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PETITIONER: MANGALORE GANESH BEEDI WORKS ETC.  ETC.

       Vs.

RESPONDENT: UNION OF INDIA ETC.

DATE OF JUDGMENT31/01/1974

BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) KHANNA, HANS RAJ MATHEW, KUTTYIL KURIEN BHAGWATI, P.N. ALAGIRISWAMI, A.

CITATION:  1974 AIR 1832            1974 SCR  (3) 221  1974 SCC  (4)  43  CITATOR INFO :  RF         1977 SC1825  (51)  R          1978 SC1410  (4)  R          1987 SC 447  (9)  RF         1992 SC 573  (6)

ACT: Beedi  and  Cigar  Workers (Condition  of  Employment)  Act, 1966--Ss.   3,  4,  2(g)(a),  2(g)(h),  2(m),  26,  27   and 31--Constitutional   validity  of--Constitution  of   India, 1950--Arts.  14,  19(1)(g)--Legislative  competence--Act  if falls  within Entry 24 List II or Entries 22, 23 and  24  of List  III, Seventh Schedule--Rules laying down  the  maximum percentage  of  Beedis  which  can  be  rejected,   validity of--Sec. 37(3) if unworkable. Interpretation--Reports       of       Commissions       and Committees--Admissibility  in evidence about the  prevailing system and conditions of industry.

HEADNOTE: The  beedi  industry is widespread in  the  country.   Three systems  are adopted for the manufacture of beedis.   First, the factory system in which the workers gather and work in a factory under the supervision of the manufacturer who is the owner  of  factory.  Secondly, the contract  system  of  em- ployment   wherein  the  proprietor  gives   the   middleman quantities  of  beedi leaves and  tobacco.   The  contractor manufactures  beedis by employing directly labourers  or  by distributing  material amongst the home workers.  The  third system is that of the out workers.  They roll beedis out  of tobacco and beedi leaves supplied by the proprietor  without the agency of middle man. The  special feature of the industry is the  manufacture  of beedis  through  contractors  and by  distributing  work  in private dwelling houses where the workers take  raw-material given  by  the employers of contractors.   The  relationship between  employers and employees is not well  defined.   The application  of  the  Factories  Act  has  always  met  with difficulties.  The labour in the industry is unorganised and is  not able to look after its own interests.  The  industry

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is  highly  mobile.  The attempts of some of the  states  to legislate in this behalf have not been successful.   Anxiety has  been expressed by several committees  and  commissions, appointed  by the Central Government and some of  the  State Government, to introduce some regulation in the employer-em- ployee  relationship and to obtain certain benefits  to  the employees  which  have  been  denied  to  them.   They  have reported  extremely  unsatisfactory  and  unhealthy  working conditions,  long  hours of work with low wages  and  unres- tricted employment of women and children.  It was found that the  contract and home work systems enriched the  proprietor at the expense of the workers and also deprived the  workers of the bargaining power in regard to conditions of about. It  is in this background that the Beedi and  Cigar  Workers (Conditions  of Employment) Act, 1966, came into  existence. The Act was passed to provide for the welfare of workers  in Beedi   and  ’Cigar  establishments  and  to  regulate   the conditions   of  their  work  and  for   matters   connected therewith. The  petitioners  and the appellants, proprietors  of  beedi factories  and owners of trade mark- and some home  workers. impeached the constitutionality of the Act.  They contended; (i)  being  a  legislation for regulating  beedi  and  cigar industry  it  fell  under Entry 24 List II  of  the  Seventh Schedule   and  therefore  Parliament  had  no   legislative competence to enact the measure; (ii) Sections 3 and 4  of., Act  which required licence in respect  of  industrial  pre- mises  violated Arts. 19(1) (g)and- 14 since they  conferred unfettered  powers  on the licensing authority  without  the requisite safeguards; (iii) the provisions 2-954 SCI/74 222 of section 2(g)(a), 2(g)(b) and 2(m) read with section  2(c) and   (f)  created  a  totally  artificial   and   fictional definition   of  employer  and  thereby  imposed   vicarious liabilities upon a manufacturer of and trader in beedies  in respect of diverse matters which entailed civil and criminal liabilities and thereby imposed unreasonable restrictions on the  manufacturers  in  their right to carry  on  trade  and business; (iv) sec. 26 and 27dealing  with leave and  wages during  leave  period cast unreasonable burden  and  imposed obligations  which were not capable of fulfillment and  thus violated  Art.  19(1)(f)  and (g), and, in  any  event.  the sections were unenforceable with regard to home workers  and therefore violated Art. 19(1)(f) and (g) so far as the  same were applied to home workers; (v) Sec. 31 which provided for one  months    wages in lieu of notice of dismissal  was  an unreasonable  restriction; (vi) Rule 37 of  the  Maharashtra Rules  and  rule  29  of  the  Mysore  Rules,  dealing  with rejection of substandard beedies, framed under s. 44 of  the Act. imposed unreasonable restriction on the beedi and cigar manufacturers; and (vii) Sec. 37(3) which made provision for maternity  benefits  to women employed in  an  establishment was. unworkable. HELD  : (Per Ray, C.J., Khanna, Mathew, and Bhagwati, JJ)  : Parliament  has legislative competence for enacting the  law and  the provisions of the Act are valid and do  not  offend any provision of the Constitution. Previous material in the shape of reports of commissions  to review the working of the industry is admissible in evidence about the prevailing system and conditions of industry. State  of  Madras  v.  Rajagopalan,  [1955]  2  S.C.R.  541, referred to. (i)The  Act  does  not fall within entry  24  List  II  or entries 7 and 52 in List I. The true nature and character of

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the legislation is for enforcing better conditions of labour amongst  those who are engaged in the manufacture of  beedis and  cigars.  It, therefore, falls within entries 2, 23  and 24 in List III. The  Act, in pith and substance  is  for welfare of labour. [233H, 234E] (ii)Sections 3 and 4 of the Act are not violative of  Arts. 19(1)(g) and 14.    These sections do not confer  unfettered powers  on  the licensing authority  without  the  requisite safeguards.   The  power  to grant or refuse  a  licence  is sufficiently  controlled by necessary guidance.   There  are safeguards  preventing  the abuse of power.   The  right  of appeal is a great safeguard.  There is machinery as well  as procedure for determining the grant or refusal of a licence.[235B-C] (iii)The  provisions of Sections 2(g)(a),  2(g)(b)  and 2(m) are constitutionallyvalid  and do not  impose  any unreasonable  restriction on the manufacturer or  trade-mark holder.  There cannot be any question of unreasonableness in cases   where  the  manufacturers  or   trade-mark   holders themselves   employ   labour,  because,  there   is   direct relationship  of master and servant.  When  the  contractors engaged  labour  for the principal  employer  the  liability arises by reason of contract labour engaged for or on behalf of principal employer.  Where the contractor engages  labour for  the manufacturer it is not unreasonable restriction  to impose liability on the manufacturer for the labour  engaged by  the manufacturer through the contractor.  When the  con- tractor  engages  labour  for  and on  his  own  behalf  and supplies the finished product to the manufacturer he will be the  principal employer in relation to such labour  and  the manufacturer  will not be responsible for  implementing  the provisions of the Act with regard to such labour employed by the contract.  It will be a question of fact in each case as to  who  is  the  person for whom  the  contract  labour  is engaged.   If an independent Contractor employs  labour  for himself  the liability will attach to him as  the  principal employer and not to the manufacturer.  The Act thus  fastens liability  on the person who himself engages labour  or  the person  for  whom or on whose behalf labour  is  engaged  or where a person has ultimate control over the affairs of  the establishment  by  reason  of advancement  of  money  or  of substantial  interest in the control of the affairs  of  the establishment [237D.  F; 241A] , 223 (iv)The provisions of sections 26 and 27 are applicable  to home workers and workers in industrial premises and are also capable  of  being made applicable  without  any  reasonable restriction  on  the employers.  As a matter of fact  it  is found  that home workers can turn out 700 to 1000 beedies  a day.   The  minimum wages prescribed by various  states  for these home workers are between Rs. 2 to Rs. 4.30 for rolling 1000  beedis.   It will, therefore, not  cause  unreasonable financial  burden  on  account of  leave  wages.   The  home workers will get wages for the leave period corresponding to the  number of beedies manufactured by him for a  particular employer.   The hours of work will be immaterial because  if he  works  for less number of hours he  will  obtain  lesser payment.  There will be no difficulty in computing wages for the  annual  leave period.  The home worker will  get  leave wages  corresponding  to  his actual earnings  just  as  the worker  in  the  industrial premises will  get  leave  wages corresponding  to  his  full-time  earning.   The  basis  of calculation  of  wages in the case of home  workers  is  the daily  average of his total full time earnings for the  days he  has  worked during the month immediately  preceding  his

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leave. [248C-D] (v)The provisions contained in s. 31 cannot be said to  be unreasonable restrictions.  Section 2(rr) of the  Industrial Disputes Acts defines wages.  Some aid can also be had  from the  definition  of wages in the Payment of Wages  Act  that wages  include leave wages.  Therefore, the word ’wages’  in sec.  31  of the Act will mean wages  which  are  calculated under s. 27 of the Act.  The calculation can be made both in respect  of workers in industrial premises and home  workers in establishments. [248G] (vi)The  rules  are valid on the ground  that  the  maximum limit of 5 per cent for the rejection of Beedis is based  on experience in the industry, and, secondly, the employer  can reject more than 5 per cent by raising a dispute before  the appropriate  authority.   Rules about rejection  and  fixing maximum  limit of 5 per cent are reasonable and  fair.   The rules are intended to eliminate exploitation of  illiterate, workers who are mostly women. [250A] (vii)The  reasonableness of section 37(3) has not  been challenged.   There  is  no difficulty with  regard  to  the working  of the Maternity Benefits Act, 1961, in  regard  to maternity  benefits to women employer in  an  establishment. [252D] Chintaman Rao & Anr. v. The State of Madhya Pradesh,  [1958] S.C.R. 1340; Birdhichand Sharma v. First Civil Judge  Nagpur JUDGMENT: Ltd.  v.  Union  of  India  &  Anr.  [1961]  1  S.C.R.  860, distinguished. Shanker Balaji Waji V. State of Maharashtra, [1962] Supp.  1 S.C.R. 249, held inapplicable. Dewan  Mahideen  Saheeb v. United Bidi Workers  Union  Salem [1964]  7  S.C.R. 646 Chintaman Rao’s case;  Silver  Jubilee Tailoring  House  &  Ors,  Chief  Inspectors  of  Shops  and Establishment & Anr. referred to. Syed  Saheb  &  Sons v. State of Mysore  [1972]  Mysore  Law Journal 450, approved. Abdul  Azeez  Sahib and Sons, etc. v. The  Union  of  India, [1973]  II  M.L.J. 126  Chetabhai Purshottam  Patel.   Beedi Manufacturers  of  Bhandara & Ors v. Stale  of  Maharashtra, [1972]  1 L.L.J. 130: Chirukandeth Chandrasekharan v.  Union of  India [1972] 1 L.L.J. 340, and Civil Appeals  Nos.  1972 and 1968 of 1971 .(Andhra Pradesh), over ruled. ALAGIRISWAMI,  J, (concurring) : The Act is the result of  a compromise between the Original intentions of the Government and  the  modifications  they had to make  in  the  proposed measure  as a result of concessions intended to  bring  home workers within the scope of the Act.  The original intention was  not to permit beedi rolling in private homes which will involve  thousands  of labourers in thousands  of  far-fiung homes and the difficulty of applying the 224 provisions  of  the measure to them The result  is  an  Act, which  is  likely to give rise to many difficulties  in  its actual  working.   It  is obvious on a  reading  in  of  the measure that its purpose is to rope in every possible person who  could be brought in as an employer.  But the result  of the  definitions  in the Act is that everybody  would  be  a principal  employer and contractor and every labour will  be contract labour. [252H] Clause  2(g)(b)  is intended to cover cases where  a  person runs  business Benami.  There can be no objection to such  a provision.   But merely because a person lends  or  advances money  or  supplies goods he cannot be called  an  employer. The words in cl.2(g)(b) "who has by reason of his  advancing money,  supplying goods or otherwise a substantial  interest

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in  the control of affairs of any establishment"  should  be struck  down.  When section 26 provides that every  employee in  an  establishment should be allowed in a  calendar  year leave  with wages at the rate of 1 day for every 20 days  of work  performed by him during the previous calendar year  it leads to real difficulty.  The question is what is the  wage which  has to be paid to him during the period of leave.   A home  worker  might work for 1 hour on one day, 8  hours  on another  day  and not at all for a number,  of  days.   What would  be  the  wages payable to him  ?  The  difficulty  of applying  the Maternity Benefit Act is again apparent.   How can the provisions be applied to women who cannot be said to be  employed  continuously for a certain period  before  the confinement?   Under section 31, no employer shall  dispense with the services of an employee who has been employed for a period of 6 months or more except for a reasonable cause and without giving such employees at least one month’s notice or wages  in  lieu of such notice.  It is not clear as  to  who will be the employer competent to dispense with the services of the employee. [254A, 255C, 256B] While  Courts  should give effect to the intentions  of  the legislature it can be done only if that is possible  without doing  violence to the actual language of the statute.   The various  definitions plainly seek to rope in  everybody  who has anything to do with the manufacture of beedies and while trying to give effect to the penal provisions in the statute considerable difficulties will ,.rise. There will on the one hand  be  the actual occupier of  the  industrial  premises. There  will  be on the other hand a person  who  might  have advanced  money  to  him  and  supplied  goods  to  him  and therefore  may be substantially interested in  its  control. The  actual  occupier himself might be a contractor  and  in that case he as well as a person on whose behalf beedis  are manufactured  would be liable.  Who in that case,  would  be actually liable ? [254c] The objection is not to any of the provisions on the grounds of  unreasonableness  or  unconstitutionality.   Nobody  can dispute  the  need for setting right the evils.   But,  good intentions  should not result in. a legislation which  would become ineffective and lead to a lot of fruitless litigation over  the  years.  It has to be held in agreement  with  the majority  of  the High Courts that sections 26. 27,  31  and 37(3) do not apply to the home workers.  It would be good in the interest of all concerned if the Act is amended as early as  possible to remove all the lacunas and the  difficulties pointed  out.   The difficulties have arisen because  of  an attempt blindly to apply the provisions which will be  quite workable if they are applied to conditions where the Factory Act would be applicable. [256F]

& CIVIL  APPELLATE  JURISDICTION : Civil  Appeals  Nos.  1553, 16141618, 1769 of 1971 and 1131-1133 and 1440 of 1972. [From  the Judgment and Order dated the 24th June,  1971  of the  Mysore High Court at Bangalore in Writ  Petitions  Nos. 806, 837, 1152, 1486, 1592, 1638, 1896, 159, 4152 and 310 of 1970 and 1456 of 1971]. Civil Appeals Nos. 2516-2523,  2560, 2569, 2661-2164 of 1972 and 66-69, 72-75, 1307 854-856, 857- 859, 1203 ’and 1204 of 1973. 225 (From  the Judgment and Order dated the 8th September,  1972 of  the Madras High Court in Writ Petitions Nos.  227,  422, 2631  of  1969, 2692, 2693, 2695 2696, 2698 of  1968,  2680,

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2683,  2688, 2689, 2691, 3477, 3478 of 1968, 531, 849,  1065 of  1969, 2681, 3480 of 1968, 40, 169 of 1969,  2854,  2856, 2855  of 1968, 468 of 1969, 2847, 2849, 2850, 2853 of  1968, 3268 of 1968, 211, 231, 276 of 1969, 2701, 2797 of 1968, 212 of 1969, 2684 and 2763 of 1968). Writ Petitions Nos. 127-132 of 1972. (Under Article 32 of the Constitution for the enforcement of fundamental rights). Civil Appeals Nos. 307-311 of 1972. (Appeals by Special Leave from the Judgment and Order  dated the 30th November, 1971 of the Bombay High Court in  Special Civil  Application  Nos. 2501 of 1968, 785, 2848,  2845  and 2846 of 1969). Civil Appeal No. 585 of 1971. (From  the Judgment and order dated the  14th/15th  October, 1970 of the Gujarat High Court at Ahmedabad in Special Civil Application No. 872 of 1968). Civil Appeals Nos. 1864-1873 of 1971 and 173 of 1973. (From the Judgment and order dated the 16th/17th July,  1970 of the Bombay High Court (Nagpur Bench at Nagpur) in Special Civil  Applications  Nos. 391 to 393 of 1969, 409  of  1968, 451, 453, 513, and 514 of 1969 and 453 of 1969). Civil Appeals Nos. 1972-1988 of 1971. (From the Judgment and Order dated the 26th August, 1970  of the Andhra Pradesh High Court at Hyderabad in Writ Petitions Nos.  2587, 2818, 3007, 3009, 3058, 3156 3254,  3618,  3776, 3824, 3825, 3826, 4364, 4553, 5013, 5174 of 1968 and 1235 of 1969). Mr.   Soli  Sorabjee  with  M/s  M.  Ramachandran,  Salindra Swarup, J. B. Dadachanji, O. C. Mathur & Ravinder Narain for the Appellant (in CAs. 1553/71) & for Petitioners. M/s  M. Ramachandran, Salindra Swarup, J. B. Dadachanji,  O. C.  Mathur  &  Ravinder  Narain for  the  Appellant  (in  CA 1769/71). Mr.  K. N. Bhat, for the Appellant (in CA. 1614/71). M/s  D.  V. Patel (in C.A. 1615) and S. V.  Gupte  (in  C.A. 1616) with M/s M. Ramachandran, T. S. Pai and A. S.  Nambiar for the Appellants (in CAs. 1615 & 1616/71). M/s T. S. Pai, M. Ramachandran and A. S. Nambiar for the Ap- pellants (in CAs. 1617-1618/71). Mr.   K.  K.  Venugopal  with  Mr.  A.  S.  Nambir  for  the Appellants (in CAs. 2661-64/72, 66-69/73 and 857-859, 1203 & 1204/73): 226 Mr.   Vineet  Kumar for the Appellant (in CAs.  1131-1133  & 1440/ 72 and for Appellants (in CA 585/71). Mr.   K.  K. Venugopal with Mrs. S. Gopalakrishnan  for  the Appellant (in CAs. 2516-23/72). Mr.  K. K. Venugopal with K. R. Nambiar for the Appellant in CAs. 2560-69/72 & 72-75/73). Mr, Niren De with Mr. P, Paramashwara Rao for Respondent No. 1. Mr.   Niren De with M/s R. N. Sachthey and S. P.  Nayar  for Respondent  No.  1 (in CAS. 1614,1616-1618/71,  1131-1133  & 1440/72 and for Respondent No. 2 (in CA 1615/71). Mr.  M. Veerappa, for Respondent No. 1 (in CAs. 1553,  1614, 1616,  1.769) and for Respondents No. 1, 3, 4 and 5 (in  CA. 1615),  for  Respondent Nos. 2 to 5 (in  CAs.  1617-18)  for Respondent (in CAs. 1131, 1132 & 1440), for respondent  Nos. 2-3  (In  CA. 1133) and for Respondent No. 2 (In  WPs.  127- 128/72). Mr.  S. Govind Swaminadhan with Mr. A. V. Rangam and Miss  A Subhashini  for Respondent No. 2 (in CAs.  2516-23  2560-69, 266164, 66-69, 72-75, 854-59 & 1203-1204) and for Respondent

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(in CA. 1307/73). Mr.   K.  S. Ramamurthy with Mr. A. T. M.  Sampath  for  the Appellant (in CA. 1307). M/s.  K. S. Ramamurthy and Mr. Y. S. Chitale with M/s T.  S. Pai and A. S. Nambiar for the Petitioner in (WP. 127). Mr.  Y. S. Chitale with M/s M. Ramchandran, T. S. Pai and A. S. Nambiar for the Petitioner (in WP. 128). M/s  M.  Ramachandran, T. S. Pai and A. S. Nambiar  for  the Petitioner (in WP. 129). Mr.  A. S. Nambiar for the Petitioner (in WP. 130). Mr.  Niren De with M/s P. Parameshwara Rao, R. N.  Sachthey, and S. P. Nayar for the Appellants (in CAs. 1972-88/71)  and for Respondent No. 1 (in WP. 127-128). Mr.   D.  V. Patel with Mr. P. H. Parekh  and  Mrs.  Sunanda Bhandare for the Appellants (in CA. 307-311/72). Mr.   Niren  De  and Mr. M. C. Bhandare (for  the  State  of Maharashtra  in CA. 307 & 31 1) with M/s R. N. Sachthey  and S. P. Nayar for Respondents Nos. 1-4 (in CAs. 307-308). Mr.  Niren De with Miss S. Chakravarthy and Mr. R. H. Dhebar (for  the  State of Gujarat, M/s R. N. Sachthey and  S.   P. Nayar for Respondent Nos. 1-3 (in CA. 585). Mr.  Niren De (For Union of India in CA. 1864/71), Mr. M. C. Bhandare, (for the State of Maharashtra in CAs.  1864-1873), with M/s 227 R.N. Sachthey, and S. P. Nayar for the Appellants (in CA. 1864 to 1873/71) and for Respondent No. 2 (in CA. 173/73). Mr.   M. N. Phadke with Mr. Rameshwar Nath  for  Respondents Nos. 1-2 (in CA. 1871) and for Appellant (in CA. 173). Mr.   Rameshwar Nath, for Respondents No. 1 (in  CAs.  1864- 69),  and for Respondents Nos. 3, 5-9, 11-13, 15-17  and  20 (in CA. 1871). Mr.  M. Krishna Rao with Mr. B. Kanta Rao for Respondent No. 7. M/s    Narayan    Netter    and   Ram    Shesh    for    the Interveners---Dharwar  Distt.  Beedi Workers’  Union,  Hubli and Anr. (in CA. 1553). Mr.   R.P. Kapoor for Mr. I. N. Shroff for  Intervener-State of Madhya Pradesh (in CA. 1769). M/s  S.  R. Bommai, J. B. Dadachanji and P.  C.Bhartari  for Intervener-Puttappa Veerappa etc. (in CA. 1553). Mr.  Rameshwar Nath for Intervener (in CA. 1864). The Judgment of A. N. RAY, C.J., H. R. KHANNA, K. K.  MATHEW and  P.  N.  BHAGWATI,  JJ. was delivered  by  RAY  C.J.  A. ALAGIRISWAMY, J. gave a separate Opinion. RAY,  C.J.  The provisions of the Beedi  and  Cigar  Workers (Condition  of Employment) Act, 1966 referred to as the  Act are  impeached  as unconstitutional in these  petitions  and appeals. Broadly  stated,  the Act is challenged on,  these  grounds. First,  Parliament  has no legislative competence  to  enact this measure.  It is a legislation for regulating beedi  and cigar industry.  Therefore, it falls under Entry 24 in State List II. Second, the restrictions imposed by the Act violate freedom of trade and business guaranteed under Article 19(i) (g).  The Act imposes unreasonable burdens in cases where  a manufacturer or trade mark holder of beedi has no master and servant relationship and no effective control on independent contractors or home-workers.  The manufacturer or trade mark holder  is  rendered  liable as the  principal  employer  of contract  labour.   Third,  section 4  of  the  Act  imposes conditions   which  are  arbitrary,  excessive   extraneous. Fourth,  Section  7(i) (c) regarding entry  into  industrial premises, sections 26, 27 regarding annual leave with wages, section  31 regarding one months’s wages in lieu of  notice,

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section 37 regarding application of Maternity Benefits  Act, 1961   and   the   rules  for  rejection   of   beedis   are unconstitutional.   These provisions are  unreasonable  res- trictions on the freedom of trade and business. The  petitioners and the appellants are of  two  characters. The  majority are proprietors of beedi factories and  owners trade mark registered under the Trade Marks Act in  relation to beedis.  Some are home workers.  The  beedi  industry  is widespread in  this  Country,  The manufacture  of  beedi is done in stages.   The  tobacco  is blended often with some other ingredient.  A small  quantity of it is put on the beedi leaf which 228 is  previously  wet  to render it flexible  to  prevent  any crushing of leaf and is also cut to size.  The beedi leaf is then  rolled keeping the tobacco within it and its ends  are then  closed.   The  beedis thus rolled  are  collected  and warmed  or roasted after which they are ready  for  packing, labelling and sale.  Where the proprietor owns a trade mark, the trade mark labels are affixed to the. individual  beedis as also on the packets. The work of wetting and cutting of the wrapper leaves is one of  the  items  of work in the  process.   Power  is  seldom employed for the purpose’ The industry depends entirely upon human  labour.   If more than 20 workers are employed  in  a particular   place  for  the  manufacture  of  beedis,   the provisions  of  the Factories Act, 1940 will  apply  to  the premises. Three  systems  arc adopted in the  manufacture  of  beedis. First,  is the factory system.  There the manufacture is  an owner  of  the factory.  Workers gather and work  under  his supervision as his employees.  Second is the contract system of employment.  That is the most prevalent form.  Under this system, the proprietor gives to the middlemen quantities  of beedi  leaves and tobacco.  The contractor on receiving  the materials  manufactures  beedis (i)  by  employing  directly labourers  and manufacturing beedis or (ii) by  distributing the materials amongst the home workers, as they are  called, mostly women who manufacture beedis in their own homes  with the  assistance of other members of their  family  including children.   The third system is that the  outworkers.   They roll beedis out of the tobacco and beedi leaves supplied  by the proprietor himself without the agency of middlemen.  The beedis  thus-supplied whether by the outworkers or  contrac- tors are roasted, labelled and packed by the proprietor  and sold to the public. Under  these systems, the contractor engages labourers  less than  the statutory number to escape the application of  the Factories  Act.   There is a fragmentation of the  place  of manufacture  of  beedis with a view to evading  the  factory legislation.  Sometimes there is no definite relationship of master  and  servant  between  the  actual  worker  and  the ultimate  proprietor.   Branch managers of  contractors  are often  men of straw.  The proprietor will not be  answerable for the wages of the outworkers because there is no  Privity of  contract between them.  A large body of  actual  workers are illiterate women who could with impunity be exploited by the   proprietors,  and  contractors.   There  is  in   this background an indiscriminate and undetectable employment  of child labour.  The contractor being himself dependent on the proprietor  has little means to have any  organized  system. Women and infirm  can earn something by rolling beedis.  The dependence of these people particularly the women shows that they   have   little  bargaining  power   against   powerful proprietors or contractors.

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A typical contractor agrees with the proprietor to  purchase tobacoo  and to pay for it at the ruling rate and to  supply the proprietor with such quantity of beedis as will be fixed by  the  proprietor.   He also undertakes not  to  use,  any tobacoo  other than that supplied by the 229 proprietor.   The proprietor has the authority to  send  his representative   to   inspect  the  place   or   places   of manufacture.   The contractor undertakes not to  enter  into any  agreement of similar nature with any Other  concern  to make beedis’ The agreement. stipulates that the,  contractor will  be  the  sole employer answerable  in  regard  to  the disputes raised by the workers. There  was  a Royal Commission on Labour in India  in  1931. The findings were these.  The making of beedi is an industry widely spread over the country.  It is partly carried on  in the  home but mainly in the workshops in the  bigger  cities and  towns.   Every  type of building  is  used,  but  small workshops   is there that the graver problems mainly  raise. Many  of  these  places   are  small  airless  boxes.   semi basements  with lamp and floors.  Sanitary conveniences  and arrangements for removal of refuses are practically  absent. Payment is by piece rate.  The hours are unregulated.   Many smaller  workshops  are open day and night.   There  are  no intervals for meals.  There are no weekly holidays. In 1944, the Government of India appointed a Committee under the   Chairmanship  of  Shri  D.  V.  Rege  to   investigate conditions of industrial labour.  The report referred to the contract  system whereby the factory owner engaged  a  large number  of  middlemen supplied them with raw  materials  and purchased  finished  products from them.  The  report  found that  unhealthy  working  conditions, long  hours  of  work, employment  of women and children, deduction from wages  and the  sub-contract system of Organisation required  immediate attention.  It was desirable to abolish outworker system and to  encourage establishment of big industries if  protective labour legislation was to be enforced with success. In  1946,  the  Government of Madras appointed  a  Court  of Inquiry into labour conditions in beedi, cigar,  snuffcuring and tanning industries.  There were 90,000 workers depending on beedi industry ill Madras.  of these, 26,500 workers were women.    Employment  of  children  in  the   Industry   was universal.  2/5th of the total workers were children.   Home workers were predominant.  There were full time workers  but they  were  paid less than fair wages.   Working  conditions were  extremely unsatisfactory from the standpoint of  floor space, sanitation, ventilation and lighting. In  1954,  the  Government of India  appointed  Shri  Natraj Inspector  of Factories to assess the situation with a  view to affording maximum legislative protection to the  workers. The  Report was as follows.  Although the number of  workers engaged in the manufacture of beedi exceeded one lakh,  only 17,544  were employed in factories.  The contract  and  home work  systems  enriched  proprietor at the  expense  of  the worker and also deprived the latter of his bargaining  power in  regard to conditions of labour.  The poverty as well  as illiteracy  of  the workers was taken advantage  of  by  the employers.   There were long hours of work with  low  wages, deplorable working conditions and unrestricted employment of ’women and children. 230 The entire beedi industry was unorganised and scattered over the  entire  state, employing a large force  of  women.   It called  for radical reforms in the organisation.  There  was reluctance of the manufacturer to provide certain  amenities

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to  the  workers  such as  rest  sheds,  canteens,  creches, ambulance  room, etc.  Under the indirect employment  system conditions obtaining in the industry were still worse.   The middlemen  contractors did not observe any higher  standards in the premises than in those under the manufacturers.   The Payment  of  Wages  Act applied to  factories,  but  it  was difficult  to  detect  violations of  the  Act  because  the prescribed  registers  were  not  maintained.   The   Madras Maternity  Benefit  Act  which  applied  to  factories   was rendered  practically ineffective as far as  petty  industry was  concerned  because there was no record  to  prove  that women  were employed.  The Report stated that the  employers succeeded   in  organised  circumvention  of  all   existing legislation by resorting to splitting up of their  factories into  smaller units run by contractors who bad no  knowledge in respect or working places. The  conditions  in  working places were  bad.   The  Report suggested licensing of premises to fix responsibility of the employer   for   maintenance   of   minimum   standards   of ventilation, lighting and sanitation in working places. The employment of women and children, wages and wage  struc- ture  in the industry were all considered by the  Committee. The  Committee  recommended solution  of  unhealthy  working conditions under miserable environments, long working  hours with  its attendant evils, unregulated employment  of  women and children and deduction from wages.  The contract of home work  system of employment was found to be  designed  solely for the promotion of trade but not the industry of which the labour forms the integral part.  It was, therefore, expected that  the beedi industry should carry the labour along  with it as it developed and was organised in such manner that  it discharged its social and moral responsibilities towards the workers. It  is in this background that the Act came into  existence. In State of    Madras v. Rajagopalan, [1955] 2 SCR 541  this Court  held  that  the previous material  in  the  shape  of Reports of Commissions of review the working of the industry was  admissible in evidence about the prevailing system  and conditions of industry. The Beedi and Cigar Workers (Conditions of Employment)  Act, 1966 is an Act to provide for the welfare of the workers  in beedi   and  cigar  establishments  and  to   regulate   the conditions   of  their  work  and  for   matters   connected therewith.   The  special feature of the  industry  was  the manufacture   of   beedis   through   contractors   and   by distributing  work in the private dwelling house, where  the workers  took  raw  materials  given  by  the  employers  of contractors.    The  relationship  between   employers   and employees  was  not well defined.  The  application  of  the factories  Act  met with difficulties.  The  labour  in  the industry was unorganised and was not able to look after  its own interests.  The industry was highly mobile.  The attempt of  some of the States to legislate in this behalf  was  not successful.  The necessity for central                             231 legislation was felt.  A bill was mooted to provide for  the regulation  of  the contract system of  work,  licensing  of beedi and cigar industrial premises and matter like  health, hours of work, spread over, rest periods, over time,  annual leave  with  pay, distribution of raw  materials  etc.   The anxiety  was  expressed by several Committees  to  introduce some regulation in the employer-employee relationship and to obtain  certain benefits to the employees which were  denied to them. The  so-called contractor or the employer as styled  by  the

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employees has been a matter of some concern to the employees as  well as to the State.  There were certain good  and  bad points  about  the  systems  that  were  prevalent  in   the manufacture  of beedi.  The contractor was very often a  man of  straw.  He was said to be the creation of the  principal employer  who put him forward on many occasions as a  screen to  avoid  his  own responsibility  towards  the  employees. Another  broad grievance was that there was double  checking and  rejection of beedis or double chhat, out of  which  the second   chhat  at  the  principal  employer’s   place   was invariably  in the absence of the employee.  This chhat  was alleged to be most irrational and depending upon the whim of the employer.  As far as the house work system was concerned there  was  an advantage to the employee with some  kind  of disadvantage to the employer.  Persons who could spare  time in  their houses but could not move out for the  purpose  of employment  got ready employment and could supplement  their income  from agriculture or other sources.  They were  in  a position to work as and when leisure was available and  like a  factory  employee there was no rigour  of  attending  the factory  or  work at stated time and for  stated  number  of hours.   It  appeared  that pilfering was  a  vice  of  this industry.   By pilfering tobacco which is the most  valuable ingredient,  the employees were able to earn some income  by again rolling it into beedis and selling them. The  relationship  between  the  proprietor,  middlemen  and outworkers  came  up  for consideration  in  this  Court  in Chintaman  Rao & Anr. v. The State of Madhya Pradesh  [1958] SCR 1340.  The proprietor of a beedi factory was  prosecuted under   the  Factories  Act  for  noncompliance   with   the provisions  of  that Act.  The proprietor pleaded  that  the workers  were not under his employment.  The contention  was that  the  sattedars  who were found  in  the  factory  were independent  contractors  and not workers.   The  management issued  tobacco and sometimes beedi leaves to sattedars  who manufactured  beedis,  in  their  own  factories  or  by  an arrangement with a third party.  The sattedars collected the beedis  thus  made  and  supplied to  the  factories  for  a consideration.    It  was  held  that  the  sattedars   were independent contractors and not the agents.  The enforcement of   factory  and  labour  legislation  could  be   rendered impossible  by adopting the simple device of  disintegrating what normally will be a factory.  The legislature wanted  to regulate the contract system.  The legislation did not  want to  stop  the contract system.  The provisions  in  the  Act recognised the contractor as a part and parcel of the  beedi industry.   The  contractor is referred to where  the  terms ’contract labour’ or ’principal employer’ of ’employer’ have been  defined.  Several functions which the employer has  to perform  are also performed by the contractor.  He  delivers tobacco  and  leaves  to the home worker  and  collects  the rolled beedis 232 after  application  of  chhat.  He makes  payment  to  them. Therefore,  the contractor has been retained as an  integral part  though  the attempt is to eliminate  the  vices  which crept into the industry. The  Madras  High Court in M/s.  K. Abdul  Azeez  Sahib  and Sons, Four Horse Beedi Manufacturers, Vellore--4 and Ors. v. The Union of India (1973) 11 M.L.J. 126 held the definitions of employer and principal employer in Section 2 (g) (a)  and 2(m) of the Act to be-valid but held that sections 26 and 27 of  the Act are wholly unenforceable against the trade  mark holders  whether  with  reference to home  workers  or  with reference  to employees working in any industrial  premises.

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The  Madras High Court held that since a worker in  a  beedi industry   is  not  required  to  work  regularly  for   any prescribed  period of hours in a day or even day  after  day for  any date specified period, from the very nature of  the case, the provisions in the Maternity Benefit Act, 1961  are unworkable with regard to such home workers, and, therefore, they  will  have no application to them.   The  Madras  High Court  held that section 7(1)(c), 7(2), 26, 27, 31,  and  37 (3) in so far as they relate to home workers are ultra vires and illegal and unenforceable against trade mark holders  in beedis  and contractors in the manufacture of  beedis.   The Madras  High Court held that section 7(1) (c), 7(2), 26  and 27 are ultra vires and illegal and unenforceable against the petitioner who are manufacturers of cigar or cigar rollers. The  Bombay High Court in M/s.  Chotabhai Purshottam  Patel, Beedi   Manufacturers  of  Bhandara  &  Ors.  v.  State   of Maharashtra by Secretary, Industries and Labour  Department, Sachivalaya,  Bombay & Ors. (1972) 1 L.L.J., 130  held  that the provisions of section 2(g) (a) and 2 (m) of the Act  are invalid to be in excess of the requirements of the situation because  if  the principal employer is fared with  the  pro- position   of   bearing   all   the   civil   and   criminal responsibilities  of omission and commission of  contractors under   him   the  inevitable  result  will  be   that   the manufacturer will give up the Gharkata system and may  think of some other system less onerous under the Act.  The Bombay High  Court also said that the words "in relation  to  other labour"  contained  in section 2(g) (b) are to  be  deleted. The  Bombay High Court further held that the  provisions  of sections 26 and 27 of the Act will not apply to home workers at all. The  Mysore High Court in P. Syed Saheb & Sons. v. State  of Mysore  (1972) Mysore Law Journal 450 held that  sections  3 and  4  of the Act are constitutional and not  violative  of Articles  14 and 19 (1) (g) of the Constitution.  Section  3 of the Act prohibits establishment of an industrial premises without obtaining a licence granted under the Act.   Section 4  of  the  Act provides for the procedure  for  the  issue, renewal  and  cancellation of a licence.   The  Mysore  High ,Court  further held that sections 26 and 27 of the Act  are not unreasonable restrictions and it is possible to find out whether a home worker has qualified himself for annual leave and  it  is  possible to make up for the  lost  wages.   The Mysore  High Court also held that section 31 ,of the Act  is valid  and Rule 29 does not impose unreasonable  restriction by  compelling the employer to accept beedis when  they  are sub-                             233 standard and the sub standard beedis and cigars exceed 5 per cent.   If’ the employer finds that the sub standard  beedis and  cigars  are above 5 per cent then he has to  refer  the matter to the Inspector. The  Kerala  High Court in Chirukandeth  Chandrasekharan  v. Union of India (1972) 1 L.L.J. 340 held that the  provisions of sections 2 (g) (a), 2 (m) 3, 4, 21, 26 and 27 of the  Act impose  unreasonable restrictions on business or  trade  and are violative of-Article 19(1) (g) of the Constitution.  The Kerala High Court held that the words "in relation to  other labour"  occurring  in  section 2(g) (b) have  also  to,  be deleted.  The Kerala High Court held sections 3 and 4 to  be valid.   The Kerala High Court held that sections 26 and  27 will  not  apply  to home workers.  The  Kerala  High  Court struck  down rule 29 of the Kerala Rules on the ground  that imposition of 5 per cent on the maximum amount of  rejection is  an arbitrary percentage.  Kerala Rule 29 stated that  no

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employer  shall  ordinarily reject more than 2-5  per  cent. The  provision states that there- can be rejection up  to  5 per  cent for reasons recorded in writing.  This  imposition of  5  per cent limit in the proviso was  construed  by  the Kerala  High  Court  to be unreasonable in as  much  as  the quality  of beedis would go down if the workers are  assured that more than 5 per cent will not be rejected. The Andhra Pradesh High Court in Civil Appeals Nos. 1972 and 1988  of 1971, held that sections 3 and 4 of the Act  offend Articles  14  and 19 (1) (g) of the  Constitution  and  are, therefore, void.  The Andhra Pradesh High Court came to  the conclusion that the provisions contained in sections 3 to 27 of  the  Act do not apply to home workers.  The  High  Court held that the Act is applicable to an independent contractor where  he  is employing labour for and on  his  own  behalf. There   he  is  the  principle  employer.    No   artificial relationship of master and servant arises as a result of the operation of the definitions in section 2 (g) (a) (b) and  2 (m) of the Act.  The Gujarat High Court, in Civil Appeal No. 585  of  1971,  upheld  the provisions  of  the  Act  to  be constitutional. The  first contention on behalf of the petitioners  and  the appellants is that the Act of 1966 is invalid on the  ground of  lack  of  legislative competence.  The  High  Courts  of Madras,  Kerala,  Gujarat, Mysore and  Andhra  Pradesh  have rightly  held  the Act to  have  constitutional  competence. Counsel on behalf of the petitioners contended that entry 24 in  list II is the only legislative Entry for the  piece  of Legislation.  Entry 24 speaks of industries subject to  the, provisions of Entries 7 and 52 of list I. Entry 7 in List  I speaks  of  Industries declared by Parliament by law  to  be necessary  for the purpose of defence or for the  projection of  war.   Entry  52 in List I  speaks  of  Industries  the, control  of which by the Union is declared by Parliament  by law to be expedient in the public interest.  The legislation in the present cast does not fall within Entry 24 in List II or  Entries 7 and 52 in List Entry 24 in List III speaks  of Labour  including  conditions  of  work,  provident   funds, employers’ lability, workmen’s compensation, invalidity  and old agepensions  and maternity benefits.  The Act is  for welfare of labour. It  is not an Act for  industries.   The true  nature and character of the legislation shows that  it is   for, enforcing better 234 conditions  of labour amongst those who are engaged  in  the manufacture of beedis and cigars. The scheme of the Act relates to provisions regarding health and  welfare,  conditions of employment, leave  with  wages, extension  of benefits by applying other Act to Labour.   To illustrate  section  28 of the Act extends benefits  of  the Payment of Wages Act to, industrial premises, Section 31  of the Act provides for security of service, Section 37 of  the Act  extends the benefit of Industrial Standing Orders  Act, 1946.  Again, section 37 (3) of the Act makes provisions  of the Maternity Benefit Act applicable to every establishment. Section  38(1)  of  the Act applies  the  safety  provisions contained  in Chapter IV of the Factories Act to  industrial premises.   Section  39(1) of the Act makes  the  Industrial Disputes Act, 1947 applicable to matters ,arising in respect of  every  industrial premises.  Section 39(2)  of  the  Act provides  that disputes between an employee and an  employer in  relation to issue of raw materials, rejection of  beedis and  cigars,  payment  of wages for the  beedis  and  cigars rejected by the employer, shall be settled by such authority as the State Government may specify.  An Appeal is  provided

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to the appellate authority whose decision is final.  Section 39(1)  of the Act applies to industrial  premises.   Section 39(2) of the Act applies to every establishment. The  Act  speaks of licensing of industrial  premises.   The benefits  under  the  Act are extended  to  both  industrial premises  and  establishments.   Establishments  mean   also places where home workers work. The  pith  and  substance  of  this  Act  is  regulation  of conditions  of employment in the beedi and  cigar  industry. The Act deals with particular subject matter as regards  the establishments  and industrial premises.  These matters  are regulation  of conditions of employment in the industry  and the  industrial  relations  between  the  employer  and  the employee.   Entries 22 to 24 in List III are wide enough  to cover this piece of labour welfare measure.  Entry 22  deals with  labour welfare.  Entry 23 deals with social  security, employment and unemployment.  Entry 24 deals with welfare of labour  including  conditions  of  work,  provident   funds, employer’s liability, workmen’s compensation, invalidity and old  age pensions and maternity benefits.  The Act is  valid and falls within Entries 22, 23, and 24 of List III. Sections 3 and 4 of the Act were challenged as violative  of Article  19(1)(g) and Article 1.4 on account  of  procedural unreasonableness and conferment of unfettered powers on  the licensing authority without the requisite safeguards.  These two  sections  require  licence  in  respect  of  industrial premises.  The provisions are applicable both to trade  mark holders as well as contractors.  There is no difficulty with regard  to  manufacturers to obtain licence  in  respect  of industrial premises.  If contractors are employers of labour for  and on their own behalf, the contractors will  have  to obtain  licences  for manufacture of  beedis  in  industrial premises.  The relevant authorities have to refer to certain matters in the grant of refusal of a licence.  These matters as  set out in section 4 of the Act are (a)  suitability  of the  place of premises which is proposed to be used for  the manufacture  of  beedi  or cigar or both  (b)  the  previous experience of the applicant, (c) the 235 financial resources of the applicant including his financial capacity to meet the demands arising out of the provision of the laws for the time being in force relating to the welfare of  labour (d) whether the application is made  bonafide  on behalf of the applicant himself or any ,other person and (e) welfare  of the labour for the locality in the  interest  of the  public  generally  and such other  matters  as  may  be prescribed.    The  licensing  authority  is   required   to communicate his reason in writing when he refuses to grant a licence.   Section  5 of the Act provides an appeal  to  the appellate authority against such order.  The power to  grant or refuse a licence is sufficiently controlled by  necessary guidance.   There  are safeguards preventing  the  abuse  of power.   The  right  to appeal is a  great  safeguard.   The various  matters  indicated in section 4 in  regard  to  the grant  of  licence indicate not only  the  various  features which  are to be considered but also rule out any  arbitrary act.    There  is  machinery  as  well  as   procedure   for determining  the  grant  of  refusal  of  a  licence.    The application  for grant of a licence is to be  determined  on objective consideration as laid down in the section.   There is neither unfairness nor unreasonableness in sections 3 and 4 of the Act. The  validity  of the Act was challenged  on  the  principal ground that the Act imposed unreasonable restrictions on the manufacturers in their right to carry on trade and  business

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in  the manufacture of beedis and cigars.  The  unreasonable restriction  was  said  to be the  imposition  of  vicarious liability  on  the manufacturers for acts and  omissions  in case of independent contractors through whom they get beedis and  cigars  and over whose employees they do not  have  any control  and with whom they do not come in  contract.   The. provisions  of section 2(g) (a) and 2(m) read with  sections 2(e)  and  (f)  of  the Act are said  to  create  a  totally artificial and fictional definition of employer and  thereby to  cast  vicarious liabilities upon a manufacturer  of  and trader in beedis in respect of diverse matters which  entail civil and criminal liabilities.  Liabilities are imposed  on manufacturer or trader in beedis in respect of home  workers whom it is said, they cannot control.  The home workers  are in  thousands.  It is impossible for a manufacturer to  have any  idea of the identity of the persons rolling  beedis  or the  premises where they work.  Raw materials are  delivered to workers to do the work of rolling the beedis himself  and not having done by any other person.  It is, therefore, said there is no rational basis for imposing vicarious liability. Though liabilities and obligations are great in relation  to contract  labour  there  is  said  to  be  no  corresponding creation  of  rights  which normally exist  in  employer  in respect of his employees.  The cumulative effect and  impact of  the various provisions of the Act imposing liability  on the  manufacturer  is said to render it impossible  for  the manufacturer  or  trader to carry on his business.   From  a commercial  point of view, the restrictions are said  to  be drastic and unreasonable. The Act defines in section 2(e) contract labour meaning  any person  engaged or employed in any premises by or through  a contractor with or without the knowledge of-the employer  in any manufacturing process.  Section 2(f) of the Act  defines employee  to mean a person employed directly or through  any agency whether for wages or not in- 236 any  establishment to do any work skilled and unskilled  and includes  (i)  any labour who is given raw materials  by  an employer or a contractor for being made into beedi and cigar or  both  at home (hereinafter referred to in  this  Act  as ’home  worker’  and  (ii)  any person  not  employed  by  an employer or a contractor but working with the permission of, or  under  agreement  with,  the  employer  or   contractor. Section  2(g) of the Act defines "employer" to mean  (a)  in relation to contract labour the principal employer, and  (b) in relation to other labour, the person who has the ultimate control over the affairs of any establishment or who has, by reason of his advancing money, supplying goods or otherwise, a substantial interest in the control of the affairs of  any establishment,  and  includes any other person to  whom  the affairs  of  the establishment are entrusted,  whether  such other   person  is  called  the  managing  agent,   manager, superintendent  or by any other name.  Section 2(m)  of  the Act  defines ’principal employer’ to mean a person for  whom or  on  whose  behalf  any contract  labour  is  engaged  or employed  in  an  establishment.  Section 2(h)  of  the  Act defines  ,establishment’  to  mean  any  place  or  premises including  the precincts thereof in which or in any part  of which any manufacturing process connected with the making of beedi or cigar or both is being or is ordinarily, carried on and includes an industrial premise.. Section 2(i) of the Act defines ’industrial premises’ to mean any place or  premises in  which  any industry or manufacturing  process  connected with  the  making of beedi or cigar or both is being  or  is ordinarily, carried on with or without the aid of power.

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These definitions indicate these features.  First, there are workers in industrial premises and workers in establishment. Second,  the  Act recognizes home workers.  Third,  the  Act recognises   contract  labour  by  or  through   contractor. Fourth, any person who is given raw materials by an employer or  a contractor is an employee.  Again, any  person  though not employed by an employer or a contractor but working with the  permission  or under agreement with the employer  or  a contractor  is an employee.  Fifth, in relation to  contract labour  the principal employer is a person for whom  and  on whose   behalf   labour  is  engaged  or  employed   in   an establishment.   Sixth,  the employer in relation  to  other labour is a person who has ultimate control over the affairs of  any  establishment  or who has by  reason  of  advancing money,  supply goods or otherwise a substantial interest  in the affairs of any establishment. The  two  classes of employers are broadly  defined  as  the employer and the principal employer.  The first kind is  the manufacturer   who   directly  employs   labour.    Such   a manufacturer  becomes,  an employer within  the  meaning  of Section 2(g) (b) of the Act by engaging labour.  The  second class  of employer is the principal employer who  through  a contractor  as  defined in section 2(a) of the  Act  engages labour  which is known as contract labour.  This  labour  is engaged by or on behalf of the manufacturer who becomes  the principal  employer.   The third category of employer  is  a contractor’ who engages labour for executing work for and on his own behalf.  Such a contractor may undertake work from a manufacturer or a trade mark- bolder but he 237 becomes  the  principal  employer in  relation  to  contract labour  on the ground that the labour is engaged for and  on his  own  behalf.  The fourth class of employer is  where  a contractor  becomes what is known ,is sub-contractor,  of  a contractor.  A contractor in such a case would ask the  sub- contractor  to engage labour for and on behalf of  the  con- tractor.   In  such  a  case the  contractor  would  be  the principal  employer because the sub-contractor  is  engaging contract  labour for and on behalf of the contractor who  is the  principal  employer.  The fifth class  of  employer  is where  a  person by reason of advancing money  or  supplying goods  or  otherwise having a substantial  interest  in  the control of any establishment becomes the employer of labour. To  illustrate, a mortgagee in possession of  an  industrial premises,  a hypothetic of goods manufactured in  industrial premises or in any establishment, a financier in relation to a  manufacturer  or  a contractor or  a  sub-contractor  may become employer by reason of such consideration mentioned in the Act. In  cases  where  the  manufacturer  or  trade  mark  holder himself’  employs  labour there is  direct  relationship  of master  and servant and therefore liability is attracted  by reason  of that relationship.  There cannot be any  question of unreasonableness in such a case.  In the second  category the  manufacturer  of  trade mark  holder  engages  contract labour  through  a contractor and he becomes  the  principal employer.  Though such labour may be engaged by a contractor with  or without the knowledge of the manufacturer or  trade mark  holder,  this  contract  labour  is  engaged  for  the principal  employer who happens to be the trade mark  holder or  the  manufacturer.  The liability arises  by  reason  of contract  labour engaged for or on behalf of  the  principal employer.  In the third category, the contractor becomes the Principal employee because the contractor engages labour for or  on his own behalf.  Where the contractor engages  labour

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for the manufacturer it. is not unreasonable restriction  to impose liability on tile manufacturer for the labour engaged by the manufacturer through the contractor.  It is important to  notice that the Act fastens liability on the person  who himself  engages labour or the person for whom and on  whose behalf  labour  is engaged or where a  person  has  ultimate control  over the affairs of the establishment by reason  of advancement  of  money  or of substantial  interest  in  the control of the affairs of the establishment. Therefore,  the  manufacturers or trade  mark  borders  have liability in respect of workers who are directly employed by them  or  who  are employed  by  them  through  contractors. Workers  at  the  industrial premises  do  not  present  any problem.   ’the  manufacturer  or  trade  mark  holder  will observe all the provisions of the Act by reason of employing such  labour  in the industrial premises.   When  the  manu- facturer engages labour through the contractor the labour is engaged  on behalf of the manufacturer, and the  latter  has therefore  liability  to such contract labour.  It  is  only when the contractor engages labour for or on his own  behalf and supplies the finished product to the, manufacturer  that he will be the principal employer in relation to such labour and   the   manufacturer  will  not   be   responsible   for implementing 3--954SCI/74 238 the  provisions  of  the  Act with  regard  to  such  labour employed by the contractor. if the right of rejection  rests with  the manufacturer or trade mark holder, in such a  case the contractor who will prepare beedis through the  contract labour  will find it difficult to establish that he  is  the independent contractor.  If it is a genuine sale transaction by  the contractor to the manufacturer or trade mark  holder it will point in the direction of an independent contractor. This  Court in Dewan Mohideen Sahib v. United Bidi  Workers’ Union  Salem,  [1964] 7 S.C.R. 646 said that the  so  called independent  contractor  in  that  case  was  supplied  with tobacco  and  leaves and was paid certain  amounts  for  the wages of the workers employed and for his own trouble.   The so  called independent contractor was merely an employee  or an  agent  of  the appellant in that case.   The  so  called independent  contractor  had no independence  at  all.   The proprietor  could at his own choice supply raw  material  or refuse to do so.  The contractor had no right to-.insist  on supply  of raw materials to him.  The work  was  distributed between a number of so called, independent contractors,  who were told to employ not more than 9 persons at one place  to avoid regulations under the Factories Act.  This Court  held that  the  relationship of master and  servant  between  the appellant  and the employees employed by I  the  independent contractor  was  established in that case.  If it  is  found that manufacturers or trade mark holders are not responsible on  the ground that the person with whom ’they  are  dealing are  really  independent contractors then  such  independent contractors   will  have  to  be  considered  as   principal employers within the meaning of the Act. The  contention  on  behalf  of  the  petitioners  and   the appellants  is  that in common law a person cannot  be  made responsible  for  actions of an independent  contractor  and that he should not be penalised for the contravention of any law  by an independent contractor is to be examined in  view of  the  language  employed  in  defining  the   expressions contract  labour,  contract,  establishment,  employer   and principal employer.  It was particularly said that when home workers  wore  given  tobacco and  leaves  directly  by  the

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manufacturers  the  home workers would not  be  under  their control and the manufacturers should not be made responsible for  providing any amenities or leave facilities  for  those home workers. This Court in Silver Jubilee Tailoring House & Ors. v. Chief Inspector  of Shops and Establishments & Anr. (Civil  Appeal ’No. 1706 of 1969 decided on 25th September, 1973) discussed the  question as to whether employer  employee  relationship existed between the tailoring house and the workers in  that case.  The definition of a person employed in that case  was a   person  wholly  or  principally  employed   therein   in connection with the business of the shop.  The workers  were paid on piece rate basis.  They attended the shops if  there was  work.   The rate of wages paid to the workers  was  not uniform.  The rate depended upon the skill of the worker and the  nature of the work.  The workers were given  cloth  for stitching.  They were told bow the stitching was to be done. If they did not stitch it 239 according  to  the instructions, the employer  rejected  the work.   The worker was asked to restitch.  If the  work  was not  done according to the instruction no further  work  was given  to  a  worker.   A worker did not  have  to  make  an application  for leave if he did no,’ come to the shop on  a day.  if there was no work, the employee was free  to  leave the  shop. All the workers worked in the shop. Some  workers could take cloth for stitching to their homes. Mathew, J. speaking for the Court referred to the  decisions of this Court and English and American decisions and cameto these  conclusions. First, in recent years the control  test as  traditionally  formulated  has not been  treated  as  an exclusive  test.  Control is an important  factor.   Second, the  organisation  test, viz., that the workers  attend  the shop  and work there is a relevant factor.  If the  employer provides  the  equipment this is some  indication  that  the contract  is  a  contract of service.  If  the  other  party provides  the equipment this is some evidence that he is  an independent contractor.  No sensible inference can be  drawn from  the  factor  of equipment where it  is  customary  for servants to provide for their own equipment.  Little  weight can  today  be  put upon the provisions of  tools  of  minor character  as  opposed  to plant and equipment  on  a  large scale.  Third, if the employer has a right to reject the end product  if it does not conform to the instructions  of  the employer  and direct the worker to restitch it, the  element of control and supervision as formulated in the decisions of this  Court  is  also present.  Fourth, a person  can  be  a servant  of more than one employer.  A servant need  not  be under  the  exclusive  control of one  master.   He  can  be employed  under  more than one employer.   Fifth,  that  the workers  are  not obliged to work for the whole day  in  the shop  is  not very material.  In the ultimate  ’analysis  it would depend on the facts and circumstances of each case  in determining the relationship of master and servant. The  present  legislation  is intended  to  achieve  welfare benefits  and  amenities for the labour.  That  is  why  the manufacturer  or  trade marks holder becomes  the  principal employer  though  he  engages contract  labour  through  the contractor.   He cannot escape liability imposed on  him  by the  statute  by  stating that he  has  engaged  the  labour through a contractor to do the work and therefore he is  not responsible  for the labour.  The Contractor in such a  case employs  the labour only for and on behalf of the  principal employer.   The contractor being an agent of  the  principal employer for manufacturing beedis is amenable to the control

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of  principal employer.  That is why the statute  says  that even if the contract engages labour without the knowledge of the  employer the principal employer is answerable for  such labour  because the labour is engaged for or on his  behalf. The  act and the Rules thereunder prescribe  maintenance  of log  books  and registers.  Where the  manufacturer  or  the trade mark holder engages labour directly, the  manufacturer maintains  registers and lo books.  Where  the  manufacturer engages  contract labour through a contractor  the  manufac- turer  will  require the contract or to  maintain  such  log books  of  the contract labour and through  such  books  and registers win keep control over not only the contractors but also the labour. 240 The  principal employer is the real master of the  business. He  has  real  control of the business. He  is  held  liable because  he  exercises  supervision and-  control  over  the labour  employed for and on his behalf by  contractor.   The benefits  of the welfare measure reach the workmen  only  by direct responsibility of the principal employer.  The  basis of  the  welfare measure is in the interest of  the  workers with  regard  to their health, safety  and  wages  including benefits  of leave and family life.  The Bombay  High  Court and  the  Kerala  High  Court  struck  down  the  provisions contained in sections 2(g) (a) and 2(m) of the Act in regard to  the principal employer being liable for contract  labour as an unreasonable restriction on the manufacurer’s right to carry on business.  This view proceeds on the basis that the principal  employer  is liable for acts of  the  independent contractor.    The  Act  does  not  define  an   independent contractor, nor mention the independent contractor.’ The Act speaks  of  the principal employer in relation  to  contract labour  and  employer in relation to other labour.   When  a contractor engages labour for or on behalf of another person that  other  person  becomes the  principal  employer.   The Attorney General rightly said that if it were established on the  facts  of  any particular case that  a  person  engaged labour  for  himself he would be the principal  employer  of contract  labour.  In such an instance there is no  question of agency on behalf of another person. In   cases  where  an  industrial  manufacturer   finds   it convenient  to  give  work on contract  rather  than  do  it employing  his  own  man he cannot have  the  advantages  of employing the labour without corresponding obligations.   If the  contractors could be made responsible for  the  working conditions of labour or their wages or their leave or  their other  benefits  than no question would arise.   It  is  not uncommon  for  labourers to work for a contractor  on  terms which  are  designed to satisfy the law that  they  are  not servants but independent contractors. In  the present case, it is not material to find out  as  to who can be called an independent contractor.  It can be said that independent contractors are those who employ labour for and on behalf of themselves in so far as the present Act  is concerned.   The only scope for inquiry is whether a  person has  employed  labour  for and on his own  behalf.   If  the answer be in the affirmative then such a contractor would be a principal employer within the meaning of section 2(g) (a). It  appears that the principal employer or the employer,  as the case may be,’ is liable on the ground that the labour is employed  for or on behalf of the principal employer or  the employer.   In  relation to contract  labour  the  principal employer  is  the  person for whom or on  whose  behalf  any contract  labour  is engaged in any establishment.   An  em- ployer in relation to other labour is the person who has the

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ultimate  control over the affairs of any  establishment  or has a substantial interest in the control of the affairs  of any  establishment  as defined in section 2 (g) (b)  of  the act.   There  is no vicarious liability in the case  of  the principal  employer or in the case of employer The Act  does not  define  an independent contractor.  The  Act  does  not prevent  an independent contractor from being the  principal employer  in  relation  to contract labour.  It  will  be  a question of fact in each case as to 241 who  is  the  person for whom or on  whose  behalf  contract labour is engaged.  If such a contractor who is referred  to as an independent contractor employs labour for himself  the liability  will attach to him as the principal employer  and not  to the manufacturer or trade mark holder.  There is  no restriction  on the right of the manufacturer or  the  trade mark holder to carry on business.  They are liable under the Act for contract labour employed for or on behalf of them. For  the  foregoing  reasons the provisions of  the  Act  in particular contained in sections 2(g) (a), 2(g) (b) and 2(m) are   constitutionally   valid  and  do   not   impose   any unreasonable  restriction on the manufacturer or trade  mark holder. On behalf of the petitioners and the appellants, it is  said that  section 26 of the Act gives substantive rights  wit  I regard to leave and section 27 of the Act is the  procedural part  in computing wages.  The contention advanced was  that section   26   of  the  Act  speaks  of  employees   in   an establishment and, therefore, these sections do not apply to home workers- The contentions are that sections 26 and 27 of the  Act cast an unreasonable burden and impose  obligations which  are  not practically capable of fulfillment  and  are thus  violative  of  Articles  19(1)  (f)  and  (g)  of  the Constitution.   In any event sections 26 and 27 of  the  Act ire  said to be unenforceable in regard to home workers  and are,  therefore, violative of Articles 19(1) (f) and (g)  so far  as the same are applicable to home workers.  These  two sections  deal  with leave and wages  during  leave  period. Broadly  stated, section 26 allows leave at the rate of  one day for every 20 days of work performed by an adult employee during  the previous calender year.  In the case of a  young person  leave is at the rate of one day for very 15 days  of work   during  the  previous  calender  year.    There   are provisions as to calculation of leave which are not material in the present case. Under section 27 of the Act an employee shall be paid at the rate equal to the daily average of his full time earning for the days on which he had worked during the month immediately preceding  his leave exclusive of any overtime earnings  and bonus but inclusive of dearness and other allowances.  There are two explanations.  The first explanation states that the expression  "total full time earning" includes cash  equiva- lent to the advantage accruing through the confessional sale to  employees  of  foodgrains and  other  articles,  as  the employee  is  for the time being entitled to, but  does  not include  bonus.  The second explanation states that for  the purpose  of determining the wages payable to a  home  worker during  leave  period  or  for the  purpose  of  payment  of maternity  benefit to a woman home worker "day"  shall  mean any  period  during  which such home  worker  was  employed, during a period of twenty four hours commencing at midnight, for making beedi or cigar or both. The  word "establishment" is defined in section 2(h) of  the Act to mean any place or premises including the precincts in which  or  in any part of which  any  manufacturing  process

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connected  with  the making of beedis or cigars or  both  is carried on and it includes an industrial premises.   Section 2(i)  of the Act defines "industrial premises" to  mean  any place or premises not being a private dwelling house where 242 the  industry or manufacturing process of making  beedis  or cigar is carried on.  An Employee is defined in section 2(f) of  the Act to mean any person employed directly or  through any  agency in any establishment and include any labour  who is  given  raw materials by an employer or a  contractor  at home referred to as the home’ worker and person employed  by an employer or a contractor but working at the premises with the employer or contractor.  Therefore, the words  ’employed in an establishment’ in section 26 of the Act are  referable to home, workers as well.  The second explanation to section 27 of the Act also speaks of determination of wages  payable to home worker during leave period. It  was  said  that the words  "total  full  time  earnings" occurring in section 27 of the Act were inapplicable to home workers for these reasons. First  a  home  worker with the  assistance  of  his  family members  could collect large earnings in a  month  preceding the month in which he would take leave.  This was said to be an  unreasonable  restriction on an employer inasmuch  as  a home  worker  would not work hard or perhaps at  all  for  a considerable period of time and would work only in the month preceding which he would take leave.  It is not possible for a home worker to. increase his earnings because the employer will have control over raw materials supplied to home worker as also on the daily turnover.  An employer is in a position to prevent malpractice or abuse of taking more materials  to make a higher income.  It is also reasonable to hold that an employer  will  not  allow an  employee  on  increasing  the income. It  was  secondly said that section 27 of the  Act  did  not prescribe the minimum number of days an employee should work before he was entitled to annual leave wages.  Reference was made  to  section  79(1) of the  Factories  Act  1948  which provides for 240 days of work as minimum for entitlement  of annual  leave.  The provisions in section 26 of the  Act  is that  for every 20 days one day’s leave is allowed.  If  any worker does not work hard one will not be entitled to  leave as  contemplated in the Act.  The basis of  calculating  one day’s leave for every 20 days of work is also adopted in the case  of  Government servants. (See  Central  Civil  Service Leave  Rules,  1972  Rules 26 and 2(m).   Instead  of  being unreasonable it can be said to be an impetus to a servant to put  in the maximum of work in order to obtain  the  maximum amount of leave.  The entitlement to leave under section  27 of  the Act is based on the number of days of  actual  work. It  is,  therefore, not an unreasonable restriction  on  the employer. Thirdly  it is said that the payment of leave wages  at  the rate  equal  to  the daily average of his  total  full  time earnings  in  the  case of  home  workers  is  unreasonable. Reference  is made to section 22 of the Act which speaks  of notice  of periods of work in industrial premises.   Section 22  of  the Act is not applicable to home workers.   In  the case  of  home workers it is said that they are free  to  do work  at any time and for any length of time in a  day  even for  24 hours a day.  It is, therefore said that it will  be difficult to calculate the total full time earnings of  home workers. 243 The  works  in section 27 of the Act are  "total  full  time

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earnings".   One  meaning of the words in the case  of  home workers  will  be daily average hours of work done  by  home worker  during  the last month before  leave  provided  such average  does  not  exceed  the  daily  period  of  work  as prescribed in a notice under section 22 of the Act.  Such  a construction  would give not only full meaning to the  words "full  time earnings" but would also place home workers  and workers  in  industrial premises in the same  position  with regard to their leave wages.  It will not cast  unreasonable burden   on  the  employer  in  the  form  of  leave   wages disproportionate  to  the amount of work done  by  the  home workers. Another  meaning is that the total full time earnings  would be  the  actual  total earnings as far  as  the  workers  in industrial  premises as well as home workers are  concerned. With regard to the second meaning the words "full time" will not  have any restriction as to hours of work.   The  result may be that a home worker may have longer hours of work  and larger  income  compared with the worker in  the  industrial premises, but such longer hours of work can be controlled by an  employer  both with regard to giving raw  materials  and allowing longer hours of work. As  a matter of fact it is found that home workers can  turn out 700 to 1000 pieces a day.  That is the view expressed in the  Report of the Royal Commission on labour in India  1931 as  also the Labour Investigation Committee Report 1944  and the  Report  of  the  Court  of  Enquiry  appointed  by  the Government of Madras, 1947.  The minimum wages prescribed by various  states for these home workers are between Rs. 2  to 4.30  for  rolling 1000 pieces.   Therefore,  the  Financial burden  on  account  of leave wages will not  be  higher  to constitute any unreasonable restriction. The  Bombay High Court in the present appeals said that  the provisions  of  sections  26 and 27 of  the  Act  constitute unreasonable  restriction  not  only  with  regard  to  home workers  but  also with regard to  employees  in  industrial establishment.   The  reason given is that if  employees  in industrial  premises do not choose to work for all  days-for the  full  hours notified it will be equally  impossible  to determine  what his full time earnings will be and what  his daily  average  of the full time earnings for  the  days  on which  he  worked during the preceding month will  be.   The Mysore High Court in the present appeal correctly said  that the  home  workers  will  get wages  for  the  leave  period corresponding  to the number of beedis manufactured  by  him for  a particular employer.  The hours of work will in  that case be immaterial, because if he worked for less number  of hours he would obtain lesser payment.  There will thus be no difficulty  in computing wages payable for the annual  leave period.  The home worker will get leave wages  corresponding to  his actual earning just as the worker in the  industrial premises will get leave wages corresponding to his full time earnings.  The  Andhra Pradesh High Court in the present  appeal  said that home workers carry on their rolling work at homes which are  neither  establishments nor industrial  premises.   The word  "establishment" as defined in section 2(h) of the  Act relates to home workers as well.  It 244 is  only industrial premises as defined in section  2(i)  of the Act which excludes private dwelling houses. The  home workers are not required to work for  a  specified number  of hours a day.  The fact that sections 17 to 23  of the Act can have no application to home workers but only  to persons  employed  in industrial premises  does  not  tender

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sections 26 and 27 of the Act inapplicable to home  workers. The  express  language of sections 26 and 27 of the  Act  is relatable  to  home workers.  They work  in  establishments. ’The daily average of total full time earnings for the  days worked  during the month immediately preceding the leave  is applicable  to home workers. IL is because payment  to  home workers  is  made  at piece rate, viz., for  the  number  of beedis rolled.  The Madras High Court said that sections  26 and 27 of the Act have imposed- unreasonable restrictions on manufacturers in regard to employees in industrial premises. The Madras High Court held that for working 11 days a worker would  be  entitled to one day as annual leave  with  wages. The Act does not say so.  The Act provides that any fraction of leave for half a day or more will be treated as one day’s full leave.  Therefore, if on a calculation of entire  leave at  the rate of one day for every 20 days of work, there  is any  fraction of more than one day’s leave so calculated  or earned it would be treated as one day. It  is  only   where there is fraction of leave earned that for such 11 days work one day’s leave is to be given. It is not same as  providing oneday’s leave for working only 11 days in all cases.  The entitlement underthe Act to one day’s leave for every  20 days  shows that the period of 20 days is a  minimum  period prescribed for earning one day’s leave. The structure of sections 26 and 27 of the Act is  two-fold. First, so far as workers employed in industrial premises are concerned  they  are  entitled to annual  leave  with  wages provided  they  work for at least 20 days a year,  for  full hours work specified in the notice.  Therefore, sections  26 and  27 of the Act will not apply to workers  in  industrial premises  who  have  not  worked  for  full  working   hours according  to  the  notice  for 20  days  a  year.   Second, sections 26 and 27 of the Act will apply to home workers who work  at  least  20  days a year  and  the  day  within  the expression 20 days will mean any period of day because there is no notified hours of work. In  view  of the fact that the two sections  are  applicable both to workers in industrial premises and home workers  the expression ;’total full time earnings" occurs in section  27 of  the Act.  Section 17 deals with working hours.   Section 22 speaks of notice of periods of work.  Sections 17 and  22 refer   to  industrial  premises  and  are   therefore   not applicable  to home workers.  The total full  time  earnings for   workers  in  industrial  premises  will  attract   the specified periods of work contemplated in section 22 of  the Act.   With regard to a home worker the wages  during  leave period  will  be  calculated with  reference  to  the  daily average  of  his total full time earnings for  the  days  on which he worked during the preceding month.. In the case  of home workers it will be the average of 30 days earnings.  To illustrate,  if  the  worker has earned  different  sums  on different  days during the month the sums will be added  for the purpose of arriving at an average.  The computation 245 in the case of home workers will be first with reference  to the total earning during the month and full time earning  is the average thereof.  ’.The second explanation to section 27 of  the  Act shows that for the purpose of  determining  the wages  payable to home worker during leave period day  shall mean any period during which such home worker, was  employed during  any  period of 24 hours.  Therefore, so far  as  the home worker is concerned day shall mean any period. The  manner in which leave wages for workers  in  industrial premises  and  home  workers are to  be  calculated  may  be illustrated  with reference to the beedis and Cigar  workers

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(Conditions  of  Employment) Mysore  Rules,  1969.   Section 44(2) of the Act provides that the State Government may make rules  inter  alia for the records and register  they  shall maintain in establishments in compliance with the provisions of  the Act and the rules thereunder.   Establishment  means both  industrial  premises and any private house  where  the home-workers  carry  on their work.  Rule 33 of  the  Mysore Rules framed under the Act speaks of maintenance of  records and registers in Form No. XIII.  Form No. XIII has 8 columns as  the  muster roll of employees  in  industrial  premises. Rule  33(2) of the Mysore Rules speaks of records  for  home workers in Form No. XIV.  There are four columns showing the date,  whether work was done, number of beedis  manufactured and the wages received.  At the footof Form XIV it shows the total number of days worked in the month. Therefore, in  the  case of home workers wages are  calculated  on  the basis  of these records, namely, the number of  days  worked and  second  the amount of wages received.  In the  case  of home worker hours of work are not necessary.  In the case of employee industrial premises columns 8 and 9 show inter alia the group, relay, shift number and period work.  With regard to  home workers payment is made at the rate of 1000  pieces of beedis.  Leave with wages in the case of home workers  is on  that  basis  of  payment.  The log book  is  a  form  of guarantee and security for both the employer and the  worker in regard to quality of work and relative payment. Reference  was made to four earlier decisions of this  Court for  the  purpose  of showing that sections 26  and  27  are inapplicable  to  home workers.  These  decisions  are  Shri Chintamani Rao & Anr. v. The State of Madhya Pradesh  [1958] S.C.R.  1340; Shri Birdhichand Sharma v. First Civil  Judge, Nagpur  & Ors., [1961] 3 S.C.R. 161; Shankar Balaji Waje  v. State  of Maharashtra, [1962] Suppl.  I S.C.R. 249 and  M/s. Bhikuse  Yamasa Kshatriya (P) Ltd. v. Union of India &  Anr. [1964]  1  S.C.R. 860.  These four cases were  decided  with reference  to the Factories Act.  Sections 79 and 80 of  the Factories Act were considered there.  These two sections are in  similar language to section 26 and 27 of the  Act.   The only  difference is that unlike section 79 of the  Factories Act,  in  section 26 of the Act there is no  requirement  of working  for  240 days a calendar year  for  entitlement  to annual  leave and further that-in section 26 of the Act  the words  used are employee" in place of the word ’worker’  and the  word "establishment" in place of the word "factory"  in the Factories Act. In Chintaman Rao (supra) case this Court held that the three ingredients and concepts of employment are, first there must be  an employer, second, there must be an employee  and  the third, there must 246 be a contract of employment.  In Chintaman Rao case  (supra) certain independent contractors- known as Sattedars supplied beedis  to  the Manager of a beedi factory.   The  Sattedars manufactured  the  beedis  in their own  factories  or  they entrusted  the  work  to third parties.   The  Inspector  of Factories  found in the beedi factory certain sattedars  who came  to deliver beedis manufactured by them.  The owner  of the factory was prosecuted for violation of sections 62  and 63 of the Factories Act for failure to maintain the register of adult workers.. It was held that the Sattedars and  their "coolies  (sic)  were not workers within the  definition  of section  2(1) of the Factories Act.  The ratio was that  the Sattedars  were  not  under  the  control  of  the   factory management  and  could  manufacture  beedis  wherever   they pleased.   Further the ’coolies’ (sic) were not employed  by

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the management through the Sattedars. In  Birdhichand Sharma case (supra) the  appellant  employed workmen in factory.  The workmen were not at liberty to work at their houses.  Payment was made for piece rates according to  the amount of work done.  The workmen applied for  leave for  15 days.. Ile appellants did not pay their wages.   The appellant contended that the workmen were not workmen within the  meaning  of the Factories Act.  It was  held  that  the workmen could not be said to be independent contractors  but were  workmen  within the meaning of section 2  (1)  of  the Factories Act.  A distinction was sought to be drawn between workmen  and independent contractors.  It was held that  the workmen  could come and go when they liked, they were  piece rate  workers within the, meaning of the Factories Act.   If the worker did not reach factory before midday the would  be given no work.  He was to work at the factory.  He could not work elsewhere.  He would be removed if he was absent for  8 days.   His attendance was noted.  If his work did not  come up  to the standard the pieces prepared would  be  rejected. The leave provided under section 79 of the Factories Act was held  to  be a matter of right when a worker had  put  in  a minimum number of working days. In  Shankar  Balaji Waje case (supra) it was held  that  the labourers  who used to roll beedis in the factory  were  not workers   within   the  meaning  of   the   Factories   Act. Birdhichand  Sharma  case (supra) was distinguished  on  the facts.   The minority view was that the workers  in  Shanker Balaji   Waje  case  (supra)  were  of  the  same  type   as Birdhichand  Sharma  case (supra).  In Shankar  Balaji  Waje case (supra) the majority view was that there was  contracts of service.  The worker was not bound to attend the  factory for  any fixed hours.  He could be absent from the work  any day  he  liked  and  for  ten  days  without  informing  the appellant.  He had to take permission if he was to be absent for  more  than 10 days.  The worker was not bound  to  roll beedis  at  the factory.  He could do so at  home  with  the permission   of   the  appellant.   There  was   no   actual supervision.   Beedis  not  up  to  the  standard  could  be rejected.  Workers were paid at fixed rates. In  Bhikuse Yamase case (supra) this Court had  to  consider whether a notification under section 85 of the Factories Act giving the beedi rollers benefits provided to workers in the Factories  Act  was  valid.   Beedi  rollers  were   refused benefits    by   the   owners   of    beedi    manufacturing establishments.   Therefore,  the  State  Government  issued notification under section 85 of the Factories Act.  Section 85 of the Factories Act 247 provides  that the State Government may declare that all  or any  of the provisions of the Act shall apply to  any  place where a manufacturing process is carried on  notwithstanding that the number of persons employed therein is less than the number  specified in the definition of factory or where  the persons  working therein are not employed by the  owner  but are working with the permission of, or under agreement with, such owner.  The State Government designated certain  places to  be  deemed factory and the persons working there  to  be deemed  workers.   This  Court said that  extension  of  the benefits  of the-Factories Act to premises and  workers  not falling strictly within the purview of the Factories Act  is intended  to serve the same purpose.  On this reasoning  the provisions for the benefit of deemed workers were held to be reasonable  within the meaning of Article 19(1) (g)  of  the Constitution. These  four  decisions  were relied on by  counsel  for  the

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petitioners  and  the appellants lo show that  home  workers would  not be entitled to leave on the ground that  sections 26  and  27  of the Act were unworkable in  regard  to  home workers  and  constituted  unreasonable  restrictions.   The imposition  of liability to afford to home workers  benefits like   annual  leave  with  wages  cannot  be  said  to   be unreasonable restriction on the right of the owner to  carry on his business.  In the Act, the word " employee"  includes a  home  worker.   The word  "establishment"  applies  to  a private house.  The second explanation to section 27 of  the Act  indicates  that  a home worker is  dealt  with  by  the section.   Sections  26  and 27 of the Act are  to  be  read together.   In  Birdhichand Sharma case (supra)  this  Court held that if a worker had put in a number of working days he would  be entitled to leave.  This Court did not go  into  a question  as to what the meaning of the word "day  of  work" would  be to entitle a worker annual leave under section  79 of the Factories Act in Birdhichand Sharma case (supra). In  the present case the Act contemplates that home  workers are  at  liberty to work at any time and for any  number  of hours a day.  The Act cannot be said to be not applicable to home  workers.  The Act has made a distinction  between  the two types of workers and has made the Act applicable to both the  types  of  workers.  Even with  regard  to  workers  in industrial  premises where period of work is notified it  is not  obligatory  on  the part of the employer  to  allow  an employee to work in the industrial premises for the whole of the  notified period of work.  The employee can be asked  to work for the whole of the notified period of work which will not  exceed 9 hours a day or 48 hours a week as provided  in section 17 of the Act.  In Shankar Balaji Waje case  (Supra) the  majority view was that the expression "total full  time earnings"  mean  earnings in a day by working full  time  on that  day  and full time was to be in  accordance  with  the period given in the notice displayed in the factory for  the particular  day.   On  that ground the  workers  in  Shankar Balaji Waje case (supra) were held not be entitled to  wages for  the-leave  period  because  such  wages  could  not  be calculated when the terms of work were such that they  could come  and  go  when they liked and no  period  of  work  was mentioned  with  respect to workers.  The majority  view  in Shanker Balaji Waje case (Supra) will not apply to  sections 26 and- 27 of the Act because the home .workers are entitled to  wages during the leave period and such wages do  not  in the case of home workers depend upon the consideration 248 whether  a  particular home worker woks for a whole  of  the notified period of work.  The basis of calculation of  wages in  the  case of home workers is the daily  average  of  his total  full  time earnings for the day,,) on  which  he  had worked during the month immediately preceding his leave.  If a  home  workers  does full time work by  rolling  out  1000 pieces he will get corresponding amount of wages.  Both  the factory  workers in industrial premises and home workers  in establishments  are similarly placed by proper control  over or  regulation-of supply of raw materials ’Lo home  workers. Just  as  the total full time earnings of the worker  in  an industrial  premises are calculated with reference to  hours of worker each day, similarly the full time earnings of  the home workers at calculated by the earnings of each day which are  kept under control by supply of measured raw  materials to produce the requisite number of beedis which a worker can produce a day within his hours of work in the establishment. So far as home workers are concerned, the payment is made at piece  rate  and  it is not material  in  their  case  about

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specified hours of work because they will get lesser payment if they will not work for the same number of hours as worker in  industrial premises.  The provisions of sections 26  and 27 are applicable to home workers and workers in  industrial premises  are also capable of being made applicable  without any reasonable restrictions on employers. It  has  been  contended that section 31 of  the  Act  which provides  one month’s notice in lieu of notice of  dismissal was  an unreasonable restriction.  The reason  advanced  was that the Act has not defined the word "wages" and  therefore it  is not possible to calculate wages.  Section 27  of  the Act  prescribed  the rate for calculating wages  during  the period  of leave.  Section 39(1) of the Industrial  Disputes Act  applies  to  matters in  respect  of  every  industrial premises.   Section  2(rr) of the  Industrial  Disputes  Act defines  wages.  The definition of wages in  the  Industrial disputes Act applies to workers in industrial premises  con- templated  by  the Act.  Home’ workers are not  included  in industrial  premises because they work in  private  dwelling house which are establishments.  The definition of wages  in the  Industrial Disputes Act will apply to workers  who  are paid  on monthly basis.  Section 28(1) of the  Act  empowers the  State Government to direct that the provisions  of  the Payment  of  Wages  Act, 1936 shall apply  to  employees  in establishments  to which the Act applies.  Section  2(6)  of the  payment of wages Act defines "wages" to  include  inter alia  any  remuneration  to which  the  person  employed  is entitled  in respect of any leave period.  Some aid  may  be had  from  the definition of wages in the Payment  of  Wages Act.  viz. wages include leave wages.  Therefore,  the  word "wages"  in section 31 of the Act will mean wages which  are calculated  under  section  27  of  the  Act.  This  can  be calculated  both  in  the cases  of  workers  in  industrial premises and home workers in establishments.  Therefore, the provisions contained in section 31 of the Act cannot be said to be unreasonable restrictions. The Petitioners and the appellants next contended that  Rule 37 of the Maharasthra Rules and Rule 29 of the Mysore  Rules framed  under  section 44 of the  Act  imposed  unreasonable restrictions on tile beedi and cigar manufacturers.  Rule 37 of the Maharashtra Rules 249 provides  that  no employer or contractor  shall  ordinarily reject  as  substandard or chhat or otherwise  more  than  5 percent  of the beedis or cigars of both received  from  the worker   including  a  home  worker.   Rule  37(2)  of   the Maharashatra Rules further provides that where any beedi  or cigar  is rejected as sub-standard or chhat or otherwise  on any  ground other than the ground of willful  negligence  of the worker, the worker shall be paid wages for the pieces so rejected at one half of the rates at which wages are payable to him for the beedis or cigars or both which have not  been so rejected. Rule  29  of the Mysore Rules provides that no  employer  or contractor shall ordinarily reject an sub-standard or  chhat or otherwise more than 2 per cent of the beedis or cigars or both  received from the worker including a home worker.   It is  also provided there that the employer or contractor  may effect  such  rejection upto 5 per cent for  reasons  to  be recorded and communicated in writing to the worker. Rule  29 of the Kerala Rules is identical to Rule 29 of  the Mysore  Rules except that instead of 2 per cent it  provides for 2.5 per cent as a limit for rejection. The  Kerala  High  Court  held that  Kerala  rule  29  fixes arbitrary  percentage  and  is not in the  interest  of  the

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general public.  The imposition of 5 per cent by the proviso to  Rule  29  was  said  by the  Kerala  High  Court  to  be arbitrary.   It  was said that the percentage  of  rejection might be higher than 5 per cent but the fixed limit of 5 per cent would have this bad consequence.  It is that quality of beedis  would go down if the workers were assured that  more than 5 per cent would not be rejected. The  Mysore High Court rejected the contention  that  Mysore Rule  29  imposes an unreasonable restriction.   The  reason given by that High Court was as follows.  The argument  that substandard beedis or cigars in excess of 5 per cent  cannot be  rejected by the employer is unsound.  Ordinarily  2  per cent  rejection is permitted.  Rejection upto 5 per cent  is permissible only after recording reasons therefore.  But  if the employer finds that the quantity of sub-standard  beedis is  about  5 per cent, the matter is to be referred  to  the Inspector.  Therefore, Rule 29 does not compel the  employer to accept sub-standard beedi is when the rejection is  above 5 per cent. The  Bombay  High Court upheld Rule 37  of  the  Maharashtra Rules. which allows rejection of more than 5 per cent.   The 5 per cent rejection is said by the Bombay High Court to  be an  outer limit.  It does not mean according to  the  Bombay High  Court  that the rejection must be 5 per cent.   It  is said that the contractors by reason of their experience will find 5 per cent rejection to be reasonable.  The  experience suggests  that  the outer limit of 5 per    cent  is  fairly reasonable.  It is difficult to imagine that no limit should be  fixed.  The Bombay High Court further found  "ha,’  even for sub-standard beedis there is a market though at a lesser rate.  The Bombay High Court further found that pilfering of tobacco  was an accepted vice of the industry.   Inspite  of that melody rejection in the industry hardly exceeded 3  per cent.   The Bombay High Court found 5 per cent rejection  to be reasonable. 250 The maximum limit of 5 per cent for the rejection of  beedis is,  therefore,  based  on experience in  the  industry  and secondly  the  employer can reject more than 5 per  cent  by raising a dispute before the appropriate authority. On behalf of the petitioners and the appellants it was  said that  the  word  "sub-standard" by  itself  would  offer  no guidance for rejection and confer arbitrary power.   Section 39  (1)  of  the Act provides that  the  provisions  of  the Industrial  Disputes Act shall apply to matters  arising  in respect of every industrial premises and section 39 (2)  (c) of the Act provides that notwithstanding any thing contained in  sub-section  (1)  a  dispute  between  an  employer  and employee relating to the payment of wages for beedi or cigar or  both  rejected by an employer shall be settled  by  such authority and in such manner as the State Government may  by Rules specify in that behalf.  Section 44(2) (r) of the  Act provides  for making of rules with regard to the  manner  in which  sorting or rejection ,of beedi or cigar or  both  and disposal of rejected beedi or cigar or both shall be carried out.   The Mysore Rule 27 provides that any dispute  between an employer and employee in relation to rejection by the em- ployer of beedi or cigar or both make by an employee may  be referred  in  writing  by the employer or  the  employee  or employees  to  the Inspector for the area  who  shall  after making  such enquiry as he may consider necessary and  after giving  the  parties  an  opportunity  to  represent   their respective   cases,  decide  the  dispute  and  record   the proceedings in form X. Form X relates to record of  decision of Order.  Various particulars, inter alia, are substance of

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the  dispute, substance of the evidence taken  and  findings and  statement  of the reasons therefore.  There is  also  a right  of appeal from the decision of the Inspector  to  the Chief Inspector. It  therefore  appears that the Rules  about  rejection  and fixing maximum limit of 5 per cent are reasonable and  fair. First, experience in the industry as recorded in the  Report of Minimum Wages Committee supports such limit of 5 per cent as  normal  and  regular.  Second, inspite ’of  5  per  cent maximum  limit it is permissible to the employer  to  reject more  than 5 per cent.  For that a dispute is raised  before the  appropriate  authorities set up under the  Rules.   The State Government under Sections 44(2) (r) and (s) of the Act is empowered to make Rules in respect of the manner in which sorting or rejection of beedi or cigar or both and  disposal of rejected beedi or cigar or both shall be carried out  and the fixation of maximum limit of rejection of beedi or cigar or  both manufactured by an employee.  Section 39(2) of  the Act provides that a dispute between an employer and employee relating inter alia to rejection by the employer of beedi or cigar  or both made by an employee and the payment of  wages for beedi or cigar rejected by the employer shall be settled by such authority and in such manner as the State Government may by Rules specify in that behalf.  Rule 27 of the  Mysore Rules as well as Rule 27 of the Kerala Rules provide that  a dispute  between  an employer and employee or  employees  in relation  to rejection by the employer of beedi or cigar  or the payment of wages for the beedi or cigar rejected by  the employer  may  be  referred in writing by  the  employer  or employee to the Inspector for the area.  The Inspector after hearing  the parties shall decide the issue.  The  aggrieved party has the right of Appeal to the Chief Inspector. 251 Under  Rule 29 of the Mysore Rules rejection of more than  2 per  cent and upto 5 per cent is required to be for  reasons in  writing.  Rule 37 of the Maharashtra Rules provides  for rejection  upto  5 per cent without any obligation  to  give reasons.  It was said by the petitioners that the Mysore and Kerala   Rules  fixed  the  limit  for  rejection  but   the Maharashtra Rule did. not do so.  Both the Rules fixed 5 per cent as the maximum limit for rejection.  The Mysore and the Kerala Rules have nothing corresponding to Maharashtra  Rule 37(2)  requiring  payment  at  halt  the  rates  for  beedis rejected  as  sub-standard, if the same was not due  to  the willful  negligence  of the employee.  It  was,  therefore,, said   that  either  up  to  5  per  cent  rejection   under Maharashtra Rule 37 or rejection of more than 5 per cent the employer was under an obligation to make payment at half  of the rate as rejected beedis if such rejection was not due to the willful negligence of the employee. It  has,  therefore, to be, ascertained as  to  whether  the Rules prohibit employer from rejecting more than 5 per  cent even  if-they  are  found to be  sub-standard  and  secondly whether the requirement to pay wages at one half of the rite for  the rejected beedis is a reasonable  restriction.   The Rules  provide  for rejection upto 5 per  cent.   The  Rules further  used  the  word  ’ordinarily’  in  regard  to  such rejection.   In  case of rejection of more than 5  per  cent Rule  27 of the Mysore Rules and Rule 37 of the  Maharashtra Rules  provide  for raising of a dispute in regard  to  such rejection.   The  dispute contemplated is  in.  relation  to rejection  of  beedis  and  the payment  of  wages  for  the rejected  beedis.   The  word  "rejection"  and   "rejected" indicate that the dispute is raised because of the rejection of  beedis.   The  contention  advanced  on  behalf  of  the

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Petitioner  that before a dispute is raised on rejection  is possible  is  erroneous.   The  dispute  arises  because  of rejection.   Therefore, Rules 27 and 29 of the Mysore  Rules and  Rule  27  of  the  Kerala  Rules  do  not  impose   any unreasonable restriction on the right of rejection. Maharashtra  Rule 27 also permits rejection of more  than  5 per cent and raising of disputes.  The contention on  behalf of the petitioners that the Maharashtra Rule which  requires payment  at one half of the rate for the rejected beedis  on any  ground other than the ground of willful  negligence  of the  worker is an unreasonable restriction is  not  correct. The Bombay High Court correctly held that the experience  in the  industry  is that there is a  market  for  sub-standard beedis.   It  is also reasonable to hold that  home  workers will  be interested in seeing that the beedis are  not  sub- standard  because  in  the process  home  workers  would  be earning less.  The Maharashtra Rule is intended to eliminate exploitation  of  illiterate workers who are  mostly  women. The   Rules  with  regard  to  rejection   are,   therefore, reasonable.   It  is  also open to the  employers  to  raise dispute for rejection above 5 per cent. The Petitioners and the appellants challenged section  37(3) of  the Act as unworkable.  That sub-section  provides  that the  provisions  of the Maternity Benefit  Act,  1961  shall apply  to every establishment as if such establishment  were an establishment to which the said  Act had been applied  by notification under section 2 (1) of "he said 1961 Act.   The proviso  to section 37(3) of the Act states  that  Maternity Benefit Act in its application to a home worker shall  apply subject 252 to certain modifications.  The Madras High Court upheld  the contention and said that since a worker in a beedi  industry is not required to work regularly for any prescribed  period of  hours in a day or even day after day for  any  specified period, from the very nature of the case, provisions of  the said  1961  Act  are unworkable with  regard  to  such  home workers. It  may  be  stated  that  the  reasonableness  of section 37(3) of the Actwas  not challenged.   An  argument which was submitted was that itwas  difficult to  locate home workers.  That argument was not pressed in this  Court. The  provisions-of  the said 1961 Act in sections  4  and  5 thereof deal with prohibition of employment of, or work  by, women, prohibited during certain period and right of payment of  maternity benefit.  Section 4 of the 1961 Act  does  not present  any difficulty because it speaks of prohibition  of work  by  a  women in any establishment  during  six  months immediately  following  the  day of  her  delivery  Further, section  4  provides  that  on a request  being  made  by  a pregnant  woman  she will not be required to do work  of  an arduous nature or work which involves long hours of standing and  that  period  is one month  immediately  preceding  the period  of  six  weeks  before  the  date  of  her  expected delivery.   Section 5(2) of the said 1961 Act provides  that no  women shall be entitled to maternity benefit unless  she has actually worked in any establishment for a period of not less  than  160  days,  in  the  twelve  months  immediately preceding  the date of her expected delivery.  There  is  no difficulty  with  regard  to working of  these  sections  in regard  to  maternity  benefits  to  women  employed  in  an establishment. For  these reasons, we hold that Parliament had  legislative competence in making this Act and the provisions of the  Act are   valid  and  do  not  offend  any  provisions  of   the Constitution.

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The Writ Petitions Nos. 127-132 of 1972 are dismissed.   The Judgments  of the Madras High Court, Bombay High  Court  and the  Andhra  Pradesh  High Court are set  aside,  and  Civil Appeals  Nos. 2516-23, 2560-69, 2661-64 of 1972, 66-69,  72- 75, 1307, 854-56, 857-59, 1203 and 1204 of 1973, 307-311  of 1972   and  173  of  1973  are  dismissed.   The  State   of Maharashtra  and  the  Union of India  appeals  against  the judgments  of the Bombay High Court and the  Andhra  Pradesh High  Court being Civil Appeals Nos. 1864-73/1971 and  1972- 88/1971  respectively  are accepted.  The appeals  from  the Judgement  of the Gujarat High Court and Mysore High  Courts being  Civil  Appeals  Nos.  585/1971  and  1553,   1614-18, 1769/1971,   113133  and  1440  of  1972  respectively   are dismissed.  The parties will pay and bear their own costs. ALAGIRISWAMI,  J.-I am substantially in agreement  with  the judgment  delivered  by my Lord, the Chief  Justice,  but  I think it is necessary to add a few words to clarify  certain matters  in  view of the complications that  are  likely  to arise  otherwise.   The Act is the result  of  a  compromise between  the original intentions of the Government  and  the modifications they had to make in the proposed measure as  a result  of  concessions intended to bring the  home  workers within the scope of the Act.  The original intention was not to permit beedi rolling in private homes which will  involve thousands of labourers in thousands  253 of  far-flung  homes  and the  difficulty  of  applying  the provisions  of  the measure to them.  The result is  an  Act which  is  likely to give rise to many difficulties  in  its actual  working.  It is obvious on a reading of the  measure that  its  purpose is to rope in every possible  person  who could  be brought in as an employer.  But the result of  the definitions  in  the  Act  is that every  body  would  be  a principal employer, employer and contractor and every labour will be contract labour. Take the definition of the word " contractor".  In so far as it  says  that  it means "a person who,  in  relation  to  a manufacturing process, undertakes to produce a given  result by executing the work" it is not objectionable and refers to a  contractor  ordinarily understood.  But  when  the  words "through  contract  labour"  are  added  it  leads  to  com- plications.   "Contract  labour" is defined as  "any  person engaged  or  employed  in  any  premises  by  or  through  a contractor".  Therefore, all labour employed by a contractor is contract labour.  If any manufacturer employs any  person through  a contractor, the labour would be contract  labour. Then  again  "contractor" also means "a person  who  engages labour  for any manufacturing process in a private  dwelling house". In  such  a  case even a  principal  employer  who engages labour for anymanufacturing  process would  be  a contractor.    The   further   definition   of   the    word "contractor". includes a sub-contractor, agent, munshi,  the kedar or sattedar.  These are obviously. included to cover a class  of  persons  dealt  with by  this  Court  in  certain decisions  including Chintaman Rao’s Case (1958  SCR  1340). An  "employer"  is defined to be, in  relation  to  contract labour, the principal employer.  I have already pointed  out that  contract labour would include labour employed even  by the  manufacturer himself direct.  "Principal  employer"  is defined  as  "a  person  for whom or  on  whose  behalf  any contract labour is engaged or employed in an establishment". Therefore, when contract labour is employed for a person  he is  principal employer. When contract labour is  engaged  or employed  on  behalf  of a person he  is  also  a  principal employer.  What distinction could be made between the two is

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a  little difficult to understand.  However, in  the  second part of definition of "employer" in relation to labour other than  the contract labour in clause 2(g) (b) though in  view of what I have said earlier it is difficult to see what that other  labour  could  be-there can be no  objection  to  the person who has the ultimate control over the affairs of  any establishment  being  considered the employer, as  also  any person  to  whom  the  affairs  of  the  establishment   are entrusted, whether such other person is called the  managing agent,  manager, superintendent, or by any other name.   But to call a person who has, by reason of his advancing  money, supplying goods or otherwise, a substantial interest in  the control  of  the  affairs  of  any  establishment,  also  an employer  is  very difficult to justify.  It  is  apparently intended to cover cases where a person runs business  benami i.e. in another’s name.  There can be no objection to such a provision.   But merely because a person lends  or  advances money or supplies goods he cannot be called an employer.  He may  have  a  substantial interest in  the  control  of  the affairs of the manufacturing establishment in the sense that the  security  for  the  money  advanced  depends  upon  the manufacturing  establishment being run properly or  even  in the sense that a person supplying goods might also be  4-L954Sup.C.I./74 254 interested  in the control of the affairs because he may  be supplying  goods on credit.  I think the words "or who  has, by  reason  of  his advancing  money,  supplying  goods,  or otherwise,  a  substantial interest in the  control  or  the affairs of any establishment" should be struck down. The interpretation placed upon the expression ’employer"  by the  learned Attorney General does not really flow from  the various  definitions in the Act.  I think it is not  without significance  that the learned Attorney General put  forward this  interpretation because it is only on that  basis  that the  Act  could be, workable at all.  While I  realise  that courts   should  give  effect  to  the  intentions  of   the legislature, it can be done only if that is possible without doing  violence to the actual language of the statute.   The various  definitions plainly seek to rope in  everybody  who has anything to do with the manufacture of beedies and while trying to give effect to the penal provisions in the statute considerable difficulties will arise.  There will on the one hand  be  the actual occupier of  the  industrial  premises. There  will  be on the other hand a person  who  might  have advanced  money  to  him  and  supplied  goods  to  him  and therefore  may be substantially interested in  its  control. The  actual  occupier himself might be a contractor  and  in that case lie as well as the person on whose behalf  beedies are manufactured would be liable.  Who, in that case,  would be  actually liable ? I do not agree with the view taken  by the Bombay High Court that the Act exhibits an intention  to retain  the system of contractors.  It only takes notice  of the existence of the system of contractors and it appears to me  that  by making the principal  employer  responsible  in every  case  it is actually trying to  force  the  principal employer to undertake the work of manufacture himself rather than give it to contractors because in any case he would  be ultimately  liable financially and otherwise to everyone  of the  workmen  employed.  Quite possibly  if  an  independent contractor is one of. the type envisaged by the Madras  High Court in its judgment in Abdul Aziz Sahib & Sons v. Union of India  (1973  2  MLJ 126) that is, of a  person  buying  the materials  from  the  person whom it calls  the  trade  mark holder  and then selling the, beedies to him, he,  could  be

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called  an  independent contractor.  But he  is  actually  a manufacturer  himself in that case.  He may be  selling  the beedies  manufactured by him riot to one person but to  many persons.   The conditions in the beedi industry  being  that the  actual person who ultimately sells the beedies  to  the public  employs various means by which he does not take  any responsibility  for the welfare of the workers  employed  in the industry, the Act proceeds on the basis that he must  be made  responsible.   I  find  it  difficult  to  accept  the contention   of  the  learned  Attorney  General  that   the criterion  adopted by the Madras High Court is both wide  as well  as  restrictive.   It  can  be  said  to  be  wide  or restricted, as one- choose to call it, only if one envisages a  situation like the one in Dewan Mohidnees’s case (1964  7 SCR 646).  But then if the so called contractor is really  a benami  for  the  manufacturer there  is  no  difficulty  in holding the manufacturer responsible. The  main contentions put forward on behalf of  the  various appellants  are regarding the provisions of ss. 26, 27,  29, 31  and 37 of the Act and Rule 37 of the  Maharashtra  Rules and the corresponding rules 255 made  by  the  various other States.   The  very  convincing reasons  and  the criticism made by the  various  appellants were  not  met  by the arguments  advanced  by  the  learned Attorney  General.   It  is now well  established  from  the Chintamani  Rao’s case (supra), Shankar Balaji’s case  (1962 Supp.   I SCR 249) and Bhikuse’s case (1964 1 SCR 860)  that in this industry even people working in factories  belonging to manufacturers come as they like, go as they like, work on some  days even for one hour a day, and there are  no  fixed hours of work.  This sort of situation exists mainly due  to the  fact that the payment is made to the worker on a  piece rate,  and  the  work  is also carried  on  as  a  part-time occupation.  What applies to them applies with greater force to  the  home workers.  Therefore when section  26  provides that every employee in an establishment (which will  include a dwelling house) shall be allowed in a calendar year  leave with  wages at the rate of one day for every twenty days  of work performed by him during the previous calendar year,  it leads  to real difficulty.  There may not be much  point  in the  criticism that whereas the Factories Act  provides  for annual leave only for person who had worked for 240 days  in a  year this Act provides for one day’s leave for  every  20 days during which they have worked.  It may be possible  for the contractor to know on how many days  the home worker has worked from the log book maintained by him.  But what is the wage which has to be paid to him during the period of  leave ?  That  term  is  not defined in the  Act  and  it  is  not permissible  to refer to other Acts in order  to  understand the meaning of that term.  Even if we take it to be what  it means  in popular usage it is not possible to say  what  are the wages in the case of a home worker.  A home worker might work for one hour on one day, eight hours on another day and not  at  all for a number of days What would  be  the  wages payable  to him ? I am not canvassing the reasonableness  of this provision but of the difficulty in giving effect to the provision.   The  same criticism applies  to  various  other provisions  contained in that section.  Section 27  provides that  for the leave allowed to an employee under section  26 he  shall be paid at the rate equal to the daily average  of his  total full-time earnings for the days on which  he  had worked  during  the month immediately  preceding  his  leave exclusive  of any overtime earnings and bonus but  inclusive of  dearness  and  other allowances.   The  term  "Full-time

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earnings"  has  been  interpreted in  Shankar  Balaji’s  and Bhikuse’s cases.  If it is not applicable to an employee  of the  type  of Pandurang in Shankar Balaji’s case  surely  it cannot  apply to a home worker.  This difficulty is not  got over,  by  Explanation  II which describes a  "day"  as  any period  during which the home worker was employed  during  a period  of  twenty-four  hours.   That  does  not  help   in calculating the full-time earnings.  Again. what meaning are we to give to the term "fulltime earnings" when there is  no period  of  work  at all and there are  no  fixed  hours  of working  in the case of a home worker ? I am  not  satisfied with  the  learned  Attorney  General’s  interpretation   of section  23 that it is not permissible after this  Act  came into-  force  for  any worker of the type  of  Pandurang  in Shankar Balaji’s case to work under the conditions described in  that  case.  If a person should not be  employed  in  an industrial premises except in accordance with ’,he notice of work displayed in the premises under section 22, it 256 does  not mean that he cannot work for less than the  period mentioned in the notice of work.  Only if he is employed for a  longer  time than that mentioned in the  notice  of  work would  the occupier of the industrial premises make  himself liable  to be proceeded against.  In any case even  if  that interpretation  is  correct  that cannot  apply  to  a  home worker. The  difficulty of applying the provisions of the  Maternity Benefits Act is again apparent, The very purpose of allowing the home workers ’Lo work in their homes being that the work of rolling beedies is light work, which men and women can do in  their homes during their spare hours, the  provision  of the  Maternity  Benefits,  Act  regarding  women  not  being allowed  to  do arduous labour for a certain  period  before delivery  and after delivery is not apparent.  And  how  can the provision be applied to women who cannot be said to  be, so to say, employed continuously for a certain period before the confinement. Under  section  31  no  employer  shall  dispense  with  the services  of an employee who has been employed for a  period of  six months or more, except for a reasonable  cause,  and without giving such employees at least one month’s notice or wages  in  lieu  of  such notice.  Is  it  enough  that  the employee has been employed for a period of six months if  he has  been  working for one or two days  every  month  during those six months, and in any case how are his wages in  lieu of notice to be determined ? And who, would be the "employer competent  to dispense with the services of  the  employee’? If  a contractor dispenses with the services of an  employee in  contravention  of  section 31  and  is  convicted  under section 33 for the first time, would the principal  employer be liable to imprisonment if there is a second  prosecution? These are some of the problems which are likely to arise  in actual working of the Act. I must make it clear that my abjection is not to any of  the provisions  on  the  ground  of  their  unreasonableness  or constitutionality.   The  long abstracts which  the  learned Attorney   General  read  from  the  Report  of  the   Royal Commission  on Labour, the Royal Committee Report,  and  the Reports of Dr. B. V. N. Naidu and Mr. M. A. Natarajan depict the  miserable  conditions  in  which  the  workers  in  the industry  work.   Nobody can dispute the  need  for  setting right those evils.  But good intentions should not result in a  legislation which would become ineffective and lead to  a lot  of fruitless litigation over the years.  I think it  is necessary  to utter a word of caution lest the fact that  we

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uphold the validity of the Act as such should be interpreted by  various courts and tribunals as sanctioning  one  inter- pretation  or  the other of the  various  provisions.   That would  be  opening up the pandora’s box  of  litigation.   I would  therefore hold in agreement with the majority of  the High Courts that sections 26, 27, 31 and 37(3) do not  apply to home workers. And finally as regards Rule 37 of the Maharashtra Rules,  it was  accepted  by  the appellants as  reasonable  if  it  is interpreted as mean-  257 ing  that  ordinarily  chhat up to five per  cent  could  be rejected,  but  higher  than that is rejected  it  would  be subject to a decision by the inspector.  It was said that to make  the rejection of chhat in excess of five per  cent  to depend  upon  the decision by the inspector would  make  ail those  beedies  useless because they have got to  be  heated immediately so that the beedi’s may not be spoilt because of the moisture. I  think that interpretation is  correct  and the other States may amendthe Rules so as to bring it in line with the Maharashtra Rule. I havetried  to interpret the various provisions of  the Act not in order to,consider their constitutionality or the reasonableness of the restrictions as reflecting on  the constitutionality, but of their in terpretation in so far as they   are  likely  to  lead  to  difficulties   in   actual application of the provisions of the Act.  I think it  would be  good  in  the interest of all concerned if  the  Act  is amended  as early as possible to remove all the lacunae  and the  difficulties  pointed out  above.   These  difficulties have-  arisen  because of an attempt blindly  to  apply  the provisions,  which  would  be’ quite workable  if  they  are applied  to  conditions  where the Factories  Act  would  be applicable,  where the labour is regular in its  attendance- every  day as well as over a period, to conditions  of  work which are vastly different as well as to people who work at- home without a conscious attempt to mould them to suit those conditions.   The  sooner that is done the  better  for  all concerned. P.H.P. Appeals dismissed. 258