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CASE NO.: Appeal (civil)  658 of 2002

PETITIONER: Haldia Refinery Canteen Emps. Union & others

RESPONDENT: M/s. Indian Oil Corporation Ltd. & others

DATE OF JUDGMENT: 29/04/2005

BENCH: ASHOK BHAN & A.K. MATHUR

JUDGMENT: J U D G M E N T

BHAN, J.

       This appeal by grant of leave is directed  against the judgment dated 31.03.2000 passed  by the Division Bench of the High Court of  Calcutta at Calcutta in M.A.T. No.4310 of  1998.  By the impugned order the Division  Bench has set aside the judgment and order of  the Single Judge of the same High Court in  C.O. No.6266 (W) of 1990 with C.O. No.6274 (W)  of 1990.  The Single Judge had allowed the  writ application filed by the appellants and  directed the Indian Oil Corporation Limited,  Haldia Oil Refinary (hereinafter referred to  as "the respondent") to absorb the appellants  in its service and regularise their services.   Division Bench has set aside the aforesaid  direction given by the learned Single Judge  and held that the appellants were neither  entitled to be absorbed nor regularised in the  service of the respondent.

       Short facts of the case are as under:-

       Two sets of writ applications were filed  in the High Court of Calcutta involving common  question of law and fact, both of them were  taken up together by the Single Judge and  disposed of by the common judgment.   Admittedly, the appellants are working in the  statutory canteen run by the respondent  through contractor in its factory at Haldia,  District Midnapore, West Bengal. Respondent  was treating the appellants as the employees  of the contractor.  Aggrieved against this,  the appellants filed the writ applications in  the High Court contending therein that the  factory of the respondent where the workmen  are employed is governed by the provisions of  Indian Factories Act, 1948 (for short "the  Factories Act") and the canteen where the said  workman are employed is a statutory canteen  established by the respondent as required  under the provisions of the Act.  It is  averred in the petition that the canteen is  maintained for the benefit of the workmen  employed in the factory and the respondent has

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direct control over them. Contractor though  shown as a contractor has no control over the  management, administration and functioning of  the canteen.  That the canteen is a part of  the establishment of the management and the  workers in the canteen are the employees of  the management.  That the work carried on is  perennial in nature and the canteen is  incidental to and is connected with the  establishment of the management.  It was  contended that the appellants were the regular  employees of the respondent.  The management  had refused to grant the status of regular  employees to the appellants and treated them  as employees of the canteen contractor  contrary to the statutory provisions and  judicial pronouncements of this Court.  Writ  applications were filed seeking issuance of  mandamus to the respondent to absorb the  appellants in its service and to regularise  them as such.

       Respondents in their written statement  denied that the appellants were its employees  or they were entitled to be regularised as  such.  None of the appellants was appointed by  the respondents.  All of them were appointed  by the contractor and therefore, they were the  employees of the contractor.  Under the  Factories Act, a factory employing more than  250 workers is required to provide the  facility of a canteen.  The Factories Act or  the Rules framed thereunder do not require  that such a canteen should be managed and run  by regular employees of the establishment.  In  law it is open and permissible to the  management to entrust the same to a  contractor.  It was contended that the  respondent being a public sector undertaking  has devised and put in place rigid employment  strategies for its core activities based on  employment strengths derived on the basis of  production and output norms and requirement  studies. All recruitment by and within the  corporation is made strictly according to  those norms on the basis of staff strength and  quotas fixed for direct recruitment on the  basis of job qualifications, employment norms,  reservation of posts to be filled by internal  promotion pursuant to settlements arrived at  by the corporation with its recognised unions  and such employment can only be made against  existing vacancies.  It cannot appoint any  person in contravention of the recruitment  policy which requires the management to follow  the system.  Therefore, apart from the fact  that the appellants were not in regular  employment of the respondent, the absorption  or regularisation of their services would  contravene Article 16(4) of the Constitution  as well as the reservation policy which is  applicable for recruitment in the  establishment managed by it.    

The learned Single Judge before whom the

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writ applications came up for hearing relying  upon the two judgments of this Court in M.M.R.  Khan & Others Vs. Union of India & Others  [1990 (Supp) SCC 191] and   Parimal Chandra  Raha & Others Vs. Life Insurance Corporation  of India & Others  [1995 Supp (2) SCC 611]  held that under the provisions of the  Factories Act, it is the statutory obligation  of the employer to provide and maintain a  canteen for the use of its employees.  The  canteen becomes a part of the establishment  and, therefore, the workers employed in such  canteen are the employees of the management.   After referring to the various provisions  including the rules framed under the Factories  Act the learned Single Judge came to the  conclusion that the respondent exercises a  very high degree of control over the  contractor who has been given the contract of  running the canteen.  The obligation to  provide canteen being statutory the facility  became a part of service condition of the  employees.  It was held that the appellants  were in fact the employees of the respondent  and were being wrongly treated as employees of  the contractor.  Accordingly, a direction was  given to the respondents to absorb the  appellants in its service and regularise them  with effect from the date of filing of the  writ application.

Aggrieved against the judgment and order  of the Single Judge, the respondent-management  filed intra court appeal which has been  accepted.  The Division Bench relying upon a  later Three-Judge Bench judgment of this Court  in Indian Petrochemicals Corporation Ltd. &  Another Vs.  Shramik Sena & Others  [(1999) 6  SCC 439] reversed the judgment of the Single  Judge and dismissed the writ applications  filed by the appellants.  Aggrieved against  the aforesaid judgment of the Division Bench,  the present appeal has been filed.                  We have carefully considered the  submissions made by the learned counsels for  the parties.  In Indian Petrochemicals  Corporation Ltd. & Another (supra) this Court  while disposing of an identical and similar  question of law and fact with regard to the  status of the employees working in the canteen  and the status of the contractor who was  running the canteen on the contract basis  elaborately dealt with the scope of Section 46  of the Factories Act, 1948, particularly with  reference to the definition of ’worker’ as  occurring in Section 2(1) of the Factories  Act.  After elaborate analysis of the earlier  two judgments of this Court in M.M.R. Khan &  Others and   Parimal Chandra Raha & Others   cases (supra), it was held that what has been  held in these cases is that the workmen were  the employees of the management for the  purposes of Factories Act alone and did not  become the employees of the establishment for

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any other purpose.  After referring the  arguments advanced it was held:-

"If the argument of the workmen in  regard to the interpretation of  ’Raha’ case is to be accepted then  the same would run counter to the  law laid down by a larger Bench of  this Court in Khan case.  On this  point similar is the view of  another three-Judge Bench of this  Court in the case of Reserve Bank  of India v. Workmen.  Therefore,  following the judgment of this  Court in the cases of Khan and  R.B.I., we hold that the workmen  of a statutory canteen would be  the workmen of the establishment  for the purpose of the Factories  Act only and not for all other  purposes."                                         [Emphasis supplied]

Further it was observed:-

"It is clear from this definition  that a person employed either  directly or by or through any  contractor in a place where  manufacturing process is carried  on, is a "workman" for the purpose  of this Act.  Section 46 of the  Act empowers the State Government  to make rules requiring any  specified factory wherein more  than 250 workers are ordinarily  employed to provide and maintain a  canteen by the occupier for the  use of the workers.  It is not in  dispute, pursuant to this  requirement of law, the Management  has been providing canteen  facilities wherein the respondent  employees are working.  Hence, it  is fairly conceded by the learned  counsel for the Management that  the respondent workmen by virtue  of the definition of the "workman"  under the Act, are the employees  of the appellant Management for  purposes of the Act."

After having gone into the question of  worker being declared the employee of the  management for the purpose of Factories Act,  the Court further analysed the question as to  whether such relationship as existed between  the worker and the employer under the  Factories Act could be extended to wider  arenas.  It was held that the status of a  workman under the Factories Act confine the  relationship of employer and the employees to  the requirements of Factories Act alone and

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does not extend for any other purpose.  It was  observed as under:-

"The question however is: does  this status of a workman under the  Factories Act confine the  relationship of the employer and  the employees to the requirements  of the Factories Act alone or does  this definition extend for all  other purposes which include  continuity of service, seniority,  pension and other benefits which a  regular employee enjoys.  The  Factories Act does not govern the  rights of employees with reference  to recruitment, seniority,  promotion, retirement benefits  etc.  These are governed by other  statutes, rules, contracts or  policies.  Therefore, the  workmen’s contention that  employees of a statutory canteen  ipso facto become the employees of  the establishment for all purposes  cannot be accepted."

                                       [Emphasis supplied]

After having declared in unequivocal terms  the employees working in the canteen can be  treated as the employees of the principal  employer only for the limited purposes of the  Factories Act, the Court went on to examine  further as to whether on the basis of material  present on the record, the employees could be  treated as the employees of the principal  employer for all/any other purpose.  After  noticing the fact that the employees in the  said case were entitled to continue in the  employment of the company irrespective of the  change in the contractor in view of an order  passed by the Industrial Court and the fact  that the management was reimbursing the wages  of the canteen workers and certain other  peculiar features of the case came to the  conclusion that the respondents in that case  were in   fact the workmen of the management.   These factors were summarised as:-

"(a)    The canteen has been there since the  inception of the appellant’s factory.

(b)     The workmen have been employed for  long years and despite a change of  contractors the workers have continued  to be employed in the canteen.

(c)     The premises, furniture, fixture,  fuel, electricity, utensils etc. have  been provided for by the appellant.

(d)     The wages of the canteen workers have  to be reimbursed by the appellant.

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(e)     The supervision and control on the  canteen is exercised by the appellant  through its authorised officer, as can  be seen from the various clauses of  the contract between the appellant and  the contractor.

(f)     The contractor is nothing but an agent  or a manager of the appellant, who  works completely under the  supervision, control and directions of  the appellant.

(g)     The workmen have the protection of  continuous employment in the  establishment."

Considering these factors cumulatively in  addition to the fact that the canteen in the  establishment of the management is a statutory  canteen the workmen were held to be the  employees of the management.  On the question  of fact it was concluded that the contractor  in that case was engaged only for the purpose  of record and for all other purposes the  workers were in fact the workmen of the  management.  It was observed in para 27 as  under:-

"At this stage, it is necessary to  note another argument of Mr.  Andhyarujina that in view of the  fact that there is no abolition of  contract labour in the canteen of  the appellant’s establishment, it  is open to the Management to  manage its canteen through a  contractor.  Hence, he contends  that by virtue of the contract  entered into by the Management  with the contractor, the  respondent workmen cannot be  treated as the employees of the  Management.  This argument would  have had some substance if in  reality the Management had engaged  a contractor who was wholly  independent of the Management, but  we have come to the conclusion on  facts that the contractor in the  present case is engaged only for  the purpose of record and for all  purposes the workmen in this case  are in fact the workmen of the  Management.  In the background of  this finding, the last argument of  Mr. Andhyarujina should also  fail."

The Division Bench with reference to the  facts of the present case came to the

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conclusion that the appellants were not the  employees of the management.

During the course of hearing, the learned  advocates on both the sides extensively  referred  to the terms and conditions of the  contract between the canteen contractor and  the respondent and also to the various  statutory provisions of the Factories Act and  the rules framed thereunder to point out their  respective points of view about the nature of  the contract and as to whether the canteen is  run by the contractor in his capacity and  status of a contractor or that the contractor  was merely an agent or servant of the  respondent and was functioning merely for the  sake of record.

We have gone through the terms and  conditions of the contract agreement entered  between the parties and in particular the  following terms and conditions on which lot of  emphasis was laid by the counsel for the  appellant to show the extent of control  exercised by the management over the  contractor in the running of the canteen:-

"5. CATERING STAFF:

5.1     The contractor shall at his cost  maintain adequate number of catering  staff such as Cooks, helpers, service  boys, sweepers and other persons for  smooth and efficient running of the  canteen services.  The contractor  shall engage required number of  persons in the canteen with the  explicit permission/approval of the  Owner.  

5.2     The present man power in the canteen  is 119 covering all categories of  personnel as mentioned below: However, if at any time it is decided  to increase or decrease the manpower,  the  contractor shall get  proportionate increase or decrease of  monetary compensation in this respect  provided such increase or decrease in  the manpower should be done only with  the express approval of the owner.  If  any manpower is added without approval  of the Owner, it will be at the cost  of the contractor and no liability for  compensation whatsoever shall accrue  on the Owner for such act/acts.  No  person below the age of 18 years or  found to be medically unfit, will be  allowed employment in the canteen.   Also if, at any time, any canteen  employee is found involved in moral  turpitude in any court of law, the  services of such canteen employee will  be immediately terminated by the

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Contractor and no liability for  compensation whatsoever will accrue on  the owner for such act/acts.

5.3     The contractor shall maintain a  register showing names and addresses  of the persons so engaged along with  photographs of each person and shall  produce the same for inspection on  demand by Welfare Officer or such  other person so authorised by the  owner.  The contractor shall not use  or allow to be authorised to be used  canteen building or any part thereof  for dwelling purpose and shall not  allow any outsiders to loiter in or  around the canteen without valid  authority."  

With regard to the nature of employment of  the employees working in the canteen,  stipulation at S.No.4.6 reads thus:-

"4.6 The contractor, shall be  required to employ/engage only  that  member of employees/workers  as may be specifically authorised  by the owner from time to time and  shall maintain complete records of  such employees/workers with regard  to their names, address,  qualifications, experience and  other required details.  The owner  shall have absolute right to test,  interview of otherwise assess or  determine skills, knowledge  proficiency, capability etc. so as  to ensure that such  employees/workers are competent,  qualified or otherwise suitable  for efficiently and safely  performing the work covered by  this contract.  Any  employee/worker rejected not  authorised by the owner shall not  be employed/engaged by the  contractor on the work covered by  this contract."

No doubt, the respondent management does  exercise effective control over the contractor  on certain matters in regard to the running of  the canteen but such control is being  exercised to ensure that the canteen is run in  an efficient manner and to provide wholesome  and healthy food to the workmen of the  establishment.  This however does not mean  that the employees working in the canteen have  become the employees of the management.   

A free hand has been given to the  contractor with regard to the engagement of

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the employees working in the canteen.  There  is no clause in the agreement stipulating that  the canteen contractor unlike in the case of  Indian Petrochemicals Corporation Ltd. &  Another (supra) shall retain and engage  compulsorily the employees who were already  working in the canteen under the previous  contractor.  There is no stipulation of the  contract that the employees working in the  canteen at the time of the commencement of the  contract must be retained by the contractor.   The management unlike in Indian Petrochemicals  Corporation Ltd. case (supra) is not  reimbursing the wages of the workmen engaged  in the canteen.  Rather the contractor has  been made liable to pay provident fund  contribution, leave salary, medical benefits  to his employees and to observe statutory  working hours.  The contractor has also been  made responsible for the proper maintenance of  registers, records and accounts so far as  compliance of any statutory  provisions/obligations are concerned.  A duty  has been cast on the contractor to keep proper  records pertaining to payment of wages etc.  and also for depositing the provident fund  contributions with authorities concerned.   Contractor has been made liable to defend,  indemnify and hold harmless the employer from  any liability or penalty which may be imposed  by the Central, State or local authorities by  reason of any violation by the contractor of  such laws, regulations and also from all  claims, suits or proceedings that may be  brought against the management arising under  or incidental to or by reason of the work  provided/assigned under the contract brought  by employees of the contractor, third party or  by Central or State Government Authorities.   

The management has kept with it the right  to test, interview or otherwise assess or  determine the quality of the employees/workers  with regard to their level of skills,  knowledge, proficiency, capability etc. so as  to ensure that the employees/workers are  competent and qualified and suitable for  efficient performance of the work covered  under the contract.  This control has been  kept by the management to keep a check over  the quality of service provided to its  employees.  It has nothing to do with either  the appointment or taking disciplinary action  or dismissal or removal from service of the  workmen working in the canteen.  Only because  the management exercises such control does not  mean that the employees working in the canteen  are the employee of the management.  Such  supervisory control is being exercised by the  management to ensure that the workers employed  are well qualified and capable of rendering  the proper service to the employees of the  management.  

In Indian Petrochemicals Corporation Ltd.

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(supra) this Court after analysing the earlier  judgments on the same point has held that the  workmen working in the canteen becomes the  workers of the establishment for the purposes  of Factories Act only and not for any other  purpose.  They do not become the employees of  the management for any other purpose entitling  them for absorption into the service of the  principal employer.  Factors which persuaded  this Court in Indian Petrochemicals  Corporation Ltd. case (supra) to take the view  that the workmen in that case were employees  of the management are missing in the present  case.   No power vests in the management  either to make the appointment or to take  disciplinary action against the erring workmen  and their dismissal or removal from service.   The management is not reimbursing to the  contractor the wages of the workmen.  On these  facts, it cannot be concluded that the  contractor was nothing but an agent or a  manager of the respondent working completely  under the supervision and control of the  management.  

Another fact which goes to show that the  appellants are the employees of the canteen  contractor is that a settlement was arrived at  between the contractor and the workmen of the  canteen in the presence of Assistant Labour  Commissioner of the area which was valid for  the period from 01.12.1987 to 30.11.1990  wherein certain terms and conditions were  agreed upon between these parties with regard  to some labour issues relating to the workmen  employed by the contractor.  Another  settlement between the same parties was also  arrived at which was valid upto 01.12.1993  concerning once again the labour issues  between the workmen and the contractor.   Respondent-management was not a party to  either of these two settlements.  This clearly  goes to show that the workmen were treating  themselves to be the employees of the  contractor and not that of the management.

For the reasons stated above, we agree  with the view taken by the Division Bench that  the appellants did not become the workers of  the management for a purpose other than the  Factories Act.  We do not find any merit in  this appeal and dismiss the same with no  orders as to costs.