REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5846  OF 2008 (Arising out of SLP (C) No.4578 of 2007)  

Steel Authority of India Ltd. and Anr. ...Appellants

Versus

State of West Bengal and Ors. ...Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Leave granted.  

2. Challenge in this appeal is to the judgment of a Division

Bench of the Calcutta High Court dismissing the writ petition

filed by the appellants. Challenge was to the reference made

by the Government of West Bengal of a purported industrial

dispute  under  Section  7-A  of  the  Industrial  Disputes  Act,

1947  (in  short  the  ‘Act’).  According  to  the  appellants,  the

reference was incompetent in view of what has been stated

by  this  Court  in  Steel  Authority  of  India Ltd.  v.  National

Union Waterfront Workers (2001 (7) SCC 1).  

3. Factual scenario as projected by the appellants in the

present appeal and the writ petition is as follows:

Respondent  No.4  i.e.  National  Union  of  Water  Front

Worker  (in  short  the  ‘Union’)  made  a  representation  to

Regional  Labour  Commissioner  (Central)  on  21.4.1987

seeking  conciliation  of  proceeding  for  regularization  of

services  of  members  of  its  Union  who  were  working  as

contract labours with M/s Bardhan and Co. under principal

employers i.e. the present appellants. Another representation

was made on 4.6.1987 to the Labour Commissioner claiming

the  status of  the  workers  as contract  labours  of  aforesaid

2

M/s  Bardhan  and  Co.  under  present  appellants  and  for

regularization. The State of West Bengal issued Notification

on 15.7.1989 prohibiting employment of contract labours in

the  4  stockyards.  The  aforesaid  notification  was  kept  in

abeyance from time to time and ultimately was extended till

March 1994. Some workers belonging to the Union filed Writ

Petition before the Calcutta High Court seeking absorption in

view of Notification dated 15.7.1989.  It was inter-alia stated

that they were working as contract labours. Learned Single

Judge of the Calcutta High Court by order dated 25.4.1994

held that the writ petitioners were entitled to absorption and

regularisation from 15.7.1989  when the contract labour was

abolished.  The  present  appellants  were  directed  to  absorb

and  regularize  the  writ  petitioners  in  any  establishment

under  their  control  and  the  absorption  was  to  be  made

according to suitability and experience for a particular job.

An appeal  was  filed  by  the  present  appellants  which

was dismissed by a Division Bench. Thereafter Special Leave

Petitions Nos. 12657-58 of 1998 were filed before this Court.

3

The  matter  was  referred  to  the  Constitution  Bench.  The

appeal  was  disposed  of  inter-alia  with  the  following

observations and directions given, in SAIL’s case (supra):

“127. The  order  of  the  High  Court  at Calcutta under challenged insofar as it relates to holding that the West Bengal  Government is  the   appropriate  Government  within  the meaning of the CLRA Act, is confirmed but the direction  that  the  contract  labour  shall  be absorbed and treated on par with the regular employees of the appellants, is set aside. The appeals are accordingly allowed in part”.  

Workers raised a dispute under Section 10(1) of the Act

in  October  2001  and  January  2002.   On  18.11.2003,  as

noted  above,  the  reference  was  made  to  the  Industrial

Tribunal  which  was  challenged  before  the  High  Court  by

filing a writ petition. The primary stand taken was that in

view  of  the  accepted  position  by  the  Union  and  the

employees at different points of time that the workers were

contract labours, and having at no point of time pleaded that

the  agreement  with the  contractors  was  sham and bogus,

after long lapse of time it was impermissible to raise  such a

4

dispute   purportedly   in  view  of  certain   observations  in

SAIL’s case (supra).  The High Court rejected the plea and as

noted above dismissed the writ petition.  The learned counsel

for the appellants have submitted that in para 125 of SAIL’s

judgment  it  was  categorically  held  that  the  direction  to

absorb as given by the High Court was not sustainable and

there is no question of any fresh absorption. It is pointed out

that  at  all  points  of  time  the  Union  and  the  workers

categorically  admitted  that  the  workers  were  contract

labours. Earlier a writ petition was filed under Article 32 of

the Constitution of India, 1950 (in short the ‘Constitution’)

which was disposed of on 14.11.1988. Even at that point of

time  there  was  no  plea  that  the  agreement  with  the

contractors was bogus or sham. It is pointed out that on a

representation  made  by  the  appellants,  the  Government

issued  a  Notification  dated  15.7.1989.  Even earlier  in  the

writ petition filed there was no plea regarding the agreement

being sham or bogus. The prayer was only for absorption and

to  quash  the  Notification  keeping  in  abeyance  the

Notification  dated  15.7.1989.  In  the  writ  petition  it  was

5

categorically stated that the contractors were agents of the

principal  employer.  The  direction  given  in  the  earlier  writ

petition filed  by the  respondents  regarding  absorption and

regularization from 15.7.1989 was set aside.  Therefore, for

the first time the belated plea with unsupportable material

should not have been accepted by the High Court.  

4. Learned counsel for the respondent No.4-Union on the

other hand submitted that the Union always took a stand

that  their  work  was  of  perennial  nature  which  should  be

placed on equal terms with regular employed and, therefore,

by implication it was pleaded that the existing arrangement

was sham. On 15.7.1989 the State of West Bengal prohibited

contract labour because work was of a perennial nature and

significant to employee full time workmen. This according to

learned  counsel  for  respondent  No.4  shows  implicit

acceptance  that  the  use  of  contract  labour  was  of

camouflage.  The grievances of the Union and the workmen

were essentially to the effect that the agreements are nothing

but sham and bogus agreements. There has been no delay or

6

latches.  Before SAIL’s decision in 2001, decision in Air India

Statutory Corporation and Ors. v.  United Labour Union and

Ors. (1997 (9) SCC 377) the cases cited was in force.  In view

of that decision, regularization was permissible following the

Notification prohibiting contract labour.  The absorption was

ordered  by  a  learned  Single  Judge  on  25.4.1994,  but  the

decision was stayed till the decision in SAIL was rendered on

30.8.2001.  

5. The scope of judicial review in cases of reference under

Section 10 of the Act is very limited.  In SAIL’s case (supra) it

was,  inter-alia,  held  that  (a)  The  State  Government  has

jurisdiction  to  deal  with  the  matter  and  (b)  automatic

absorption is not permissible in law. The orders of a learned

Single Judge and the Division Bench assailed in the appeals

directing  absorption  were  bad  in  law.  It  is  inter  party

decision.   For  the  first  time  in  2003  the  plea  about

regularization and absorption was raised.  

7

6. In  Steel  Authority of India Ltd. v.  Union of India and

Ors. (2006 (12) SCC 233), it was inter alia noted as follows:

“20. The 1970 Act is a complete code by itself. It not only provides for regulation of contract labour but also abolition thereof. Relationship of  employer  and  employee  is  essentially  a question  of  fact.  Determination  of  the  said question would depend upon a large number of factors. Ordinarily, a writ court would not go into such a question.

xx xx xx

24. When, however, a contention is raised that the contract entered into by and between the management  and  the  contractor  is  a  sham one,  in view of  the  decision  of  this  Court  in Steel  Authority  of  India  Ltd. an  industrial adjudicator would be entitled to determine the said  issue.  The  industrial  adjudicator  would have jurisdiction to determine the said issue as in the event if it be held that the contract purportedly  awarded  by  the  management  in favour  of  the  contractor  was  really  a camouflage  or  a  sham  one,  the  employees appointed  by  the  contractor  would,  in  effect and substance, be held to be direct employees of the management.

25. The view taken in  Steel Authority of India Ltd. has  been  reiterated  by  this  Court subsequently.  (See  e.g.  Nitinkumar  Nathalal Joshi v.  ONGC  Ltd. and  Municipal  Corpn.  of Greater Mumbai v. K.V. Shramik Sangh.)

8

xx xx xx

28. The workmen whether before the Labour Court or in writ proceedings were represented by the same union. A trade union registered under  the  Trade  Unions  Act  is  entitled  to espouse the cause of the workmen. A definite stand was taken by the employees  that they had  been  working  under  the  contractors.  It would,  thus,  in  our  opinion,  not  lie  in  their mouth  to  take  a  contradictory  and inconsistent  plea  that  they  were  also  the workmen of  the  principal  employer.  To  raise such  a  mutually  destructive  plea  is impermissible  in  law.  Such  mutually destructive  plea,  in  our  opinion,  should   not  be  allowed  to  be  raised  even  in  an industrial  adjudication.  Common  law principles  of  estoppel,  waiver  and acquiescence  are  applicable  in  an  industrial adjudication.

xx xx xx

33. The effect of an admission in the context of Section  58  of  the  Evidence  Act  has  been considered  by  this  Court  in  Sangramsinh  P. Gaekwad v. Shantadevi P. Gaekwad wherein it was categorically held that judicial admissions by themselves can be made the foundations of the rights of the parties and admissions in the pleadings are admissible proprio vigore against the maker thereof. (See also  Union of India v. Pramod Gupta.)

9

34. Recently  this  Court  in  Baldev  Singh v. Manohar Singh  held: (SCC p.504, para 15)

“15. Let us now take up the last ground on which the application for amendment of the written statement was rejected by the High Court as well as the trial court. The  rejection  was  made  on  the  ground that inconsistent plea cannot be allowed to be taken. We are unable to appreciate the ground of rejection made by the High Court  as  well  as  the  trial  court.  After going through the pleadings and also the statements  made  in  the  application  for amendment of the written statement, we fail to understand how inconsistent plea could be said to have been taken by the appellants  in  their  application  for amendment  of  the  written  statement, excepting  the  plea  taken  by  the appellants  in  the  application  for amendment  of  written  statement regarding the joint ownership of the suit property.  Accordingly,  on  facts,  we  are not  satisfied  that  the  application  for amendment  of  the  written  statement could  be  rejected  also  on  this  ground. That apart, it is now well settled that an amendment of  a plaint and amendment of a written statement are not necessarily governed by exactly the same principle. It is  true that some general  principles  are certainly common to both, but the rules that  the  plaintiff  cannot  be  allowed  to amend  his  pleadings  so  as  to  alter materially  or  substitute  his  cause  of action  or  the  nature  of  his  claim  has necessarily  no  counterpart  in  the  law

10

relating  to  amendment  of  the  written statement.  Adding  a  new  ground  of defence  or  substituting  or  altering  a defence does not raise the same problem as adding, altering or substituting a new cause of action. Accordingly, in the case of  amendment of  written statement,  the courts are inclined to be more liberal in allowing  amendment  of  the  written statement than of plaint and question of prejudice  is  less  likely  to  operate  with same  rigour  in  the  former  than  in  the latter case.”

While  laying down the principle,  this  Court followed  Modi  Spg.  &  Wvg.  Mills  Co. and distinguished Heeralal.

35. It is, thus, evident that by taking recourse to  an amendment  made  in the pleading,  the party  cannot  be  permitted  to  go  beyond  his admission. The principle would be applied in an industrial adjudication having regard to the nature  of  the  reference  made  by  the appropriate Government as also in view of the fact that an industrial adjudicator derives his jurisdiction from the reference only.

36. There  is  another  aspect  of  the  matter which should also not be lost sight of. For the purpose  of  exercising  jurisdiction  under Section  10  of  the  1970  Act,  the  appropriate Government is required to apply its mind. Its order  may be  an administrative  one  but  the same would not be beyond the pale of judicial review.  It  must,  therefore,  apply  its  mind before making a reference on the basis of the

11

materials  placed  before  it  by  the  workmen and/or  management,  as  the  case  may  be. While doing so, it may be inappropriate for the same authority on the basis of the materials that a notification under Section 10(1)(d) of the 1947  Act  be  issued,  although  it  stands judicially  determined  that the workmen were employed  by  the  contractor.  The  State exercises administrative power both in relation to  abolition  of  contract  labour  in  terms  of Section 10 of the 1970 Act as also in relation to  making  a  reference  for  industrial adjudication to a Labour Court or a Tribunal under Section 10(1)(d) of the 1947 Act. While issuing a notification under the 1970 Act, the State would have to proceed on the basis that the  principal  employer  had  appointed contractors and such appointments are valid in  law,  but  while  referring  a  dispute  for industrial  adjudication,  validity  of appointment of the contractor would itself be an issue as the State must prima facie satisfy itself that there exists a dispute as to whether the workmen are in fact not employed by the contractor  but  by  the  management.  We  are, therefore,  with respect,  unable  to  agree  with the opinion of the High Court.”

7. It  is  the  stand  of  the  appellants  that  admittedly  the

workmen were employed by the contractors.  So far as the

question of under payment as pleaded and categorizing it as

unfair labour practice are concerned, obviously relate to the

12

contractors  but  it  cannot  by  no  stretch  of  imagination  be

categorized as sham or bogus.  

8. Stand of respondent No.4-Union that somebody has to

examine  and  see  whether  the  agreement  was  genuine  or

sham or bogus. It has to be the industrial adjudicator. If it is

found to be genuine the question of relaxation would arise. It

is pointed out that the originally demands were for salary or

perks.  As  observed  by  this  Court  in  State  of Haryana v.

Charanjit Singh (2006 (9) SCC 321) the concept of equal pay

for equal  work is not applicable  to the contract labour.  In

para 22 it was observed as follows:

“22. One other  fact which must be  noted is that Civil Appeals Nos. 6648, 6647, 6572 and 6570 of 2002 do not deal with casual or daily- rated  workers.  These  are  cases  of  persons employed  on  contract.  To  such  persons  the principle of equal pay for equal  work has no application.  The  Full  Bench  judgment  dealt only  with  daily-rated  and  casual  workers. Where a person is employed under a contract, it is the contract which will govern the terms and conditions of service. In  State of Haryana v.  Surinder  Kumar persons  employed  on contract  basis  claimed  equal  pay  as  regular

13

workers  on the  footing  that  their  posts  were interchangeable.  It  was  held  that  these persons had no right to the regular posts until they are duly selected and appointed.  It  was held that they were not entitled to the same pay as regular employees by claiming that they are discharging the same duties.  It  was held that the very object of selection is to test the eligibility  and  then  to  make  appointment  in accordance with the rules. It was held that the respondents  had  not  been  recruited  in accordance  with  the  rules  prescribed  for recruitment.”

9. In  that  sense  the  question  of  short  payment  is  not

relevant. There is no pleading about agreement being sham.

This Court had on many occasions dealt with the question of

delay in reference.  In  U.P. State Road Transport Corpn. V.

Babu Ram  (2006 (5) SCC 433)  it was observed as follows:

“8. However,  certain  observations  made  by this  Court  need  to  be  noted.  In  Nedungadi Bank Ltd. v.  K.P. Madhavankutty it was noted at para 6 as follows: (SCC pp. 459-60)  

“6. Law does not prescribe any time- limit  for  the  appropriate Government  to  exercise  its  powers under Section 10 of the Act. It is not that this power can be exercised at

14

any  point  of  time  and  to  revive matters  which  had  since  been settled.  Power  is  to  be  exercised reasonably  and  in  a  rational manner. There appears to us to be no  rational  basis  on  which  the Central  Government  has  exercised powers in this case after a lapse of about  seven  years  of  the  order dismissing  the  respondent  from service.  At  the  time  reference  was made no industrial  dispute  existed or could be even said to have been apprehended.  A  dispute  which  is stale  could  not  be  the  subject- matter  of  reference  under  Section 10 of the Act. As to when a dispute can  be  said  to  be  stale  would depend  on  the  facts  and   circumstances  of  each  case.  When the  matter  has  become  final,  it appears  to  us  to  be  rather incongruous  that  the  reference  be made under Section 10 of the Act in the  circumstances  like  the  present one.  In  fact  it  could  be  said  that there was no dispute pending at the time when the reference in question was  made.  The  only  ground advanced  by  the  respondent  was that two other employees who were dismissed  from  service  were reinstated.  Under  what circumstances they were dismissed and  subsequently  reinstated  is nowhere mentioned. Demand raised by  the  respondent  for  raising  an industrial dispute was ex facie bad and incompetent.”

15

10. In  S.M. Nilajkar v.  Telecom District Manager (2003 (4)

SCC 27), it was observed as follows:

“17. It  was  submitted  on  behalf  of  the respondent that on account of delay in raising the dispute by the appellants the High Court was  justified  in  denying  relief  to  the appellants. We cannot agree. It is true, as held in Shalimar Works Ltd. v. Workmen that merely because the Industrial Disputes Act does not provide for a limitation for raising the dispute, it  does  not  mean  that  the  dispute  can  be raised at any time and without regard to the delay  and  reasons  therefor.  There  is  no limitation prescribed for reference of disputes to  an  Industrial  Tribunal;  even  so  it  is  only reasonable  that  the  disputes  should  be referred  as  soon  as  possible  after  they  have arisen and after conciliation proceedings have failed, particularly so when disputes relate to discharge of workmen wholesale. A delay of 4 years  in  raising  the  dispute  after  even  re- employment of most of the old workmen was held  to  be  fatal  in  Shalimar  Works  Ltd. v. Workmen.  In  Nedungadi  Bank  Ltd. v.  K.P. Madhavankutty a delay of 7 years was held to be  fatal  and disentitled  the  workmen to  any relief. In Ratan Chandra Sammanta v. Union of India it  was  held  that  a  casual  labourer retrenched by the employer deprives himself of remedy available in law by delay itself; lapse of time results in losing the remedy and the right as well. The delay would certainly be fatal if it has resulted in material  evidence  relevant  to

16

adjudication  being  lost  and  rendered  not available.  However,  we do not think that the delay in the case at hand has been so culpable as  to  disentitle  the  appellants  to  any  relief. Although the High Court has opined that there was  a  delay  of  7  to  9  years  in  raising  the dispute  before  the  Tribunal  but  we  find  the High  Court  factually  not  correct.  The employment of the appellants was terminated sometime in 1985-86 or 1986-87. Pursuant to the judgment in  Daily Rated Casual Labour v. Union of India the Department was formulating a  scheme  to  accommodate  casual  labourers and the appellants  were  justified in awaiting the outcome thereof. On 16-1-1990 they were refused to be  accommodated  in the  Scheme. On 28-12-1990 they initiated the proceedings under the Industrial Disputes Act followed by conciliation proceedings and then the dispute was  referred  to  the  Industrial  Tribunal-cum- Labour  Court.  We  do  not  think  that  the appellants  deserve  to  be  non-suited  on  the ground of delay.”

11. In  Nedungadi  Bank  Ltd. v.  K.P.  Madhavankutty  and

Ors. (2000  (2)  SCC  455)  the  delay  of  7  years  in  seeking

reference  to disentitle  the workmen to any relief  has been

dealt with.  It is to be noted that all through respondent No.4

focused on several other aspects and not on the question of

bogus or sham agreement.            

17

12. Above  being  the  position  the  decision  of  the  Division

Bench  cannot  be  maintained  and  is  set  aside.  The

proceedings initiated pursuant to the reference made by the

State Government in 2003 stand quashed.

13. The appeal is allowed.  

……………………..…………….J. (Dr. ARIJIT PASAYAT)

……………………………………J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, September 25, 2008

18