http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: GODAVARI SUGAR MILLS LTD.

       Vs.

RESPONDENT: KEPARGAON TALUKA SAKHAR KAMGARSABHA, SAKARWADI

DATE OF JUDGMENT: 16/12/1960

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. GUPTA, K.C. DAS

CITATION:  1961 AIR 1016            1961 SCR  (3) 342

ACT: Industrial  Dispute-System of contract labour-Abolitions  by Industrial  Court--Jurisdiction-If violative  of  employer’s fundamental  right  to carry on  business-Bombay  Industrial Relations Act, 1947(11 of 1947), ss. 3(18), 42(2), 73A, Item (2) SCh.  11, Item (6)   Sch.   III--Constitution of  India, Art. 19(1)(g).

HEADNOTE: A dispute having arisen between the appellant-employer and its  workmen regarding the employment of contract labour  in the  appellant’s mills, the union representing  the  workmen which  is the respondent in the present case  after  serving notice  on  the  appellant  under s.  42(2)  of  the  Bombay Industrial  Relations Act made reference to  the  Industrial Court under S. 73A of the Act demanding the abolition of the system  of employing contractors’ labour and  the  permanent increment  of employees in the respective departments.   The contention  of  the  appellant, inter  alia,  was  that  the Industrial  Court had no jurisdiction to decide the  dispute which  was  within the exclusive jurisdiction  of  a  Labour Court  under item (6) of Sch.  III of the Act, and that  any award  directing  the  abolition of  contract  labour  would contravene  the  appellant’s fundamental right to  carry  on business  under  Art.  19(1)(g) of  the  Constitution.   The Industrial  Court  decided that the Industrial  Court  would have  jurisdiction as the matter was covered by item (2)  of Sch.  11 of the Act and that there was no  contravention  of the  fundamental  rights of the appellants.  On  appeal  the Labour  Appellate Tribunal, held, that the Industrial  Court had  jurisdiction to decide the matter although it  was  not covered  by item (2) of Sch. 11 of the Act.  As regards  the question  of contravention of the fundamental right it  held that  the  question  whether  the  restriction  imposed  was reasonable  depended  upon the facts of each  case  and  the matter  was  outside  the  powers  of  a  court  of  appeal. Eventually it set aside the entire award on the merits.   On appeal ’by the appellant by special leave, Held,  that  the Industrial Court had jurisdiction  to  deal with the matter. Whatever might be the ambit of the word "employment" used in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

item  (6) of Sch.  III, if a matter was covered by Sch.   11 it  could only be referred to the Industrial Court under  s. 73A.   A  question  relating to the  abolition  of  contract labour  inevitably  raised  a dispute  relating  to  matters contained in items (2), (9) and (10)    of Sch.  11, namely, permanent increase in the number of 343 persons  employed, the employees’ wages, hours of  work  and rest intervals and could, therefore, be referred only to  an Industrial Court. The  power given to the Industrial Court which was a  quasi- judicial  tribunal to decide whether contract labour  should be    abolished  or not would  not  make  the  definition of "industrial  " matter" in so far as it referred to the  mode of   employment  an  S.  unreasonable  restriction  on   the fundamental right of the employer to carry on his trade  and as such there was no contravention of his fundamental  right by  providing  in  S.  3(18)  that  an  "industrial  matter" included also the mode of employment of the employees.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 352 of 1958. Appeal  by special leave from the judgment and  order  dated July  27, 1956, of the Labour Appellate Tribunal  of  India, Bombay, in Appeal (Bom.) No. 72 of 1956. G....S. Pathak, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the appellant. D....S.  Nargoulkar and K. R. Choudhuri, for the  respondent No. 1. B. P. Maheshwari, for the Interveners. 1960.  December 16.  The Judgment of the Court was delivered by WANCHOO,  J.-This  is  an  appeal by  special  leave  in  an industrial  matter.   The appellant owns  two  sugar  mills. There  was a dispute between the appellant and  its  workmen with respect to the employment of contract labour in the two mills.  Consequently, a notice of change under S. 42 (2)  of the  Bombay  Industrial  Relations  Act,  No.  XI  of  1947, (hereinafter  called the Act) was given to the appellant  by the union re. presenting the workmen.  Thereafter the union, which  is  the respondent in the present  appeal,  made  two references to the industrial court, one with respect to each mill,  under s. 73A of the Act, and the main demand  in  the references  was that "the system of  employing  contractors’ labour should be abolished and the strength of the employees of   the  respective  departments  should   be   permanently increased sufficiently 344 and accordingly".  The appellant raised two main contentions before the industrial court, namely, (i) that the industrial court  had  no  jurisdiction to decide the  dispute  as  the matter  was  covered by item (6) of Sch.   III  of  the Act, which  is  within  the exclusive jurisdiction  of  a  labour court;  and  (ii)  that any  award  directing  abolition  of contract  labour would contravene the fundamental  right  of the  appellant to carry on business under Art.  19(1)(g)  of the Constitution. The  industrial  court decided both the points  against  the appellant; on the question of jurisdiction it held that  the matter  was  covered by item (2) of Sch. 11 of the  Act  and therefore the industrial court would have jurisdiction,  and on the second point it held that there was no  contravention of  the fundamental right conferred on the  appellant  under

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

Art.  19(1)(g).  It may be mentioned that the  second  point arose  on the stand taken by the appellant that the  workmen of  the contractors were not the workmen of  the  appellant. The industrial court then dealt with the merits of the  case and  passed  certain orders, with which we are  however  not concerned in the present appeal. It  may  be mentioned that there were cases  relating  to  a number of other sugar mills raising the same points, which were  decided at the same time by the industrial court.   In consequence,  there were a number of appeals to  the  Labour Appellate Tribunal by the mills and one by one of the unions (though  not  by the respondent-union).  All  these  appeals were  heard together by the appellate tribunal,  where  also the  same  two points relating to jurisdiction  and  contra- vention of the fundamental right guaranteed by Art. 19(1)(g) were raised.  The Appellate Tribunal did not agree with  the industrial  court that the references were covered  by  item (2) of Sch. 11 to the Act.  It, however, held that the  word "employment"  in item (6) of Sch.  III to the Act had to  be given  a restricted meaning.  It pointed out that the  three Schedules did not exhaust the comprehensive provisions of s. 42(2)  and  the  subject-matter  of  dispute,  namely,   the abolition of contract labour was a question of far  reaching and important change which could not have 345 been intended to be dealt with in a summary way by a  labour court,  which  is  the lowest in  the  hierarchy  of  courts established  under  the  Act.  It therefore  held  that  the industrial court had jurisdiction to decide the matter.   On the question of contravention of the, fundamental right, the appellate  tribunal took the view that the question  whether the  restriction  imposed was reasonable depended  upon  the facts  of each case and therefore was a matter  outside  its power as a court of appeal It then considered the merits  of the  matter and came to the conclusion that the approach  of the  industrial court to the questions raised before it  was not  correct and therefore it found it difficult to  support the  award.  Eventually it set aside the award and  remanded the   matter  for  early  hearing  in  the  light   of   the observations  made by it.  Further, it decided that  in  the interest  of justice the entire award should be  set  aside, even  though there was no appeal before it by the unions  in most  of the cases.  The appellant then came to  this  Court and  was granted special leave; and that is how  the  matter has come up before us. Mr.  Pathak on behalf of the appellant has raised  the  same two points before us.  We shall first deal with the question of  jurisdiction.  Reliance in this connection is placed  on item (6) of Sch.  III of the Act, which is in these terms:- "Employment including- (i)  reinstatement and recruitment; (ii) unemployment  of  persons previously  employed  in  the industry concerned." It is not in dispute that matters contained in Sch.  III are within the jurisdiction of a labour court and an  industrial court  has  no  jurisdiction  to  decide  any  matter  in  a reference  under  s.  73A of the Act  which  is  within  the jurisdiction  of a labour court.  Mr. Pathak  contends  that item (6) of Sch.  III speaks of "employment" and includes in it  two matters which might otherwise not have been  thought to  be  included  in  it.   Therefore,  according  to   him, employment as used in item (6) is wider than the two matters included in it 44 346

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

and the question whether contract labour should be  employed or not would be a matter of employment within the meaning of that  word  in  item (6) of Sch. 111.  We do  not  think  it necessary for purposes of this appeal to consider what would be the ambit of employment as used in item (6) of Sch.  111. The  scheme  of the Act shows that under ss. 71 and  72  the jurisdiction  of a labour court and an industrial  court  is concurrent  with  respect  to any matters  which  the  State Government  may deem fit to refer to them; but under s.  73A reference by a registered union which is a representative of employees  and which is also an approved union, can only  be made to an industrial court, subject to the proviso that  no such  dispute can be referred to an industrial  court  where under  the  provisions  of  the Act it  is  required  to  be referred  to the labour court for its decision.  Sec. 78  of the  Act  provides  for jurisdiction of  labour  courts  and matters specified in Sch.  11 are not within their  ordinary jurisdiction.  Therefore, when a registered union wishes  to refer  any matter which is contained in Sch.  11 of the  Act such  reference  can be made by it only  to  the  industrial court.   It follows in consequence that whatever may be  the ambit  of  the word "employment" used in item  (6)  of  Sch. III,  if  any matter is covered by Sch. 11 it  can  only  be referred  to  the industrial court under s.  73A.   Now  the question whether contract labour should be abolished (on the assumption that contract labour is not in the employ of  the mills)  immediately raises questions relating  to  permanent increase  in  the number of persons  employed,  their  wages including the period and mode of payment, hours of work  and rest  intervals, which are items (2), (9) and (10)  of  Sch. 11.  Therefore, a question relating to abolition of contract labour  is  so inextricably mixed up with  the  question  of permanent increase in the number of persons employed,  their wages,  hours  of work and rest intervals that  any  dispute relating to contract labour would inevitably raise questions covered  by  Sch.  11.  Therefore,  a  dispute  relating  to contract  labour if it is to be referred under s. 73A  by  a registered union can only be referred to an industrial court as it immediately 347 raises matters contained in items (2), (9) and (10) of  Sch. 11.   Mr.  Pathak  urges however that  matters  relating  to permanent increase in the number of persons employed due  to the abolition of contract labour, their wages, hours of work and  rest intervals were not really disputed at all  by  the appellant.  It appears that in the written-statements of the appellant, these points were not raised; but the decision of the  appellate  tribunal shows that one of  the  contentions raised  before  it by the sugar-mills was that  the  workmen concerned were not employees of the sugar mills.  Therefore, as  soon  as  this  contention is raised  a  dispute  as  to permanent increase in the number of persons employed,  their wages,  hours of work and rest intervals  would  immediately arise.   It must therefore be held that a question  relating to  the  abolition of contract labour  inevitably  raises  a dispute with respect to these three items contained in  Sch. 11.   In  the  circumstances  we are  of  opinion  that  the industrial  court had jurisdiction to deal with the  matter. In particular, we may point out that in their petitions  the unions had raised at least the question as to the  permanent increase  in the number of persons employed and  that  would immediately  bring in item (2) of Sch.  11. It is true  that the question of permanent increase in the number of  persons employed,  their  wages, hours of work  and  rest  intervals would only arise if contract labour is to be abolished;  but

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

in  our opinion these are matters so inextricably  mixed  up with  the question relating to abolition of contract  labour that they must be held to be in dispute as soon as the  dis- pute  is  raised  about the abolition  of  contract  labour, (assuming always that the employer does not accept  contract labour  as part of its labour force).  The contention  about jurisdiction must therefore be rejected. This  brings  us  to the second  contention  raised  by  Mr. Pathak.   He bases his argument in this behalf on s.  3(18), which defines an " industrial matter " as meaning any matter relating   to  employment,  work,  wages,  hours  of   work, privileges,  rights or duties of employers or employees,  or the mode, terms and 348 conditions  of  employment.   Mr.  Pathak  urges  that   the definition   of  "  industrial  matter  "  contravenes   the fundamental  right guaranteed under Art. 19(1)(g),  when  it provides that the mode of employment is also included within it.   Reference  is also made to s. 3(17) which  defines  an "industrial  dispute" as any dispute or difference which  is connected with any industrial matter.  Mr. Pathak  therefore urges   that  reading  the  two  definitions  together   the industrial court is given the power to decide disputes as to the mode of employment and that contravenes the  fundamental right  guaranteed  under Art. 19(1)(g), for  it  enables  an industrial court to adjudicate on the mode of employment and thus  interfere with the right of the employer to  carry  on his  trade as he likes subject to  reasonable  restrictions. Now  assuming that the mode of employment used in  s.  3(18) includes such questions as abolition of contract labour, the question would still be whether a provision which enables an industrial court to adjudicate on the question whether  con- tract  labour  should  or  should not  be  abolished  is  an unreasonable restriction on the employer’s right to carry on his  trade.  We cannot see how the fact that power is  given to the industrial court, which is a quasi-judicial  tribunal to decide whether contract labour should be abolished or not would  make the definition of "industrial matter" in so  far as  it  refers to the mode of  employment,  an  unreasonable restriction  on  the fundamental, right of the  employer  to carry  on  trade.  The matter being entrusted  to  a  quasi- judicial tribunal would be decided after giving both parties full   opportunity  of  presenting  their  case  and   after considering  whether  in the circumstances of  a  particular case  the  restriction  on  the  mode  of  employment  is  a reasonable restriction or not.  The tribunal would always go into the reasonableness of the matter and if it comes to the conclusion that the mode of employment desired by labour  is not  reasonable  it will not allow it; it is  only  when  it comes to the conclusion that the mode of employment  desired by labour in a particular case is a reasonable restriction 349 that  it will insist on that particular mode  of  employment being used.  Take, for example, the case of contract  labour itself.   The  tribunal will have to go into the  facts  of each case.  If it comes to the conclusion that on the  facts the  employment  of contract labour is reasonable  and  thus doing  away with it would be an unreasonable restriction  on the right of the employer to carry on trade, it will  permit contract  labour to be carried on.  On the other hand if  it comes  to the conclusion that employment of contract  labour is  unreasonable in the circumstances of the case before  it it  will hold that it should be abolished, the reason  being that its abolition would be a reasonable restriction in  the circumstances.   Therefore the decision whether the mode  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

employment in a particular case is a reasonable  restriction or  unreasonable  one is in the hands  of  a  quasi-judicial tribunal.   In the circumstances it cannot be said  that  by providing  in s. 3(18) that an "industrial matter"  includes also  the mode of employment, there is any contravention  of the fundamental right of the employer to carry on trade.  If the argument on behalf of the appellant were to be  accepted it  would  mean that judicial and  quasi-judicial  decisions could be unreasonable restrictions on fundamental rights and this  the  Constitution does not envisage at  all.   We  are therefore of opinion that this contention also fails. Finally,  Mr.  Pathak draws our attention to ss.  3(13)  and 3(14)  of the Act and submits that the appellant never  said that  contract labour employed in its mills was not  in  its employment.   Sec.  3(13) defines the  word  "employee"  and includes in it any person employed by a contractor to do any work for him in the execution of a contract with an employer within  the meaning of sub-cl. (e) of cl. (14).  Sec.  3(14) defines  the word "employer" in an inclusive manner and  in- cludes "where the owner of any undertaking in the course  of or  for the purpose of conducting the undertaking  contracts with any person for the execution by or under the contractor of  the  whole or any part of any work which  is  ordinarily part of the undertaking, the owner of the undertaking".   It is urged that in view 350 of  these definitions, the employees of the contractors  are the  employees of the mills and the mills are the  employers of  these  employees  of the  contractors.   Therefore,  Mr. Pathak  urges  that  there is no  necessity    of abolishing contract labour and that the industrial court may, if it  so chooses,  give  the same wages and hours of  work  and  rest intervals  and other terms and conditions of  employment  to the  employees  of  the  contractors  as  are  provided  for comparable  direct  employees of the appellant and  in  such circumstances  it  would  not be necessary  to  abolish  the contract system so long as the employees of contractors  are to  be in the same position as the direct employees  of  the appellant as to their terms and conditions of service.  This was  not however the-manner in which the case was  contested before the industrial court or the appellate tribunal.   All that we need therefore say is that when the matter goes back before  the  industrial court as directed by  the  appellate tribunal,  the industrial court may take this submission  of the  appellant into account and may consider whether  it  is necessary  to  abolish  the contract  system,  provided  the appellant  is  able  to assure  the  industrial  court  that employees  of  the  contractors who are  deemed  to  be  its employees within the meaning of s. 3(13) and s. 3(14)  would have  the full benefit of the same terms and  conditions  of service as its comparable direct employees. The appeal fails and is hereby dismissed with costs. Appeal dismissed. 351