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PETITIONER: GUJARAT ELECTRICITY BOARD,THERMAL POWER STATION, UKAI, GUJAR

       Vs.

RESPONDENT: HIND MAZDOOR SABHA & ORS

DATE OF JUDGMENT09/05/1995

BENCH: SAWANT, P.B. BENCH: SAWANT, P.B. MAJMUDAR S.B. (J)

CITATION:  1995 AIR 1893            1995 SCC  (5)  27  JT 1995 (4)   264        1995 SCALE  (3)498

ACT:

HEADNOTE:

JUDGMENT:                          WITH           CIVIL APPEAL NOS.5498-02, 5503 & 5504 OF 1995           [Arising out of SLP Nos.9310-14, 9315 and            13520/91]                          JUDGMENT Sawant, J.           Leave granted in all the petitions.           These  four   groups  of   appeals  raise   common questions of  law relating  to  the  abolition  of  contract system  of  labour.  Civil  appeals  C.A.NO.5497  &  5504/95 arising out  of SLP  [c] Nos. 2613 of 1991 and 13520 of 1991 are filed  by the  managements,  viz.,  Gujarat  Electricity Board and  M/s.  Bihar  State  Cooperative  Milk  Producers’ Federation Ltd.  respectively,  while  civil  appeals  5498- 02/95,5503/95 arising out of SLP [c] Nos.9310-14 of 1991 and 9315 of 1991 are filed by the employees’ unions, viz., Delhi Officers and  Establishment Employees’  Union and  New Delhi General Mazdoor  Union respectively,  both against  the same management, viz.,  Standing Conference of Public Enterprises [SCOPE] & Anr. 2.   For the  sake of  convenience, we  will first deal with the facts  in Civil  Appeal 5497/95  arising out  of SLP [C] No.2613 of  1991 and  the questions  of law  as  they  arise therefrom. C.A.5497/95 @ SLP [C] No.2613 of 1991 3.   The appellant-Board  runs a  Thermal Power  Station  at Ukai  in   Gujarat  where   it  generates   and  distributes electricity to  the consumers.  At the relevant time besides the direct  workmen,  the  Board  deployed  through  various contractors 1500  skilled and  unskilled manual labourers to carry on  the work  of loading and unloading of coal and for feeding the  same in  the hoppers and for doing the cleaning and other allied activities in its power station. It appears that these  workmen hailed from the adivasi area and many of them had  lost their  land on account of the construction of

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the Thermal  Power Project of the Board with the result that the employment  in the  power station  was the only means of livelihood left  for them. The contractors, according to the respondent-Union, exploited these workmen by flouting labour laws. Ultimately,  the workmen  organised themselves  into a trade union.  But on  that count they were victimised and on 16th November,  1981, the  services of  a thousand  of these workmen were  abruptly  terminated.  The  Union,  therefore, filed  a  writ  petition  in  the  High  Court  praying  for direction to  reinstate the workmen and for implementing and enforcing the  Factories Act,  the Employees’ Provident Fund Act, the  Payment of  Wages Act and other labour enactments. The High  Court  by  its  order  of  16th    December,  1981 appointed one  Shri Israni  as a  Court Commissioner to make detailed enquiries  regarding the  allegations made  in  the writ petition and also to try to resolve the dispute between the parties.  The Commissioner held talks with the concerned parties and  also associated  the  officers  of  the  Labour Department of  the Government  with the  said talks.  It was agreed by  and between  the parties, viz., the Board and the contractors on  the one  hand and  the workmen on the other, that all  the workmen  whose names and numbers were mutually agreed to,  be allowed  to enter  the power station for work from 4th January, 1982 and that a settlement under Section 2 [p] of  the Industrial Disputes Act, 1947 [for short the ‘ID Act’] be duly executed in that behalf. It was further agreed that the remaining disputes between the parties, viz., those relating to  the revision  of wages  of the  workmen,  their rights and  privileges arising  out of  the  Factories  Act, Employees’ Provident  Fund Act,  Maternity Benefits  Act and the Workmen’s  Compensation Act as well as the disputes with regard to  the  workmen’s  contention  that  they  were  the employees of  the Board,  be referred  for adjudication by a joint  reference  under  Section  10  [2]  of  the  ID  Act. Accordingly, a  joint application  was made to the Assistant Commissioner of  Labour under  Section 10  [2] of the ID Act requesting  him  that  the  disputes  mentioned  therein  be referred for  adjudication to  the Industrial  Tribunal  and consequently  the   reference   from   which   the   present proceedings arise  was made. The terms of the reference were as follow:      (1) Whether  the workers  whose services are engaged by the contractors,  but who  are working  in the Thermal Power Station of  Gujarat Electricity  Board at  Ukai, can legally claim to be the employees of the G.E.B.? (2) If yes, whether such employees  can claim  the following  rights  which  the other employees  of Gujarat  Electricity Board  are  already enjoying? a.  weekly off.  b. sick leave, c. C.L., d. Earned or Privilege  Leave, e.  Maternity Leave & other benefits to female employees,  f. Gratuity,  9. Provident Fund, h. Bonus and i. Wage scales, etc., (3) If they are not held to be the employees of  Gujarat  Electricity  Board,  what  are  their rights in  respect of  the matters  mentioned in  [2] above, against  their   respective  employers?   [4]  Whether  such employees prove  that during  the year  1979, 1980 and 1981, they or any of them were made to work overtime. If yes, what would be  due to  them on  that account  and from  whom? (5) Whether such  employees are  entitled to  revision of  their present wages?  If yes,  what should  be their revised wages and from  which date?  (6) Whether  the said employees prove that so far as their services are concerned, there have been breaches of  any of  the provisions  of the  Factories  Act, Employees  Provident   Fund  Act,   Maternity  Benefits  and Workmen’s Compensation  Acts. If  yes, what  relief  can  be legally given to them in that respect and from which date?"

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4.   Before the  Tribunal, the  Union filed the statement of claim as well as an application for interim relief. Both the Board and  the contractors  submitted  their  reply  to  the application for  interim relief. The Tribunal gave its award being Award  Part I  dated 30th  April, 1982  giving interim relief whereby  the Board  was directed  to pay wages to the workmen at  the rate of Rs.9.40 per day from 1st April, 1982 till the  disposal of  the main  reference. Under  the  said Award, the  Board was  directed to give to the workmen leave with wages  and weekly off in accordance with the provisions of the  Factories Act,  and maternity  benefits as  per  the provisions of the Maternity Benefits Act.      To the  main reference,  written statements  were filed both by  the Board and the contractors. The Board also filed application stating  therein that  in the  meanwhile some of the contractors who were engaged and who were parties to the reference were  no longer  working  with  it  and  that  new contractors were engaged in their place. The Tribunal joined the new contractors as parties to the dispute. Likewise, the Union also  made an  application for  joining  some  of  the contractors as  parties and  they were  joined as parties to the  reference.  Some  contractors  filed  applications  for decision on  the preliminary  point raised  in their written statement that  since demand  nos. 1  and 2 in the reference amounted to a demand for abolition of contract labour system the Tribunal  had no  jurisdiction  to  entertain  the  said demand and  that the  said point should be heard first. This application was rejected by the Tribunal.      After recording  evidence and  hearing the parties, the Tribunal by  its award  came to  the conclusion that quite a number of  skilled and  unskilled employees were employed in the Thermal  Power Station  for unloading  of  coal  wagons, breaking  of   coal,  feeding  them  in  hoppers,  stacking, cleaning  earth   work,  fabrication  jobs  etc.,  that  the labourers were the local advasis and they were not given any leave or other facilities before 1982 except the wages which were very  meagre, that  workmen were  doing  all  types  of unskilled jobs  which they  were asked  to do  and that they were  rotated   in  different   jobs.  Further,   while  the contractors had  changed, the  workmen continued to work and the workmen  were working  for periods  ranging from  5 to 8 years. The  contractors had  not maintained  any records and were  not   providing   any   facilities   whatsoever.   The contractors  had   no  licence  under  the  Contract  Labour [Regulation and  Abolition] Act,  1970 [hereinafter referred to as  the ’Act’] and that no releevant original certificate of registration  or licence  had been vrought on record. The registration certificate  and four  licences produced by the Board were  ignored by  the Tribunal on the ground that they were only copies and nothing had been produced in support of their  authenticity.   The  Tribunal  also  held  that  ever otherwise, these  documents  were  not  relevant  since  the registration   certificate   produced   pertained   to   the contractors who were not concerned in the present case while the licences  produced were  for a  period subsequent to the date of  the reference. The Tribunal relied on the decisions of the  High Courts  of  Madras  and  Karnataka,  viz.,  The Workmen  of   Best  &   Cromption  Industries  Ltd.  v.  The Management of  Best &  Cromption Engineering  Ltd., Madras & ors. [1985 (1) LLJ 492 and Food Corporation of India Loading and Unloading  Workers’ Union  v. Food  Corporation of India [1987 (1)  LLJ 407]  respectively and  held that the workmen concerned in  the reference  could not be the workmen of the contractors. The  Tribunal then  proceeded  to  analyse  the position of  each of  the seven  contractors involved in the

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reference, and held, on the basis of the evidence concerning the said  contractors and  the workmen  working undet  them, that the  workmen of  all the  seven contractors  should  be deemed to  be the  workmen of  the Board.  The Tribunal also gave consequential direction for payment of arrears of wages to the  worrkmen by  adjusting the advances which were given to them  by the  interim directions of the Tribunal. Against the said  award of  the Tribunal, the Board preferred a writ petition before the High Court.      The High  Court by  its decision under challenge before us, held,  among other  things, that there was no demand for abolition of  contract labour  system as  contended  by  the Board and  hence the  preliminary objection  raised  by  the Board that  the Tribunal had no jurisdiction to consider the question of  the abolition of contract labour system in view of the  provisions of  the Act, had no merit in it. The High Court held that the Tribunal was called upon to decide as to whether the  workers who  were engaged  for working  in  the Thermal Power  Station were employees of the Board or of the contractors. Hence  the Tribunal was required to examine the reality behind  the facade after piercing the veil. The High Court also  held, negativing the contention to the contrary, that the  Tribunal had  not based  its finding  on the  sole ground that there were no valid licences for certain periods for certain  contractors issued  under the provisions of the Act. The  Tribunal  had  decided  the  question  on  overall consideration of  the facts  and circumstances  and  on  the grounds apart from the absence of valid licences. One of the factors taken  into consideration  by the  Tribunal was  the continuous nature of work. 5.   Before us the main contention advanced on behalf of the appellant-Board is  that after  the coming into force of the Act, it is only the appropriate Government which can abolish the contract  labour system  after  consulting  the  Central Board or  the State  Board, as  the case may be and no other authority   including   the   industrial   adjudicator   has jurisdiction either  to entertain such dispute or to directs its abolition.  It is  also contended on behalf of the Board that in  any case neither the appropriate Government nor the industrial adjudicator  has the  power to  direct  that  the workmen of  the erstwhile  contractor should be deemed to be the workmen  of the  principal employer and such a direction is contrary to the provisions of the Act. The Central  Government or the industrial adjudicator as the case may  be, can  only direct  the abolition of the contact labour system  as per  the provisions of the Act but the Act does not  permit either  of them  to declare  the  erstwhile workmen of  the  contractor  to  be  the  employees  of  the principal  employer.  It  is  also  contended  that  if  the contract  is   genuine  as  evidenced  by  the  registration certificate  granted  to  the  principal  employer  and  the licence issued  to the  contractor, then it would have to be held that the workmen concerned are in effect the workmen of the contractor and not the workmen of the principal employer and hence  no dispute can be raised under the ID Act by such workmen for  any relief since it is only the workmen present or past  who can  raise such  a dispute under the ID Act for relief against  their employer.  On the  other hand,  it  is contended on  behalf of  the workmen  that the  Act does not prevent or  prohibit the  raising of  a dispute under the ID Act for  abolition of  the contract labour system. Where the contract is  genuine, the  workmen of the principal employer can raise  the dispute  for abolition of the contract labour system. Where  it is  not genuine,  the workmen  of  the  so called contractors  themselves can  raise a  dispute  for  a

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declaration that  they are  in fact  the  employees  of  the principal employer.  In either  case, on  the basis  of  the well-known factors  laid down  by the  judicial decisions to establish the  relationship of the employer and the employee between the  parties, the Tribunal or the Court, as the case may be,  will have  jurisdiction  to  declare  the  contract labourers as  the direct employees of the principal employer and grant consoquential reliefs. 6.   In view  of the  aforesaid contentions,  the  questions that fall for consideration in this appeal, which are common to all the appeals are, as follows: [a] Whether an industrial dispute can be raised for     abolition of the contract labour system in view of the     provisions of the Act? [b] If so, who can raise such dispute? [c] Whether the Industrial Tribunal or the appropriate     Government has the power to abolish the contract labour     system? and [d] In case the contract labour system is abolished, what is     the status of the erstwhile workmen of the contractors? 6.   We may  first refer  to the  relevant provisions of the Act.      The Statement  of Objects  and Reasons accompanying the Bill provided as under:           "The  system   of   employment   of      contract labour  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 labour,  progressive  abolition      of the system and improvement of service      conditions of  contract labour where the      abolition was  not possible.  The matter      was discussed  at  various  meetings  of      Tripartite Committees at which the State      Governments were  also  represented  and      general consensus  of opinion  was  that      the system  should be abolished wherever      possible  or  practicable  and  that  in      cases where  this system  could  not  be      abolished   altogether,    the   working      conditions of  contract labour should be      regulated so  as to  ensure  payment  of      wages   and   provision   of   essential      amentities.      2.   The proposed Bill aims at abolition      of contract  labour in  respect of  such      categories  as   may  be   notified   by      appropriate Government  in the  light of      certain criteria  that  have  been  laid      down,  and  at  regulating  the  service      conditions  of   contract  labour  where      abolition  is  not  possible.  The  Bill      provides for  the setting up of Advisory      Boards  of   a   tripartite   character,      representing   various   interests,   to      advise Central  and State Governments in      administering   the    legislation   and      registration   of   establishments   and      contractors. Under  the  Scheme  of  the      Bill, the  provision and  maintenance of

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    certain  basic   welfare  amenities  for      contract labour, like drinking water and      first-aid  facilities,  and  in  certain      cases rest-rooms and canteens, have been      made obligatory.  Provisions  have  also      been made  to guard  against details  in      the matter of wage payment."      As the preamble of the Act points out, the Act has been placed on  the statute  book for  two purposes, viz., [i] to regulate the  employment of  contract  labour  and  [ii]  to provide for  its abolition  in certain circumstances and for matters connected  therewith. It  is thus clear that the Act does contemplate  the total abolition of contract labour but its abolition  only in certain circumstances and to regulate the employment of contract labour in certain establishments. The object  as well  as the  provisions of the Act also show that the  Parliament while realising the need for abolishing the contract  labour system  in certain  circumstances  also felt the  need to  continue it  in  other  circumstances  by properly regulating the same. The Act came into force on and from  5th   September,  1970.   It  applies   to  [a]  every establishment in  which 20  or more  workmen are employed or were employed as contract labour on any day of the preceding 12 months  and  [b]  to  every  contractor  who  employs  or employed on  any day  of the  preceding 12 months 20 or more workmen. Liberty  is given  to the appropriate Government to apply  the  provisions  of  the  Act  to  any  establishment employing such  number of  workmen less  than 20  as may  be specified in the notification. The provisions of sub-section [5] of  Section 1  of the Act make it clear [a] that the Act will not  apply to  establishments in  which work only of an intermittent or  casual  nature  is  performed  and  [b]  if question arises  whether work  performed in an establishment is of  an intermittent  nature, the  appropriate  Government shall decide  that  question  after  consultation  with  the Central Advisory  Board or  the State  Advisory Board as the case may  be and  that "ics  decision shall  be final".  The explanation to  the said sub-section [5] makes it clear that the work  performed in  an establishment shall not be deemed to be  of an intermittent nature [i] if it was performed for more than  120 days in the preceding 12 months or [ii] if it is of a seasonal character and is performed for more than 60 days  in   a  year.   Section  2  [a]  gives  definition  of ’appropriate   Government’.    Section   2    [e]    defines ’establishment’ to  mean [a] any office or department of the Government or  a local authority and [b] any place where any industry, trade,  business,  manufacture  or  occupation  is carried on.  Section 2  [g]  defines  ’principal  employer’. Section 2 [i] defines ’workmen’as under:      "[i] "workmen" means any person employed      in or in connection with the work of any      establishment to  do any  skilled, semi-      skilled    or     un-skilled     manual,      supervisory, technical  or clerical work      for hire or reward, whether the terms of      employment be  express or  implied,  but      does not include any such person      [A]  who   is  employed   mainly  in   a      managerial or  administrative  capacity;      or      [B] who, being employed in a supervisory      capacity  draws   wages  exceeding  five      hundred rupees  per mensem or exercises,      either  by  the  nature  of  the  duties      attached to  the office  or by reason of

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    the  powers  vested  in  him,  functions      mainly of a managerial nature; or      [C] who  is an  out-worker, that  is  to      say, a  person to  whom any articles and      materials are  given out by or on behalf      of the principal employer to be made up,      cleaned,  washed,  altered,  ornamented,      finished, repaired, adapted or otherwise      processed for  sale for  the purposes of      the trade  or business  of the principal      employer  and   the  process  is  to  be      carried out  either in  the home  of the      out-workers or  in some  other premises,      not being premises under the control and      management of the principal employer." Sections  3   and  4  require  the  Central  and  the  State Government to  constitute  respectively  Central  and  State Advisory Contract  Labour Boards.  Section 7  requires every principal employer  of an  establishment to  which  the  Act applies, to  make an  application in  the prescribed form to the   registering    officer   for   registration   of   the establishment.      Section 8  provides for  revocation of the registration if the  registration of  any establishment has been obtained by misrepresentation  or supression  of any material fact or if for any other reason, the registration has become useless or ineffective. Section 9 of the Act speaks of the effect of non-registration. It states that no principal employer of an establishment  shall   employ   contract   labour   in   the establishment after  the time fixed for the purpose. Section 10 then provides as follows:      "10,  Prohibition   of   employment   of      contract  labour.   [1]  Notwithstanding      anything  contained  in  this  Act,  the      appropriate   Government    may,   after      consultion with the Central Board or, as      the  case   may  be,   a  State   Board,      prohibit,   by   notification   in   the      Official Gazette, employment of contract      labour  in  any  process,  operation  or      other work in any establishment.      [2]  Before   issuing  any  notification      under sub-section  [1] in relation to an      establishment,      the      appropriate      Government  shall  have  regard  to  the      conditions of work and benefits provided      for  the   contract   labour   in   that      establishment   and    other    relevant      factors, such as -      [a] whether  the process,  operation  or      other  work   is   incidental   to,   or      necessary  for   the  industry,   trade,      business, manufacture  or occuption that      is carried on in the establishment;      [b] whether  it is  of perennial nature,      that is  to say,  it  is  of  sufficient      duration having  regard to the nature of      industry, trade,  business,  manufacture      or  occupation   carried  on   in   that      establishment:      [c]  whether   it  is   done  ordinarily      through   regular    workmen   in   that      establishment   or    an   establishment      similar thereto;      [d] whether  it is  sufficient to employ

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    considerable   number    of   whole-time      workmen.      Explanation.  -  If  a  question  arises      whether  any  process  or  operation  or      other work  is of  perennial nature, the      decision  of   the  appropriate  of  the      appropriate Government  thereon shall be      final."      Section  12   provides  for   the  licensing   of   the contractors and states that no contractor shall undertake or execute any work through contract labour except under and in accordance with  the licence  issued. It  also provides that the licence issued may contain such conditions including any particular conditions as to hours of work, fixation of wages and other  essential amenities in respect of contract labour as the  appropriate Government  may deem  fit to  impose, in accordance with  the rules,  if any,  made under Section 35. Section 13  provides  for  the  grant  of  licences  in  the prescribed form  and the  application  for  licence  has  to contain  the  particulars  regarding  the  location  of  the establishment, the  nature of process, the operation or work for which  contract labour is to be employed and such of the particulars as  may be  prescribed. The licensing officer on receipt of  the application  has to  make investigation, and the licence  if granted  is valid  for the  period specified therein and may be renewed from time to time for such period and on  such conditions  as may be prescribed. The following conditions are prescribed by Rule 25 [2]:      [i] the licence shall be non-          transferable;      [ii] the  number of  workmen employed as           contract labour in the   establishm           ent shall not, on any day, exceed           the maximum number specified in the           licence;      [iii] save as provided in these rules,           the fees  paid for the grant, or as           the case may be, for renewal of the           licence shall be non-refundable;      [iv] the rates of wages payable to the           workmen by the contractor shall not           be less than the rates prescribed           under the minimum wages Act, 1948           for such employment where           applicable and where the      rates           have been fixed by agreement,           settlement or  award, not less than           the rates so fixed;      [v] (a) in cases where the workmen                employed  by   the  contractor      perform        the same  or similar kind      of work as          the workmen directly      employed by  the principal  employer  of      the            establishment,  the  wage      rates,              holidays  hours   of      work and other                conditions      of service of the                  workm      en of the contract shall be      the same as applicable to the           workmen directly employed by the                principal employer of the                     establishment on the same      or                  similar   kind    of      work;                Provided that in the case of

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         any disagreement with regard to the           type of work the same shall be           decided by the Chief Labour           Commission [Central];           (b) in  other cases the wage rates,           holidays, hours of work and           conditions of service of the           workmen of the contract shall be           such as may be specified in this           behalf by the Chief Labour           Commission [Central].      Section 14  states that  if the  licensing  officer  is satisfied either  on a  reference made to him in this behalf or otherwise,  that among  other things,  the  holder  of  a licence has  obtained the  licence by  misrepresentation  or suppression of  any material  fact or has without reasonable cause failed  to comply with the conditions subject to which the  licence   has  been  granted  or  has  contravened  any provision of  the Act  or the  Rules made thereunder, he can cancel the licence. The cancellation is without prejudice to any other  penalty to which the holder of the licence may be liable under  the Act. Section 20 casts an obligation on the principal employer  to provide  any amenity  required to  be provided under  the Act  to the  contract labour and permits the principal  employer to  recover all  expenses  from  the contractor incurred  by him  for  providing  the  amenities. Section 21  likewise makes  the contractor  responsible  for payment of  wages to  each worker employed by him, and every employer to  nominate a  representative to be present at the time  of   the  disbursement  of  the  wages.  In  case  the contractor fails  to make  the payment within the prescribed period or  makes short  payment, the  principal employer  is made liable  to make  payment of wages in full or the unpaid balance as  the case  may be  and the  principal employer is permitted  to   recover  the   amount  so   paid,  from  the contractor. Sections  22  to  27  of  Chapter  VI  prescribe penalties for  contravention of  the provisions  of the Act. Section 29  of Chapter VII requires every principal employer and every  contractor to maintain such registers and records giving such  particulars of  contract labour  employed,  the nature of  work performed  by the contract labour, the rates of  wages  paid  to  the  contract  labour  and  such  other particulars in  such form  as may  be prescribed. Section 30 makes the  laws and  agreements inconsistent  with the  Act, ineffective  while   saving  the   more  beneficial  service conditions of  the contract  labourers. Section  31 empowers the  appropriate   Government  to  grant  exemption  to  any establishment or  class of  establishments or  any class  of contractors from complying with the provisions of the Act or the  rules   made  thereunder   on   such   conditions   and restrictions as may be prescribed. 7.    Under  the Act the Government has in exercise of power granted by  Section 35  of  the  Act  made  Contract  Labour [Regulation and Abolition] Rules, 1971 [hereinafter referred to as  the ’Rules’]  which have  come into  force from  10th February, 1971. Rule 17 [1] prescribes a form, viz., Form I, for  application,   referred  to   in  Section  7  [1],  for registration  of  the  establishment,  to  be  made  by  the principal employer  for employing  contract labour. The form shows that  the employer has to furnish, among other things, information with  regard to [i] nature of work carried on in the  establishment,  [ii]  particulars  of  contractors  and contract  labour,   viz.,  [a]   names  and   addresses   of contractors, [b] nature of work in which the contract labour is employed  or  to  be  employed,  [c]  maximum  number  of

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contract labour  to be  employed on  any  day  through  each contractor, [d]  estimated  date  of  commencement  of  each contract labour under each contractor and [e] estimated date of termination  of employment  of contract labour under each contractor.  Rule  18  [1]  provides  for  Form  II  of  the certificate of  registration to  be granted  under Section 7 [2] of  the Act.  The certificate  of  registration  has  to contain [i]  the name and address of the establishment, [ii] the maximum  number of  workmen to  be employed  as contract labour in  the establishment,  [iii] the  type of  business, trade, industry,  manufacture or occupation which is carried on in  the establishment,  [iv] the  names and  addresses of contractors, [v]  nature of work in which contract labour is employed or  is to  be employed  and [vi]  other particulars relevant to  the employment  of contract labour. Rule 18 [3] requires the registering officer to maintain a register in a form showing the particulars of establishment in relation to which certificate  of registration  has been  issued and the register of  establishment has,  in addition,  to  show  the total number  of workmen  directly employed by the employer. Rule 18  [4] requires  that any  change in  the  particulars specified in  the certificate  of  registration  has  to  be intimated by  the employer to the registering officer within 30 days  from the  date of the change and the particulars of and the  reasons for  such change.  Rule 20  provides for an amendment of the certificate of registration pursuant to the change intimated  by the  employer under  Rule 18  [4] which amendment has  to be granted by the registering officer only after satisfying  himself that  there has occurred a change. Rule 21 provides for an application for a licence to be made by the  contractor in Form IV. The form requires information with regard,  among other things, to [i] name and address of the contractor,  [ii]  particulars  of  establishment  where contract labour  is to  be employed  such an  [a]  name  and address of  the establishment,  [u] type of business, trade, industry, manufacture  or occupation  which is carried on in the establishment,  [c] number  and date  of certificate  of registration of the establishment under the Act and [d] name and addresses of employer; and [iii] particulars of contract labour such  as [a]  nature of work in which contract labour is or  is to  be employed in the establishment, [b] duration of the  proposed contract  work giving  particulars  of  the proposed date  of commencing and ending of the contract work [c] name  and address of the agency or manager of contractor at the  work site  [d] maximum  number  of  contract  labour proposed to  be employed  in the  establishment on any date. Rule 21  [1] also  requires certificate  in Form  V  by  the principal  employer  that  he  has  engaged  the  applicant- contractor as  a contractor in his establishment and that he undertakes to  be bound by all the provisions of the Act and the Rules.  Rule 25  prescribes the  form and  the terms and conditions on which licence is issued to the contractor. The conditions on  which  the  licence  is  issued  include  the condition that the licence shall be non-transferable and the number  of  workmen  employed  as  contract  labour  in  the establishment shall  not on  any  date  exceed  the  maximum number specified  in the licence and that the rates of wages payable to  the workmen  by the contractor shall not be less than the  rates prescribed under the Minimum Wages Act, 1948 for such  employment, and where the rates have been fixed by agreement, settlement  or award,  the same shall not be less than the rates so fixed. In cases where the workmen employed by the  contractor perform  the same or similar kind of work as the  workmen directly  employed by  the employer  of  the establishment, the  wage rates,  holidays, hours of work and

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other conditions of service of the workmen of the contractor shall be  the same  as applicable  to the  workmen  directly employed by  the employer.  In other  cases, the wage rates, holidays, hours  of work  and conditions  of service  of the contractor’s workmen  shall be  such as  may be specified in that behalf  by the  Chief  Labour  Commissioner  [Central]. While specifying  the wage  rates, holidays  etc. the  Chief Labour Commissioner  has to  have regard  to the wage rates, holidays  etc.   obtaining  in   similar  employments.   The licensee-contractor has  to notify  any change in the number of workmen  or the  conditions of  work. Rule 27 states that every licence  granted to  the contractor  shall  remain  in force for  12 months from the date it is granted or renewed. Rule 29  provides for  renewal of licences. Rule 32 provides for the  grant of  temporary certificate of registration and licences where  the contract labour is not estimated to last for more  than 15 days. Rule 75 requires every contractor to maintain in  respect  of  each  registered  establishment  a register in  Form XIII.  This form  mentions details  to  be given in  respect, among  others, of the name and address of the principal  employer and  of the  establishment, the name and address of the contractor and the nature and location of work, the  name  and  surname  of  each  workmen  and  their permanent  home   address,  the   date  of  commencement  of employment, the  signature or  thumb-impression of  workmen, the date  of  termination  of  employment  and  reasons  for termination. Rule  76 requires  that every  contractor shall issue an  employment card  in form XIV to each worker within three days of the employment of the worker. Rule 77 requires that every  employer shall issue service certificate to each of the workmen. 8.   The provisions  of the Act and of the Rules show, among other things,  that  every  principal  employer  engaging  a contractor and every contractor engaging the contract labour in  the  establishment,  has  to  obtain  for  the  purpose, registration certificate  and the licences respectively from the authority  under the  Act. The  nature of work for which the contract  labour is  engaged, the  maximum number of the contract labour proposed to be engaged, the period for which such labour  is to  be employed,  the names and addresses of the workmen  so employed  have also  to be  furnished to the authority. The  workmen have  to be  paid minimum  wages and where there are agreements, settlements etc. the wages which are agreed  to thereunder  have to  be paid. Further, if the contract labour  is employed for doing the same type of work as  is  done  by  the  direct  employees  of  the  principal employer, wages  have to be paid and facilities given to the contract labour as are paid or given to the direct employees of the  principal employer.  Any change  in  the  nature  of employment or  the number  of the workmen to be employed and the period  for which they are to be employed etc. has to be intimated to the authority concerned.      If any amenity is required by the provisions of the Act to be provided for the benefit of the contract labour, viz., canteens, rest  rooms,  drinking  water,  latrine,  urinals, washing facilities  and first  aid facilities,  and  is  not provided  by  the  contractor  within  the  time  prescribed therefor, it  is the  principal employer  who is required to provide the  same within such time as may be prescribed. The principal employer  can, however,  recover the  expenses  of providing such  facilities from  the contractor’s account or as a  debt payable by the contractor. Further, the principal employer is  required to  nominate the  representative  duly authorised  by  him  to  be  present  at  the  time  of  the disbursement of  wages by  the contractor to the labour, and

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such representative is required to certify the wages paid to the labour.  It is  the principal employer who has to ensure the payment  of wages to the contract labour and in case the contractor  fails  to  make  payment  of  wages  within  the prescribed  period   or  makes  short  payment,  it  is  the principal employer who is made liable to make the payment of wages in full or the unpaid balance due, as the case may be. He can  recover the  amounts so  paid from  the contractor’s account or as a debt payable by the contractor.      The contractor  is also  required to  obtain a  licence before undertaking  or executing  any work  through contract labour and  he can execute such work only in accordance with the licence  issued to  him. The application for licence has to indicate the location of the establishment, the nature of process, operation  or work  for which contract labour is to be employed  and other  particulars,  prescribed  under  the Rules. The licence issued has to contain conditions relating to the  hours of  work,  fixation  of  wages  and  essential amenities.      The contravention of any provision of the Act including contravention of any condition of the licence granted to the contractor is made a penal offence.      Further, under  Section 10 of the Act, the authority to prohibit employment  of  contract  labour  in  any  process, operation or other work in any establishment has been vested in the appropriate Government which has to exercise it after consulation with the Central Board or the State Board as the case may be. Before issuing the notification prohibiting the contract labour,  the appropriate  Government  has  to  have regard to  the conditions  of work and benefits provided for the contract  labour in the establishment and other relevant factors such  as [a] whether the process, operation or other work is  incidental to or necessary for the industry, trade, business, manufacture  or occupation  that is  carried on in the establishment,  [b] whether it is of a perennial nature, i.e., whether  it is of sufficient duration having regard to the nature  of industry,  trade,  business,  manufacture  or occupation carried  on in  the establishment, [c] whether it is  done   ordinarily  through   direct  workmen   in   that establishment or  an establishment  similar thereto, and [d] whether it  is sufficient  to employ  considerable number of whole-time workers.  The explanation  to that  section makes the decision of the appropriate Government final with regard to the question whether the process, operation or other work is of  pernnial nature. The effect of non-registration of an establishment under the Act is that the establishment cannot employ contract labour. So also, the effect of non-licensing of the  contractor is  that the contractor is precluded from undertaking or executing any work through contract labour.      It is against the background of these provisions of the Act and  in the  light of  the decisions of this Court which are cited  before us  that we  have to  answer the questions raised in these appeals. 9.   On the  basis of  the provisions  of Section  10, it is contended that  no  industrial  dispute  can  be  raised  to abolish contract  labour in  any process, operation or other work in  any establishment.  The contention  is two-fold. In the first instance, it is argued that the said section gives exclusive  authority   to  the   appropriate  Government  to prohibit contract  labour and  that too  after following the procedure laid  down therein.  Before taking the decision to prohibit, the  appropriate Government has to (i) consult the Central Board  or the  State Board, as the case may be; (ii) have regard  to the conditions of work and benefits provided for the  contract labour  in that  establishment; and  (iii)

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have regard  to other  relevant factors  such as (a) whether the process,  operation or  the connected work is incidental to,  or   necessary  for   the  industry,  trade,  business, manufacture  or   occupation  that  is  carried  on  in  the establishment; (b)  whether it  is of perennial nature, that is to say, it is of sufficient duration having regard to the nature  of   industry,  trade,   business,  manufacture   or occupation carried  on in that establishment; (c) whether it is  done   ordinarily  through   direct  workmen   in   that establishment  or  an  establishment  similar  thereto;  (d) whether it  is sufficient  to employ  considerable number of wholetime workmen. The other contention is that the decision of the  appropriate Government  in that  behalf is final and the decision  is not  liable to  be challenged  in any Court including before the industrial adjudicator. 10.  In support of the first contention, reliance was placed on the following decisions of this Court :      In Vegoils Pvt. Ltd. v. The Workmen [(1972) 1 SCR 673], the facts were that the appellant, a private limited company carried on  the business of manufacturing edible oils, soaps and certain  by products,  and employed  about 700 permanent workmen for  the purpose. However, for loading and unloading seed and  oil cake  bags and  for  feeding  hoppers  in  the solvent extraction  plant,  it  employed  labour  through  a contractor. The  direct workmen raised an industrial dispute claiming, inter alia, that the work of loading and unloading seed bags  as well  as that  of feeding  hoppers  was  of  a perennial nature and hence the contract labour in respect of the said  work should  be abolished. The industrial Tribunal held that  the work of feeding the hoppers could not be said to be  intermittent and  sporadic as  claimed by the company and  that  it  was  closely  connected  with  the  principal activity of  the appellant.  The Tribunal  also  recorded  a finding that  in similar  plants in  the region, the work of feeding the  hoppers was  carried on  by permanent  workmen. Hence, the  Tribunal held  that the company should carry out this work  through permanent workmen. As regards loading and unloading of  seed and  cake bags,  the Tribunal  held  that these activities  were also  closely connected with the main industry and the work was of a permanent character. Although the comparable  units in  the same  region  carried  on  the working of  loading and  unloading through  contract labour, the Tribunal  held that  since the contract labour has to be discouraged,  the   appellant  must  employ  only  permanent workmen for  doing the  said job  as well. The Tribunal then referred to  the Act, [i.e., the Contract Labour (Regulation and Abolition)  Act] as  well as to a State enactment, viz., Maharashtra  Mathadi   Hamal  and   Other   Manual   Workers [Regulation  of   Employment  and  Welfare]  Act,  1969  and observed that  these two enactments also supported its view. In  appeal  before  this  Court,  the  company,  apart  from questioning the  Tribunal’s decision  on merits,  challenged the jurisdiction of the Tribunal to consider the question of the abolition  of contract  labour in view of the provisions of the  two Acts. This Court held that the Tribunal acquired jurisdiction  to  entertain  the  dispute  in  view  of  the reference made by the State Government on April 17, 1967. On that date,  neither the  Central Act nor the Maharashtra Act had been  passed. Even  during the  proceedings  before  the Tribunal, the  company raised no objection after the passing of the  two enactments  that  the  Tribunal  had  no  longer jurisdiction to  adjudicate upon  the dispute.  Under  these circumstances, the  Tribunal  had  to  adjudicate  upon  the points referred  to it  having due  rgard to  the principles laid down  by the  courts particularly  this Court governing

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the abolition  of contract  labour. The  Court further  held that the Act had received the assent of the President before the passing  of the Tribunal’s award while the State Act had come into  force before the passing of the award. Though the contention that  the Tribunal  lost jurisdiction to consider the question  of contract labour in view of these enactments could not  be accepted, it was held that this Court would be justified when  dealing with  the  appeal,  to  give  effect particularly to  the provisions of the Act having due regard to the clearly expressed intention of the legislature in the said Act  regarding the  circumstances under  which contract labour could  be abolished.  The Court  also held  that even according to  the evidence of the company’s witnesses it was clear that  the feeding of hoppers in the solvent extraction plant was  an activity closely and intimately connected with the main activity of the appellant, and that excepting for a few days, this work had to go on continuously throughout the year. It  could not  also be said that by employing contract labour for  the purpose,  the appellant  would be enabled to keep down  the costs  on the  ground that there would not be sufficient work  for all the workmen if permanent labour was employed. Further,  the award of the Tribunal abolishing the contract labour  in respect of feeding the hoppers was fully justified because  it was  in accordance with the principles laid  down   by  this   Court   which   were   substantially incorporated in  clauses [a] to [d] of Section 10 [2] of the Act and upheld the direction of the Tribunal in that regard. However, this  Court held  that the  Tribunal’s direction to the company  not to  engage any  labour through a contractor for the work of loading and unloading after May 1, 1971 must be set  aside. Since  the Act  had come  into force  on 10th February,  1971   and  under  Section  10  of  the  Act  the jurisdiction  to   decide   matters   connected   with   the prohibition of contract labour was vested in the appropriate Government, it  is only the appropriate Government that  can prohibit contract  labour by  following the procedure and in accordance with  the provisions  of the  Act. The Court also held that  the Industrial  Tribunal in the circumstances had no jurisdiction,  though its award was dated 20th Noveember, 1970, to  give a  direction in  that respect  which  becomes enforceable after  the date  of the coming into operation of the Act.  Further under  clause [c] of Section 10 [2] of the Act, one  of the  relevant factors  to be taken into account when contract  labour regarding  any particular type of work is proposed  to be established, is whether that type of work is  done   ordinarily  through   direct   workmen   in   the establishment or  an establishment  similar thereto.  In the case before  the Court,  similar establishments  employments employed contract  labour for  loading and unloading but the evidence also  showed that the work of loading and unloading required varying number of workmen.      It will thus appear from this decision firstly, that an industrial dispute  can be  raised by  the direct workmen of the establishment  for  abolition  of  the  contract  labour system. Secondly,  although on  the  date  the  dispute  was raised the  Act was not in force, and hence the dispute with regard to the abolition of the contract labour system had to be decided by the Tribunal, since the Act came into force at the time  of the  decision, the dispute had to be decided in accordance with  the provisions  of the  Act. Hence  on  and after the  coming into  force of the Act, no direction could be given  by the Industrial Tribunal to abolish the contract labour system,  since the  jurisdiction to  give  directions with regard  to the  proibition of contract labour is vested in the appropriate Government.

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    In B.H.E.L.  Workers’ Association  Hardwar &  Ors. etc. etc. v.  Union of  India & Ors. etc. etc. [(1985) 2 SCR 611] the matter  came to  this Court  by way  of a  writ petition filed by  the workmen  under Article 32 of the Constitution. It was  contended by  the workmen’s  Association that out of 16000 and  odd workmen  working within  the premises  of the respondent-Company, as  many  as  a  thousand  workers  were treated as  contract labour and placed under the control and at the  mercy of  contractors and  though they  did the same work as  workers directly employed by the company, they were not paid the same wages nor were their conditions of service the same  as that  of the  directly employed workers. It was further alleged that the management paid to the contractors, and in  turn, the  contractors paid  salary to  them,  after deducting substantial commission, and the wages paid to them did not  bear comparison to the wages paid to those directly employed by  the company.  Hence it  was  alleged  that  the rights of the contract workers were infringed under Articles 14 and  19 [1]  (f) [  sic. - g? ] of the Constitution and a declaration was  sought from  the Court  that the  system of contract labour  prevalent  in  the  respondent-company  was illegal, the contract employees were the direct employees of the respondent-company  and entitled  to equal  pay  as  the workmen directly  employed. The  respondent-company  opposed the petition  by contending  that if the petitioners had any genuine grievance, they could avail themselves of the rights secured to  them under  the Act,  Minimum Wages  Act,  Equal Remuneration Act,  etc. for  seeking appropriate  relief. It was further  contended on behalf of the company that certain jobs though required to be done within the plant area, could more conveniently  and efficiently be done on a job contract basis, and  this was  actually due  to the introduction of a new technology  for expansion  of production  programme with foreign collaboration. The jobs themselves were entrusted to contractors and  it was  not appropriate  to  say  that  the contractors merely  supplied the  labour. They were required to do the total job and payment was made on the basis of the quantum of work involved and not on the basis of the workers employed by  the contractor.  This Court  dismissed the writ petition by  holding that  the Act  does not provide for the total abolition  of contract  labour, but  for its abolition only in certain circumstances, and for the regulation of the employment of contract labour in certain establishments. The Act  is   not  confined   to  private  employers  only.  The definition of  ’establishment’ under  Section 2  [e] and  of ’principal employer’  under Section  2 [g] expressly include the Government  or any of its departments. The Court further held that  no invidious  distinction  can  be  made  against contract labour.  Contract labour  is entitled  to the  same wages, holidays, hours of work, and conditions of service as are applicable to workmen directly employed by the principal employer of the establishment on the same or similar kind of work. They  are entitled  to recover  their wages  and their conditions of service in the same manner as workers employed by the  principal employer  under the appropriate Industrial and Labour  Laws. If there is any dispute with regard to the type of  work, the  dispute has  to be  decided by the Chief Labour  Commissioner   [Central].  The  Parliament  has  not abolished contract labour but has provided for its abolition by the Central Government in appropriate cases under Section 10 of  the Act.  It is not for the court to enquire into the question and  to decide  whether the  employment of contract labour in  any process,  operation  or  other  work  in  any establishment should  be abolished  or not. This is a matter for the  decision of  the Government  after considering  the

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matters required  to be  considered under  Section 10 of the Act. Whether  the work  done by  the contract  labour is the same or  similar  to  that  done  by  the  workmen  directly employed by  the principal employer of any establishment, is a matter  to be  decided by  the Chief  Labour  Commissioner under the  proviso to  Rule 25  [iii] [iv]  (a) of  the 1971 Rules.      The Court  further held  that it was not possible in an application under  Article 32  to  embark  upon  an  enquiry whether the  thousand and  odd workmen  working  in  various capacities and  engaged in  multifarious activities did work identical with work done by the workmen directly employed by the company  and whether for that reason, they should not be treated as  contract labour  but as  direct employees of the company. There are other forums created under other statutes designed to  decide  such  and  like  questions.  The  Court further observed  that the  counse]  wanted  this  Court  to abolish the  employment of  contract labour by the State and by all  public sector  undertakings which  was not  possible since that  would be nothing but the exercise of legislative activity with  which function  the court is not entrusted by the Constitution.  While holding  thus, the  Court, however, directed the  Central Government  to  consider  whether  the employment of contract labour should not be prohibited under Section 10  of the  Act in  any process,  operation or other work of  the BHEL.  The Court also directed the Chief Labour Commissioner to  enquire into  the question whether the work done by  the workmen employed by the contractors is the same type of  work as  that done by the workmen directly employed by the principal employer in the BHEL, Hardwar.      In Catering  Cleaners of Southern Railway etc. v. Union of India & Ors. etc. [(1987) 2 SCR 164], the petitioners who were catering  cleaners of  the Southern Railway had filed a representative writ  petition on behalf of about 300 and odd catering cleaners  working in the catering establishments at various Railway junctions of the Southern Railway and in the pantry cars of long-distant trains running under the control of the  Southern Railway.  Since  a  long  time,  they  were agitating for  the abolition  of the  contract labour system under which  they were  employed to  do the cleaning work in the catering  establishments and  pantry cars  and for their absorption as  direct employees  of the  principal employer, viz., the  Southern Railway.  Although the  contract  labour labour system  had been abolished in almost all the railways in the  country, the Southern Railway persisted in employing contract labour  for  doing  the  work  in  question.  Since several representations  made by  them  to  the  authorities proved fruitless,  they approached  this Court under Article 32 of  the Constitution  to direct  the respondent-Union  of India and  others to  exercise their  power under Section 10 [1] of  the Act  and to  abolish  the  contract  system  and further to direct the Railways to regularise the services of the existing  catering cleaners  and to  extend to  them the service benefits  then  available  to  other  categories  of employees  in   the  catering  establishments.  The  Railway administration opposed  the writ petition contending that it had not  been found  possible to abolish the contract labour because the  nature of  the cleaning  work in  the  catering units  of   the  Southern   Railway,  was   fluctuating  and intermittent. The  Court  referred  to  the  report  of  the Parliamentary Committee  which had  held  that  the  job  of cleaning in Railway catering units was of a permanent nature and the work if entrusted to the direct employees would only marginally increase  the cost. The Committee had recommended the employment of cleaners directly by the Railways to avoid

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their exploitation.  The Court also referred to the decision of this  Court in Standard Vacuum Refining Co. of India Ltd. v. Its  Workmen &  Ors. [(1960)  3 SCR 466]. After analysing the provisions of the Act, the Court held that on the facts, it appeared  to it  to be  clear that  the work  of cleaning catering establishments  and pantry  cars was  necessary and incidental to  the industry  or  business  of  the  Southern Railway, that  the work  was of  a perennial nature, that it was done  through direct  workmen in  most Railways  in  the country  and  that  the  work  required  the  employment  of sufficient  number   of  whole-time  workmen  and  thus  the requirement of  clauses [a]  to [d] of Section 10 [2] of the Act were  satisfied. In addition, the Court found that there was a factor of profitability of the catering establishments which  as   stated  in   the  report  of  the  Parliamentary Committee, was  making a  profit of  Rs.50 lakhs  per annum. However, even  on these  findings, the  Court held  that the writ petitioners  could not  invite the  Court  to  issue  a mandamus directing  the Central  Government to  abolish  the contract labour  system because under Section 10 of the Act, Parliament had  vested in  the  appropriate  Government  the power to  prohibit the  employment of contract labour in any process, operation  or any  other work in any establishment. The  appropriate  Government  is  required  to  consult  the Central Board  or the State Board as the case may be, before arriving at  its  decision.  The  decision,  of  course,  is subject to  the judicial  review. Hence, the Court would not be justified  in issuing  a mandamus  prayed for  unless and until the Government failed or refused to exercise the power vested  in   it  under   Section  10  of  the  Act.  In  the circumstances, the  appropriate order  to make  according to the Court,  was to  direct the  Central Government  to  take suitable action under Section 10 of the Act in the matter of prohibiting  the  employment  of  contract  labour  and  the Government should  do it  within six months from the date of the order.  The Court  further observed that without waiting for the  decision of  the Central  Government, the  Southern Railway was  free of  its own motion to abolish the contract labour  system   and  to  regularise  the  services  of  the employees in  the work  of cleaning  catering establishments and  pantry  cars.  The  Court  further  observed  that  the administration of  the Southern Railway should refrain until the  decision  of  the  Central  Government  from  employing contract labour.  The Court  also directed  that the work of cleaning catering  establishments and  pantry cars should be done departmentally  by employing  those  workmen  who  were previously employed by the contractors on the same wages and conditions of  work as  were applicable to those engaged for the same work by the Southern Railway.      In Dena Nath & Ors. v. National Fertilisers Ltd. & Ors. [(1992) 1  SCC 695],  the question  involved was whether, if the principal  employer  does  not  get  registration  under Section 7  and/or the  contractor does not get licence under Section 12  of the  Act, the labour engaged by the principal employer through  the contractor  is deemed to be the direct employees of  the principal  employer or  not. On this point there was  a conflict  in the  decisions of  High Courts  of Delhi, Calcutta,  Punjab and  Kerala on  the one hand and of the High  Courts of Madras, Bombay, Gujarat and Karnataka on the other. The view taken by the former High Courts was that the only consequence of the non-compliance of the provisions of Sections  7 and  12 of  the Act  was that  the  principal employer and  the contractor  as the case may be, are liable for prosecution  under the Act whereas the view taken by the latter High Courts was that in such a situation the contract

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labour  became   the  direct   employees  of  the  principal employer. After  noticing the  decision  of  this  Court  in Standard Vacuum  Refining Co. case [supra] and going through the genesis  of the  Act, the  Court held that it is not for the High  Court to  enquire into  the  question  and  decide whether the contract labour in any process, operation or any other work  in any establishment should be abolished or not. It is  a matter  for the  appropriate Government  to  decide after considering  all the matters as required by Section 10 of the Act. The Court further held that the only consequence provided under  the Act  where either the principal employer or the  labour contractor violates the provisions of Section 7 or  12 as  the case  may be,  is the  penalty as envisaged under Sections  23 and  25 of  the  Act.  Merely  because  a contractor or  an employer  has violated  a provision of the Act or  the Rules,  the Court  cannot issue any mandamus for deeming the  contract labour  as having become the employees of  the  principal  employer.  The  Court  referred  to  the decisions of  the Karnataka and the Gujarat High Courts [the latter is  under challenge  in the  present proceedings] and observed that  it would  not like  to express any opinion on the same  since they  were under challenge in this Court but would place  on record  that  it  did  not  agree  with  the observations of  the Madras  High Court regarding the effect of the  non-registration of  the principal  employer or  the non-licensing of  the labour contractor nor with the view of the Bombay  High Court  which was under consideration before it. The  Court further  stated that  it was of the view that the decisions  of the  Calcutta and  Delhi High  Courts were correct and approved of the same. 11.  These decisions  in unambiguous  terms  lay  down  that after the coming into operation of the Act, the authority to abolish the  contract labour  is vested  exclusively in  the appropriate Government which has to take its decision in the matter in  accordance with  the provisions  of Section 10 of the Act.  This conclusion  has  been  arrived  at  in  these decisions on  the interpretation  of Section  10 of the Act. However, it  has to  be remembered  that  the  authority  to abolish the  contract labour  under Section  10 of  the  Act comes into  play only where there exists a genuine contract. In other  words, if  there is no genuine contract and the so called contract is sham or a camouflage to hide the reality, the  said   provisions  are   inapplicable.  When,  in  such circumstances, the  concerned workmen  raise  an  industrial dispute for  relief that  they should  be deemed  to be  the employees of  the  principal  employer,  the  Court  or  the industrial adjudicator  will have  jurisdiction to entertain the  dispute   and  grant  the  necessary  relief.  In  this connection, we  may refer  to the following decision of this Court which  were also  relied upon  by the  counsel for the workmen.      In The  Standard-Vacuum Refining  Co. of  India Ltd. v. Its workmen  and others.  [supra], an industrial dispute was raised by  the workmen of the appellant-company with respect to the  contract labour employed by the company with respect to the  contract labour employed by the company for cleaning maintenance work  at the refinery including the premises and plants belonging  to it.  The  workmen  made  a  demand  for abolition of  the contract  system and for absorbing workmen employed through  the contractor into the regular service of the company.  The matter  was referred  for adjudication  to industrial Tribunal.  The company  objected to the reference on the  ground [1] that it was incompetent inasmuch as there was no dispute between it and the respondents and it was not open to  them to raise a dispute with respect to the workmen

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of some other employer, viz., the contractor, and [2] in any case, it  was for  the company  to decide  what was the best method of  carrying on  its business  and the Tribunal could not interfere  with that  function of  the  management.  The Tribunal held  that the  reference was  competent. It was of the opinion  that the  work which was being done through the contractor was  necessary for  the company to be done daily, that doing  this work  through annual  contracts resulted in deprivation of security of service and other benefits of the workmen of the contractor and hence the contract system with respect to  that work  should be  abolished. In appeal, this Court held that the dispute raised was an industrial dispute within the  meaning of  section  2  [k]  of  the  Industrial Disputes  Act  because  [i]  the  respondent-workmen  had  a community of  interest with  the workmen  of the contractor, [ii] they  had also  substantial interest  in  the  subject- matter of  the dispute  inasmuch as  the class to which they belonged was  substantially affected  thereby, and [iii] the company could  give relief  in the matter. The Court further held that  the  work  in  question  was  incidental  to  the manufacturing process  and was necessary for it and was of a perennial nature  which must be done every day. Such work is generally done  by workmen  in the regular employment of the employer and  there should be no difficulty in having direct workmen for that kind of work. The matter would be different if the  work was  of intermittent or temporary nature or was so little  that it would not be possible to employ full time workmen for  the purpose.  While dealing with the contention that the  Tribunal  should  not  have  interfered  with  the management’s manner  of having  its work  done in  the  most economical and  convenient way  that it  thought proper, and that the  case in  question was  not one  where the contract system was  a camouflage  and the workmen of the contractors were really  the workmen of the company, the Court held that it may  be accepted  that the contractor in that case was an independent person  and the system was genuine and there was no question  of the  company carrying on the work itself and camouflaging it  as if  it was  done through  contractors in order to  pay less  to the  workmen. But  the fact  that the contract  in  the  case  was  a  bona  fide  one  would  not necessarily mean  that it  should  not  be  touched  by  the industrial Tribunals. If the contract had been mala fide and a cloak  for suppressing  the fact  that  the  workmen  were really the  workmen of  the company, the Tribunal would have been justified  in ordering  the company  to take  over  the entire body  of workmen and treat it as its own workmen. But because the contract in the case was bona fide, the Tribunal had not  ordered the company to take over the entire body of workmen. It had left to the company to decide for itself how many workmen.  It had  left to  the company  to  decide  for itself how  many workmen it should employ and on what terms, and had  merely directed  that when selection is being made, preference  be   given  to   the  workmen  employed  by  the contractor. The  Court also  held that the only question for decision was  whether the  work which was perennial and must go on from day to day and which was incidental and necessary for the  work of the refinery and was sufficient to employ a considerable number  of whole-time  workmen  and  which  was being done  in most  concerns through direct workmen, should be allowed to be done by contractors. Considering the nature of the  work done and the conditions of service in the case, the Court  opined that the Tribunal’s decision was right and no interference was called for.      This decision is of seminal importance for two reasons. It laid  down the tests for deciding whether contract labour

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should  be   continued  in   a   particular   establishment, occupation  or   process  etc.   Section  10   of  the   Act incorporates more  or less  the same  tests as  laid down by this decision. Secondly, it also spelt out the circumstances when the  workmen of  an establishment can espouse the cause of other  workmen who  were not  the direct employees of the establishment and  raise an  industrial dispute  within  the meaning of the ID Act.      This being  a case  decided prior  to the  coming  into operation of  the Act,  the Court has held here that even if the contract  is a  genuine one,  the industrial adjudicator will have  jurisdiction to  abolish the  contract labour and give appropriate  relief as the industrial Tribunal had done in the  case. Its  importance lies in the fact that it lends support to  the proposition  that even after the coming into operation of  the Act, the industrial adjudicator will have, in appropriate  cases, jurisdiction  to  investigate  as  to whether the  contract is  genuine or not, and if he comes to the conclusion  that it  is not,  he will  have jurisdiction also to  give suitable  relief. It may also appear that even where the  contract is  genuine but is comes to be abolished by the  appropriate Government  under Section 10 of the Act, the  industrial   adjudicator  will   have  jurisdiction  to determine  the  status  of  the  workmen  of  the  erstwhile contractor.      In Hussainbhai, Calicut v. The Alath Factory Thozhilali Union, Kozhikode  & Ors.  [(1978) 4  SCC 257],  a number  of workmen were  engaged in  the petitioner’s  factory to  make ropes. But  they were  hired by contractors who had executed agreements with  the petitioners to get such work done. When 29 of  these workmen  were denied  employment, an industrial dispute was referred by the State Government. The Industrial Tribunal held  them to  be workmen  of the  petitioner. This award was challenged by the petitioner before the High Court and the  learned Single  Judge held  that the petitioner was the employer  and  the  workmen  were  employees  under  the petitioner. The Division Bench of the High Court upheld this decision.  While   dismissing  the  special  leave  petition against the  said decision,  this Court  observed  that  the facts found  were that  the work  done by the workmen was an integral part  of the  industry concerned.  The raw material was  supplied   by  the  management,  the  factory  premises belonged to the management, the equipment used also belonged to the  management and the finished product was taken by the management for its own trade. The workmen were broadly under the control  of the  management and  the defective  articles were directed  to be  rectified  by  the  management.  These circumstances were conclusive to prove that the workmen were workmen of  the petitioner.  The Court  further held that if the livelihood  of  the  workmen  substantially  depends  on labour rendered  to  produce  goods  and  services  for  the benefit and  satisfaction of  the enterprise, the absence of direct   relationship    or   the    presence   of   dubious intermediaries cannot  snap the  real life bond. If however, there is  total dissociation  between the management and the workmen, the employer is in substance and in real life terms another. The  true test  is where  the workers  or group  of workers labour  to produce goods or services and these goods or services are for the business of another, that another is in fact,  the employer.  He has  economic control  over  the workers’ skill,  subsistence, and  continued employment.  If for any  reason, he  chokes off,  the workers  are virtually laid off. The presence of intermediate contractors with whom alone the  workers have  immediate or direct relationship ex contractu is  of no  consequence when on lifting the veil or

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looking at  the conspectus  of factors governing employment, the naked  truth is discerned and especially since it is one of the  myriad devices  resorted to  by the  managements  to avoid responsibility  when labour  legislation casts welfare obligations on  real employer  based on Articles 38, 39, 42, 43 and 43A [sic.] of the Constitution.      In R.K.  Panda &  Ors. v. Steel Authority of India Ltd. [(1994) 5  SCC 304], the contract labourers by filing a writ petition under  Article 32 claimed parity in pay with direct employees and  also regularisation  in the employment of the respondent-authority. They were continuing in employment for periods ranging from 10 to 20 years. The contractors used to be changed  but the  new contractors were under the terms of the  agreement   required  to  retain  the  workers  of  the predecessor contractors.  The workers  were employed through the contractors for different purposes like construction and maintenance of  roads and  buildings within  plant premises, public  health,  horticulture,  water  supply  etc.  In  the agreement with  the contractors,  it  was  stated  that  the parties shall  be governed  by the  provisions of the Act as well as  by the  provisions of  the payment of Bonus Act. On these facts, this Court observed as follows:          "It is  true that  with the passage      of  time  and  purely  with  a  view  to      safeguard the interests of workers, many      principal employers  while renewing  the      contracts have  been insisting  that the      contractor or the new contractor retains      the  old   employees.  In  fact  such  a      condition   is   incorporated   in   the      contract itself.  However, such a clause      in the  contract which  is  benevolently      inserted in  the contract to protect the      continuance of  the source of livelihood      of the  contract labour cannot by itself      give rise  to a  right to regularisation      in  the   employment  of  the  principal      employer. Whether the contract labourers      have  become   the  employees   of   the      principal employer in course of time and      whether the engagement and employment of      labourers through a contractor is a mere      camouflage and  a  smokescreen,  as  has      been urged  in this  case, is a question      of fact and has to be established by the      contract labourers  on the  basis of the      requisite material.  It is  not possible      for the  High Court or this Court, while      exercising    writ    jurisdiction    or      jurisdiction under Article 136 to decide      such questions, only on the basis of the      affidavits. It  need not  be pointed out      that in  all such  cases, the  labourers      are initially  employed and  engaged  by      the contractors.  As such  at what point      of time  a direct  link  is  established      between the  contract labourers  and the      principal  employer,   eliminating   the      contractor from  the scene,  is a matter      which has  to be established on material      produced before the court. Normally, the      Labour   Court    and   the   Industrial      Tribunal, under  the Industrial Disputes      Act are the competent fora to adjudicate      such disputes  on the  basis of the oral

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    and documentary evidence produced before      them."      Taking into  consideration the  developments during the pendency of  the writ  petition in  this Court and the offer made by  the respondent-authority  to the  workmen either to accept voluntary retirement on the terms offered by it or to agree to  be absorbed  on regular  basis and  the scheme  of modernisation which  was in  the process  of implementation, the Court  gave certain directions in respect of 879 workmen who were  involved in  that case. Those directions included, among other  things, regularisation of those workmen who had put in 10 years’ continuous service provided they were below 58 years  of age  which was  the age of superannuation under the respondent-authority.  The workmen  so regularised  were not to  receive any  difference  in  their  contractual  and regular wages till the date of their absorption which was to be completed  within four  months of  the date of the order. The respondent-authority  was further at liberty to retrench workmen  so  absorbed  in  accordance  with  law.  The  said direction was  further applicable  to 142 out of 246 jobs in view of  the fact  that contract  labour  had  already  been abolished in 104 jobs. 12.  As  regards   the  second   contention  based   on  the provisions of Section 10 of the Act, viz., that the decision of the  Government under the said provision as to whether it should be  abolished or not, is final and the same cannot be challenged in  any court  including  before  the  industrial adjudicator. Shri  Venugopal is  support of  his  contention relied upon  certain  decisions  of  this  Court  under  the Citizenship Act,  1955 where the finality is attached to the decision of the Central Government taken under Section 9 [2] of the  said Act.  The provisions  of Section  9 [2]  of the Citizenship Act which are more or less pari materia with the provisions of Section 10 of the present Act, are as follows      "[2]  If   any  question  arises  as  to      whether, when  or  how  any  person  has      acquired  the   citizenship  of  another      country, it  shall be determined by such      authority, in  such manner,  and  having      regard to such rules of evidence, as may      be prescribed in this behalf."      The decisions  of the  Court in  that behalf  are Akbar Khan Alam Khan & Anr. Vs. The Union of India & Ors., [(1962) 1 SCR  779] Mohd.  Ayub Khan  Vs.  Commissioner  of  Police, Madras and  Anr. [(1965) 2 SCR 884], State of U.P. Vs. Abdul Rashid &  Ors. [(1984)  Supp. SCC  347] and  Bhagwati Prasad Dixit ’Ghorewala’ Vs. Rajeev Gandhi [(1986) 4 SCC 78]. 13.  It is  not necessary  for us to go into the question of the finality  of the  decision under  Section 10  of the Act since as  held by  this Court in Vegoils Pvt. Ltd., B.H.E.L. Workers’ Association, Catering Cleaners of Southern Railway, and Dena  Nath [supra],  the exclusive  authority to  decide whether the  contract labour  should be  abolished or not is that of the appropriate Government under the said provision. It is  further not  disputed before  us that the decision of the Government  is final subject, of course, to the judicial review on the usual grounds. However, as stated earlier, the exclusive jurisdiction  of the  appropriate Government under Section 10  of the Act arises only where the labour contract is genuine and the question whether the contract is genuine, or not  can be examined and adjudicated upon by the court or the industrial  adjudicator, as  the case  may be.  Hence in such cases,  the workmen  can make a grievance that there is no genuine  contract and that they are in fact the employees of the principal employer.

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14.  It is  no doubt true that neither Section 10 of the Act nor any  other provision  thereof provides for determination of the  status of  the workmen  of the  erstwhile contractor once  the  appropriate  Government  abolishes  the  contract labour. In  fact, on  the abolition  of  the  contract,  the workmen are  in a  worse condition since they can neither be employed by  the contractor nor is there any obligation cast on  the   principal  employer   to  engage   them   in   his establishment. We  find that  this is  a vital lacuna in the Act. Although  the Act  has been  placed on the statute book with all benevolent intentions, and elaborate provisions are made to  prevent the  abuse of the contract labour system as is evident from the Statement of Objects and Reasons and the provisions of  the Act  referred to by us in detail earlier, the  legislature   has  not  provided  any  relief  for  the concerned workmen  after  the  contract  is  abolished.  One reason for  the same  pointed out to us was that the workmen engaged by the contractor may not be qualified to be engaged by the principal employer according to the latter’s rules of recruitment. In  this respect,  we  envisage  two  different situations, first  where  similar  type  of  work  is  being carried  out  by  the  direct  employees  of  the  principal employer and, second where the contract labour is engaged to execute work  which is  not being carried out by any section of the  direct  employees  of  the  principal  employer.  As regards the  first situation,  the condition  no. [5] of the licence to  be granted  to the  contractor in  Form VI under Rule 25 [1] of the Rules requires that wage rates, holidays, hours of  work  and  other  conditions  of  service  of  the contract workmen  shall be  the same  as applicable  to  the workmen directly  employed by  the  principal  employer  for performing the same or similar type of work. In other cases, the wage rates, holidays, hours of work and other conditions of  service  of  the  workmen  of  the  contractor,  as  per condition [6]  of the  said Form,  shall be  such as  may be specified by  the Chief  Labour Commissioner [Central]. When the  legislature  has  been  careful  enough  to  take  such precautions, we  are unable to appreciate as to why it could not have provided also for the absorption of the workmen who have been  doing the  work in  question. It is possible that the contractor  has been  transferring his  workmen from one job to  another and  the same workmen may not be working for all the  time in  the same establishment or the process. But as pointed  out earlier,  the application  for  registration under Rule  17 [1],  the certificate  of registration  under Rule 18  [1], the  register of  establishment under  Rule 18 [3], the  application for  licence under Rule 21 [1] and the licence  granted   under  Rule   25  [1]   all  require  the particulars of  contract  labour  to  be  furnished  in  the prescribed form.  Hence is should not be difficult to verify the workmen  who were  actually working in the establishment in question  for a  given period  of time and the period for which they  had worked  since the record of payment of wages made to  them would  be available as it is to be made in the presence of the representative of the principal employer who is also  responsible to make the payment of the whole of the wages or  the balance  of it  in case  the contractor  makes default. For ensuring the payment to the workmen, the muster roll has  necessarily to be maintained. If they have in fact worked for  a reasonably  long time  satisfactorily and have thus gained  experience,  it  should  not  be  difficult  to identify and  absorb them.  In fact,  they will  any time be better than  fresh recruits  and their  engagement would  be beneficial to the establishment concerned. On account of the abolition of  the contract labour, the establishment will in

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any case  require replacement of the contract labour. It may be  that   the  establishment  may  not  require  the  whole complement  of   the  workmen   erstwhile  employed  by  the contractor. But  that also  may not  always be correct since the contractor  would more  probably than  not have employed less work-force  than may  be necessary in order to keep his margin of profit as wide as possible. Whatever the case, the logic  in   not  employing  the  workmen  of  the  erstwhile contractor or  those of  them who  may be  necesary, in  the principal establishment  after the  contract  is  abolished, does not appear to be sound.      The legislature  probably did not consider it advisable to  make   a  provision  for  automatic  absorption  of  the erstwhile contract  labour in the principal establishment on the abolition  of the  contract labour,  fearing  that  such provision would amount to forcing the contract labour on the principal employer  and making  a contract between them. The industrial adjudicator  however is  not  inhibited  by  such considerations.  He  has  the  jurisdiction  to  change  the contractual  relationships   and  also  make  new  contracts between the  employer and the employees under the ID Act. It is for  this reason  that in  all cases  where the  contract labour is  abolished, the  industrial adjudicator, depending upon the facts of the case will have the authority to direct the principal  employer to absorb such of the workmen of the erstwhile contractor  and on  such terms as he may determine on the  basis of the relevant material before him. Hence the legislature could  have provided  in the  Act itself  for  a ireference of  the dispute  with regard to the absorption of the workmen  of the  erstwhile contractor  to the industrial adjudictor after  the appropriate  Government has  abolished the contract  labour. That would also have obviated the need to  sponsor  the  dispute  by  the  direct  workmen  of  the principal employer.  That can  still be  done by  a suitable amendment of the Act. 15.  The answer  to the  question as  to what  would be  the status of  the erstwhile workmen of the contractor, once the contract labour  system is abolished is therefore that where an industrial  dispute is  raised, the status of the workmen will be  as determined by the industrial adjudicator. If the contract labour  system is  abolished while  the  industrial adjudication is  pending or is kept pending on the concerned dispute, the  adjudicator can  give direction in that behalf in the  pending dispute.  If, however, no industrial dispute is pending  for determination of the issue, nothing prevents an industrial dispute being raised for the purpose. 16.  The last but equally important question that remains to be answered  is :  who can  raise an  industrial dispute for absorption of  the workmen  of the  ex-  contractor  by  the principal employer.  As has been pointed out earlier, if the contract is  not genuine,  the  workmen  of  the  contractor themselves can  raise such  dispute, since  in raising  such dispute the  workmen concerned  would be  proceeding on  the basis that  they are  in fact  the workmen  of the principal employer and  not of the contractor. Hence the dispute would squarely fall  within the  definition of  industrial dispute under Section  2 (k)  of the  ID Act being a dispute between the employer  and the  employees. In  that case, the dispute would not  be for  abolition of the contract labour, but for securing  the   appropriate  service   conditions  from  the principal employer on the footing that the workmen concerned were always the employees of the principal employer and they were denied  their dues.  In such a dispute, the workmen are required to establish that the so called labour contract was sham and was only a camouflage to deny them their legitimate

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dues.      However, the  situation is obviously different when the labour contract  is genuine  and there is no relationship of employer-employee between  the principal  employer  and  the workmen of  the contractor.  No industrial  dispute  can  be raised by  the workmen  of the  contractor either  before or after the  contract labour  is abolished  by the appropriate Government under  Section 10  of the  Act.  This  hurdle  in raising the  dispute will  however disappear if it is raised by the direct workmen of the principal employer who have (i) a community  of interest  with the  contract labour,  (ii) a substantial interest  in the  subject matter  of the dispute and (iii)  when the employer can grant the relief as is held in the following decisions:      In Workmen of Dimakuchi Tea Estate v. The Management of Dimakuchi Tea  Estate [(1958)  SCR 1156],  the question  for decision was  whether the  dispute  raised  by  the  workmen relating to  a person  who was  not a  workman could  be  an industrial dispute  as defined  in the  ID Act  and  as  the definition  stood   before  the   amendment  of   1956.  The appellants who  were the workmen of the respondent, espoused the cause of one Dr. Banerjee, Assistant Medical Officer who had been dismissed without hearing, with a month’s salary in lieu of  notice, but  who had accepted such payment and left the tea  garden. The  dispute raised was ultimately referred by the Government to the Tribunal. Both the Tribunal and the appellate industrial  Tribunal took  the view  that  as  Dr. Banerjee was  not workman, the dispute was not an industrial dispute as defined in Section 2 [K] of the ID Act. In appeal from the  said decision  after analysing  the provisions  of Section 2(k),  the majority of this Court summarised the law on the subject as follows :-           "To summarise. Having regard to the      scheme and  objects of  the Act, and its      other provisions,  the  expression  ’any      person’ in  Section 2(k) of the Act must      be read  subject to such limitations and      qualifications   as   arise   from   the      context; the two crucial limitations are      (1) the  dispute must  be a real dispute      between the  parties to  the dispute (as      indicated in  the first two parts of the      definition clause)  so as  to be capable      of settlement  or  adjudication  by  one      party to  the dispute  giving  necessary      relief to  the other, and (2) the person      regarding whom  the  dispute  is  raised      must be  one in  whose employment,  non-      employment,  terms   of  employment,  or      conditions of  labour (as  the case  may      be) the  parties to  the dispute  have a      direct or  substantial interest.  In the      absence of  such  interest  the  dispute      cannot be  said to  be  a  real  dispute      between the  parties. Where  the workmen      raise  a   dispute  as   against   their      employer,  the  person  regarding  whose      employment,  non-employment,   terms  of      employment or  conditions of  labour the      dispute is  raised need not be, strictly      speaking, a ’workman’ within the meaning      of  the   Act  must   be  one  in  whose      employment,  non-employment,   terms  of      employment or  conditions of  labour the      workmen as  a class  have  a  direct  or

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    substantial interest.           In the  case before  us,  Dr.  K.P.      Banerjee  was   not  a   ’workman’.   He      belonged to  the  medical  or  technical      staff- a  different category  altogether      from  workman.  The  appellants  had  no      direct, nor  substantial interest in his      employment or  non-employment, and  even      assuming that  he was  a member  of  the      same Trade  Union, it cannot be said, on      the tests  laid down  by  us,  that  the      dispute  regarding  his  termination  of      service was an industrial dispute within      the meaning of Section 2(k) of the Act."      Justice Sarkar,  in his  dissenting  judgment,  however held that  the ID  Act did  not make  the  interest  of  the workmen in  the dispute  a condition  of the existence of an industrial  dispute.   Such  an  interest  is  incapable  of definition and  to make  it a  condition  of  an  industrial dispute would  defeat the  object of  the Act.  The  learned Judge further  held that  even assuming that workmen must be interested in order that there can be an industrial dispute, the present  case satisfied  that test  and fell  within the purview of section 2 [K] of the ID Act.      In The  Standard-Vacuum Refining  Co. case  [supra]  to which we  had an  occasion to  refer to  earlier in  another context, after  taking due  note of  the propositions of law laid down in Dimakuchi (supra), this Court has discussed the law on  the subject  elaborately. The  said discussion bears verbatim reproduction here.     "....The   definition   of   "industrial      dispute’ in  Section 2(K) requires three      things-           (i)    There should be a dispute or           difference;           (ii)  The   dispute  or  difference           should  be  between  employers  and           employers, or between employers and           workmen  or   between  workmen  and           workmen;           (iii)  The  dispute  or  difference           must   be    connected   with   the           employment or non-employment or the           terms of  employment  or  with  the           conditions  of   labour,   of   any           person.      The first part thus refers to the factum      of a  real and  substantila dispute, the      second  part   to  the  parties  to  the      dispute and  the third  to the  subject-      matter of the dispute. The contention of      the learned  Solicitor-General  is  two-      fold in  this  connection,  namely,  (i)      that there  is no  real  or  substantial      dispute  between  the  company  and  the      respondents and  (ii) that  the subject-      matter of  the dispute  is such  that it      cannot come  within  the  terms  of  the      definition in Section 2(k).           The   first   submission   can   be      disposed   of    shortly.    There    is      undoubtedly  a   real  and   substantial      dispute  between  the  company  and  the      respondents  on   the  question  of  the      employment of  contract-labour  for  the

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    work of  the company.  The fact that the      respondents who have raised this dispute      are not  employed on contract basis will      not make the dispute any the less a real      or substantial  dispute between them and      the company  as to  the manner  in which      the  work   of  the  company  should  be      carried on.  The dispute in this case is      that the  company should  employ workmen      directly and  not through contractors in      carrying on its work and this dispute is      undoubtedly real  and  substantial  even      though the  regular workmen  (i.e.,  the      respondents) who  have raised it are not      employed   on    contract   labour.   In      Dimakuchi case  to which  reference  has      been made,  the dispute  was relating to      an employee  of the  tea estate  who was      not a  workmen. It was nevertheless held      that this  was a  real  and  substantial      dispute  between  the  workmen  and  the      company. How  the work should be carried      on  is   certainly  a   matter  of  some      importance to  the workmen  and  in  the      circumstances it  cannot  be  said  that      this  is  not  a  real  and  substantial      dispute  between  the  company  and  its      workmen. Thus  out of  three ingredients      of Section 2 (k) the first is satisfied;      the second also is satisfied because the      dispute is  between the  company and the      respondents; it  is the third ingredient      which really  calls for determination in      the light  of the  decision in Dimakuchi      case.           Section  2(k),  as  it  is  worded,      would  allow  workmen  of  a  particular      employer to  raise a  dispute  connected      with the  employment or  non-employment,      or the  terms of  employment or with the      conditions of  labour of  any person. It      was this  aspect of the matter which was      considered in  Dimakuchi case and it was      held that the words "any person" used in      Section  2(k)   would  not  justify  the      workmen  of  a  particular  employer  to      raise a  dispute about  any one  in  the      world, though  the words "any person" in      that provision  may not  be equated with      the  words   "any  workman".   The  test      therefore to  be applied  in determining      the scope  of the  words "any person" in      Section 2(k) was stated in the following      words at pp.1174-75:           "If, therefore,  the dispute  is  a      collective dispute,  the  party  raising      the dispute  must have  either a  direct      interest  in   the  subject   matter  of      dispute  or   a   substantial   interest      therein in  the sense  that the class to      which the  aggrieved  party  belongs  is      substantially affected  thereby.  It  is      the community  of interest  of the class      as a  whole-class of  employers or class      of  workmen-which   furnishes  the  real

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    nexus  between   the  dispute   and  the      parties  to   the  dispute.  We  see  no      insuperable difficulty  in the practical      application of  this  test.  In  a  case      where the party to a dispute is composed      of aggrieved  workmen themselves and the      subject-matter of the dispute relates to      them or any of them, they clearly have a      direct interest  in the  dispute. Where,      however, the  party to  the dispute also      composed of workmen espouse the cause of      another person  whose employment or non-      employment,  etc.,   may   prejudicially      affect their  interest, the workmen have      a substantial  interest in  the subject-      matter of  dispute. In  both such  cases      the dispute is an industrial dispute."           We have  therefore to  see  whether      the respondents  who  have  raised  this      dispute have  a direct  interest in  the      subject-matter  of   the  dispute  or  a      substantial  interest   therein  in  the      sense  that   the  class  to  which  the      respondents  belong   is   substantially      affected thereby  and whether  there  is      community  of   interest   between   the      respondents and  those whose  cause they      have espoused.  There can  be  no  doubt      that there  is community  of interest in      this case  between the  respondents  and      the  workmen   of  Ramji   Gordhan   and      Company. They  belong to  the same class      and  they   do  the  work  of  the  same      employer and  it  is  possible  for  the      company to  give the  relief  which  the      respondents    are     claiming.     The      respondents have  in our  opinion also a      substantial  interest  in  the  subject-      matter  of   the  dispute,  namely,  the      abolition  of  the  contract  system  in      doing work  of this  kind.  The  learned      Solicitor-General           particularly      emphasised that there was no question of      the interest  of the  respondents  being      prejudicially affected by the employment      or  non-employment   or  the   terms  of      service or  conditions of  labour of the      workmen of Ramji Gordhan and Company and      placed  reliance   on  the   words  "may      prejudicially  affect   their  interest"      appearing  in  the  observations  quoted      above. We may, however, mention that the      test  laid  down  is  that  the  workmen      espousing  the   cause  should   have  a      substantial  interest  in  the  subject-      matter of  the dispute,  and it was only      when    illustrating    the    practical      application of  the test that this Court      used the words "may prejudicially affect      their interest". Besides it is contended      by Mr.  Gokhale for the respondents that      even  if   prejudicial  effect   on  the      interest of  the workmen  espousing  the      cause is necessary, this is a case where      the   respondents’   interest   may   be

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    prejudicially affected in future in case      the contract  system of  work is allowed      to prevail in this branch of the work of      the company.  He  submits  that  if  the      company can  carry on  this part  of the      work by contract system it may introduce      the same system in other branches of its      work which  are now  being done  by  its      regular workmen.  We  do  not  think  it      necessary to  go into this aspect of the      matter as we have already indicated that      prejudicial effect  is only  one of  the      illustrations    of     the    practical      application of  the test  laid  down  in      Dimakuchi   case,    viz.,   substantial      interest in  the sense that the class to      which the  aggrieved  party  belongs  is      substantially affected thereby. It seems      to us  therefore  that  the  respondents      have a  community of  interest with  the      workmen of ramji Gordhan and Company who      are  in  effect  working  for  the  same      employer. They  have also  a substantial      interest in  the subject-matter  of  the      dispute in  the sense  that the class to      which they  belong (namely,  workmen) is      substantially affected  thereby. Finally      the  company  can  give  relief  in  the      matter. We are therefore of opinion that      all the  ingredients of  Section 2(k) as      interpreted  in   Dimakuchi   case   are      present in  this case  and  the  dispute      between the  parties  is  an  industrial      dispute   and    the    reference    was      competent." 17.    In  view of  the aforesaid decision, it cannot be and was not  disputed before  us that  the direct workmen of the principal employer  can espouse  an industrial  dispute  for absorption of  the contractor’s  workmen and  the industrial adjudicator will have jurisdiction to entertain such dispute and grant  the necessary  relief. The  answer  to  the  last question, viz.,  who can raise an industrial dispute for the purpose of  absorption of  the contractor’s  labour  in  the principal establishment is, therefore, as follows :      If the  workmen of the so called contractor allege that in fact  the contract  is sham  and they  are  in  fact  the workmen of  the  principal  employer,  they  may  raise  the dispute themselves  not for abolition of the contract labour system, but  for making  available to  them the  appropriate service conditions.  When such  dispute is raised, it is not for abolition  of the contract labour, but for a declaration that the  workmen concerned are in fact the employees of the principal employer,  and for  consequential reliefs  on such declaration. If however, the contract is genuine, the direct workmen of the principal employer may espouse the industrial dispute for  abolition of the contract labour system and for absorption of the contractor’s workmen as the direct workmen of the  principal employer.  When such  dispute is raised by the direct workmen of the principal employer, the industrial adjudicator can  entertain the reference; but in view of the provisions of  Section 10  of the Act, he will have first to direct the  workmen to  approach the  appropriate Government for considering  the question  as to  whether  the  contract labour in  question should  or should not be abolished under the said provisions. If, on such reference being made by the

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workmen, the  appropriate Government  does not  abolish  the contract labour,  the industrial  adjudicator has  to reject the reference since the jurisdiction to abolish the contract is exclusively  vested in  the appropriate Government and he has no  jurisdiction to  adjudicate the dispute. However, if the appropriate  Government abolishes  the contract  labour, the industrial  adjudicator can  proceed to decide (i) as to whether the  erstwhile contract labour should be absorbed in the principal  establishment; (ii) if so, to what extent and (iii) on  what terms.  The decision on the points, will have to be  given by  him by giving opportunity to the parties to lead the necessary evidence. 18.      Our conclusions and answers to the questions raised are, therefore, as follows : [i] In  view of the the provisions of Section 10 of the Act, it  is   only  the  appropriate  Government  which  has  the authority to  abolish genuine  labour contract in accordance with the  provisions of the said Section. No Court including the industrial adjudicator has jurisdiction to do so. [ii] if  the contract is sham or not genuine, the workmen of the so called contractor can raise an industrial dispute for declaring  that  they  were  always  the  employess  of  the principal employer  and for claiming the appropriate service conditions. When such dispute is raised, it is not a dispute for  abolition   of  the   labour  contract  and  hence  the provisions of  Section 10 of the Act will not bar either the raising or  the  adjudication  of  the  dispute.  When  such dispute is  raised, the industrial adjudicator has to decide whether the  contract is  sham or genuine. It is only if the adjudicator comes  to the  conclusion that  the contract  is sham, that  he will  have  jurisdiction  to  adjudicate  the dispute. If,  however, he  comes to  the conclusion that the contract is  genuine,  he  may  refer  the  workmen  to  the appropriate Government  for abolition of the contract labour under Section  10 of  the Act  and keep the dispute pending. However, he  can do  so if  the dispute  is espoused  by the direct workmen  of the principal employer. If the workmen of the principal  employer have  not espoused  the dispute, the adjudicator,  after   coming  to  the  conclusion  that  the contract is  genuine,  has  to  reject  the  reference,  the dispute being  not an  industrial dispute within the meaning of Section  2 (k) of the ID Act. He will not be competent to give any  relief to  the workmen of the erstwhile contractor even if  the labour contract is abolished by the appropriate Government under Section 10 of the Act. [iii]  If   the  labour  contract  is  genuine  a  composite industrial dispute  can still be raised for abolition of the contract labour  and their absorption. However, the dispute, will have to be raised invariably by the direct employees of the principal  employer. The  industrial adjudicator,  after receipt of  the reference of such dispute will have first to direct the  workmen to  approach the  appropriate Government for abolition of the contract labour under Section 10 of the Act and  keep the  reference pending.  If pursuant  to  such reference,  the   contract  labour   is  abolished   by  the appropriate Government, the industrial adjudicator will have to give  opportunity to  the parties  to place the necessary material before  him to  decide whether  the workmen  of the erstwhile contractor  should be  directed to  be absorbed by the principal  employer, how many of them and on what terms. If, however,  the contract  labour  is  not  abolished,  the industrial adjudicator has to reject the reference. [iv] Even after the contract labour system is abolished, the direct employees  of the  principal employer  can  raise  an industrial dispute  for absorption  of  the  ex-contractor’s

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workmen and  the adjudicator  on the  material placed before him can  decide as to who and how many of the workmen should be absorbed and on what terms. 19.  It is  in the  light of the above position of law which emerges from  the provisions  of the  Act and  the  judicial decisions  on  the  subject  that  we  have  to  answer  the contentions raised  in different civil appeals before us. As regards the  present civil  appeal, the  facts of which have already  been  referred  to  earlier,  Shri  Venugopal,  the learned counsel for the appellant- Board contended that none of the direct workmen of the Board had espoused the cause of the  contract   labour  and   hence  the   Tribunal  had  no jurisdiction to  entertain the  reference. He also submitted that any amount of consent by the appellant-Board for such a reference will  not confer  jurisdiciton on  the Tribunal to entertain the reference.      As has been pointed out earlier, the order of reference of the  dispute to  the  Tribunal  was  made  by  the  State Government on the basis of a joint application for reference under Section  10(2) of the ID Act. The application was duly signed  by   the  present  appellant-Board,  all  the  seven contractors involved  in the  dispute and  by the then Surat Labour Union  which had  both direct  as  well  as  contract labourers, as  its  members.  The  respondent-union  is  the successor of  the said  Surat Labour Union. These facts show two things,  viz., that  contrary to  the submission made by the learned  counsel, the  direct employees of the Board had espoused the  cause  of  the  contract  labourers,  and  the appellant-Board had  also accepted the fact that the dispute in question  was raised  and  supported  also  by  the  said employees. No objection was taken before the Tribunal or the High Court  either to  the order  of  reference  or  to  the adjudication of the dispute by the Tribunal that the dispute was not  espoused by  the direct employees of the appellant- Board. This  would also  show that the fact that the dispute was espoused  by the  direct  employees  of  the  Board  was accepted by  the Board  and never questioned till this date. Apart from  the fact,  therefore, that  the Board had signed the joint  application for reference and therefore it cannot in an  appeal by  special leave  under Article  136  of  the Constitution for  the first time raise the question which is a mixed  question of  law and  fact, we are of the view that even on  facts as  they stand,  it will have to be held that the dispute  was in fact espoused by the direct employees of the  appellant-Board.   We   therefore   reject   the   said contention. 20. It  was next  contended that  the dispute  raised by the workmen was for abolition of the contract and such a dispute could not  have been  entertained by the Tribunal in view of the provisions  of Section  10 of the Act. For this purpose, the learned  counsel relied  upon clause (1) of the order of Reference. We find nothing in the said clause which supports the contention  of the  learned counsel. The clause reads as follows:          "Whether the workers whose services      are engaged  by the contractors, but who      are working in the Thermal Power Station      of Gujarat  Electricity Board  at  Ukai,      can legally claim to be the employees of      the Gujarat Electricity Board?" It will  be obvious  from a  reading of the said clause that what  in   fact  is   referred  for   adjudication  is   the determination of  the status  of the  workmen, viz., whether though engaged  by the  contractors, they  are  legally  the workmen of  the appellant-Board? In other words, implicit in

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the said  clause is  the assertion  of the workmen that they are in law the workmen of the appellant-Board and not of the contractors, and  they wanted  the Tribunal  to decide their exact legal status. This is clear from also the statement of claim filed  by the  workmen in  support of their demand. In paragraph 3  of the  statement of  claim, it is averred that the Board  has been  employing Mukadam  supervisors "who are draped in  different paper arrangements and are now known as contractors of  the Thermal Power Station" and the Board and the  so-called   contractors  have  joined  hands  for  mass victimisation  and  termination  of  services  even  without payment of due wages. Again, in paragraph 5 of the statement of claim, it is stated that the workmen are being paid wages by the  management of  the Board through Mukadam supervisors now known  as contractors of the Board. The contractors come and go  but the  workmen are  working throughout  since  the inception  of   the  Thermal  Power  Station.  The  control, direction and  initiation of  these workmen are in the hands of the  supervisors and technical staff fo the Thermal Power Station. It  is also  alleged in the said paragraph that the so-called contractors  are not  the contractors  as none  of them have taken licence. It is also averred there that it is abundantly clear  that the  workmen employed  to perform the permanent and  perennial nature  of duties are the employees of the  Board. In paragraph 10 of the statement of claim, it is prayed that the Tribunal should hold and declare that the workers deployed in the Thermal Power Station under the garb of contractor  are the  permanent employees  of the  Thermal Power Station  managed  and  controlled  by  the  appellant- Board". In paragraph 6 of the application for interim relief which was  filed on  behalf of  the workmen,  it was averred that the  Board was  though different agreements showing the workmen as  if they  were working  under some intermediaries and the said intermediaries are "make-believe trappings" and are "dubious"  in nature  and it  was only  to  deprive  the workmen of the benefits which are available to the employees of the  Board that  the said  "make-believe trappings"  were employed by  the Board.  It is  therefore not correct to say that the  present reference  was for  the abolition  of  the contract. The  reference  on  the  other  hand,  was  for  a declaration that  the workmen  were in  fact and  in law the employees of  the appellant-Board  and that  they should  be given the  service conditions as are available to the direct employees of the Board.      It was  then contended  by the learned counsel that the Industrial Tribunal  has nowhere recorded a finding that the contract in question was sham, camouflage, make-believe or a subterfuge. On  the contrary, according to him, the Tribunal has held that the contract labour of each of the contractors must be  deemed to  be the employees of the appellant-Board, firstly because  the  Board  and  the  contractors  had  not produced valid proof of the registration certificate and the licences respectively,  relying  on  the  decisions  of  the Madras and  Karnataka High  Courts, and secondly, because of the nature  of the  work. He submitted that the decisions of the Madras  and Karnataka  High Courts  have been  expressly overruled by  this Court  in  Dena  Nath  case  [supra].  As regards the  nature of  work, the  exclusive jurisdiction to record a  finding in  that  behalf  is  of  the  appropriate Government under  Section 10  of the Act and the Tribunal is precluded from  recording  a  finding  in  that  behalf  and abolishing the  contract on  the basis  of such  finding. In fact, the  Tribunal  has  no  jurisdiction  to  abolish  the contract.      In the first instance, we find that the contention that

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the Tribunal  has held  that the workmen in question are the employees of the Board only because of the non-production of the valid  proof of  the certificate  and  the  licences  in question, is  not correct. The Tribunal has, on the basis of the evidence  on record,  come  to  the  conclusions,  among others, that  (i) the work was being done on the premises of the Board itself as the coal was being used for the purposes of the  Board, viz.,  generation of  electricity;  (ii)  the workmen were  broadly under  the control of the Board; (iii) there was overall supervision of the work by the officers of the Board;  (iv) the work was of a continuous nature and (v) the work  was an  integral part  of the  overall work  to be executed  for   the  purposes   of  the  generation  of  the electricity and that it had to be performed within specified time limits  as part of the integrated process. The Tribunal has also  in this  connection referred to a decision of this Court reprted  in Hussainbhai,  Calicut case  [(1978) 4  SCC 257]  to  support  its  conclusion  that  in  the  aforesaid circumstacnes found  by it, the workmen in question were the employees of the Board. It is true that the Tribunal has not in so  many words  recorded a  finding that the contract was sham or  bogus or a camouflage to conceal the real facts. It is also true that the Tribunal has referred to the decisions of the  Madras and  Karnataka High Courts and on its finding that the  Board and  the contractors  had not produced valid proof of  the registration  certificate and the licences for the relevant  period has  held that  the workmen  should  be deemed to  be the  employees  of  the  Board.  However,  the decision of  the Tribunal  has to  be read  as a whole. Thus read, the  decision makes  it clear  that the  Tribunal  has based its  conclusion both  on the  ground that  the workmen were in  fact engaged  by the appellant-Board and not by the contractors who  were merely  intermediaries set  up by  the Board and  also on  the ground that there was no valid proof of the  registration certificate  and the  licences  in  the possession of the Board and the contractors respectively. It is not,  therefore, correct  to say that the decision of the Tribunal is  based only  on the latter ground. We are of the view that  there  is  a  factual  finding  recorded  by  the Tribunal that  the labour  contracts in  question  were  not genuine and  the decision  of the  Tribunal is based on this ground as well.      It is  also not  correct to  say that  to arrive at the finding as  to whether  the labour  contracts are genuine or not,  the   Court  or   the  industrial  adjudicator  cannot investigate the factors mentioned in Section 2 (a) to (d) of Section 10(2)  of the  Act. The explanation to Section 10(2) makes the  decision of the appropriate Government final only on the question whether the process or operation or the work in question  is of  a perennial  nature or not, and that too when a  dispute arises  with regard  to the same. If no such question arises,  the finding  recorded by  the Court or the Tribunal in  that behalf  is  not  ineffective  or  invalid. Further, in  all such  cases, the Tribunal is called upon to record  a  finding  on  the  factors  in  question  not  for abolishing the contract but to find out whether the contract is sham or otherwise. The contract may be genuine even where all the  said factors  are present.  What is  prohibited  by Section 10  is the  abolition of  the contract except by the appropriate Government,  after taking into consideration the said factors,  and not  the recording  of the finding on the basis of  the said  factors, that  the contract  is sham  or bogus. 21. The  next contention  of the  learned counsel  that  the reference with  regard to  the  abolition  of  the  contract

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labour was  not maintainable  after the coming into force of the Act  has been  sufficiently answered by us earlier while discussing and  recording our conclusions on the position of law in  that behalf. Even on facts, we have pointed out that the present  reference was not for the abolition of contract labour but  for a  declaration that  the workmen were in law the  employees   of  the   appellant-Board.  The  industrial adjudicator has  undoubtedly no  jurisdiction to  abolish  a genuine labour contract in view of the provisions of Section 10 of  the Act.  However, it  is not correct to say that the reference for  the abolition  of the contract, itself stands barred.  It  is  the  terms  of  the  reference  which  will determine the  jurisdiction of the industrial adjudicator to enetertain and  decide the  reference.  The  dispute  as  to whether the  labour  contract  is  genuine  or  not  can  be agitated by  the workmen  and the industrial adjudicator has jurisdiction to  examine the controversy. If the contract is held to  be genuine,  the dispute  if it  is espoused by the direct workmen of the principal employer can be kept pending by  the  industrial  adjudicator  and  the  workmen  may  be referred by  him  to  the  appropriate  Government  for  the abolition of  the contract.  If the  appropriate  Government abolishes  the  contract,  the  industrial  adjudicator  can thereafter grant  futher relief,  if claimed,  viz., of  the absorption of the workmen of the erstwhile contractor in the principal  establishment.   If,  however,   the  appropriate Government does  not abolsih  the contract,  the  industrial adjudicator may  reject the reference, as stated earlier. It is not,  therefore, correct  to say that the reference of an industrial dispute seeking to abolish the contract is per se barred, as contented by the learned counsel. 22. It  was  also  contended  by  him  that  the  industrial Tribunal cannot make recruitment and create contract against third parties,  and for this purpose, reliance was placed by him on  the decisions  reported in Indian General Navigation and Railway  Company Ltd. & Anr. Vs. Their Workmen [1966 (1) LLJ 735 Krishna Kurup Vs. General Manager, Gujarat Refinery, Baroda [(1986) 4 SCC 375] and Gurmail Singh & Ors. Vs. State of Punjab & Ors. [(1991) 1 SCC 189].      In Indian  General Navigation  and Railway Company Ltd. and Anr.  Vs. Their workmen (supra), the facts were that the appellant  company  carried  on  business  of  Inland  Water Transport in north-east India between various river stations in Bengal  and Assam  and for  this purpose, it maintained a number of  ghats or  stations on  the river  Brahmaputra  in Assam. The  company did not employ any workmen at any of the river stations  for the  work of cargo-handling and left all such  work   to  be   carried  on   by  different   handling contractors. On 3rd May, 1954, an agreement was entered into between the company and its allied companies on the one hand and the  Indian National Trade Union Congress (INTUC) on the other. The  agreement was that a tripartite conference would be held later to decide the question of direct employment of workmen by  the company. The said conference was held on 9th and 10th May, 1954 at which the company agreed that it would progressively introduce  the system  of direct employment of labour in  all transhipment  ghats  in  Assam.  Accordingly, direct labour  was employed  by the  company in  some of the major ghats,  but in  the smaller  ghats  the  old  contract labour  continued.  On  29th  April,  1957,  a  conciliation meeting was held to consider the demand made by the Sibsagar Transhipment Labour  Union for  direct employment of workmen at three  minor ghats. No decision was, however, reached and the contract  labour continued  to work  at the  said ghats. Another tripartite  meeting was  held on 10th November, 1959

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and it  was then agreed that the company would employ direct labour in  all the  ghats on  or  before  1st  April,  1960. Meanwhile, a  material change  in the  circumstances of  the company’s working took place in one sector of its operation. The company made arrangements to open a ghat in May, 1960 as an all-the-year-round  main-line ghat  replacing the current feeder service  operation. This  step  represented  a  major advance in  the improvement of transport facilities and also led to the closure of one of the ghats on 17th May, 1960. As a result,  56 workmen  involved in the dispute in the appeal before the  Court, came  to be  discharged by payment of one month’s basic  pay. On  these facts,  the dispute raised was whether the  termination of  the services  of the 56 workmen was  justified   and   whether   they   were   entitled   to reinstatement with  continuity of service and full wages. It was contended  by the company that the said workemn were not its employees,  and in  the alternative,  the termination of the services  of the workmen being the result of the closure of the  ghat in  question, they  were not  entitled  to  any relief.  The   Industrial  Tribunal  had  made  inconsistent findings. It  had held  that the  relationship of master and servant had  been proved between the company and the workmen in question but had also added that no direct employment was introduced, as  was agreed to in the tripartite meeting held on 10th  November, 1959.  The Industrial  Tribunal had found that the  workmen in  question were  the  employees  of  the company and  had also  found that  the closure was bona fide and real and ech of the workmen was entitled to compensation under sub-section  (1) of  Section 25FFF  of the  ID Act. On these facts,  the  Court  held  that  the  company  had  not directly employed  the workmen at all and it is the contract labour which  used to  work for  the company  at the ghat in question. The  Court further  found that  though the company had guaranteed  the payment  at the prescribed rate to these workmen and  in that  sense had  undertaken the liability to pay that  money at  that rate,  the record  showed that  the money was  paid to the contractor and the contractor paid it to the  workmen from  month  to  month  until  the  ghat  in question was  closed. Even  one month’s  basic pay which was paid to  the workmen  for retrenching  them was paid to them through the  contractor. The Court, therefore, held that the Tribunal was  in error  in coming to the conclusion that the workmen in  question had  been employed  by the company. The company was  not the employer of the workmen in question and hence the  Tribunal could  give them  no relief. The workmen had claim,  if any,  against the  contractor who  was  their employer.      In Krishna Kurup Vs. General Manager, Gujarat Reginery, Baroda (supra),  out of 187 workmen, whose services had been terminated by  the respondent-company  by an oral order, 105 employees, in  respect of  whom the  Gujarat High  Court had recorded a finding for their absorption subject to scrutiny, were absorbed  by the  company, pending  the  special  leave petition before  this Court.  Special leave  was, therefore, granted for  the remaining  the 82 workmen. The Court by its order of 16th January, 1986 directed the Labour Commissioner to enqurie  into as  to whether  they could be considered to be the  employees of the company having regard to the nature of their  employment, the  period for  which they  had  been employed off  and on  and all  other relevant  factors.  The Commissioner  found   that  the  82  workmen  were  not  the employees  of  the  company,  but  were  contract  labourers employed by  the contractor.  These findings were challenged on behalf  of the  workmen, and this Court accepted the said findings holding that the appellant had failed to prove that

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the  workmen  in  question  were  direct  employees  of  the company. The  Court also  observed that  it was difficult to decide for  the Court whether 82 workmen were doing the same work as  was being done by the 105 workmen who were absorbed by the  company. The  Court also  relied upon  the affidavit filed on  behalf of the company that it had not been able to provide work  to all 105 workmen who were absorbed, and only 22 of  them had  been allotted  work and the rest 83 had not been assigned  any work  whatsoever. The  Court,  therefore, held that it would not be justified in directing the company to absorb the 82 workmen and dismissed the appeal.      In Gurmail  Singh &  Ors. Vs.  State of  Punjab &  Ors. (supra),  the   appellants  were   in  service  as  Tubewell Operators in  the Irrigation  Branch  of  the  Public  Works Department of the Punjab State. The State took a decision to transfer all  the tubewells in the said Branch to the Punjab State Tubewell  Corporation,  a  company  wholly  owned  and managed by  the State of Punjab. Accordingly, the appellants were served  with a  notice on  August 31, 1982, in terms of Section 25-F  of the ID Act, terminating their services with effect  from   November  30,   1982  and   on  that  date  a notification was issued, abolishing the posts sanctioned for the Tubewell  Circle, Irrigation  Branch  with  effect  from March 1, 1983. The appellants, inter alia, contended that in case the  action of  the State  was upheld,  the  respondent company should  be held  to be under an obligation to employ the appellants with continuity of service and under the same terms and  conditions which  they were enjoying prior to the retrenchment from  the service  of the State. The appellants also  contended   that  the   notices  did  not  fulfil  the requirements of  clauses (b)  and (c) of Section 25-F of the ID Act.  The principal  question before  the Court, however, was whether  in the  circumstances the  State was  under  an obligation to protect the terms and conditions of service of the  Tubewell   Operators  and   whether  there   cannot  be situations in  which the Court or the industrial adjudicator should, in  the interest of justice, fairplay and industrial peace, hold  the employees  entitled to  continuity with the successor without  being  compelled  to  be  satisfied  with compensation from the predecessor. On these facts, the Court held as follows:          "Section 25FF  provides that  where      there is a transfer of an undertaking by      agreement  or   operation  of   law,  an      employee who  loses his  job because  of      such  transfer  will  have  a  right  to      compensation   from   the   predecessor,      except where  he  gets  the  benefit  of      uninterrupted  service   with  the   new      employer on  no  less  favourable  terms      than before  and  will  be  entitled  to      compensation  in   case  he   should  be      retrenched later by the new employer. If      a  transfer  is  fictitious  or  benami,      Section 25-FF has no application at all.      In such  a  case,  "there  has  been  no      change of  ownership or  management  and      despite  an   apparent   transfer,   the      transferor employer  continues to be the      real  employer   and  there  has  to  be      continuity of  service  under  the  same      terms  and   conditions  of  service  as      before and  there can  be no question of      compensation". A second type of cases is      one in  which  there  is  in  form,  and

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    perhaps also  in law,  a succession  but      the management  continues to  be in  the      hands  of   the  same   set  of  persons      organised differently.  In  such  cases,      the  transferee   and   transferor   are      virtually the  same and  the  overriding      principle should  be that  no one should      be able  to  frustrate  the  intent  and      purpose  of   the  law   by  drawing   a      corporate veil  across the  eyes of  the      court. Though  these exceptions  to  the      above rules would still be operative, it      is not  necessary here to decide whether      this principle will help to identify the      transferee corporation  with  the  State      Government  for  the  present  purposes,      particularly as  there is  a  catena  of      cases  which  do  not  approve  of  such      identification.  A   third  category  of      cases falling  as an  exception  to  the      principle behind Section 25-FF is where,      as   here,    the   transferor    and/or      transferee  is   a  State   or  a  State      instrumentality, which  is  required  to      act fairly  and not  arbitrarily and the      court has  a say as to whether the terms      and conditions  on which  it proposes to      hadn over  or take  over  an  industrial      undertaking  embody   the  requisite  of      "fairness  in   action"  and   could  be      upheld. In  such circumstances,  it will      be open  to the  Court to review overall      aspects of  transfer of  the undertaking      and the  arrangement between  the  State      Government and  the Corporation  and  to      issue  appropriate  directions  that  no      injustice results  from the  changeover.      Such directions  could be issued even if      the elements  of  the  transfer  in  the      present case  fall short  of a  complete      succession   to    the    business    or      undertaking  of   the   State   by   the      Corporation, as  the principle sought to      be applied is a constitutional principle      flowing from  the contours of Article 14      which  the  State  and  Corporation  are      obliged to adhere to.           x             x              x           x             x              x      Looking at the facts of this case in the      above perspective, it appears that the      State Government  has acted  arbitrarily      towards the  appellants. It has abridged      the  rights   of   the   appellants   by      purporting   to    transfer   only   the      tubewells and  retrenched the appellants      from  service   as  a  consequence.  The      conduct of  the government  in depriving      the appellants  of substantial  benefits      which have  accrued to  them as a result      of   their   long   service   with   the      government,   although   the   tubewells      contine to  be run  at its  cost by  the      Corporation  wholly   owned  by  it,  is      something which  is grossly  unfair  and

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    inequitable."      Holding thus,  the Court directed the absorption of the workmen by  the Corporation, and granted them the benefit of their service  with the  Government for  the purposes of the computation  of   their  salary,   length  of   service  and retirement benefits,  but denied  them the  benefit to claim the seniority over the employees of the Corporation engaged, since its  commencement in  1970. The Court further directed that the Corporation should ensure that the workmen were not retrenched as  surplus on  account of  any  closure  of  any tubewells or  other like  reason until  they retired or left the service of the Corporation voluntarily for any reason.      Thus, it  would be seen that these three decisions have not in  any way diluted the propositions of law laid down by this Court  in Dimakuchi  and Standard Vacuum (supra), where the Court  has approved  of the jurisdiction of the Tribunal to direct  the principal  employer to  absorb the workmen of the erstwhile  contractor as  his direct employees depending upon the  satisfaction of  the factors laid down therein and on terms  that the  Tribunal on  the basis  of the  material before it,  may deem  fit to fix in the circumstances of the case.      It is  also not  correct to  say  that  the  Act  is  a complete Code  by  itself  and,  therefore,  the  industrial Tribunal has  no jurisdiction  to give  a direction  to  the principal employer  to absorb  the workmen  in question.  We have already  pointed out  that the  Act is  silent  on  the question of  the status  of the  workmen  of  the  erstwhile contractor once the contract is abolished by the appropriate Government. Hence,  as far  as the question of determination of the  status of  the workmen is concerned, it remains open for decision by the industrial adjudicator. There is nothing in the  Act which  can be  construed to  have  deprived  the industrial adjudicator  of the jurisdiction to determine the same. So  long as,  therefore, the said jurisdiction has not been taken  away from  the  industrial  adjudicator  by  any express provision  of the  Act or  of any  other statute, it will have  to be  held that  the said jurisdiction which, as pointed out above, has been recognised even by the decisions in Dimakuchi  and Standard Vacuum cases (supra) continues to exist.  In  the  exercise  of  the  said  jurisdiction,  the industrial adjudicator can certainly make a contract between the workmen  of the ex-contractor and the principal employer and direct the principal employer to absorb such of them and on such  terms as the adjudicator may determine in the facts of each  case. We  find nothing in the decisions relied upon on behalf  of the  appellant  which  goes  counter  to  this proposition  of   law.  The   decisions  in  Indian  General Navigation and  Railway  Company  Ltd.,  Krishna  Kurup  and Gurmail Singh  (supra) on which reliance is placed on behalf of  the   appellant  for  the  purpose,  have  already  been discussed by us above. The only additional decision which is pressed into  service in  this  behalf  is  Sanghi  Jeevaraj Ghewar Chand  & Ors.  Vs. Secretary, Madras Chillies, Grains Kirana Merchants Worker’s Union and Anr. [(1969) 1 SCR 366]. By a  common decision in this case, two appeals were decided by this  Court. In  one appeal,  the establishement employed less than  20 employees  and it  was not  a factory;  in the other appeal, the establishment was in the public sector. By reason of  exclusion under  Section 1(3)  of the  Payment of Bonus Act,  1965, the  establishment in the first appeal was excluded from  the application of that Act whereas by reason of exemption  under Section  32(x), the establishment in the other appeal  stood exempted  from the operation of the said Act. On  these facts, the question was whether the employees

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of the  two establishments  could claim  bonus de  hors  the Payment of  Bonus Act  and the  Court held,  considering the history  of   the  legislation,   the  background   and  the circumstances in  which the  Bonus Act  was enacted, and the object of  the Act  and its  scheme, that  the  Act  was  an exhaustive Act,  dealing comprehensively  with  the  subject matter of  bonus in  all its aspects, and the Parliament had not left  it open to those to whom the Act did not apply, by reason  of   its  provisions   either  as  to  exclusion  or exemption, to  raise a  dispute with regard to bonus through industrial  adjudication   under  the   ID  Act   or   other corresponding law.  The ID  Act itself did not provide for a statutory  right  for  payment  of  bonus  although  it  had provided substantial  rights for  workmen with regard to lay off, retrenchment  compensation etc.  It will  thus be clear that the  right to bonus which was spelt out by the judicial decisions was  expressly denied  by the  Bonus  Act  to  the workmen in the establishment concerned in that case, and yet the workmen  claimed the  bonus on  the basis of the alleged provisions of  the ID  Act. In  the present  case, there  is nothing in the Act, as pointed out earlier, which has either expressly  or   impliedly  taken  away  the  raising  of  an industrial dispute  to absorb the ex-contractor’s workmen in the  principal  establishment  when  the  dispute  has  been espoused by  the direct  workmen or  the jurisdiction of the Tribunal to  give a direction for the purpose, of course, on such terms  as it  deems fit  in the  circumstances of  each case.      For all  these reasons,  we are  unable to  accept  the contention that the industrial adjudicator cannot direct the principal employer  to  engage  ex-contractors’  workmen  as direct employees. 23.  It was  then contended  that the  bulk of  the contract labour was  engaged by  the contractors  in the  process  of unloading coal,  and since  the year  1989  the  process  of unloading coal had been fully mechanised at the Ukai Thermal Power Plant  with which  we are  concerned and  as such,  no labour was required in the process of the unloading of coal. For this purpose, reliance was placed on the contents of the additional affidavit  filed by  the Board during the hearing of the  present appeal.  We are  concerned  in  the  present appeal with  the award  of the Tribunal dated 22nd February, 1988. If  a situation  has,  thereafter,  arisen  where  the workmen directed  to be  employed by  the award  have become surplus, it is open for the appellant-Board to retrench them in accordance  with the  provisions  of  law.  However,  the situation in 1989 cannot be pressed into service to negative the award  of 1988  by which  the dispute raised in 1982 was adjudicated. 24.  The last  argument was  that  the  appellant-Board  has several other  thermal  power  plants  in  the  State  where certain type of work is done through contract labour only by contractors and  the present Thermal Power plant is only one of them.  Any decision  in the  present  appeal  will  have, therefore, according  to the  Board serious repercussions in the other  plants. It  is contended  that  this  might  also result in  total break-down  of the functioning of the Board which would  not be  in the  interest of  the workers  as  a class. To say the least, the argument is one in terrorem and has only  to be  stated to  be rejected.  The Board  has  to manage its  affairs according  to the provisions of law. The Courts cannot  grant it exemption from the law on the ground that it will not be in a position to run its affairs.      For the  above reasons,  we confirm the decision of the High Court  and the  award of  the Tribunal  and dismiss the

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appeal with costs. C.A. 5498-02  & 5503/95  @ SLP (C) No. 9310-9314 and 9315 of 1991 25.  These appeals  arise out  of the  decision of  the High Court in  a writ petition filed by the appellant-Union under Article 226  of the  Constitution. In  view of  what we have held above,  the decision of the High Court that the workmen concerned  do   not  become  the  direct  employees  of  the respondent-enterprises   merely   because   there   are   no registration certificates  and licences  with the respondent undertakings and the concerned contractors respectively, has to be  upheld. The  decisions relied upon by Shri Mukhoty on behalf of  the workmen, viz., D.S.Nakara & Ors. Vs. Union of India [(1983)  (1) SCC 305]; Delhi Transport Corporation Vs. D.T.C. Mazdoor  Congress [(1991) Suppl. (1) SCC 600] and The State of  Haryana Vs.  Piara Singh  [(1992) 4  SCC 118]  are inapplicable to the issues involved in these appeals.      The  remedy  of  the  workmen  is  to  raise  a  proper industrial dispute  as  indicated  earlier  for  appropriate reliefs. If  and when such dispute is raised, the Government should make  the reference  within two months of the receipt of the dispute and the industrial adjudicator should dispose of the same as far as possible within six months thereafter.      Civil Appeals are therefore dismissed but with no order as to costs. C.A. 5504/95 @ S.L.P. (C) No. 13520 of 1991 26.  In this  case, the  Labour Court  has given  relief  of reinstatement with  back-wages to  the workmen.  There is no finding recorded by the Court whether the industrial dispute was raised  by the direct employees of the appellant-Society and whether  the labour  contract was  genuine or  not.  The Labour Court  has proceeded  to  grant  the  relief  to  the workmen only  on the basis that the registration certificate and the  licences under  the Act  were not  produced by  the Society and  the  contractors  concerned  respectively  and, therefore, the  workers should  be deemd to be the employees of the Society.      In view  of what  we have  held above, the award of the Labour Court  and the  decision of  the High  Court are  set aside.  The  workers  are  free  to  raise  a  fresh  proper industrial dispute and claim appropriate relief. If and when such dispute  is raised,  the  Government  should  make  the reference within  two months  of the  receipt of the dispute and the  industrial adjudicator  should dispose of the same, as far as possible, within six months thereafter.      Civil appeal  is, therefore,  allowed but with no order as to costs. 27.  While  parting  with  these  matters,  we  cannot  help expressing  our   dismay  over   the  fact   that  even  the undertakings in  the public  sector have  been indulging  in unfair labour  practice by  engaging  contract  labour  when workmen can  be employed diretly even according to the tests laid down by Section 10 [2] of the Act. The only ostentsible purpose in  engaging the  contract  labour  instead  of  the direct employees  is the  monetary advantage by reducing the expenditure. Apart from the fact that it is an unfair labour practice, it  is  also  an  economically  short-sighted  and unsound  policy,   both  from  the  point  of  view  of  the undertaking concerned  and  the  country  as  a  whole.  The economic growth  is not  to be  measured only  in  terms  of production and  profits. It  has to  be gauged  primarily in terms of  employment and  earnings of the people. Man has to be the  focal point  of development. The attitude adopted by the undertakings  is inconsistent  with the  need to  reduce unemployment and the Government policy declared from time to

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time, to give jobs to the unemployed. This is apart from the mandate of  the directive  principles contained  in Articles 38,  39,  41,  42,  43  and  47  of  our  Constitution.  We, therefore, recommend that -      [a] all  undertakings which are employing the contract      labour system  in any process, operation or work which      satisfies the  factors mentioned in clauses [a] to [d]      of Section  10 [2]  of the  Act, should  on their own,      discontinue the  contract labour and absorb as many of      the labour as is feasible as their direct employees;      [b] both  the Central  and the State Governments should      appoint a  Committee to  investigate the establishments      in which  the contract  labour is  engaged and where on      the basis  of the  criteria laid down in clauses [a] to      [d] of  Section 10  [2] of the Act, the contract labour      system can  be abolished  and direct  employment can be      given  to   the  contract   labour.   The   appropriate      Government on its own should take initiative to abolish      the labour contracts in the establishments concerned by      following the procedure laid down under the Act.      [c] the  Central Government  should amend  the  Act  by      incorporating a  suitable provision  to  refer  to  the      industrial  adjudicator  the  question  of  the  direct      employment of  the workers  of the ex-contractor in the      principal   establishment,    when   the    appropriate      Government abolishes the contract labour.