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CASE NO.: Appeal (civil)  2992-3004 of 2003

PETITIONER: M/s Indian Drugs & Pharmaceuticals Ltd.          

RESPONDENT: Devki Devi and Ors.                                              

DATE OF JUDGMENT: 05/07/2006

BENCH: ARIJIT PASAYAT & TARUN CHATTERJEE

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J

       These appeals involve identical issues and are, therefore,  disposed of by this common judgment.

Appellant calls in question legality of the judgment  rendered by a learned Single Judge of the Uttaranchal High  Court. Several writ petitions were filed by the appellant  questioning correctness of the award dated 23.12.1999  holding that respondent No.2 in the writ petitions (respondent  No.1 in each of these appeals) were entitled to re-instatement  and compensation of Rs.5,000/- with litigation expenses of  Rs.500/- each.  It was held by the Labour Court that there  was clear violation of the provisions of Section 6-N of the U.P.  Industrial Disputes Act, 1947 (in short the ’Act’) as cessation  of their work amounted to retrenchment which was in  violation of the aforesaid provision.  

       Background facts in a nutshell are as follows:

       M/s Indian Drugs & Pharmaceuticals Limited (for short  IDPL), the appellant, is a public undertaking fully owned and  controlled by the Government of India. It has one of its units  at Virbhadra, Rishikesh, District Dehradun. Several workers of  the unit died in harness leaving behind the widows and  families. The IDPL Workers’ Union took up their cause and  other disputes in a meeting held on 12.8.1988. In the said  meeting as item No.3 the Union demanded that the  widows/dependants of deceased employees should be given  employment in the plant. Till such time the decision for their  employment is received from the corporate office, the  management should employ them as contract labour. The  management agreed to consider the Union’s suggestion  sympathetically.  

       However, appellant decided to give work to them on  contract basis by appointing them as contractor for  maintenance of office records, cleaning and mopping of floors  etc. on a consolidated amount.  As contractors they were liable  to pay provident fund and other statutory liabilities for the  labourers engaged by them to carry out the contracts. The  respondents were appointed as contractors from time to time.  After the meeting which was held on 12.8.1988 the Head  Office vide letter dated 27.5.1998 took a decision that contract  labour arrangement should cease. It was also decided that in  view of financial stringencies it has been decided to dispense

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with system forthwith and existing contractual agreements  were to be reviewed.  

       With effect from 1.8.1998 contracts with the respondents  were terminated. Respondents raised industrial dispute which  was referred to the Labour Court U.P. Dehradun who gave the  award against the appellant-company on the ground that the  said respondents were the workmen and they were entitled to  be regularized. It applied the principle of lifting the veil of  contract to find out the correct position.     

       Against the said order, the appellant-company filed Writ  Petitions which were dismissed on the ground that the  minutes of the meeting dated 12.8.1988 was a settlement  between the parties in terms of Section 2(p) of the Industrial  Disputes Act, 1947 (in short the ’ID Act’) read with Rule 58 of  the Industrial Disputes (Central) Rules, 1957 (in short the  ’Central Rules’). High Court recorded a finding that the  settlement between the employer and employees acquired a  statutory status, as a result of which the job contractors  cannot be said to be contract labourers. In fact they are  workmen in view of their engagement. Therefore, the  respondents cannot be said to be contract labourers but were  in reality workmen.   

       It was noted by the High Court that there was settlement  arrived at between the management of the Rishikesh Unit of  the appellant-company and the office bearers of the Union and  since the respondent in each appeal was given employment in  furtherance of the policy of the appellant-company, they were  workmen. The High Court noted that the employment was  given to the dependants/widows of the workmen who had died  in harness. Since the engagement was pursuant to a  settlement in terms of Section 2(p) of the ID Act, it was binding  on the parties to the agreement in terms of Section 18(1) of the  ID Act. It was noted that the Memorandum of Settlement was  arrived at in terms of Rule 58 of the Central Rules. What was  projected by the appellant, according to the High Court, as job  contract is nothing but employment given under dying in  harness scheme. Accordingly, the Labour Court’s award was  upheld.  

       In support of the appeals, learned counsel for the  appellant submitted that the Labour Court and the High Court  have clearly lost sight of various relevant factors. The  appellant is a sick company and is before Board of Industrial  and Financial Reconstruction (in short ’BIFR’) since 1992.  There is no rule or scheme for providing appointment on  compassionate ground. The appellant has never employed the  concerned respondents on compassionate ground and in any  event the company was not in a position to employ such  persons. The bleak financial position of the company has been  considered by this Court in Officers & Supervisors of IDPL v.  Chairman & M.D., IDPL and Ors. (2003(6) SCC 490).  Originally more than 6500 employees were employed and out  of them 6171 have taken retirement and only 421 employees  are working throughout the country. The appellant-company  is not functional and is trying to further reduce the number of  employees. In the absence of any rule or scheme for  compassionate employment, no direction could have been  given by the Labour Court and the High Court erroneously  held that there was a settlement arrived at.  The Minutes of  the meeting dated 12.8.1988 clearly show that there was no  settlement. On the other hand, the minutes show that only  demands of the Union and the agreement of the management

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to consider the suggestions sympathetically were accorded.  This cannot by any stretch of imagination be considered a  Memorandum of Settlement in terms of Section 2(p) of the ID  Act or Rule 58 of the Central Rules.  The Labour Court  erroneously held that the labour contract given was in fact not  a contract but an appointment of the respondents as  workmen. The language of the contract is clear and  unambiguous.  

       In response, in the counter affidavit and the notes of  submissions it has been mentioned by learned counsel for the  respondents that the orders of the Labour Court and the High  Court do not warrant interference. It is stated that though  contracts were purportedly entered into for all practical  purposes, the respondents were detained as employees by the  appellant-company.             The undisputed position is that the appellant-company  does not have any rule or scheme for compassionate  appointment.          As was observed in State of Haryana and Ors. v. Rani  Devi & Anr. (AIR 1996 SC 2445), it need not be pointed out  that the claim of person concerned for appointment on  compassionate ground is based on the premise that he was  dependant on the deceased-employee. Strictly this claim  cannot be upheld on the touchstone of Article 14 or 16 of the  Constitution of India. However, such claim is considered as  reasonable and permissible on the basis of sudden crisis  occurring in the family of such employee who has served the  State and dies while in service. That is why it is necessary for  the authorities to frame rules, regulations or to issue such  administrative orders which can stand the test of Articles 14  and 16. Appointment on compassionate ground cannot be  claimed as a matter of right. Die-in harness Scheme cannot be  made applicable to all types of posts irrespective of the nature  of service rendered by the deceased-employee. In Rani Devi’s  case (supra) it was held that scheme regarding appointment  on compassionate ground if extended to all types of casual or  ad hoc employees including those who worked as apprentices  cannot be justified on constitutional grounds. In Life  Insurance Corporation of India v. Asha Ramchandra Ambekar  (Mrs.) and Anr. (1994 (2) SCC 718), it was pointed out that  High Courts and Administrative Tribunals cannot confer  benediction impelled by sympathetic considerations to make  appointments on compassionate grounds when the regulations  framed in respect thereof do not cover and contemplate such  appointments. It was noted in Umesh Kumar Nagpal v. State  of Haryana and Ors. (1994 (4) SCC 138), that as a rule in  public service appointment should be made strictly on the  basis of open invitation of applications and merit. The  appointment on compassionate ground is not another source  of recruitment but merely an exception to the aforesaid  requirement taking into consideration the fact of the death of  employee while in service leaving his family without any  means of livelihood. In such cases the object is to enable the  family to get over sudden financial crisis. But such  appointments on compassionate ground have to be made in  accordance with the rules, regulations or administrative  instructions taking into consideration the financial condition  of the family of the deceased.          In Smt. Sushma Gosain and Ors. v. Union of India and  Ors. (1989 (4) SCC 468), it was observed that in all claims of  appointment on compassionate grounds, there should not be  any delay in appointment. The purpose of providing  appointment on compassionate ground is to mitigate the

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hardship due to death of the bread-earner in the family. Such  appointments should, therefore, be provided immediately to  redeem the family in distress. The fact that the ward was a  minor at the time of death of his father is no ground, unless  the scheme itself envisage specifically otherwise, to state that  as and when such minor becomes a major he can be  appointed without any time consciousness or limit. The above  view was reiterated in Phoolwati (Smt.) v. Union of India and  Ors. (1991 Supp (2) SCC 689), and Union of India and Ors. v.  Bhagwan Singh (1995 (6) SCC 476). In Director of Education  (Secondary) and Anr. v. Pushpendra Kumar and Ors. (1998 (5)  SCC 192), it was observed that in matter of compassionate  appointment there cannot be insistence for a particular post.  Out of purely humanitarian consideration and having regard  to the fact that unless some source of livelihood is provided  the family would not be able to make both ends meet,  provisions are made for giving appointment to one of the  dependants of the deceased who may be eligible for  appointment. Care has, however, to be taken that provision for  ground of compassionate employment which is in the nature  of an exception to the general provisions does not unduly  interfere with the right of those other persons who are eligible  for appointment to seek appointment against the post which  would have been available, but for the provision enabling  appointment being made on compassionate grounds of the  dependant of the deceased-employee. As it is in the nature of  exception to the general provisions it cannot substitute the  provision to which it is an exception and thereby nullify the  main provision by taking away completely the right conferred  by the main provision.          In State of U.P. and Ors. v. Paras Nath (1998 (2) SCC  412), it was held that the purpose of providing employment to  the dependant of a Government servant dying-in-harness in  preference to anybody else is to mitigate hardship caused to  the family of the deceased on account of his unexpected death  while in service. To alleviate the distress of the family, such  appointments are permissible on compassionate grounds  provided there are Rules providing for such appointments.  The above position was highlighted in Commissioner of  Public Instructions and Ors. v. K.R. Vishwanath (2005 (7) SCC  206).

Additionally, in Officers and Supervisors of IDPL’s case  (supra) the financial condition of the appellant company had  been noted in detail. No production is going on in the company  since 1994. These are factors which have been completely lost  sight of by the Labour Court and the High Court. Both the  Labour Court and the High Court held that there was a  settlement arrived at in the meeting dated 12.8.1988. On bare  reading of the minutes of the meeting it is clear that there was  in fact no settlement. The relevant portion reads as follows:

       "The Union demanded that the  widows/dependants of deceased employees  should be given employment in the plant as  was done earlier. They have written several  letters in this regard but no fruitful result has  come out. The widows/dependants are waiting  for employment for the last 2 years  and are at  the verge of starvation. Till such time, the  decision for their employment is received from  the corporation office, the management should  employ them as contract labour so that they  may earn their bread and avoid starvation.  Further, the management should ensure

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payment of minimum wages. The number of  such needy widows/dependants of deceased  employees is about thirteen.

       The management agreed to consider the  Union suggestion sympathetically. On the  request of Union the Management informed  that this will be done in a week’s time."         To provide sustenance to the family members of the  deceased workmen certain job works were given. The  agreements have been placed on record. The cost of the  contract, the nature of the work and the time allowed have  been clearly indicated in each of the contracts. It also clearly  indicates the number of persons who are to be engaged for  carrying out the job contract work. There was no material  before the Labour Court to conclude that the contract was not  a job contract and in fact employment had been given. There is  no foundation for such a conclusion.  

Above being the position, the Labour Court and the High  Court were not justified in holding that the respondent in each  case was a workman and/or that there was retrenchment  involved. The award of the Labour Court and the judgment of  the High Court are therefore set aside  

The appeals are allowed but with no order as to costs.