http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: KANPUR SURAKSHA KARAMCHARI UNION (REGD.)

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT26/08/1988

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) DUTT, M.M. (J)

CITATION:  1988 SCR  Supl. (2) 590  1988 SCC  (4) 478  JT 1988 (3)   461        1988 SCALE  (2)431

ACT:     Factories  Act, 1948; Section 46-Canteens maintained  in Defence  Industrial Installations-Employees working in  such canteens-Employees  of the factories in which canteens  have been established.

HEADNOTE:     The  President  of India, by order dated July  25,  1981 accorded  sanction  to  treat  all  employees  of   canteens established   ia  Defence  Industrial  Installations   under section  46  of  the  Factories  Act,  1948,  as  Government employees. The order was given effect from 22.12.1980.     The  petitioners  were working in the  canteens  of  the three Defence establishments at Kanpur, forming part of  the Defence   Department  of  the  Union  of  India.  On   their retirement after 22.10.1980 the petitioners claimed that the period  of  service  rendered by them  prior  to  22.10.1980 canteens be counted towards their qualifying service for the purposes  of  pension.  Their claim was  not  accepted.  The respondents’  contention  was that prior to  22.10.1980  the canteens   in   Ordnance  factories  were   supervised   and controlled  by the Canteen Managing Committee consisting  of equal  number  of  elected representatives  of  the  factory workers  and  nominees of management, and  these  Committees were  the  appointing authority of the Canteen  workers  and paid their salaries.     Allowing the petitions, it was,     HELD: (1) It was admitted by the respondents that by the letter dated 24.5.1965 of the Ministry of Defence, provision had  been  made for subsidising the canteens  maintained  in Defence  Industrial Installations under section 4th  of  the Act.  The  letter also contained directions  regarding  pay- scales,  conditions of service, etc. of the  employees.  The cost of supervisory and clerical staff and cooks etc. was to be  reimbursed by the Government and the  canteen  buildings formed  part  of  the  industrial  establishment  concerned. [595A-B]     (2) The expression ’occupier’ of a factory is defined in section  2 (n) of the Factories Act, 1948 as the person  who has ultimate control over the affairs of the factory.  Under                                                   PG NO 590                                                   PG NO 591

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

cause (iii) of section 2(n), in the case of a factory  owned or  controlled  by  the Central Government,  the  person  or persons  appointed to manage the affairs  of the factory  by the  Central Government shall be deemed to be the  occupier. [596C,F]     (3)  A  canteen  is  an integral  part  of  the  Defence establishment belonging to the Union of India. There  cannot be a canteen without sufficient number of workers working in the  canteen.  They have to be appointed  by  the  occupier. Otherwise he would not be fully complying with section 46 of the  Factories  Act. The Managing Committee  cannot  be  the employer  of those workmen in the true sense of  the  terms. The  Managing Committee constituted under section 46 of  the Act  which is not an incorporated body and  whose  financial position  is  un  certain cannot be  considered  to  be  the employer  who has to bear the legal  responsibilities  under the several labour laws in force in India. [597C-D]     (4)  The  basic  requirements of the  canteen,  such  as Buildings, utensils, crockery, cutlery, furniture, etc.  are to be supplied by the occupier. [597B-C]     (5)  In this situation it is difficult to hold that  the employees  in canteens established under section 46  of  the Act would not be employees of the occupier, even though  for purposes of management a Canteen ,Managing  Committee, whose functions  are  advisory, has to be  constituted  under  the Rules. l597F]     (6)  It  is  also  not shown that  the  workers  in  the canteens  becoming the Government employees  on  22.10.1980. They  were  paid  by the previous  management,  namely,  the Managing Committee constituted under rule 68 of  the U.P.  Factories  Rules,  1950 any compensation  in  lieu  of services rendered by them prior to 22.10.1980. [597F-G]     (7)  It  is,  therefore,  difficult  to  hold  that  the employees working in such canteens were not employees of the factories in which the canteen had been established. If they are  employees  of  the factories in which  the  canteen  is established, the service rendered by them in these factories should  be  counted as part of the  qualifying  service  for pension. [597G-H]

JUDGMENT:     ORIGINAL JURISDICTION: Writ Petition (Civil) Nos.  5187- 89 of 1985 etc.     (Under Article 32 of the Constitution of India)                                                   PG NO 592     P.S. Khera and Mrs. Sushrna Suri for the Petitioners.     Kuldip Singh, Additional Solicitor General; C.V.S.  Rao, Ms.  A. Subhashini, Girish Chandra and N.S.D. Behl  for  the Respondents.     The Judgment of the Court was delivered by     VENKATARAMIAH,   J,  The  question  involved  in   these petitions  is  whether  the  workmen  who  were  working  in canteens established under section 46 of the Factories  Act, 1948  (hereinafter  referred to as ’the  Act’)  in  Ordnance Equipment  Factory, Kanpur, Central Ordnance  Depot,  Kanpur and  Air  Force Station, Kanpur are entitled  to  claim  the period of service in such canteens prior to 22. 10. 1980  as part of the qualifying service for claiming pension.     The three industrial establishments, referred to  above, namely;  Ordnance Equipment Factory, Central Ordnance  Depot and  Air  Force Station, Kanpur  are  defence  establishment forming  part  of  the Defence Department of  the  Union  of lndia. By the Order No. 18(l)80/D(JCM) dated the 25th  July,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

1981  sanction  was accorded by the President  of  India  to treat  all  employees  of canteens  established  in  Defence Industrial  Installations  under section 46 of  the  Act  as Government employees with immediate effect. By an amendment, the  said  Government Order was given effect  from  22.  10. 1980.  The Government Order further provided  that it  would be  applicable  to all employees of the  statutory  canteens irrespective of the type and management of the canteens  and till  the Government decided otherwise the employees of  the said canteens would continue to be governed by the terms and conditions of service laid down in their appointment letters and  contracts  of  employment already  subsisting.  It  was further stated that they would be continued to be paid  such employments to which  they were  entitled then. When some of the  employees  retired after 22.10.1980  they  applied  for payment of pension. The Defence Department declined to treat the period of service rendered by them prior to 22. 10. 1980 in such canteens as part of qualifying ˜service for purposes of  pension on the ground that it was only with effect  from 22.10.1980  from  which  date  they  had  become  Government employees   their  qualifying  service  could  be   counted. Aggrieved  by the rejection of the claim of the  workers  in those  canteens, the petitioner-s herein, have filed   these petitions  in  this Court for declaration  that  th  service rendered  by  the  employees  of  such  canteens  prior   to 22.10.1980  should   be treated as  qualifying  service  for purposes  of  pension.  On behalf of  the  Union  of   India counter-affidavits  were  filed resisting the claim  of  the                                                   PG NO 593 petitioners.  As the information furnished in  the  counter- affidavits  was inadequate for purposes of disposing of  the cases,  the Court by its order dated 22.3.1988 directed  the Union of India to file a fuller affidavit giving information about the following matters, namely; the authority which had the  power to appoint workers in such canteens prior to  22. 10.  1980,  the  authority which was paying  salary  to  the workers  in  the said canteens prior to 22.  10.  l9S0,  the authority which˜ was controlling such canteens prior to  22. 10. 1980, the particulars of the persons who were  consumers of  the service rendered by the said canteens prior  to  22. 10.1980  and other relevant matters in order tn  decide  the status  of  the  workers  in  the  said  canteens  prior  to 22.10.1980. Thereupon a further affidavit has been filed  by Shri   N.   Sivasubramanian,   Joint   Secretary   (Ordnance Factories) to the Government of India, Ministry of  Defence, New Delhi. In the said affidavit it is stated that (a) prior to being declared as Government servants w.e.f. 22. 10. 1980 the  canteens workers in Ordnance Factories were  under  the canteen managing committees constituted as per provisions of section  46 of the Act, (b) the supervision and  control  of such  canteens  were  exercised  by  the  Canteen   Managing Committee consisting equal number of elected representatives of  the factory workers and nominees of the  management  and the Canteen Managing Committee was the appointing  authority of  the canteen workers; and (c) that the  Canteen  Managing Committee  was  paying the salary to the  workers  and  also controlling  the canteens. It was further admitted  that  by the  letter dated 24.5. 1965 of the Ministry of  Defence  it had been ordered thus:     "The question of subsidising the canteens maintained  in Defence   Industrial   Installations   with   reference   to provisions of Section 46 of the Factories Act 1948 has  been under the consideration of Government for some time. After a detailed examination of the matter it has been decided  that in  order to reduce the cost of meals and snacks  served  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

the  canteen  to  the personal  of  the  Defence  Industrial Installation  registered  as factories and  subject  to  the conditions  indicated in the succeeding paras, the  cost  of supervisory and clerical staff and cooks. bearers.  helpers, vendors etc. employed in these canteen should be  reimbursed by  the  Govt. to the Managing Committee  of  such  canteens     The Commandants of the installation will  simultaneously ensure  that the cost of the meals/snacks provided by  these canteens  is reduced proportionate to the  subsidy  received from Govt. for the cost of the staff . . ... . .. . ..                                                   PG NO 594     In order to ensure that uniform standards for employment of staff and payment of salaries as far as possible and  the subsidy paid by the Government is related to total number of personnel  served by the canteens the number and  grades  of supervisory clerical and working staff and the scales of pay that should be allowed to them are given in Appendix ‘A’  to this office Memorandum for the guidance of the  installation Commanders and the Managing Committee. These scales of staff and  salaries are the maximum outer limits within which  the local  Management may engage the staff and workers  actually required.  Where  staff can be engaged  on  more  economical rates  it  may  be  employed on  such  rates.  The  existing supervisory  clerical and working personnel may  be  brought over  to those pay scales to the extent necessary by  taking into account their existing emoluments and thereafter annual increments  may be allowed after one year from the  date  of switch over to these scales. Other concessions or allowances of  any kind should be allowed to the staff in  addition  to these consolidated pay scales. Other terms and conditions of service  may  continue  to  be  regulated  by  the  Managing Committee  as here-to-fore .......Reimbursement of the  cost of  staff  will be limited to the scales  indicated  in  the appendix .....     These  orders are not applicable to the  canteens  which are  at present run by contractors. Such canteens can,  how- ever, be switched over to this scheme after the terms of the contract with the contractor have expired or by  terminating the  contract,  in  accordance  with  the  existing  clauses thereof  if any. This scheme will also be applicable to  new canteens organised by cooperative societies of the staff  of Managing  Committee  appointed  under the  guidance  of  the administration  in pursuance of section 46 of the  Factories Act  in  other Defence Industrial  Installations  which  are registered  as ,factories,, and where canteens have  not  so far been opened".     It  is  seen from the above letter of  the  Ministry  of Defence  that prior to 24.5.1965 there were three  kinds  of canteens,  namely;  (i)  canteens run  by  contractors  (ii) canteens  run  by co-operative societies of the  staff,  and (iii)  canteens which had been established under section  46                                                   PG NO 595 of  the  Act.  We  are not  concerned  with  the  first  two categories  of the canteens but only with the last  category of  canteens  in this case. The above  Ministry  of  Defence letter  provides for subsidising the canteens maintained  in Defence  Industrial  Installations under section 45  of  the Act.   It  also  gives  directions   regarding   pay-scales, conditions  of  service etc. The consumers of  the  services rendered  by such canteens were the ‘factory  employees  for whose  benefit  they had been established. It  is  also  not disputed  that  the  building or  buildings  in  which  such canteens   had  been   established  formed   part   of   the industrial establishment concerned.     The  Act  is  applicable both to the  factories  run  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

Government and the factories run by other private companies, organisations,  persons etc. It was enacted for the  purpose of improving the conditions of the workers in the factories. Section 46 of the Act reads thus:     "46.  Canteens.-(1) The State Government may make  rules requiring  that in any specified factory wherein  more  than two  hundred  and fifty workers are ordinarily  employed,  a canteen or canteens shall be provided and maintained by  the occupier for the use of the workers.     (2) Without prejudice to the generality of the foregoing power, such rules may provide for-     (a) the date by which such canteen shall be provided ;     (b)   the   standards  in   respect   of   construction, accommodation, furniture and other equipment of the canteen;     (c) the foodstuffs to be served therein and the  charges which may be made thereof;     (d)  the  constitution of a managing committee  for  the canteen and representation of the workers in the  management of the canteen ;     (dd)   the  items of expenditure in the running  of  the canteen which are not to be taken into account in fixing the cost of foodstuff and which shall be borne by the employer;     (e)   the delegation to the Chief Inspector, subject  to such  conditions as may be prescribed, of the power to  make rules under clause (c)."                                                  PG NO 596     Rule  68 of the U.P. Factories Rules, 1950  (hereinafter referred to as ‘the Rules’) framed under sections 46 and 112 of the Act gives particulars regarding the type of  building that should be made available for running a canteen and  the manner  in  which  accounts should  be  maintained  in  such canteens.  It  further  provides  that  a  canteen  managing committee should be established under clause (20) of rule 68 of  the  Rules. The Managing Committee shall consist  of  an equal  number  of  persons nominated  by  the  occupier  and elected  by workers. The number of elected workers shall  be in  the proportion of 1 for every 11000 workers employed  in the  factory, provided that in no case shall there  be  more than  5 or less than 2 workers on the Committee. The  object of  providing  for the establishment of   Canteen   Managing Committee is to see that the employees of the factories have some  amount of say in the management of the affairs of  the canteens  but  the obligation to establish a  canteen  under section  46  of  the Act is imposed  on  the  occupier.  The expression  ‘occupier’  of a factory is defined  in  section 2(n) of the Act as the person who has ultimate control  over the affairs of the factory, provided that (i) in the case of a  firm or other association of individuals, any one of  the individual partners or members thereof shall be deemed to be the occupier; (ii) in the case of a company, any one of  the directors  shall be deemed to be the occupier; and (iii)  in the  case  of a factory owned or controlled by  the  Central Government or and  State Government, or any local authority, the person or persons appointed to manage the affairs of the factory  by the Central Government, the State Government  or the local authority, as the case may be, shall be deemed  to be  the occupier. Under clause (iii) of section 2(n) of  the Act,  in  the case of a factory owned or controlled  by  the Central  Government,  the  person or  persons  appointed  to manage the affairs of the factory by the Central  Government shall be deemed to be the occupier. The person so  appointed to  manage  the  affairs  of the  factory  of  that  Central Government is under an obligation to comply with section  36 of  the  Act by establishing a canteen for  the  benefit  of workers.  the Canteen Managing Committee, as  stated  above,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

has  to be established under rule 66 of the Rules to  manage the  affairs  of the canteen. The functions of  the  Canteen Management Committee are merely advisory. It is appointed by the  Manager appointed section 7 of the Act and the  Manager is  required to consult the Canteen Managing Committee  from time  to  time as to the quality and quantity  of  foodstuff served in the canteen, that arrangement of the menus,  times of  meals  in  the canteen etc. The food.  drink  and  other items  served in the canteen are required to be sold on  ‘no profit’  basis  and the prices charged are  subject  to  the approval of the Managing  Committee. The accounts pertaining to  a canteen in a Government factory may be audited by  its departmental Accounts Officers.                                                   PG NO 597     The  building for the canteen has to be provided  by the occupier. Under sub-rule (13) of rule 68 of the rules  there shall  be  provided  and  maintained  sufficient   utensils, crockery,   cutlery,  furniture  and  any  other   equipment necessary for the efficient running of the canteen. Suitable clean clothes for the employees serving in the canteen shall also be provided and maintained. Thus the basic requirements of  the  canteen,  such  as  buildings,  utensils, crockery, cultery, furniture etc. should be supplied by the  occupier. Under  the  Ministry of Defence letter dated  24.5.1965  the prices of food, drink and articles supplies for the canteens are  to be subsidised. A canteen is an integral part of  the Defence establishment belonging to the Union of India. There cannot  be a canteen without sufficient  number  of  workers working  in  the canteen. The have to be  appointed  by  the occupier.  Otherwise  he would not be  full  complying  with section 46 of the Act. The Managing Committee cannot be  the employer of those workmen in the true sense of the term. The Managing  Committee constituted under section 46 of the  Act which  is  not  an incorporated  body  and  whose  financial position  is  uncertain  cannot  be  considered  to  be  the employer  who h as to bear the legal responsibilities  under the  several labour laws in face in India. We may,  however, add  that in the case of a canteen run b a contractor  or  a co-operative society or some other body the position may  be different.  But  even  then  there  has  to  be  a  Managing Committee  if  such  a  canteen  is  treated  as  a  canteen established  for purposes of satisfying the requirements  of section  46 of the Act. Even in this case the contractor  or the  co-operative  society or some other body  will  be  the employer but no the Managing Committee. In this situation it is  difficult  to  hold  that  the  employees  in   canteens established  under  section  46 off the  Act  would  not  be employees  of  the  occupier, even though  for  purposes  of management a Canteen Managing Committee, whose functions are advisory  as pointed out above, has to be constituted  under the  Rules. It is also not shown that on the workers in  the canteens  becoming the Government employees on  22.10.  1980 they  were  paid  by the  previous  management,  named,  the Canteen Managing Committees consituted  under rule 68 of the Rules  any compensation in lieu of the services rendered  by them prior to 22.10.1980. We find it, therefor, difficult to hold  that the employees working in such canteens  were  not employees  of  the factories in which the canteen  had  been established. If they are employees of the factories in which the canteen is established. the service rendered by them  in these factories should be counted as part of the  qualifying service for pension. Hence, the plea of the Union Government that  the  service  rendered  by  the  workers  in  canteens                                                   PG NO 598 established  under  section  46  of the  Act  on  and  after

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

22.10.1980  alone can be included in the qualifying  service for   pension  cannot  be  accepted.  The  period  prior  to 22.10.1980 also should be counted for purposes of pension.     We, therefore, direct the Union Government to treat  the period  during which the workers had served in the  canteens established  under  section  46 of the Act  in  the  Defence establishments  at  Kanpur with which we  are  concerned  in these  cases  prior  to 22. 10. 1980 also  as  part  of  the qualifying  service  for  purposes of  pension.  We  further direct that the pension payable to those employees who  have retired  from  service  on or after 22. 10.  1980  shall  be recomputed by taking the period of service during which they had  worked  prior  to 22. 10. 1480 in  such  canteens  into consideration.  Such  computation shall be made  within  six months  from today. The arrears of pension payable to  those who  have  retired from service shall be disbursed  to  them within three months after such computation.     The petitions are accordingly allowed. No costs.     R.S.S.                             Petitions allowed.