall have regard to the
conditions of work and benefits provided for the contract labour in that establishment and other relevant factors, such as
(a) Whether the process, operation or other work is incidental to or necessary for the industry, trade, business, manufacture or In occupation that
is carried on in the establishment;
(b) whether it is of perennial nature, that is to say, it is of sufficient duration having is regard to the nature of industry, trade, business, manufacture
or occupation carried on in that establishment;
(c) whether it is done ordinarily through 2o regular worianan in that establishment or an establishment similar thereto;
(d) whether it is sufficient to employ considerable number of whole-tiine workmen.
Section 10 of the said Act, has relevance. It contemplates two things. The appropriate Government may, after consultation with the Central
Board, prohibit, by notification in the official Gazette, employment of contract labour in any process, operation or other work in any establishment.
Thus, it is seen, u/s 10 of the said Act, the employment of contract labour can be regulated or the same can be 35 abolished in a given case.
We have already noticed that the I st respondent-Bharat Petroleum Corporation, is registered as a principal employer. As already noticed,
Section 10 of the Act speaks about the prohibition or abolition of employment of contract labour and that the appropriate Government, after
consultation with the Central Board, or, as the case may be, a State Board, by notification in the official Gazette, may do the same. It is not in
dispute that till date, there is no notification prohibiting contract labour by the Central Government, in so far as the 1st respondent-Corporation is
concerned. The so Central Government has not even constituted an Advisory Board. The 1st respondent was permitted in law to engage contract
labour on the contrary.
Mr. N. Paramasivan, learned counsel for the Appellants, made the following further submissions. According to him, the decision reported in
Gujarat Electricity Board, Ibermal Power Station, Ukai v. Hind Mazdoor Sabha (supra) was decided by a Bench of two Hon''ble Juages and it
comprised of a batch of four Civil Appeals raising common question of law relating to the abolition of contract system of labour. Apart from the
general remedy, directions were also given by the Bench in each case depending upon the facts and circumstances of that case, as could be seen
from the judgment. The law enunciated as the general remeqy for the abolition of general contract of labour in the above case is as follows :
Our conclusions and answer to the question raised are, therefore, as follows :
(i) In view of the provisions of Section 10 of the Act, it is only the appropriate Government which has the authority to abolish genuine labour
contract in accordance with the provisions of the said Section. No Court including the Industrial Adjudicator had jurisdiction to do so.
(ii) If the contract is sham or not genuine, the workmen of the so-called contractor can s raise an industrial dispute for declaring that they were
always the employees of the prining the approsuch dispute abolition of 0 the provisions of Section 10 of the Act will not bar either the raising or the
adjudication of the dispute. When such dispute is raised, the Industrial Adjudicator has to decide whether the cons tract is sham or genuine. It is
only if the Adjudicator comes to the conclusion that the contract is sham, that he will have jurisdiction to adjudicate the dispute. If, however, he
comes to the conclusion that the contract o is genuine he may refer the workmen to the appropriate Govermnent for abolition of thecontract labour
u/s 10 of the Act and keep the dispute pending. However, he can do so if the dispute is espoused by the direct workmen of the principal
employer. If the workmen of the principal employer have not espoused the dispute, the Adjudicator, after coming to the conclusion that the
contract is genuine, has to reject the reference, the dispute being not an industrial dispute within the meaning of Section 2(k) 10 of the ID Act. He
will not be competent to give any relief to the workmen of the erstwhile contractor even if the Labour Contract is abolished by the appropriate
Government u/s 10 of the Act.
(iii) If the labour contract is genuine a composite industrial dispute can still be raised for abolition of the contract labour and their absorption.
However, the dispute, will have to be raised invariably by the direct employees of the principal employer. The Industrial Adjudicator, after receipt
of the reference of such dispute will have first to direct the workmen to approach the appropriate Government for abolition of the contract labour
u/s 10 and keep the reference pending. If pursuant to such reference, the contract labour is abolished by the appropriate Government, the
Industrial Adjudicator will have to give opportunity to the parties to place the necessary material before him to decide whether the workmen of the
erstwhile contract should be directed to be absorbed by the principal employer, how many of them and on what terms. If, however, the contract
labour is not abolished, the industrial adjudicator has to reject the reference.
(iv) Even after the contract labour system is abolished, the direct employees of the principal employer can raise an industrial dispute for absorption
of the ex-contractor''s workmen and the adjudicator on the material placed before him can decide as to who and how many of the workmen
should be absorbed and on what terms.
According to the learned counsel for the sc appellants, if the contract is sham or not genuine, the workmen of the contractor can raise an
industrial dispute for declaring that they were always the employees of the principal employer. It is further submitted that the contract labour cannot
raise an industrial dispute against a principal employer as there is no employer and employee relationship as contemplated u/s 2(k) of the Industrial
Disputes Act, 1947. The other remedies are only by the mercy to of a union of regular (direct) workmen of the establishment to raise an industrial
dispute espousing the cause of the contract labour.
Referring to the judgment of the Suis preme Court in Air India Statutory Corporation v. United Labour Union (supra) and particularly the
passage occurring in page 1119, the learned counsel for the appellant submitted that this case was dealing with a contract labour after its abolition.
According to him, the remedy suggested and directed in this case would be equally applicable to cases wherein the abolition has not preceded. He
also invited our attention to paragraph 61 of the said judgment, wherein a as Three Judges Bench of the Supreme Court held as follows :
The right and remedy would be a teasing illusion and would be rendered otiose and to practically compelling the workman at the mercy the
principal employer. Considered from this pragmatic perspective, with due respect to the learned Judges,. the remedy carved out in Gujarat
Electricity Board case (supra) would be unsatisfactory. The shortcomings were not brought to the attention of this Court. So, that part of the
direction in Gujarat Electricity Board case is not, with due respect to the Bench, correct in to law. The Dena Nath''s case 1992 1 LLJ 289, as held
earlier, has not correctly laid down the law. Therefore, it stands overruled. Moreover, the Bombay High Court has correctly held that the High
Court ss under Article 226 of the Constitution world direct the principal employer to absorb the contract labour, after its abolition, even though
some of the contractors have violated Section 12 of the Act and the appellants have violated Section 7 of the Act,. In the Judgments under appeal,
High Court has directed to absorb the services of the workman from the date of the judgment. The respondent Union did not challenge it. We are,
therefore, constrained not to grant the benefit to the employees of the respondent-Union from the date of the abolition of the contract labour
system. We, therefore, uphold the direction issued by the High Court to regularise their services with effect from the respective dates of the
judgments of the High Court with all consequential benefits. Before conclusion, we express our deep appreciation for valuable assistance given by
all the learned counsel in the appeals
Learned counsel& for the appellant has also cited a few other decisions reported in R. K. Panda v. Steel Authority of India 1994 AIR i SCW,
2460, Sankar Mukherjee and Others Vs. Union of India (UOI) and Others, and National Federation of Railways Porters, Vendors and Bearers
Vs. Union of India and others, wherein the Supreme Court has granted relief to the contract labour directing their absorption as directs workmen
of the principal employer, even though there had not been any notification or other order abolishing/prohibiting contract labour as contemplated u/s
10 of the Contract Labour (Regulation and Abolition) Act.
In R. K. Panda''s case (supra), the Supreme Court held that the contract labour were continuing in the employment of the respondent for the
last ten years in spite of change of contractors and hence they were directed to be absorbed as regular em loyees. The Supreme Court, in the said
case, as observed as follows :
In spite of there being no report by the Advisory Board u/s 10(2) and no prohibition u/s 10(1), the Act was enforced and this Court directed to
absorb 4s them within the guidelines laid down in the judgment. This ratio also is an authority for the proposition that the jurisdiction of the Court
under Article 32, pari materia with Article 226 which is much wider than Artiso cle 32 ''for any other purpose'' under which ill suitable directions
are required to be given based on factual background . Therein the need to examine the correctness of Dena Nath''s (supra) ratio did not arise nor
is it a s case of abolition of contract labour. So., its reference appears to be as a statement of laying the law in Dena Nath''s case (supra).
In Sankar Mukherjee''s case (supra), the loading and unloading of bricks from wagons and trucks were not prohibited, though cleaning and
stacking and otiier allied jobs in the brick department were prohibited by the State Govis ernment u/s 10 of the Act. The Supreme Court held that
there was no justification to exclude the job of loading and unloading of bricks from the purview of the notification and directed those workmen to
be absorbed as direct ao workmen. The Supreme Court has further held as follows :
The State Government exercising the power u/s 10 of the Act prohibas ited employment of contract labour in cleaning and stacking and other
allied jobs in the brick department. Loading and unloading of bricks from wagons and trucks was not abolished. Writ petition under Article 32 of
the Constitution of India was filed. A Bench of three Judges of this Court had held that the Act requires to he construed liberally so as to effectuate
the object of the Act. The, bricks transportation to the factory, loading and unloading are continuous process, therefore, all the jobs are incidental
to or allied to each other. All the workmen performing these jobs were to be treated alike. Loading and unloading job and the other jobs were of
perennial nature. Therefore, there was no justification to exclude the jobs of loading and unloading of bricks from wagons and trucks from the
purview of the notification dated February 9, 1980. Thus, this Court had given direction to abolish the contract labour system and to absorb the
employees working in loading and unloading the bricks which is of perennial nature.
In National Federation of Railway Porters, Vendors and Bearers case (supra), the Supreme Court was to consider whether the railway parcel
porters working in the different railway stations were contract labour for several years. The matter was referred to the Central Assistant Labour
Commissioner to fuid out whether the job was of a permanent and perennial nature and whether the petitioners were working for a long period. On
receipt of the rert with findings in favour of workers, the gneh had directed the Railway Administration to regularise them into the service.
The above three cases were referred to in Air India Statutory Corporation, etc. Vs. United Labour Union and others [overruled], . In yet
another case viz., Catering Cleaners of 1 Southern Railways v. Union of India 1987 1 LLJ 345 the Supreme Court directed the Central
Govermnent to consult the Central Board or the State Board and to take appropriate action u/s 10 of the Act. The learned counsel for tl,.e
appellants has also read to us paragraphs 14, and 59 of the Air India''s case (supira).
Winding up his arguments, the learned z counsel for the appellant submitted that the workmen were employed with the Bharat Petroleum
Corporation even prior to 1978 and that the industry viz., the plant, is a continuous process industry; the loading and unloading operations are of
perennial nature and that they are incidental to the main activities of the industry cannot also be disputed and that when the writ tition was finally
dismissed on September r,1996, these workmen were denied job and they are jobless since September 10, 1996. According to him, during the
pendency of the writ gtition the contractor died and the management s been engaging these workmen directly without any intermediary. The
''appropriate m Government'' viz. the Government of India, atural Gas have reproceedings in appeal dethe learned counsel for the appellants
prayed for justice to the workmen.
Mr. Sanjay Mohan, in reply to the above arguments of the learned counsel for the appels(lant, has submitted the following : The Contract
Labour (Regulation and Abolition) Act, 1970, seeks to achieve two purposes viz., (i) to regulate engagement of contract Labour; and (ii) to
abolish, in a given case, by virtue of Section 10, contract labour in certain activities. He also invited our attention to certain passages in Gujarat
Electricity Board Case (supra) and also to certain passages in Air India''s case (supra).
The Supreme Court in Gujarat Electricity Board ease (supra), comprising of a Bench of two Hon''ble Judges viz., P. B. Sawant and S. B.
Majmudar., JJ. went into the question of contract labour and gave their views on three different aspects, which are as follows :
i) The existing contract labour can raise an industrial dispute and contend that the contract is a sham or not genuine. In such disipute, if there is a
conclusion that the contract is a sham, the Labour Court would have jurisdiction to give relief to the contract labour.
ii) If the Labour Court finds that the contract is genuine, then, the dispute can be kept pending and the parties be asked to approach the
Government for abolition of the contract labour by issuance of notification u/s 10 of the Act., But, in a situation of this kind, the direct employees of
the principal employer only can raise a dispute and not the contract labour.
iii) If there is abolition of contract labour, in that activity by issuance of a notification u/s 10, then, on a dispute being espoused by the direct
employees of the principal employer, it is for the Court to grant relief to the erstwhile contract labour depending upon how many regular workmen
are required and the terms for absorption.
From the above, it would be seen that three distinct points were considered by the Supreme Court in Gujarat Electricity Board case (supra).
The next judgment of the Supreme Court is Air ln&a''s case (supra). It was decided by a Bench of three Hon''ble Judges, one of whom was S.
B. Majmudar, J. who was in the Bench in Gujarat Electricity Board case. The question framed by the Supreme Court for its decision in Air India''s
case is found in paragraph 53 of the Judgment. Therefore, according to Mr. Sanj ay Mohan, the Air India case did not deal with all aspects of the
Act but only a situation arising out of abolition of contract labour u/s 10 of the Act. In paragraph 58, K. Ramaswami, J., who delivered the main le
judgment, has observed as follows :
Abolition of contract labour system ensures rights to the workmen for regularisation of them as employees in the establishment in which they were
hitherto working as contract labour through the contractor. The contractors stand removed from the Regulation under the Act and direct
relationship of employer and employee is created between the principal employer and workmen.
After referenu to Dena Nath''s case (supra) the Supreme Court went on. to observe in Air India case in paragraph 53 as follows :
The contractor is an intermediary between the workmen and the principal employer. The moment the contract labour systems stand prohibited u/s
10(1), the embargo to continue as a contract labour is put an end to and direct relationship has been provided between the workmen and the
principal employer there by the principal employer directly becomes responsible for taking the services of the workmen hitherto regulated through
the contractor.
Paragraph 61 at page 1149 of the Air India''s case (supra) has relevance in this context. The thrust of this paragraph is seen from the
observation of the Supreme Court, which is as follows :
In this behalf it is necessary to recapitulate that on abolition of the contract labour system, by necessary implication the principal employer is under
statutory obligation to absorb the contract labour. The linkage between the contractor and the employee stood so snapped and direct relationship
stood restored between principal employer and the contract labour as it employees. Considered from this perspective, all the workmen in the
respective services working on contract labour are required to be absorbed in the establishment of the appellant ..... Considered from this
pragmatic perspective, with due respect to the learned Judges, the remedy carved out in Gujarat Electricity Board case (.supra) would be
unsatisfactory. The shortcomings were not brought to the attention of this Court. So, that part of the direction in Gujarat Electricity Board case is
not, with due respect to the Bench, correct in law.
Therefore, Mr. Sanjay Mohansubmitted that the Supreme Court was concerned only with the legal consequences of abolition of coni tract
labour and the Air India case judgment is not for the proposition that all contract labour will be deemed to be employees of the principal employer
on account of passage of time or that every kind of contract labour is opposed to law or that no industrial dispute need be raised to decide
questions of fact that are in dispute. In this context, he invited our attention to the recommendations made by the Supreme Court in Gujarat
Electricity Board case (supra) in the last paragraph, which would only show that the Supreme Court recommended that contract labour in public
sector undertakings may, on their own, be discontinued and such workmen be absorbed as direct labour as far as was feasible.
The Air India case (supra) after referring to various case laws on the subject of contract labour, summed up the proposition only in regard to
the situations arising out of the abolition Of contract labour u/s 10 of the Act. The said judgment, in our view, is not in support of the proposition
that contract labour can straightaway claim to be direct employees of the principal employer due to passage of time. That part of the direction in
the Gujarat Electricity Board case (supra) with regard to the step to be taken for absorption upon abolition of contract labour arising out of a
notification u/s 10 of the Act, was only found to be bad. In other words, the direction made by the Supreme Court in Gujarat Electricity Board
case (supra) 10 that contract labour still will have to raise an industrial dispute even after abolition of contract labour u/s 10 of the Act so as to
decide how many should be absorbed by the principal employer and on what terms alone s would be found to be bad in law because, as per the
Air India case judgment, the legal effect of abolition of contract labour is, that the contract labour are automatically employees of the principal
employer.
S. B. Majmudar, J''s concurring judgment in Air India case (supra) has relevance particularly because, the learned Judge himself was in the
Bench which delivered the judgment in Gujarat Electricity Board case (supra). S. B. Majmudar, J. concurring with the views expressed by the two
other Hon''bic Judges has observed thus at p 1151 :
I have gone through the lucid and erudite, judgment prepared by learned Brother Ramaswamy, J. I wholly concur with what has been held therein.
1 endorse each and every conclusion to which my learned 2s Brother Ramaswamy, J. has reached. However, as the fate of erstwhile contract
labour on abolition of contract labour system under the provisions of Section 10(1) of the Contract Labour (Regulation and Abolition) 30 Act,
1970 has always raised a vexed question before the High Courts and before this Court. 1 have thought it fit to pen my observations on this
question. It is true that a Bench of two Judges of this Court to which 1 was a party in the case of Gujarat Electricity Board, Thermal Power
Station, Ukai, Gujarat v. Hind Mazdoor Sabha (supra) in the Light of the earlier judgment of two Judges'' Bench of this Court in the case of Dena
Nath v. National Fertilizers Ud. (supra) had to soften the rigour of the latter decision, by trying to evolve a locus paenitentiae for contract labourers
on abolition of their contract labour from the establishment. But on further consideration it is found, as rightly held by Brother Ramaswamy, J., that
such a scheme would not be workable.
The observations made by S. B. Majmudar, J., at page 1154 of the Judgment would show that the larger Bench of the Supreme Court in the
Air India case (supra) was concerned oni with the fate of erstwhile contract labour on ge abolition of contract labour under 5 Section 10 of the
Act. The question that was framed was, as to what happens after such prohibition. It is observed as follows :
It is also required to be noted that the question which has been posed for our consideration is as to what is the fate of the erstwhile contract labour
on abolition of contract labour system in the establishment u/s 10 of the Act. Such a question is had not come up for consideration before this
Court in R. K. Panda''s case (supra). Therefore, it could not be urged that the ratio of Dena Nath''s case was approved by three Member Bench
in R. K. Panda''s case (supra). In the latter case no abolition was directed by the appropriate Government u/s 10 of the Act. It was a case in which
the contract labourers were claiming to be absorbed directly by the principal employer without there being any order u/s 10. Consequently, the
question with which we are concerned in the present case did not fall for consideration of the Bench in R. K. Panda''s case (supra), nor had the
Bench decided that question one way or the other. I, therefore, respectfully concur with the view taken by Brother Ramaswamy, J., on the scope
and ambit of Section 10 of the Act and hold'' that on abolition of contract 3s labour system from any establishment u/s 10 of the Act by the
appropriate Government the logical and'' legitimate consequence thereof will be that the erstwhile regulated contract labour covered by the 4o
sweep of such abolition for the concerned activities would be entitled to he treated as direct employees of the employer on whose establishment
they were earlier working and they would be entitled to be treated as regular employees at least from the day on which the contract labour system
in the establishment for the work which they were doing gets abolished.
The submission of Mr. Sanjay Mohan, learned counsel for the respondent, merits acceptance. As pointed out by him, the only question that
came up for consideration in Air India case (supra) was the effect of a notification u/s 10 of the Act abolishing contract labour in a particular
activity. Therefore, the same cannot be used to support die proposition that this Court in a writ petition can go into the question whether contract
labour should be directly absorbed by the principal employer in a given case. The right of the contract labour would still be available as provided
by the judgment of the Supreme Court in the Gujarat Electricity Board case (supra) in so far as they would still have to raise an industrial dispute in
accordance with the first part of the Judgment. In such a dispute, if it is established that the contract is a sham, then, the contract labour are
straightaway entitled to relief of absorption by the principal employer. However, if the Industrial Tribunal finds that the contract is genuine, then, the
contract labour will have to approach the Government to issue a notification u/s 10 of the Act. If a notification is issued abolishing the contract
labour., then, the judgment of the Supreme Court in Air India''s case (supra) will come to the rescue of the contract labour and in terms of the said
judgment, the contract labour are entitled to be absorbed as contract labour of the principal employer straightaway without having to raise any
industrial disputes.
It is not in dispute that the powers of the writ Court are unfettered. When it becomes a question of fact as to whether or not in a given case a
contract is a sham or not, to decide that point, evidence may have to be let in by both parties, in an industrial dispute before the Industrial Tribunal.
On the facts of the case, from the prayer in the writ petition and of the arguments advanced by the counsel appearing on either side and on a
perusal of the averments made by either party, it would be seen that the individuals in question were admittedly employed by the contractor Palani,
who passed away a few weeks before the judgment was delivered in the writ petition. When the contract was subsisting, employment of the
contract labour depended upon dayto-day exigencies and requirements of loading and unloading and on some days all the contract labour would
be engaged and on some other days, only a few and on some other days none at all. In fact, orders were passed during the peiidency of the writ
petition, that the contract labour should be provided work by contractors, whose names were spelt out in the order itself made by this Court
depending upon exigencies. Eventually, all the contractors except Palani did not renew their contracts and by virtue of the interim orders of this
Court, the contract labour of Palani were; engaged according to exigencies. Upon the dismissal of the writ petition, the interim order dissolved and
now, as submitted by the learned counsel for the respondent, new contractors are in the picture engaging their own workmen for loading and
unloading operations.
For all the fore-going reasons, the writ appeal fails, however, with liberty to the contract labour to raise an industrial dispute if they; so desire
or choose. Ale writ appeal is dismissed with the above observation. No costs.