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Judgment
Rajagopalan, J.—The petitioner applied under Article 226 of the Constitution for the issue of a writ of certiorari to set aside the award of the
Industrial Tribunal in I. D. No. 16 of 1957.
The petitioner-company manufactures and sells beedis. It resisted the claim of the Union, the first respondent, which represented the labourers,
who did the manual work of rolling the beedis, for enhanced remuneration for their services. The labourers were paid Rs. 1-4-0 for every 1000
biddis they rolled. All the material was supplied by the company. They claimed enhanced remuneration at Rs. 2-4-0 per 1000. The claim was
referred as an industrial dispute u/s 10(1)(c) of the Industrial Disputes Act for adjudication by the Industrial Tribunal.
In the course of the proceedings before the Tribunal, the company (petitioner) contended among other things (I) that the labourers were not
workmen"" as defined by Section 2(s) of the Industrial Disputes Act; that the dispute between the company and the beddi rollers was not an
industrial dispute, and that therefore the Tribunal had no jurisdiction to take up adjudication of the disputed claims of the beedi rollers; and (2) that
in any event the company had not the financial capacity to pay any more to the beedi rollers, as its margin of profit out of the sale price of the
beedis it manufactured was less than three annas per 1000 beedis. The Tribunal negatived both the contentions. The Tribunal awarded an increase
of four annas and directed that the beedi rollers should be paid Rs. 1-8-0 for every 1000 beedis rolled by them. The validity of that award was
challenged by the petitioner mainly on the ground that the Tribunal was in error in negativing the two contentions mentioned above.
The plea of the company, that the beedi rollers were not ""workmen"" as defined by Section 2(s) of tlie Industrial Disputes Act, raised a
jurisdictional issue, on the correct determination of which depended the further jurisdiction of the Tribunal to adjudicate upon the dispute between
the company and the Union as an industrial dispute. The real question at issue between the parties was, whether the beedi roller was a person
employed"" within the meaning of Section 2(s) of the Act.
It should be taken as well settled now that the use of the expression ""employed"" in the statutory definition of workman in Section 2(s) of the Act
required proof, in this case, that the jural relationship between the company and each of the beedi rollers was that of master and servant. That was
the basis on which the evidence in that case was examined by the Supreme Court in Shivnandan Sharma Vs. The Punjab National Bank Ltd., . In
Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra, , Bhagwati J. laid down at page 211 (of SCJ) : (at p. 267 of AIR):
The essential condition of a person being a workman within the terms of this definition is that he should 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 employer and employee or master and servant. Unless a person is thus ''employed'' there can be no question of his being a
workman within the definition of the terms as contained in the Act.
That was re-affirmed in Chintaman Rao and Another Vs. The State of Madhya Pradesh, . The same view was taken by this Court also -- see
Annamalai Mudaliar and Bros. Vs. Regional Provident Fund Commissioner, Madras and Others, , Abdul Kader Sahib v. State of Madras, 1956
1 Mad LJ 574, Modern Match Industries Vs. Labour Appellate Tribunal of India, Madras and Others, , and K. Kesava Reddiar, Gold Merchant
Quilon, Travancore-Cochin State Vs. Labour Appellate Tribunal of India, Madras and Others, . It was again the same principle that Balakrishna
Ayyar J. applied in his recent unreported decision in Palaniappa Mudaliar v. Court of Addl. First Class Magistrate, Kulitalai, W. P. Nos. 1165 to
1167 of 1936 AIR 1958 Mad 602.
It is true, as Sinha J. pointed Shivnandan Sharma Vs. The Punjab National Bank Ltd., , that it is the case law on Torts that has been evolved by
courts in England that has provided the foundation for the distinction between a servant and an independent contractor. At page 414 of the report
(SCJ): (at p, 409 of AIR) the learned Judge almost sounded a note of warning when he said :
Those learned authors have discussed in great detail cases illustrative of those distinctions, indicating the circumstances in which the general rule
has been applied to individual cases with such modifications as the facts and circumstances of a particular case required. We are here not
concerned with those nice distinctions which have been drawn in connection with the rule of vicarious liability in torts. We are here concerned only
with the question how far the test laid down by the standard authors as quoted above can be applied to determine the present controversy,
whether the Treasurers of the bank were its servants as contended on behalf of the bank.
The difficulties of importing common law concepts of master and servant in determining the scope of statutory definitions was explained at greater
length by Rutledge J. in National Labour Relations Board v. Hearst Publications, (1944) 88 Law Ed. 1170. After pointing out that the principal
question in that case was whether those who worked as newsboys were employees within the meaning of the National Labour Relation Act
(Wagner Act), the learned Judge proceeded :
Because the Congress did not explicitly define the term (employees), respondents say its meaning must be determined by reference to common-
law standards. In their view ''common-law standards'' are those the courts have applied in distinguishing between ''employees'' and ''independent
contractors'' when working out various problems unrelated to the Wagner Act''s purposes and provisions.
The argument assumes that there is some simple, uniform and easily applicable test which the courts have used, in dealing with such problems, to
determine whether persons doing work for others fall in one class or the other. Unfortunately this is not true. Only by a long and tortuous history
was the simple formulation worked out which has been stated most frequently as ''the test'' for deciding whether one who hires another is
responsible in tort for his wrong doing. But this formula has been by no means exclusively controlling in the solution of other problems.
And its simplicity has been illusory because it is more largely simplicity of formulation than of application. Few problems in the law have given
greater variety than the cases arising in the borderland between what is clearly an employer-employee relationship and what is clearly one of
independent entrepreneurial dealing. This is true within the limited field of determining vicarious liability in tort. It becomes more so when the field is
expanded to include all the possible applications of the distinction.
It is hardly necessary to stress particular instances of these variations or to emphasise that they have arisen principally, first, in the struggle of the
courts to work out common-law liabilities where the legislature has given no guides for judgment, more recently also under statutes which have
posed the same problem for solution in the light of the enactments particular terms and purposes.
After pointing out that the Wagner Act was a federal legislation administered by a national agency intended to solve a national problem on a
national scale, the learned Judge proceeded :
Whether given the intended national uniformity, the term ''employee'' includes such workers as these newsboys must be answered primarily from
the history, terms and purposes of the legislation. The word ''is not treated by Congress as a word of art having a definite meaning .....'' Rather ''it
takes colour from its surroundings ..... (in) the statute where it appears.
7a. The learned Judge observed further :
It will not do, for deciding this question as one of uniform national application, to import wholesale the traditional common-law conceptions or
some distilled essence of their local variations as exclusively controlling limitations upon the scope of the statute''s effectiveness.
The further observation of the learned Judge at page 1183 of the report was :
. . . . . the broad language of the Act''s definitions, which in terms reject conventional limitations on such conceptions as ''employees'' ""employer
and ""labour dispute"", leaves no doubt that its applicability is to be determined broadly, in doubtful situations, by underlying economic facts rather
than technically and exclusively by previously established legal classifications."" .
These principles were summarised and reaffirmed in United States v. Silk, (1947) 91 Law Ed. 1757 : see the observations at pp. 1767-68.
Even with reference to the common-law concept of the jural relationship of master and servant, more than one factor will have to be taken into
account. In Restatement of the Law, Vol. I, published by the American Law Institute, at page 483, the learned authors stated :
In determining whether one acting lor another is a servant or an independent contractor, the following matters of fact, among others, are
considered :
(a) the extent of control which, by the agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist
without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer; and
(i) whether or not the parties believe they are creating the relationship of master and servant
Whatever might be the law courts in America are bound to administer, I have to apply the law as it has been laid down by the Supreme Court
of India in the cases I have mentioned above with specific reference to the requirements of Section 2(s) of the Industrial Disputes Act. In
Chintaman Rao and Another Vs. The State of Madhya Pradesh, , Subba Rao J. re-affirmed the correctness of the test laid down by Bhagwati J. in
Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra, :
The proper test is whether or not the hirer had authority to control the manner of execution of the act in question.... 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.
. ."" As I endeavoured to explain in Annamalai Mudaliar and Bros. Vs. Regional Provident Fund Commissioner, Madras and Others, , one of the
factors to be considered in deciding whether there was clue control and supervision of the work of the labourer in question was, whether the time
of the labourer was at the disposal of the person for whom that labourer worked. Balakrishna Ayyar J. amplified that idea when he observed in his
unreported decision in W. P. nOS. 1165 and 1167 of 1956: AIR 1958 Mad 602:
What is the position in the present case? Even apart from the various statutes, statutory rules and notifications regarding holidays, hours of work
and the like, the petitioner here cannot require any of the persons using the facilities on his premises to work between particular hours. He cannot
require any one of them even to attend on any particular day. The worker can come any day he likes, work as long as he likes, or as short as he
likes and go away. He may work fast or he may work slow, The petitioner cannot tell him that he should work on towels and not on bed-sheets or
vice versa. If the worker so pleases he can work on towels though the petitioner would prefer him to work on bed-sheets. And, more important of
all, the petitioner cannot prevent anybody from working for a competing manufacturer. Come when you like, go when you like, work when you
like, stop whenyou like, work as fast as you like, work as slow as you like, work on what you like or not at all; --that is the position of the workers
vis-a-vis the petitioner. Such persons cannot, in my opinion, be said to be ''employed'' by the petitioner.....
Whether or not the test of control and supervision, inclusive of the control over the time of the labourer, is the sole test to apply, that test must
be satisfied before the relationship of master and servant is established. That relationship must be established before a person could be said to be
employed"" within the meaning of Section 2(s) of the Industrial Disputes Act. In applying that test we have to consider what the industry is, what
the activity of the, labourer is in that industry, and what is the control exercised in relation to that activity by the person for whom that activity is
carried on. In Zulis v. Wirth Bros. Pty Ltd., 93 C LR 561 at p. 571, the learned Judges pointed out:
''The duties to be performed may depend so much on special skill or knowledge or they may be clearly identified or the necessity of the employee
acting on his own responsibility may be so evident, that little room for direction or command in detail may exist. But that is not the point. What
matters is lawful authority to command so far as there is scope for it. And there must always be some room for it, if only in incidental or collateral
matters.
The factual position and the economic realities in a given case cannot be ignored in applying the test, which eminent Judges have pointed out is
by no means an easy one in its application.
That was the test the Tribunal applied, and it came to the conclusion that that test was satisfied by the facts established in this case, and that the
beedi rollers who worked in the seven factories of the petitioner were persons employed by him, and that they were his workmen within the
meaning of Section 2(s) of the Act. Whether there was material on record to support that conclusion is what I have to verify.
Even in paragraph 1 of its award the Tribunal set out:
This company has, many factories, scattered over several places in the North Arcot Dt. the head office being at Ranipet. There are six factories at
Ranipet and one at Arcot, and in this reference we are concerned only with those seven factories. The evidence shows that in these seven factories
about 800 workmen are employed. As stated above, all of them are engaged in the manufacture or jadi beedis of small variety. The process of
manufacture of the beedis takes place almost wholly within the factory premises belonging to the company. The factory opens at about 7-45 a. m.
and is kept going till about 6 p. m. in the evening. The workers come to the factory during those hours and take delivery of a specified quantity of
raw materials from the management and loll them into beedis within the premises of tha factory and hand over the quantity of manufactured stuff
and receive their daily wages the next day. But the beedi leaves are distributed to the workers the prior day for being taken home and cut into the
required shape and those leaves are brought by the workers to the factory when they turn up for work the next morning.
In formulating the test to apply and to decide whether the beedi rollers were workmen as required by Section 2(s) of the Act, the Tribunal
recorded:
All the foots and circumstances of a particular case have to be examined to find out whether the time taken by the workers was under the control
of the owner of the factory and whether the relationship was one of master and servant. It must be remembered that the primary test to be applied
in deciding whether the relationship of master and servant is present is whether the time of the person who worked was at the disposal of the
owner of the factory.
It is true that the labourers who rolled beedis were paid on piece work basis, but that as the Tribunal pointed out was quite consistent with the
existence of the relationship of master and servant between the company and the beedi rollers. It is also true that the evidence established that out
of Rs. 1-4-0 per 1000 a beedi roller was paid for rolling 1000 beedis he had to pay four annas for getting the beedi leaves cut if, he chose to have
them cut by another person.
There was also evidence that, when the labourer worked in the factory of the company, the labourer could get assistance of helpers without
seeking the permission of the company. That again is not inconsistent with the contract between the petitioner and the labourer being a contract of
service. It should he remembered it was really manual labour, though as the Tribunal pointed out ""the work demands a certain degree of skill end
ability"". In 1957 SCJ 208: AIR 1957 SC 204, Bhagwati J. pointed out:
Now a person who agrees himself to work and does so work and is therefore a workman does not cease to be such by reason merely of the fact
that he gets other persons to work along with him and that those persons are controlled and paid by him. What determines whether a person is a
workman or an independent contractor is whether he has agreed to work personally or not. If he has, then he is a workman and the fact that he
takes assistance from other persons would not affect his status.
In support of this position the learned Judge quoted a passage from Halsbury''s Laws of England Vol. 14, pages 651-2.
The workman must have consented to give his personal services and not merely to get the work done, but if he is bound under his contract to
work personally he is not excluded from the definition, simply because he has assistance from others, who work under him.
Dealing with the contention of the company, that the beedi rollers were free to come and go as they pleased, without any permission, and that
the time of the beedi roller was not at the disposal of the petitioner company and under its control, the tribunal recorded :
It is true that the management gave evidence that the workers are free to come to the factory when they liked and leave at such hours as they
chose. But I was not impressed with that evidence. The fact that regular attendance registers are maintained would falsify that story. During the
fixed hours, the factories are kept open and during those hours the workers are expected to turn up for work.
It was certainly within the jurisdiction of the Tribunal to accept the oral evidence of the witnesses called by the Union in preference to that given by
the witnesses for the management. It must also be remembered that, while both sides talked of theoretical possibilities, neither attempted to
correlate its claim to any specific instance. The Tribunal was certainly entitled to consider the economic realities in appreciating such oral evidence.
There was no evidence to show that the beedi rollers who worked in the factories of the petitioner did work in any other factory, to establish the
position that the beedi rollers could work at their choice for any one who chose to avail himself of their services. There was regularity of
employment of the labourers employed by the petitioner company''s factory, which was hardly consistent with the theoretical possibility of the
beedi roller taking up work of beedi rolling at his choice and at his pleasure. There was material in this case on which the Tribunal could rest its
conclusion, that the time of the beedi roller who worked in the factories of the petitioner company was in reality at the disposal of the company,
and that the company exercised such control and supervision, over the work of beedi rolling in the factory as it called for.
There was thus no error in the decision of the Tribunal on the jurisdictional issue, whether the beedi rollers were workmen within the meaning
of Section 2(s) of the Act.
The next question is, was the exercise of the jurisdiction, which the Tribunal had to adjudicate upon the industrial dispute between the petitioner
company and its workmen, vitiated.
The learned counsel for the petitioner company urged that the Tribunal really failed to consider the relevant factor, the financial capacity of the
petitioner company to pay any additional remuneration for the services rendered by the beedi rollers. The increase in this case, it should be
remembered, was from Rs. 1-4-0 per thousand beedis to Rs. 1-8-0. The learned counsel urged that the approach to the question itself was
vitiated when the Tribunal recorded ""In the present case no controversy was raised in regard to the capacity of the industry to pay.
The learned Judge who presided over the Tribunal was apparently concerned at that stage with the industry of beedi manufacture as such, and not
with any individual manufacturer like the petitioner-company engaged in that industry. The Tribunal next proceeded to consider the evidence that
was placed before it by the petitioner company in support of its contention, that any increase in the remuneration to the beedi rollers would be
beyond its financial capacity. The Tribunal recorded:
But the learned counsel contended that as shown in the annexures to the counter statement filed by the management, they are able to make a profit
of only 2 annas 10 pies per 1000 beedis so that the margin of profit would not admit of any further increase.
I am unable to accept the contention of the learned counsel for the petitioner, that the Tribunal was under the impression that the capacity of the
petitioner to pay any more as remuneration to the beedi worker was not in controversy. That question was specifically considered and decided by
the Tribunal.
The further contention of the learned counsel for the petitioner, however, appears to be wellfounded. In the course of the enquiry before the
Tribunal, the Management filed certain statements which purported to be abstracts from its regularly maintained accounts, abstracts, prepared by
an Income Tax practitioner. On that basis a calculation memorandum was also prepared and submitted to the tribunal. The tribunal observed:
But that statement is not signed by any Chartered Accountant or Auditor, but purports to be signed by an Income Tax practitioner. There is
therefore no guarantee as to the correctness of the figures mentioned in that statement. In other words, I am not convinced that the calculation in
the said annexure is correct and that the management is making a profit of only Re. 0-2-10 and not more for every thousand.
The real complaint of the petitioner''s learned counsel was that in the proceedings before the Tribunal the petitioner had not been given a real and
effective opportunity to establish its case, that any further increase beyond Re. 1-4-0 per thousand beedis was beyond the financial capacity of the
company to pay. The Tribunal, it should be remembered, declined to accept as correct the statements of accounts filed by the company. In
paragraph 5 of the petitioners affidavit, after referring to the fact that the statements of accounts were filed before the Tribunal on 9-10-1957, it
was averred:
On 10-10-1957, I was to be examined. Huge accounts books of the petitioner company scrutinised and accepted by the Income Tax department
were brought by taxi from Ramnet for the purpose of being filed and marked to be proved by me as regards the correctness of the statement filed.
The tribunal told counsel for the petitioner company that it was not necessary to file the account books in view of the fact that a statement culled
from the accounts had already been filed by the petitioner company. The correctness or authenticity of the statement of accounts was not
challenged by the first respondent at any time.
No counter affidavit was filed on behalf of the Tribunal. But then the Tribunal itself does not normally enter into the controversy at such a stage of
the proceedings, and I therefore attach no importance to the fact that no counter affidavit was filed on behalf of the Tribunal traversing the
allegations set out above, The records of the Tribunal gave no indication whether the petitioner''s counsel had sought an opportunity to tender in
evidence the original account books themselves, and whether the petitioner''s counsel was told that the original books of accounts themselves were
unnecessary.
Nor is there anything in the record to show that either the authenticity of the original books of accounts or that of the statements prepared from
those accounts was specifically challenged by the Union. In paragraph 5 of the counter-affidavit filed on behalf of the Union, the first respondent, in
the proceedings before me, it was not denied that the account books had been brought to the Tribunal as claimed by the petitioner. All that was
stated was-
I am not aware of the taxi load of accounts said to have been brought from Ranipet.
The further averments in paragraph 5 of the counter affidavit filed on behalf of the first respondent were:
The above statement was purported to be signed by some Income Tax practitioner. The petitioner did not have it marked and filed through any
witness. If he had done so, it would have been subject to cross-examination. Instead he merely gave it to the Tribunal. He brought an account
book or two and showed it to the Tribunal and when the Tribunal did not appear to be impressed by it, he did not file them and have them marked
as evidence. He gave up all attempts at pressing his account and instead contended himself with the mere abstract.....
That the statements of accounts filed by the petitioner before the Tribunal were relied upon by the petitioner should be obvious. In paragraph 5 of
the counter-affidavit filed on behalf of the first respondent there was a further averment, ""I objected to the abstract as incorrect and as a deliberate
attempt to present a false picture."" As I pointed out, the records of the Tribunal did not bear out the truth of this claim, that objection had been
taken that the statements had not Been correctly prepared.
When M. W. 1 was examined for the management, he was asked: ""You have given the cost of production as an annexure to the statement.
Are the figures correct?"" His answer was ""Yes."" Subsequently he was put some further questions about the details of the cost of manufacture as
shown in the accounts. As the learned counsel for the petitioner pointed out, there was no real cross-examination with reference to these details of
the evidence of M. W. 1. When W. W. 1 was examined on behalf of the Union, specific questions were put in cross-examination, obviously to
sustain the claim of the petitioner, that the details given in the statements of accounts filed by the petitioner-company relating to the cost of
manufacture were correct. I find it difficult to accept as correct what was averred in paragraph 5 of the counter affidavit filed on behalf of the
respondent.
It was certainly within the jurisdiction of, the Tribunal to assess the evidentiary value of the statements of accounts filed by the petitioner, and it
was equally within the jurisdiction of the Tribunal to decline to accept those statements, either because they had not been certified by a Chartered
Accountant, or because the original books of accounts themselves had not been produced.
There is nothing apparent on the record to indicate that the Tribunal called upon the petitioner-company to produce its primary books of accounts
to verify if at least the statements of accounts had been correctly prepared, apart from the question, whether the entries in the account books were
true or not. It is nothing unusual to produce statements of accounts of this kind at least for convenience of reference. It such statements have to be
rejected, it seems only reasonable first to give an opportunity to the company to produce its books of accounts themselves and to examine them.
Such an opportunity does not appear to have been given.
The further contention of the company was that such an opportunity was sought and was in effect denied, because the Tribunal said that as the
statements of accounts had been filed, the production of the original books of account themselves were not necessary. As between the averments
in paragraph 5 of the affidavit of the petitioner and those in parargaph 5 of the counter affidavit filed On behalf of the first respondent, I am
prepared to accept as substantially correct what the petitioner stated. Even in paragraph 5 of the counter affidavit filed on behalf of the first
respondent, there was reference to the production of some accounts. Even that was not referred to in the award,
In the circumstances of the case which I have set out above, the contention of the petitioner is well founded, that in the proceedings before the
Tribunal the company was not given an opportunity it was entitled to, to place all the material on record to sustain its claim, that it was beyond its
financial capacity to pay anything more, than He. 1-4-0 per thousand beedis. I regret the necessity to record that the implied finding of the
Tribunal, that a further increase of four anas per 1000 beedis was well within the financial capacity of the petitioner company to pay, was vitiated
by the failure of the Tribunal to accord what the petitioner was entitled to, the right to place all the relevant material on record before the Tribunal
decided the question of the financial capacity of the petitioner company.
It is on this narrow basis that I feel compelled to set aside the award of the Tribunal, which in effect means that the question of the quantum of
increase, if any, will have to be decided afresh and as incidental thereto, the question of the petitioner''s capacity to pay will have to be decided
afresh as one of the relevant factors to be taken into account.
The petition is allowed and the rule is made absolute. A writ of certiorari will issue to set aside the award of the Industrial Tribunal in I. D. No.
16 of 1957. There will be no order as to costs.