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PETITIONER: WORKMEN OF THE FOOD CORPORATION OF INDlA

       Vs.

RESPONDENT: M/S. FOOD CORPORATION OF INDIA

DATE OF JUDGMENT28/02/1985

BENCH: DESAI, D.A. BENCH: DESAI, D.A. ERADI, V. BALAKRISHNA (J) KHALID, V. (J)

CITATION:  1985 AIR  670            1985 SCR  (2)1065  1985 SCC  (2) 136        1985 SCALE  (1)344

ACT:       Industrial Disputes Act, 1947, sec. 9A-Contract System abolished-Introduction of  direct payment  system effect  of whether     introduction  of  contract  systems  amounts  to discharge, termination of service or retrenchment of workmen - whether  notice u/s  9A is  a condition  precedent to such change-Effect of non- issuance of such notice.

HEADNOTE:       There were 464 workmen designated as handling Mazdoors for handling  foodgrains at  Siliguri Depot  set up  by  the respondent-Food Corporation  of India  in West Bengal. Prior to January  2, 1973,  the work of handling foodgrains at the said depot  was entrusted  by the respondent to a contractor who used  to engage  workmen and  the workmen received their salaries or    wages or  remuneration from the contractor as determined by  the  contractor  or  as  agreed  between  the Contractor and the workmen. The respondent introduced direct payment system  with effect from January 2, 1973 pursuant to an  agreement   arrived  at  between  the  parties  and  the intermediary   contractor disappeared  from the picture. The method adopted  was that  the bills for the piece rate wages payable to  handling Mazdoors  were prepared  by  the  Depot staff. The  work rendered  by each workmen had to be entered into a  muster  roll  register.  The  respondent-Corporation distributed the  wages calculated  on  piece  rate  to  each workman  through   Sardars/Mondals  and   each  workman  was required to  be a  party  to  the  acquittance  roll  to  be retained by  the respondent.  The Sardars  Mondals  used  to accept payment  and sign  bills on  behalf of  the aforesaid workmen.  The  respondent  changed  this  method  of  direct payment with  effect from  March 10,  1975  superseding  the direct payment  system and  reintroducing contractor  system and that  too without  giving any  notice of  change to  the Workmen’s Union-appellant  herein as contemplated by section 9(A) of  the Industrial  Disputes Act  1947 (I.D.  Act,  for short) Consequently  the respondent  discontinued employment of the    aforesaid  464   workmen  and   brought   in   the intermediary contractor  and  treated  the  workmen  as  the workmen employed  by  the  contractor.  The  appellant-Union raised   an   industrial   dispute   as   to   whether   the

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discontinuance  of   employment  of  464  workers  of  their Siliguri Depot  w.e f.  21st July  1974 by the respondent is lawful and  justified and  the  same  was  referred  to  the tribunal which  negatived the  claim of  the appellant-union and held that the discontinuance of contractor system in the year 1973 and 1066 introduction a direct payment system did not bring about any change in the status of the workmen and therefore they never became the  workmen  of  the  respondent-Corporation.  As  a corollary,  it  further  held  that  reintroduction  of  the contractor system  in 1975 did not constitute discontinuance of the  services of  the affected workmen. Hence this appeal by special leave. The appellant-Union  contended  (i)  that  oven  though  the workmen    were initially engaged by the contractor when the work of  handling food  grains brought to Siliguri Depot was entrusted to  a contractor,  but subsequently  at least from April 1973, the intermediary contractor was removed and they became the  workmen directly employed by the Corporation and wore therefore,  the workmen  of the  respondent; and unless their services  were  legally  terminated,  they  cannot  be discontinued from service of the  Corporation  and some  other master imposed upon them. (ii) that  apart  from  being  an  unfair  labour  practice,  the changeover was  illegal  and  vindictive  and  malicious  in character and  that the respondent was legally bound to give a notice  of the  said change  to the  Union as contemplated u/s. 9A  of the I.D. Act. On the other hand, the respondent- Corporation argued  (i) that  even when the so called direct payment system was introduced after removing the contractor. it was  basically a  spill over  of the  old contract system save  and   accept  that  the  contractor  was  replaced  by Sardars/Mondals to whom total payment on piece rate was made and who distributed the wages to the individual workmen, the rate of  payment remaining  the same  as was in vogue at the time the  contractor handled  the work  and therefore  at no point of  time, the concerned workman ever became the direct workmen of  the Corporation  and no  question  of  giving  a notice of  change arose  as required  by section 9(A) of the I.D. Act       Allowing the appeal, ^              HELD:  (1) ’Workmen’  has been  defined in  the Industrial disputes  Act to  mean any  person (including  an apprentice)  employed   in  any  industry  to  do..  ".  The expression employed  has at least two known connotations but as used  in the  definition, the context would indicate that it is  used in  the sense of a relationship brought about by express or  implied 1’  contract of  service  in  which  the employee renders  service for  which he  is engaged  by  the employer and the latter agrees to pay him in cash or kind as agreed between  them or statutorily prescribed. It discloses a relationship  of  command  and  obedience.  The  essential condition of  a person  being a  workman within the terms of the definition  is that he should be employed to do the work in that  industry and  that there should be, in other words, an employment  of his  by the employer and that there should be a  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 term as     contained in the I.D. Act. [1075F-H; 1076A-B]        Dharangadhara   Chemical  Works   Ltd.  v.  State  of Saurashtra, [l957] SCR 152; referred to.

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1067       (2)  No employer  since the  introduction of  the I.D. Act, 1947 and A contrary to its Certified Standing Orders as statutorily required  to be  drawn up  under the  Industrial Employment (Standing Orders) Act, 1946 can dispense with the service of  any workman  without complying  with the  law in force Any  termination of service contrary to the provisions of the  Standing orders  and the provisions of the I.D. Act, 1947 would be void. It is  not  necessary  to  call  in  aid precedents  to  substantiate  this  too  obvious  and  well- established  proposition.   Section   9A   also   makes   it obligatory     upon an  employer who  proposes to effect any change in  the  conditions  of  service  applicable  to  any workman in  respect of  any matter  specified in  the Fourth Schedule to  give a notice of desired or intended change. It cannot do  so without  giving to  the workman  likely to  be affected by  the change a notice in the prescribed manner of the nature  of the change proposed to be effected and within 21 days of giving such notice. [1080B-C;1082H;1083A-B]       3(i) It is nowhere suggested that Sardars/Mondals were contractors. They  were merely the agents of the Corporation for distributing the salary/ wages earned by each workman as set out  in the register to be maintained in respect of each workman by his name and the wages earned by him at the piece rate. Once  the  rate  remained  unchanged  even  after  the removal   Of the  contractor, the  qualitative change in the position  of   workmen  consequently   would  be,  that  the workmen’s earnings  at piece rate accelerated upward because the  contractor’s   commission  whatever  he  retained  unto himself became  available to the workmen and they benefitted Therefore, the  abolition of  the contract  system  and  the introduction of  direct payment system brought about a basic qualitative  change   in  the   relationship   between   the Corporation and  the workmen engaged for handling foodgrains in that on the disappearance of the intermediary contractor, a direct  relationship  of  master  and  servant  came  into existence between  the contractor and the workmen . [ 1078D- G]       3(ii)  Moreover, it was obligatory for the Corporation to arrange  for handling the bags of foodgrains. The workmen handled the foodgrains for the Corporation and none else For this service  rendered, the  Corporation agreed  to pay  and paid wages at piece rate to each workman whose name appeared in the  register to be maintained for the purpose as per the directions given by the District Manager. If the pay packets were actually  distributed by  Sardars/Mondals, they  can be said to  be doing clerical work on behalf of the Corporation in the  same manner  as a  clerk in  the Accounts Department prepares and  distributes pay  packets for  each employee of the Corporation  month to month. If the clerk cannot be said to be the employer, ipso facto the Sardars/Mondals could not be clothed  with the  status of the replaced contractor. The intermediary   screen   having   disappeared,   the   direct relationship came  into  existence  and  the  conclusion  is inescapable  that  since  the  introduction  of  the  direct payment system,  the  workmen  became  the  workmen  of  the Corporation and  a direct  master servant  relationship came into existence. [1079A-C]       3(iii)  The findings  of the tribunal when it observed something contrary  to record that the contractor system was not discontinued but it 1068 was really snatched away by the Mazdoors from the contractor apart  from   being  perverse  is  contrary  to  record  and overlooks two  important letters  dated January l8, 1973 and

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April 28,  1977 by which the Union and the Managing Director respectively affirmed  the voluntary  settlement arrived  at between the parties, both for abolishing the contract system and introducing the direct payment system. The tribunal feel into a  serious error  in overlooking  relevant evidence and drawing surmises  contrary to  the  record.  Therefore,  the award of  the Tribunal  rejecting the  reference and denying the benefit  must be  quashed and  set aside and an award be made that  the aforementioned 464 workmen who had become the workmen of  the Corporation  continued  to  be  the  workmen employed by the Corporation and shall be entitled to all the rights, liabilities,  obligations and  duties as  prescribed for the workmen by the Corporation. [1019D-E; 1083G-H]       (4)  When workmen  working under  an employer are told that they  have ceased  to be  the workmen of that employer, and have  become work  men of  another employer  namely, the contractor in  this case,  in legal  parlance such an act of the first  employer constitutes  discharge,  termination  of service or  retrenchment by  whatsoever name  called  and  a fresh employment by another employer namely, the contractor. If the  termination of  service by  the  first  employer  is contrary to  the well  established legal position the effect of  the   employment  by   the  second  employer  is  wholly irrelevant. No  attempt was  made to justify the termination of service  of the aforementioned workers of the Corporation by the  subtle device  of introducing  a contractor so as to briny about  a cessation  of contract  of employment between the workmen  and the  Corporation and  a fresh  contract  of employment between  the workmen  and the contractor. If what was intended  to be  done was  retrenchment,  ex  facie  the action is  contrary to  the provisions  of Sec. 25F of the I Act,  1947.   Viewed  from   either  angle,  the  action  of introducing so  as  to  displace  the  Contract  of  service between the Corporation and the workmen would be illegal and invalid and  ab initio void and such action would not alter, change or  have any  effect on  the  status  of  the  afore- mentioned 464  workmen who  have become  the workmen  of the Corporation. [1080C-F]       (5) If the workmen likely to be affected by the change are persons to whom the Fundamental and Supplementary Rules, Civil Services  (Classification, Control  and appeal) Rules, Civil Services  (Temporary  Service)  Rules,  Revised  Leave Rules,  Civil  Service  Regulations,  Civilians  in  Defence Services (Classification  Control and  Appeal) Rules  or the Indian Railway  Establishment  Code or  any other rules or regulations that may be notified in this behalf by the appropriate Government in the  Official Gazette, apply no notice of change would be necessary before  effecting a change. No attempt was made on behalf of the respondent-Corporation to urge that any of the aforementioned rules  would govern the conditions of service of the workmen involved in the dispute Now after introducing the direct  payment system agreed to between the parties, if the Corporation of the employer wanted to introduce a change in respect of any of the matters set out in Fourth Schedule. it was obligatory to give a notice of change. Item  1 in the Fourth Schedule provides: ’wages, including the period and 1069 mode of  payment’. By  cancelling the  direct payment system and introducing  the contractor, both the wages and the mode of payment  are being  altered to  the disadvantage  of  the workmen. Therefore,  obviously a  notice of change was  must before introducing  the change,  otherwise it  would  be  an illegal change.  Any such  illegal change  invites a penalty under Sec. 31 (2) of the I.D. Act, 1947. Such a chance which

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is punishable  as a  criminal offence  would obviously be an illegal change  it must  be held  that without anything more such an  illegal change would be wholly ineffective. [1083C- P]       (6) The Food Corporation of India was set up under the Food  Corporations   Act  1964   The  scheme   of  the  Food Corporations  Act   would  not  permit  the  Corporation  an instrumentality of  the State, to act in a manner thoroughly arbitrary by  first keeping  a contractor,  removing him and reinducting him without a semblance of consideration for the fate of  the working  for it  or for its benefit or for some world connected  with  the  functions  of  the  Corporation. Therefore, the  scheme of  the Act  has hardly any relevance save and  except that its action is likely to be struck down as arbitrary  being violative  of Art.  14, but  it  is  not necessary  to  go  so  for  because  the  relief  under  the Industrial Disputes Act is readily available to the workmen. While the trend is in the direction of abolition of contract labour,  this   public  sector  undertaking  appears  to  be completely oblivious  to the  trend and  the pace-setter  as enacted by the Parliament in the Contract Labour (Regulation and Abolition) Act, 1970. The Act was enacted with a view to abolishing wherever  possible or practicable, the employment of contract  labour. The Corporation attempted by its action to reverse that trend which does not credit to it. Where the law helps,  such anti-labour  practices must  be thwarted or nipped in the bud [1081G-H;1082C-D]

JUDGMENT:       CIVIL  APPELLATE JURISDICTION:  Civil Appeal  NO. 1055 (NL) of 1981.        From  the  Award  of  Central  Government  Industrial Tribunal, Calcutta  dated 29  8.1980) in  Reference No 13 of 1977 dated 27.9 1980.       T.S.  Krishnamurthi, S.K. Nandy and C.S. Vaidyanathan, for the Appellants.       S.N.  Kacker, S.  Chatterjee and  A.K. Panda,  for the Respondents.          the judgment of the Court was delivered by       DESAI,  J Vacillation  on the  part of a public sector undertaking has  pushed this  trivial dispute  to  the  Apex Court adding   to the  anxiety and  misery on  the  part  of lowest grade  workmen and  wasteful  expenditure  on  futile litigation. 1070       Food  Corporation of  India (’Corporation’  for short) was set  up under  an  Act  of  Parliament  being  the  Food Corporations Act, 1964 (’Act’ for short) to provide, amongst other, for  the establishment  of Food  Corporations for the purpose of  trading in food-grains and other food stuffs and for matters  connected therewith and incidental thereto. For performance of  the functions  statutorily prescribed  under Sec. 13  of the  Act  namely,  to  undertake  the  purchase, storage,  movement,  transport,  distribution  and  sale  of foodgrains and  other foodstuffs, the Corporation has to set up godowns/depots and other storage facilities and to engage labour for handling foodgrains at the godowns or in transit. The  Corporation  adopted  different  methods  at  different places for  employing labour  for handling  foodgrains . One such depot  has been setup by the Corporation at Siliguri in West Bengal  State Number  of workmen designated as handling Mazdoor were  employed at  Siliguri Depot.  At the  relevant time, 464  workmen were  attached to  this depot. It appears

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initially a  contractor was  engaged by  the Corporation for handling storage  and  transit  of  foodgrains  at  Siliguri Depot. Subsequently,  by negotiations  and settlements.  the contract system  was abolished and the workmen were directly paid the  wages, presumably  at piece  rate for  the service rendered by  them by  the Corporation. A further attempt was made to  bring  about  a  basic  change  in  the  system  by reinducting the  intermediary contractor.  This  attempt  to change the  status of  the workmen from being workmen of the Corporation  to   becoming  the   labour  employed   by  the contractor  was  resisted  by  ’Food  Corporation  of  India Workers’ Union  - appellant herein(’Union’ for short) and it led to  negotiations between  the Corporation  and the Union resulting in  a settlement  as evidenced  by Union’s  letter dated January  18, 1973.  Two terms of the settlement may be noticed here. They read as under:      "(i) the FCI management agrees to take a final decision           by  1.4.73   on  the   demand  of  the  Union  for           departmentalisation of  the workers working in the           Corporations’ permanent owned large-size go downs,           where work  goes on  all the  year round  in  West           Bengal, Bihar, Orissa, Assam and New Delhi.      (ii) .............      (iii)............... 1071      (iv) In the  meantime the  Food  Corporation  of  India           management agrees  to introduce the direct payment           system to  the  workers  working  in  their  owned           godowns as  also in  the hired godowns at the same           stations at  which this  system is  introduced for           the  owned   godowns  in   the  aforesaid  States.           .................. The payment to the workers will           be made  at the rates at which the contractors are           being paid now".       These terms  of settlement  have been  set out  in the aforementioned letter of the Union. The Managing Director in his reply  dated January  20, 1973  confirmed  the  decision taken as  indicated in the letter under reply. It would thus appear that  the negotiations  ended in  a  settlement.  The Corporation addressed  communication No.  A-50(38)/72-Labour dated April 28, 1973 to its various Regional Managers in the aforementioned five  States pointing  out therein  that  the procedure in  respect of  direct payment  to labourers  laid down in  the communication  shall be  followed.  The  method adopted is  that the  bills for the piece rate wages payable to handling  Mazdoors should be prepared by the Depot Staff, and the Sardar/Mondal would accept payment and sign bills on their behalf  and  distribute  the  wages  to  the  handling labour. A  copy of  this letter  was also  sent to the Joint Secretary of  the Union By the letter dated October 29, 1973 of the  District Manager  of  the  Corporation  at  Siliguri addressed to the Joint Secretary of the Union, the Union was informed to  advise the local representatives of the workmen to submit  the wage bill in time in which particulars of per head out  turn by  name’ was  required to  be mentioned. The expression ’per  head out  turn’ means  the quantum  of work rendered by  each workman  with his name so that his wage at piece rate can be calculated and paid to him .This system of payment was being implemented and was in vogue, till January 27, 1975.  On account  of some other industrial dispute, the members of  the Union  who were workmen attached to Siliguri Depot went  on strike.  On and  from January  28, 1975. This strike  was  called  off  on  March  9,  1975  .  The  usual management response  followed and  effective from  March 10, 1975  the   Corporation  changed   the  method   of  payment

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superseding the  direct  payment  system  and  reintroducing contractor system and that too without giving any 1072 notice of change as contemplated by Sec 9A of the Industrial Disputes Act,  1947 (’I.D.  Act’ for  short).  As  a  direct consequence of  this change,  the  Corporation  discontinued employment of  464 workmen  attached to  Siliguri Depot  and brought in the intermediary contractor and treated the afore mentioned workmen as the workmen employed by the contractor. The Union  protested against  this illegal  action  alleging that apart  from being an unfair labour practice, the change over was  illegal and vindictive and malacious in character. According to  the  Union  these  464  workmen  were  already accepted as  the workmen of the Corporation and unless their services   were   legally   terminated,   they   cannot   be discontinued from  service of the Corporation and some other master imposed upon them.       An  industrial dispute  in this  behalf raised  by the Union was  referred by the Central Government to the Central Government Industrial  Tribunal, Calcutta  under Sec.  10 of the l  D. Act  for adjudication.  The reference  was in  the following terms:             "Whether the discontinuance of employment of 464      worker- of  their  Siliguri  Depot  with  effects  from      21.7.75 by  the management of Food Corporation of India      is lawful  and justified  ? If  not, to what relief are      the workers entitled ?"       The  Corporation contested  the reference  inter  alia contending that  ordinarily the  handling of  foodgrains  at various depots was entrusted to a contractor who employs his own workmen and that this system of employing the contractor was unavoidable  because the  receipt  and  distribution  of foodgrains at various depots is not a continuous process but solely depends  upon the  transport system  and work is of a fluctuating nature.  It was  admitted  that  direct  payment system was  introduced at Siliguri Depot and the contractors were replaced  by workers  working under  their Sardars  and they  were   never  accepted   as  direct   workmen  of  the Corporations. It was contended that the Sardars replaced the contractor but  the system  remains the  same and  that  the workers were  paid  the  same  rate  as  were  paid  to  the contractors and  at no point of time the workmen ever became the direct  workmen of  the Corporation.  A reference to the strike of  the workmen at the Siliguri Depot was made in the written statement  and it was stated that the strike was not called 1073   off   by  the   workmen  unanimously  but  it  had  to  be discontinued on  account of  prohibitory order  made by  the appropriate Government  while exercising its power to make a reference of  the existing  industrial dispute under Sec. 10 of the I.D. Act for adjudication. It was contended that Sec. 9-A of  the I.D.  Act is  not attracted because there was no change  which  necessitated  a  notice.  The  allegation  of victimisation and unfair labour practice were denied.       The  rival contentions  and the  nature  of  reference necessitated a decision on the question: whether the workmen represented by the union and attached to Siliguri Depot were or had  become at  any point  of time  the  workmen  of  the Corporation and  whether an  illegal change made with regard to their conditions of service by the Corporation ?       Chapter II-A was introduced in the Industrial Disputes Act, 1947  by Sec.  6 of  the Amending  Act 36 of 1956 which came into  force on  March  10,  1957.  Sec  9A  imposed  an obligation on the employer to give a notice of change, if he

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proposes to  effect any  change in the conditions of service applicable to any workman in respect of any matter specified in the  Fourth Schedule.  Item No  1 in  the Fourth Schedule reads: ’wages,  including the  period and  mode of payment’. Thus if  mode of payment in vogue is sought to be changed by the employer, Sec. 9A imposes an obligation to give a notice of change  to the  workmen likely  to be  affected  by  such change in  the prescribed  manner cogently  setting out  the nature of  the change  proposed to  be effected.  Any change effected without  following the procedure prescribed in Sec. 9A will be punishable under Sec. 31(2 of the I.D. Act       The  dispute between  the parties  revolves round  the status of  464 workmen  whose discontinuance from employment resulted in  the industrial  dispute which  was referred for adjudication. In  short the  dispute is: whether the workmen covered by the reference were the workmen of the Corporation or employed  by  the  contractor  and  were  therefore,  the workmen of  the contractor  ? The  Union contends  that even though the  workmen were initially engaged by the contractor when the  work of  handling foodgrains  brought to  Siliguri Depot was  entrusted to  a contractor  but  subsequently  at least from April, 1973, the intermediary contractor 1074 was removed and they became the workmen directly employed by the Corporation  and were  therefore,  the  workmen  of  the Corporation. On  the other  hand, the  Corporation  contends that the  work of  handling foodgrains at Siliguri Depot was always entrusted  to a  contractor because  the work is of a fluctuating and  intermittent nature  and therefore,  it was not possible  to have  regular work  force for  handling the same. According  to the Corporation, even when the so-called direct payment  system was  introduced  after  removing  the contractor, it  was  basically  a  spill  over  of  the  old contract system  save and  except that  the  contractor  was replaced by  Sardars/Mondals to  whom total payment on piece rate  was   made  and  who  distributed  the  wages  to  the individual workman,  the rate  of payment remaining the same as was in vogue at the time the contractor handled the work. It was  therefore, submitted  on behalf  of the  Corporation that at  no point of time, the concerned workmen ever became the direct  workmen of  the Corporation  and  therefore,  no question of  giving a  notice of change arose as required by Sec. 9A of the I.D. Act.        The   Tribunal  held   that  initially  there  was  a contractor engaged  to undertake handling of foodgrains. The contractor engaged  the workmen for handling the foodgrains. It was  how ever,  held that  prior to  the introduction  of ’direct payment  system’ in January 1973 at no point of time the handling of foodgrains which means loading and unloading from wagons,  trucks and  then storing  and stacking  in the godowns, was  ever undertaken  by the Corporation and always the work  was entrusted  to a contractor who engaged his own workmen. The  Tribunal accepted  the contention of the Union that since  January  2,  1973,  the  contractor  system  was discontinued and  what is  called the  direct payment system was introduced  . The  Tribunal however proceeded to observe that this  did not  bring about  any change in the status of the workmen  and therefore, they never became the workmen of the Corporation.  As a  corollary, the  Tribunal  held  that reintroduction of  the contractor  system in  1975  did  not constitute discontinuance  of the  services of  the affected workmen. In  accordance with  these findings,  the  Tribunal negatived the  claim of  the workmen  and made  the award to that effect. Hence this appeal by special leave.      The first  and the  foremost question  is: what  is the

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effect of  the introduction  of direct  payment system  from January 2, 1075 1973 on  the status of the workmen involved in the reference ? A The Tribunal proceeded to examine the evidence about the existence of  contractor system  prior to January, 1973 That is hardly relevant. Parties are agreed that prior to January 2, 1973  the work  of handling  foodgrains at Siliguri Depot was entrusted  by the  Corporation to  a contractor  and the contractor engaged  the workmen  and  the  workmen  received their salaries  or wages or remuneration from the contractor as determined  by the  contractor or  as agreed  between the contractor and  the workmen  and therefore, the workmen were not the  workmen of  the Corporation. It is merely adding to the length of the judgment to examine evidence in respect of an admitted  position. Correct  approach is  to accept  this uncontroverted finding of the Tribunal.       It is not in dispute that since January 2, 1973 direct payment system was introduced. What does this direct payment system imply?  Has it any impact on the relation between the Corporation  and   the  workmen   to  whom   by  the  change introducing direct  payment system,  the Corporation removed the contractor, took work from the workmen and agreed to pay each workman  by name  on piece  rate basis according to his out-turn work  ? Has it any bearing on the issue involved in the dispute, name on the status of the workmen ?       Briefly  stated, when Corporation engaged a contractor for handling  foodgrains at  Siliguri Depot, the Corporation had nothing  to do  with the manner of handling work done by the contractor,  the labour  force employed by him, payments made by  him etc.  In such  a fact  situation, there  was no privity of  contract or  employer and  workmen  between  the Corporation and  the  workmen  ’Workman’  has  been  defined (omitting  the   words  not  necessary)  in  the  Industrial disputes Act  to mean  any person  (including an apprentice) employed in  any industry to do.. ’. The expression employed has at  least two  known connotations  but as  used  in  the definition, the  context would  indicate that  it is used in the sense  of a  relationship brought  about by  express  or implied contract  of service  in which  the employee renders service for  which he  is engaged  by the  employer and  the latter agrees  to pay  him in case or kind as agreed between them or  statutorily prescribed. It discloses a relationship of command  and obedience.  The  essential  condition  of  a person being a workman within the terms of the definition is that he should be employed 1076 to do the work in that industry and that there should be, in other words,  an employment  of his by the employer and that there should  be a 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 term as contained in  the Act. (Dharangadhara Chemical Works Ltd. v. State of  Saurashtra(1). Now  where a  contractor employs  a workman to  do the  work which  he contracted  with a  third person to  accomplish on  the definition  as it  stands, the workman of  the contractor  would not without something more become the workman of that third person. Therefore, when the contract system  was in  vogue, the  workmen employed by the contractor were certainly not the workmen of the Corporation and no claim to that effect has been made by the Union.       On  January 2,  1973 pursuant to the agreement arrived at between the parties evidenced by the letter dated January 18,1973, the  parties agreed  to introduce and did introduce

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the direct  payment system to workmen working in the godowns owned by  or hired  by the Corporation. Introduction of this system is confirmed by the letter dated January 20, 1973 and was not  disputed before us. What constitutes direct payment system becomes  clear from  the letter  dated April 28, 1977 addressed by  the Corporation  to all  its Regional Managers working at Calcutta, Patna, Gauhati and Bhubaneswar. As this has a  direct bearing on the understanding of the concept of direct  payment   ill  contra-distinction   to  the  earlier prevailing system of engaging contractor and in supersession of it,  the same  may be  reproduced in  extenso.  Says  the letter:               "The procedure in respect of direct payment to      labourers  laid   down  as  under  should  be  followed      strictly:-      (1)  The bills would be prepared by the Depot Staff.      (2)  The Labour should authorise their Sardar/Mondal to           accept payment  and sign bills on their behalf and           give acquittance.      (3)  The authorised  Sardars/Mondals may  then  receive           the money after giving acquittance. (1) [1957] SCR 153 1077      (4)  The bill  with acquittance  in original  should be           with A FCI" .       Further amplifying this method, the Corporation by its letter dated October 22, 1973, directed as under:                "I have been directed by Zonal Manager (East)      that the  payment to be made to the workers directly by      us after the Direct Payment System.                  You are therefore, requested to advise your      local representatives  to submit  the bill  in time  in      which particulars  of per  head out-turn by name should      be mentioned,  so that we do not feel any difficulty to      pass the  bill and  to pay  the  workers  in  time.  If      formalities  as  directed  by  Zonal  Manager  are  not      observed we  will not  be able  to pay the worker- from      next fortnight."       Examining  the system  of direct  payment as setout in the letter  dated April  28, 1973  further amplified  by the letter dated October 29, 1973, it becomes crystal clear that name of  every  workman  engaged  to  handle  foodgrains  at Siliguri Depot  will be mustered in a register and his daily out-turn will  be specified.  The payment  will be  by piece rate as  was in  vogue at the time of contractor system. The bill will  be prepared  setting out the names of the workmen and the  out-turn of  each. The pay bill will be prepared by the  Depot   staff  who   are  regular   employees  of   the Corporation. The payment will be made by the Corporation but will be  distributed to  each workman according to the piece rate by  what are  called Sardar/Mondal.  The bill  with the acquittance in  original evidencing  payment would  be filed with the  Corporation. It  must at once be made clear that a salary or  wages of  a workman  in an industrial undertaking can be  monthly rated  which requires  the workmen to render service daily for specified number of hours but the rate per month is  fixed. It  can be  piece rate  correlated to daily production with  an obligation  to render  service daily for specified number  of hours,  the  monthly  wage  bill  being worked out  according to  production. Both  the systems  are known to  be in  vogue in  industrial employment.  When  the contractor system  was in  vogue, the  contractor was  being paid in  lump sum arrived at by multiplying the rate per bag to total number of bags. What number of workmen and for what length of time they were to be engaged for doing the

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1078 handling work  was loft to the discretion of the contractor. The Corporation  had nothing  to do  how many  workmen  were employed nor the rate or method of payment by the contractor to the  labour force employed by him. Corporation was solely concerned with the number of bags handled by the contractor. It was  not an  contract for  supply of  labour but  it  was specifically a  contract for  handling bags  of  foodgrains. When  the   direct  payment   system  was   introduced,  the intermediary contractor  disappeared from  the picture.  The work rendered  by each  workman had  to be  entered  into  a muster roll  register. The  Corporation will  distribute the wages calculated  on piece rate to each workman was required to be  a party to the acquittance roll to be retained by the Corporation. The wages were distributed by Sardar/Mondals.       Can  there be any doubt about the relationship between the Corporation  and the workmen since the date of abolition of the  contract system  and introduction  of direct payment system as  discussed herein  ? It  is nowhere suggested that Sardars/Mondals  were  contractors.  They  were  merely  the agents of  the Corporation for distributing the salary/wages earned by  each workman  as set  out in  the register  to be maintained in  respect of  each workman  by his name and the wages earned  by him  at the  piece rate.  Assuming  as  was contended  by   Mr.  Kacker   on  behalf   ofthe  respondent Corporation that once the rate remained unchanged even after the removal  of the  contractor, direct  payment system does not bring  about any  qualitative change  in the  status  of workmen, a  fact that  stares into  the eye and the one that cannot  be   overlooked  is  that  the  contractor  had  not undertaken  the  contract  obligation  for  some  altruistic motives. He  had  done  so  for  earning  for  profits.  Now accepting what  Mr. Kacker  and Mr.  Pai submitted  that the rates remained  unchanged  the  qualitative  change  in  the position  of   workmen  consequently   would  be,  that  the workmen’s earnings  at piece rate accelerated upward because the  contractor’s   commission  whatever  he  retained  unto himself became available to the workmen and they benefitted. Therefore, the  abolition of  the contract  system  and  the introduction of direct payment system hereinbefore discussed brought about a basic qualitative change in the relationship between the Corporation and the workmen engaged for handling foodgrains in  that on the disappearance of the intermediary contractor, a direct relationship of matter and servant came into existence  between the  contractor and  the workmen. To illustrate this  point succinctly, let it be made clear that it was obligatory for the Corpo- 1079 ration to  arrange for  handling the bags of foodgrains. The work- A  men handled  the foodgrains for the Corporation and none else. For this service rendered, the Corporation agreed to pay  and paid  wages at  piece rate to each workman whose name appeared  in the  register to  be  maintained  for  the purpose as per the directions given by the District Manager. If  the   pay   packets   were   actually   distributed   by Sardars/Mondals. they  can be said to be doing clerical work on behalf  of the  Corporation in the same manner as a clerk in the  Accounts Department  prepares  and  distributes  pay packet for  each employee of the Corporation month to month. lf the  clerk cannot  be said to be the employer, ipso facto the Sardars/Mondals  could not be clothed with the status of the replaced  contractor.  The  intermediary  screen  having disappeared, the direct relationship came into existence and the conclusion is inescapable that since the introduction of the direct payment system, the workmen became the workmen of

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the Corporation  and a  direct master  servant  relationship came into existence.       The  Tribunal fell  into error  when it failed to draw the  logical  and  inescapable  conclusion  from  the  facts hereinbefore discussed  and  completely  misdirected  itself when it  observed something  contrary to  record  that  ‘the contractor system  was not  discontinued but  it was  really snatched away  by the  Mazdoors from  the  contractor’.  The finding apart  from being perverse is contrary to record and overlooks two  important letters  dated January 18, 1973 and April 28,  1977 by which the Union and the Managing Director respectively affirmed  the voluntary  settlement arrived  at between the parties, both for abolishing the contract system and introducing  the direct  payment system.  Therefore, the Tribunal fell  into a  serious error in overlooking relevant evidence and  drawing surmises  contrary to  the record. Its finding, therefore,  becomes  unsustainable  and  cannot  be upheld.      The next question to which we must address ourselves is whether once  on the  introduction  of  the  direct  payment system, the  workmen acquired  the status  of the workmen of the  Corporation,   was  it   open  to  the  Corporation  to unilaterally discontinue  the system  without the consent of the workmen and reinduct contractor so as to again introduce a smoke-screen  which may  on  paper  effectively  deny  the status of  being the workmen of the Corporation, acquired by these workmen. And on discontinuance of the system of direct payment, without  ordering retrenchment of their services by the 1080 Corporation, they  obtained a  fresh  employment  under  the Contractor Is it legally permissible ? The question provides its own  correct and effective answer. No employer since the introduction of  the I.D.  Act, 1947  and  contrary  to  its Certified Standing  Orders as  statutorily  required  to  be drawn up  under the  Industrial Employment(Standing  Orders) Act, 1946  can dispense  with the  service  of  any  workman without complying  with the law in force. Any termination of service contrary  to the  provisions of  the Standing Orders and the  provisions of  the J.D. Act, 1947 would be void. It is not  necessary to  call in aid precedents to substantiate this too  obvious  and  well-established  proposition.  Then workmen working  under an  employer are  told that they have ceased to  be the  workmen of that employer, and have become workmen of  another employer  namely, the contractor in this case, in  legal parlance  such an  act of the first employer constitutes   discharge,    termination   of    service   or retrenchment  by   whatsoever  name   called  and   a  fresh employment by  another employer  namely, the  contractor. If the termination of service by the first employer is contrary to the  well-established legal  position, the  effect of the employment by  the second  employer is wholly irrelevant. No attempt was  made to  justify the  termination of service of the afore-mentioned workers of the Corporation by the subtle device of  introducing a  contractor so  as to bring about a cessation of  contract of employment between the workmen and the Corporation  and a  fresh contract of employment between the workmen  and the  contractor. If what was intended to be done was  retrenchment, ex  facie the  action is contrary to the provisions  of Sec.  25F of  the I.D.  Act, 1947. Viewed from either  angle, the  action  of  introducing  so  as  to displace the contract of service between the Corporation and the workmen  would be illegal and invalid and ab initio void and such  action would  not alter, charge or have any effect on the  status of  the afore-mentioned  464 workmen  who had

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become the workmen of the Corporation.       Mr.  Kacker and  Mr. Pai, learned counsel on behalf of the Corporation  urged that  having regard  to the functions for which the Food Corporation of India was set up under the Food Corporations  Act, 1964, it can without incurring the l ability  of   employing  workmen   where  work   is  of   an intermittant nature,  employ  a  contractor  for  supply  of labour or  for handling  certain works  of the  Corporation. Without in  any way  reflecting upon  the bona  fides  of  a public sector  Corporation to engage a contractor for supply of labour treating it as a commodity, we may assume that the Corporation can 1081 engage a  contractor for  supply of  labor, the  question is whether it  A has  done so.  The long title of the Act shows that the Act was enacted to provide for the establishment of Food Corporations  for the  purpose of trading in foodgrains and other foodstuffs and for matters connected therewith and incidental thereto.  By Sec.  3 the  Central Government  was authorized to  establish a  corporation to  be known  as the Food Corporation  of India.  Sec. 5 provides for the initial capital and  for acquiring  power to increase the capital in such  manner   as  the   Central  Government  or  the  State Government as the case may be may determine, initial capital being provided  by Central  Government. Sec.  7 provides for the constitution  of the  Board of Directors. The management of the  Corporation is  to vest  in a Board of Directors and the Board  of Directors  in discharging  its functions shall act  amongst   others  according   to  the  instructions  on questions  of   policy  as  may  be  given  by  the  Central Government. The annual net profit of the Food Corporation of India has  to be  paid to  the Central Government (Sec. 33). Every  Food   Corporation  has  to  submit  to  the  Central Government an  annual report  of its working and affairs and the same  has to  be laid  before the  Houses of Parliament. Sec. 45  confers power  on  the  food  Corporation  to  make regulations not  inconsistent with the Act and the rules mad thereunder to provide for all matters for which provision is necessary or  expedient for  the purpose of giving effect to the  provisions   of  the  Act.  Without  prejudice  to  the generality  of   the  power   conferred  by  Sec  45(1)  the regulations must provide for, amongst others, the methods of appointment, the conditions of service and the scales of pay of the  officers and  employees of  a Food Corporation other than the Secretary of the Food Corporation of India.       From  the perusal  of the  scheme of  the Act,  it  is undeniable  that   the  Food  Corporation  of  India  is  an instrumentality of  the State comprehended in the expression ’other authority’  is Art  12 of  the  Constitution  and  is subject  amongst   other  things   to  Part   III   of   the Constitution. If so, it must act fairly so as not to violate Art. 14  of the  Constitution. Now we fail to understand how this scheme  of the  Act would  permit the  Corporation,  an instrumentality of  the State, to act in a manner thoroughly arbitrary by  first keeping  a contractor,  removing him and reinducing him  without a semblance of consideration for the fate of the workmen working for it or for its benefit or for some work  connected with  the functions of the Corporation. Therefore, the  scheme of  the Act  has hardly any relevance save and except that its action is likely to be struck down 1082 as arbitrary  being violative  of Art.  14, but  it  is  not necessary  to  go  so  far  because  the  relief  under  the Industrial Disputes Act is readily available to the workmen.       The  submission that it was open to the Corporation to

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engage a  contractor for  handling of foodgrains may be true or legally  acceptable; the  question, however,  is  whether once some  workmen became  the workmen of the Corporation as here in  before discussed, was it open to the Corporation to induct a  contractor and treat its workmen as workmen of the contractor. The  answer is  in the negative, for the reasons here in  before discussed.  The agony  consequent upon  such submission may  be unmasked-  While  the  trend  is  in  the direction of abolition of contract labor, this public sector undertaking appears  to be completely oblivious to the trend and the  pace-setter as  enacted by  the Parliament  in  the Contract Labor  (Regulation and  Abolition)  Act,  1970.  An assertion  in   the  Statement   of  Objects   and   Reasons accompanying the  Bill, which  was enacted into the law, may help the  Corporation in freeing itself from the traditional master-servant relationship and help it in becoming an ideal employer where  exploitation in any form is wholly eschewed. The statement reads as under:                 ’ The system of employment of contract labor      lends itself  to various  abuses. The  question of  its      abolition  has   been  under   the   consideration   of      government for  a long  time. In  the Second  Five Year      Plan,   the    Planning   Commission    made    certain      recommendations,  namely,  undertaking  of  studies  to      ascertain the  extent of the problem of contract labor,      progressive abolition  of  system  and  improvement  of      service,  conditions   of  contract   labor  where  the      abolition was not possible."       The Act was enacted with a view to abolishing wherever possible or  practicable, the employment of contract labour. The proposed  Bill aimed  at abolition  of contract labor in respect  of   such  categories   as  may  be  notified.  The Corporation attempted  by its  action to  reverse that trend which does  no credit  to it. We say no more save and except saying that  where the  law helps, such anti labor practices must be thwarted or nipped in the bud.              It  is at  this stage  necessary to examine the implication  of   Sec.  9A   of  the   I.D.  Act,  1947.  As hereinbefore pointed out, Sec. 9A 1083 makes it  obligatory upon an employer who proposes to effect any A  change in the conditions of service applicable to any workman in  respect of  any matter  specified in  the Fourth Schedule to  give a notice of desired or intended change. It cannot do  so without  giving to  the workman  likely to  be affected by the change, a notice in the prescribed manner of the nature  of the change proposed to be effected and within 21 days  of giving such notice. There is a proviso to Sec 9A which has no relevance here. However, incidentally it may be pointed out that if the workmen likely to be affected by the change are persons to whom the Fundamental and Supplementary Rules, Civil  Services (Classification,  Control and Appeal) Rules, Civil  Services (Temporary  Service)  Rules,  Revised Leave Rules, Civil Service Regulations, Civilians in Defense Services (Classification,  Control and  Appeal) Rules or the Indian Railway  Establishment Code  or any  other  rules  or regulations that  may be  notified in  this  behalf  by  the appropriate Government  in the  Official Gazette,  apply  no notice of  change would  be necessary  before   effecting  a change. No  attempt was  made on  behalf of  the respondent- Corporation to  urge that  any of  the aforementioned  rules would govern  the  conditions  of  service  of  the  workmen involved in  the dispute.  Now after  introducing the direct payment  system  agreed  to  between  the  parties,  if  the Corporation or  the employer wanted to introduce a change in

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respect of any of the matters set out in Fourth Schedule, it was obligatory  to give  a notice  of change.  Item l in the Fourth Schedule  provides: ’wages,  Including the period and mode of payment’. By canceling the direct payment system and introducing the  contractor, both  the wages and the mode of payment  are  being  altered  to  the  disadvantage  of  the workmen. Therefore,  obviously a notice of change was a must before introducing  the change,  otherwise it  would  be  an illegal change.  Any such  illegal change  invites a penalty under Sec.  31(2) of the l.D. Act, 1947. Sch a change which is punishable  as a  criminal offence  would obviously be an illegal change.  It must  be held that without anything more such an illegal change would be wholly ineffective.       In  view of  the discussion,  this appeal  has  to  be allowed and    the  award  of  the  Tribunal  rejecting  the reference and  denying the  benefit must  be quashed and set aside and  an award  be made  that  the  aforementioned  464 workmen who  had  become  the  workmen  of  the  Corporation continued to  be the workmen employed by the Corporation and shall be entitled to all the rights, liabilities, obli 1084 gations and  duties as  prescribed for  the workmen  by  the Corporation. A  formal award to that effect shall be made by the Tribunal.       As  it was stated before this Court that these workmen continued  need   to  be  employed,  undoubtedly  under  the contractor since  the illegal  change  was  introduced,  the question of  paying backwages  does not arise. The Tribunal, however, must  satisfy itself  before making the final award whether any  workman was denied work and consequently wages. The Corporation  shall pay costs quantified at Rs. 10,000 to the appellant-Union. M.L.A.                                        Appeal allowed 1085