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PETITIONER: HUSSAINBHAI, CALICUT

       Vs.

RESPONDENT: ALATH FACTORY THOZHILALI UNION,KOZHIKODE AND ORS.

DATE OF JUDGMENT28/07/1978

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. DESAI, D.A. REDDY, O. CHINNAPPA (J)

CITATION:  1978 AIR 1410            1978 SCR  (3)1073  1978 SCC  (4) 257

ACT: Employee in labour law, concept of-Whether includes a person hired  by  an  independent labour  contractor  for  creating vinculum juris.

HEADNOTE: The  petitioner  a factory owner,  manufacturing  ropes  had entered  into agreements with intermediate  contractors  who had hired the respondent union’s workmen.  In an  industrial dispute  raised  by  the  respondent  union  the  petitioner contended  that no direct employer-employee  vinculum  juris existed between him and the workmen.  However, the  Tribunal gave an award in favour of the workmen which was affirmed by both  the  single Judge as well as a Division Bench  of  the Kerala High Court. Dismissing the special leave the Court, HELD  :  1. Where a worker or a group of workers  labour  to produce  goods or services and these goods or  services  are for  the  business  of another, that other is  in  fact  the employer.   He has economic control over the  workers’  sub- sistence,  skill, and continued employment.  If he, for  any reason, chokes off the worker is, 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  looking ;it  the conspectus of factors governing employment,  Courts discern the naked truth, though draped in different  perfect paper arrangement, that the real employer is the management, not the immediate contractor. [1075 C-D] If  the  livelihood of the workmen substantialy  depends  on labour  rendered  to  produce goods  and  services  for  the benefit  and satisfaction of an enterprise, the  absence  of direct    relationship   or   the   presence   of    dubious intermediaries  or the make-believe trappings of  detachment from  the  Management cannot snap the real-life  bond.   The story  may  vary but the inference  defies  ingenuity.   The liability  cannot  be shaken off.  Of course,  if  there  is total dissociation in fact between the disowning  management and  the aggrieved workmen, the employment is, in  substance and  in  real-life  terms,  by  another.   The  Management’s adventitious connections cannot ripen into real  employment.

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[1075 E-F-G] 2.The source and strength of the industrial branch of  Third World  Jurisprudence  is social justice  proclaimed  in  the Preamble  to the Constitution.  The Court must be astute  to avoid  the mischief and achieve the purpose of the  law  and not  be misled by the maya of legal appearance  when  myriad devices   are   resorted   to   when   labour    legislation casts’welfare  obligations  on the real  employer  based  on Articles  38, 39, 42, 43 and 43A of the  Constitution.   The contention of the_ petitioner as to the non-existence of the vinculum  juris between the respondent and himself is if  at all impeccable only in laissez faire economics red in  tooth and  claw’  and  under the Contract Act  rooted  in  English common law as the human gap of a century yawns between  this strict  doctrine and the industrial Jurisprudence of  today. [1074.  G-H, 1075 -D-E]

JUDGMENT: CIVIL APPELLATE JURISDICTION :Special Leave petition (Civil) No. 1853 of 1978. From  the Judgment and Order dated 30-6-1977 of  the  Kerala High Court in Writ Appeal No. 142/77. 1074 N. Sudhakaran for the Petitioner. The Order of the Court was delivered by KRISHNA  IYER, J.-The petitioner before us in  this  special leave  petition is a factory owner manufacturing  ropes.   A number of workmen were engaged to make ropes from within the factory,  but  those workmen, according to  the  petitioner, were  hired by contractors who had executed agreements  with the  petitioner  to get such,, work  done.   Therefore,  the petitioner  contended that the workmen were not his  workmen but the contractors’ workmen.  The industrial award, made on a  reference by the State Government, was attacked  on  this round.  The l earned single Judge of the High Court, in  ’an elaborate judgment, rightly held that the petitioner was the employer  and  the  members  of  the  respondent-Union  were employees  under the, petitioner.  A division  Bench  upheld this stand and the petitioner has sought special leave  from this Court. It is not in dispute that 29 workmen were denied  employment which  led to the reference.  It is not in dispute that  the work  done  by  these workmen was an integral  part  of  the industry  concerned; that the raw material was  supplied  by the  Management; that the factory premises belonged  to  the Management;  that  the equipment used also belonged  to  the Management  and that the finished product was taken  by  the Management  for  its own trade.  The  workmen  were  broadly under  the control of the Management and defective  articles were directed to be rectified by the Management.  This  con- catenation  of circumstances is conclusive of the  question. Nevertheless, this issue is being raised time and again  and so  we  proceed to pass a speaking order.   We  should  have thought  that  even  cases where this  impressive  array  of factors were not present, would have persuaded an industrial court  to  the  conclusion that  the  economic  reality  was employer-employee  relationship  and,  therefore,  the   in- dustrial  law was compulsively applicable.  Even so, let  us look at the issue afresh. Who is an employee, in Labour Law?  That is the short,  die- hard  question  raised  here but  covered  by  this  Court’s earlier decisions.  Like the High Court, we give short shift to  the  contention  that the petitioner  had  entered  into

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agreements  with intermediate contractors who bad hired  the respondent-Union’s  workmen  and  so  no  direct   employer- employee  vinculum juris existed between the petitioner  and the workmen. This argument is impeccable in laissez faire economics  ’red in  tooth  and claw’ and under the Contract  Act  rooted  in English  Common Law.  But the human gap of a  century  yawns between  this strict doctrine and industrial  jurisprudence. The  source and strength of the industrial branch  of  Third World  Jurisprudence  is social justice  proclaimed  in  the Preamble to the Constitution.  This Court in Ganesh  Beedi’s case  1974  (1)LLJ 367 has raised on  British  and  American rulings to hold that mere contracts are not decisive and the complex of  1075 considerations  relevant to the relationship  is  different. Indian  Justice, beyond Atlantic liberalism, has a  rule  of law which runs to the aid of the rule of life.  And life, in conditions of poverty aplenty, is livelihood and  livelihood is  work with wages.  Raw societal realities, not  fine-spun legal niceties, not competitive market economics but complex protective  principles,  shape  the  law  when  the  weaker, working  class sector needs succour for  livelihood  through labour.  The conceptual confusion between the classical  law of  contracts  and the special branch of  law  sensitive  to exploitative situations accounts for the submission that the High   Court  is  in  error  in  its  holding  against   the petitioner. The  true test may, with brevity, be indicated  once  again. Where a worker or group of workers labours to produce  goods or services and these goods or services are for the business of  another, that other is, in fact, the employer.   He  has economic  control over the workers’ subsistence, skill,  and continued  employment.  If he, for any reason,  chokes  off, the  worker  is,  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  looking  at  the conspectus  of factors governing employment, we discern  the naked  truth,  though  draped  in  different  perfect  paper arrangement,  that the real employer is the Management,  not the  immediate contractor.  Myriad devices,  half-hidden  in fold  after  fold of legal form depending on the  degree  of concealment   needed,  the  type  of  industry,  the   local conditions  and  the like, may be resorted  to  when  labour legislation casts welfare obligations on the real  employer, based   on  Articles  38,  39,  42,  43  and  43-A  of   the Constitution.   The court must be astute to  avoid  mischief and achieve the purpose of the law and not be misled by  the maya of legal appearances. If  the livelihood of the workmen substantially  depends  on labour  rendered  to  produce goods  and  services  for  the benefits  and satisfaction of an enterprise, the absence  of direct    relationship   or   the   presence   of    dubious intermediaries  or the make-believe trappings of  detachment from  the  Management cannot snap the real-life  bond.   The story may vary but the inference defies ingenuity.  The lia- bility cannot be shaken off. Of  course, if there is total dissociation in  fact  between the  disowning  management and the  aggrieved  workmen,  the employment  is,  in  substance and in  real-life  terms,  by another.   The Management’s adventitious connections  cannot ripen into real employment. Here, on the facts, the conclusion is correct and leave must be refused.

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S.R. Petition dismissed. 329SCI/78