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CASE NO.: Appeal (civil)  4263 of 2006

PETITIONER: Steel Authority of India Ltd

RESPONDENT: Union of India & Ors.

DATE OF JUDGMENT: 26/09/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T [Arising out of SLP (Civil) No. 12621-13236 of  2004]

S.B. SINHA, J :

       Leave granted.

       Appellant is a Government company.  In carrying out its activities of  manufacture of steel and other products it appointed several contractors.   Respondent Nos. 4 to 618 herein are said to have been employees of the   contractors.  They raised a dispute before the State Government demanding  their absorption as permanent employees.   

By a notification dated 19.11.1985, the State Government referred the  following industrial dispute for adjudication by  the Presiding Officer,  Labour Court, in exercise of its power under Section 10(1)(c) of the  Industrial Disputes Act, 1947 (for short, ’the 1947’ Act’)  :          "Are the contract workers employed in the nature of  contract work listed as per Annexure working in the  premises of Visveswaraya Iron and Steel Ltd.,  Bhadravathi, justified in demanding absorption as regular  permanent employees of Visveswaraya Iron & Steel Ltd.  Bhadravathi?                                   In the said proceedings, the workmen in their statements of claim filed  on 26.02.1986 prayed for their absorption as permanent employees in the  employment of  Appellant.  Inter alia, a jurisdictional question was raised by   Appellant herein on the premise that the matter relating to the regulation and  abolition of contract labour being governed by the Contract Labour  (Regulation and Abolition) Act, 1970 (for short, ’the 1970 Act’), the  reference made by the State Government was impermissible in law.  It was  contended that the State Government having not issued any notification  prohibiting employment of contract labour in terms of  Section 10 of the  1970 Act, the workmen did not have any legal right to claim absorption.   

Indisputably, during the pendency of the said dispute before the  Labour Court, Appellant herein filed a writ petition, questioning the legality  and/or validity of the said reference, which was marked as Writ Petition  No.26874 of 1995.  One of the questions which was raised therein was that  the State Government had no jurisdiction to make a reference  in relation  thereto.  The writ petition was disposed of by the High Court observing that   Appellant may raise a preliminary issue in that behalf.   

The workmen, however, on 21.11.1997 filed an additional claim  statement alleging that the contracts entered into by and between  Appellant  and the contractors being sham and bogus, they were  direct employees of

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the management.  

By reason of an award dated 13.07.1999, the said reference was held  to be not maintainable.  A writ petition came to be filed by some trade  unions alleging that the workmen were direct employees of Appellant and  were, thus,  entitled to be absorbed as permanent workmen.   

A  learned Single Judge of the High Court, by an order dated  05.12.2001, while holding the said writ petition to be not maintainable,  directed :

       "For the reasons stated supra, these writ petitions  are allowed with a direction to the Union of India \026 the  2nd respondent to accept the petition presented before this  Court as the petition submitted by the petitioner \026Union  raising an industrial dispute in terms of Section 2(k) read  with Section 12(1) of the I.D. Act and also under the  provisions of the Contract Labour (Regulation and  Abolition) Act, 1970.  Further, keeping in view the law  laid down by the Supreme Court in the Steel Authority of  India Ltd. case and notwithstanding the fact that the  conciliation proceedings are conducted, the second  respondent shall in exercise of its power, make reference  to the appropriate Central Industrial Tribunal or the  Labour Court for adjudication of the existing industrial  dispute between the workmen of the petitioner/Union and  the respondent No.1 Management within eight weeks  from the date of receipt of a copy of this order.  The  respondents 2 and 3 while exercising their power under  Section 10(1)(d) of the I.D. Act shall not consider the  pendency of these petitions before this Court from the  year 1999 keeping in view the law laid down by the Apex  Court in the Steel Authority’s case referred to and pass  appropriate order making reference either to Central  Industrial Tribunal or Labour Court for adjudication of  the existing Industrial dispute between the workmen and  first respondent."

       Intra-court appeals were filed thereagainst on the ground that no  industrial dispute could be raised by the workmen concerned in terms of the  judgment of this Court in Steel Authority of India Ltd. and Others v.  National Union Waterfront Workers and Others  [(2001) 7 SCC 1].  It was  further contended that the award of  the Labour Court having been accepted  by the workmen, the matter relating to abolition of contract labour could  only be decided by the Appropriate Government in terms of Section 10 of  the 1970 Act and not otherwise.  By reason of the impugned judgment, the  said appeals have been dismissed.         It is not disputed before us that the matter relating to abolition of  contract labour being governed by the provisions of the 1970 Act, the  Industrial Court will have no jurisdiction in relation thereto.  It is also not in  dispute that the decision of the Constitution Bench of this Court in Steel  Authority of India Ltd. (supra) governs the field.   

       In the said decision, it was, inter alia, held :                   "(3) Neither Section 10 of the CLRA Act nor any  other provision in the Act, whether expressly or by  necessary implication, provides for automatic absorption  of contract labour on issuing a notification by the  appropriate Government under sub-section (1) of Section  10, prohibiting employment of contract labour, in any  process, operation or other work in any establishment.  Consequently the principal employer cannot be required  to order absorption of the contract labour working in the

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establishment concerned.                 xxx             xxx             xxx  (5) On issuance of prohibition notification under  Section 10(1) of the CLRA Act prohibiting employment  of contract labour or otherwise, in an industrial dispute  brought before it by any contract labour in regard to  conditions of service, the industrial adjudicator will have  to consider the question whether the contractor has been  interposed either on the ground of having undertaken to  produce any given result for the establishment or for  supply of contract labour for work of the establishment  under a genuine contract or is a mere ruse/camouflage to  evade compliance with various beneficial legislations so  as to deprive the workers of the benefit thereunder. If the  contract is found to be not genuine but a mere  camouflage, the so-called contract labour will have to be  treated as employees of the principal employer who shall  be directed to regularise the services of the contract  labour in the establishment concerned subject to the  conditions as may be specified by it for that purpose in  the light of para 6 hereunder.

(6) If the contract is found to be genuine and  prohibition notification under Section 10(1) of the CLRA  Act in respect of the establishment concerned has been  issued by the appropriate Government, prohibiting  employment of contract labour in any process, operation  or other work of any establishment and where in such  process, operation or other work of the establishment the  principal employer intends to employ regular workmen,  he shall give preference to the erstwhile contract labour,  if otherwise found suitable and, if necessary, by relaxing  the condition as to maximum age appropriately, taking  into consideration the age of the workers at the time of  their initial employment by the contractor and also  relaxing the condition as to academic qualifications other  than technical qualifications."

       The industrial dispute was raised by two Unions, namely,   Visveswaraya Iron & Steel Ltd. Workers Association, Bhadravathi and  Visveswaraya Iron & Steel Ltd. Contract Employees’ Union, Bhadravathi.                  The award dated 13.07.1999 was confined to only one issue, namely,  Issue No.6 framed by the Labour Court. The said issue was determined by  the Labour Court pursuant to or in furtherance of the order of the High Court  passed in Writ Petition No.26874 of 1995.  While determining the said  question, the Labour Court framed seven issues by an order dated  31.12.1998, some of which are :

       "(i)    Whether the 1st party proves that they were  employed by the 2nd party  Management in the job of  permanent and perennial in nature.

       (ii)    Whether the 2nd party Management proves  that the 1st party workmen were employed under different  contractors in the job of permanent and perennial in  nature in various departments of the Management.

       (iii)   Whether the 2nd party proves that system of  contract labour in respect of the nature of the workers  involved in this Reference was not abolished in the 2nd  party Industry and that this Reference is not sustainable."                  The Labour Court opined :

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"\005The plain reading of the first point in dispute to be  decided by this Court  is that "are the contract workers  employed in the nature of contract work, justified in  demanding absorption as regular permanent employees  of the management VISL, Bhadravathi (hereinafter called  the Management).  Therefore the point in dispute pre- supposes that the 1 party Union Employees are the  contract workers employed in the nature of contract work  under certain contractors and whether such contract  workers are to be absorbed by the Management.  The fact  that the Union Employees who seek their absorption by  the Management are the contract workers is further very  much evident from the averments made in the claim  statement preferred on behalf of the 1 party Union.  Para  1 of the claim statement reads that they are representing  the contract labourers of the Management against whom  the present reference is made by the Government\005"                          The learned Presiding Officer of the Labour Court observed that in the  light of the judgment of the High Court between the parties, the moot  question that arose for consideration was as to whether the court could  decide the validity of the reference as it stood, holding :

"\005It was contended that the dispute under reference  since pertained to the abolition of contract labour which  contract labour was not abolished by the appropriate  Government under Sec.10 of the Contract Labour Act by  way of Notification as contemplated under the said  provision the reference is bad in law inoperative and  illegal.  I find substance in his arguments.  Undisputedly,  there is no abolition of Contract Act under Sec. 10 of the  said Act by the appropriate Government in this case.  It  was well argued that the Industrial Disputes Act where  under the present reference is made is a general  enactment and therefore, a special central enactment  namely, the Contract Labour Act shall prevail to the  extent that it applies over the provisions of I.D. Act\005"     

It was further held :

"\005This Court certainly has got no jurisdiction to pass  Award in favour of the employees holding them to be the  employees of principal employer namely the  management.  The question under reference, raised  before this Court, certainly, relates to the abolition of  contract labour and that question cannot be decided by  this Court but by the competent appropriate Government  under the provisions of Sec. 10 of the Contract Labour  Act\005"   

The Labour Court also took into consideration the contention raised  by the representatives of the Union that the issue as to whether the  members  of the Unions were really the employees of the management and not those of  the employees of the contractors was to be tried and decided by the said  court as both the parties had led their oral and documentary evidences  in  that behalf.  Having regard to the nature of reference by the Appropriate  Government, which fell for consideration before the Labour Court,  it  declined to go into the said question, opining that it was not within its  province to go into the question as to who the actual employer was as the  same did not fall in the category of matters, which can be said to be   incidental  to the main dispute.  It was opined :

"\005Therefore, it is clear that the I party Union itself   apprehended that the reference made to this Court was

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not in accordance with the law.  The principle laid down  by his lordship of our Hon’ble High Court in the case  reported in ILR 1994 Karnataka page 2603, taken support  of by Learned Representative for the I Party Union  contending that jurisdiction point cannot be raised by the  management at this belated stage, in my opinion again  had no much substance the management in this case has  challenged the jurisdiction of this court at earliest point  of time at para 2 of its counter statement.  Therefore, it  cannot be said that the jurisdiction point was raised by  the  management at a belated state.  Therefore, as  contended for the management and as observed by his  lordship of our Hon’ble High Court in the above said  unreported judgment, the proper course and remedy  available for the I party Union was not by way of  reference on hand at least with the present terms, but by  way of approaching the Hon’ble High Court invoking its  writ jurisdiction seeking directions to the Central  Government to take a decision under Section 10 of the  Contract Labour Act, as was already done in respect of  the 23 employees at Sl. No.26 Annexure to reference on  hand.  Therefore, for the reasons foregoing I am  constrained to hold that reference is not valid and proper  and that this court has no jurisdiction to adjudicate upon  the same.  Accordingly Issue No. 6 is answered in the  affirmative and following order is passed."                  Before adverting to the questions raised before us, we may at this  juncture notice the contention of Mr. V.N. Raghupathy that whereas in the  reference only 26 workmen were made parties, more than  600 workmen  were made parties in the writ petition and, thus, only because before the  appropriate Government a demand was raised by some of the workmen  contending that they were workmen of the contractors, an  industrial dispute  could be raised that the contract was a sham one and  in truth and substance   the workmen were employed by the management.

Writ Petitioner No.1 was Visveswaraya Iron & Steel Limited Contract  Employees’ Union.  615 workmen were parties thereto.  They were  admittedly represented by  Writ Petitioner No.1 only.   An industrial dispute  was also raised,  as noticed hereinbefore, by Visveswaraya Iron & Steel Ltd.  Workers Association and Visveswaraya Iron & Steel Limited Contract  Employees Union.  The Contract Employees’ Union was common both in  the proceedings under the Industrial Disputes Act also in the writ petition.

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.

In State of Karnataka and Others v. KGSD Canteen Employees’  Welfare Association and Others  [(2006) 1 SCC 567], this Court held :

"Keeping in view the facts and circumstances of  this case as also the principle of law enunciated in the  above-referred decisions of this Court, we are, thus, of  the opinion that recourse to writ remedy was not apposite  in this case."       

We may  reiterate that neither the Labour Court nor the writ court  could determine the question as to whether the contract labour should be  abolished or not, the same being within the exclusive domain of the  Appropriate  Government.  

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A decision in that behalf undoubtedly is required to be taken upon  following the procedure  laid down in sub-section (1) of Section 10 of the  1947 Act.  A notification can be issued by an Appropriate Government  prohibiting employment of contract labour if the factors enumerated  in sub- section (2) of Section 10 of the 1970 Act are satisfied.         

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 Limited (supra), 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.  

The view taken in the Steel Authority of India Limited (supra) has  been reiterated by this Court subsequently.  [See e.g. Nitinkumar Nathalal  Joshi and Others v. Oil and Natural Gas Corporation Ltd. and Others  (2002)  3 SCC 433] and Municipal Corporation of Greater Mumbai v. K.V. Shramik  Sangh and Others [(2002) 4 SCC 609].

In A.P. SRTC and Others v. G. Srinivas Reddy and Others  [(2006) 3  SCC 674, this Court held : "\005If respondents want the relief of absorption, they will  have to approach the Industrial Tribunal/Court and  establish that the contract labour system was only a  ruse/camouflage to avoid labour law benefits to them.  The High Court could not, in exercise of its jurisdiction  under Article 226, direct absorption of respondents, on  the ground that work for which respondents were  engaged as contract labour, was perennial in nature.                   It was further held :

"\005The only remedy of respondents, as noticed above, is  to approach the Industrial Tribunal for declaring that the  contract labour system under which they were employed  was a camouflage and therefore, they were, in fact, direct  employees of the Corporation and for consequential  relief\005."

Similar view has been taken in KGSD Canteen Employees’ Welfare  Association (supra).    

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.

The 1947 Act was enacted, as the preamble indicates, for investigation  and settlement of industrial dispute and for certain other purposes.  It  envisages collective bargaining.  Settlement between Union representing the  workmen and the Management is envisaged thereunder.  It provides for  settlement by mutual agreement.  A settlement or an award in terms of   Section 18(3)(b) of the 1947 Act is binding on all workmen including those  who may be employed in future.  

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What assumes importance is the ultimate goal wherefor the 1947 Act  was enacted, namely, industrial peace and harmony.  Industrial peace and  harmony is the ultimate pursuit of the said Act, having regard to the  underlying philosophy involved therein.  The issue before us is required to  be determined keeping in view the purport and object of the 1947 Act.

It is interesting to note that in Modi Spinning & Weaving Mills  Company Ltd. & Another  v. Ladha Ram & Co.  [(1976) 4 SCC 320], this  Court opined that when an admission has been made in the pleadings, even  an  amendment thereof  would not be permitted.   

We are not oblivious of the decision of this Court in Panchdeo Narain  Srivastava v. Km. Jyoti Sahay and Another [AIR 1983 SC 462 = (1984)  Supp. SCC 594], wherein it has been held that an admission made by a party  can be withdrawn and/or explained away; but we may notice that  subsequently a Division Bench of this Court distinguished the said decision  in Heeralal v. Kalyan Mal and Others [(1998) 1 SCC 278].

The effect of an admission in the context of Section 58 of the Indian  Evidence Act has been considered by this Court in Sangramsinh P. Gaekwad  and Others v. Shantadevi P. Gaekwad (Dead) through Lrs. and Others   [(2005) 11 SCC 314], 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 (Dead) by Lrs.  and Others [(2005) 12 SCC 1]  

Recently this Court in Baldev Singh and Others etc. v. Manohar Singh  & Another etc.  [2006 (7) SCALE  517], held :                 "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 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 Spinning  & Weaving Mills Co.  (supra) and distinguished Hira Lal (supra).

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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.    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 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.       

We would, however, hasten to add that this judgment shall not come  in the way of the appropriate Government to apply its mind for the purpose  of issuance of a notification under Section 10 of the 1970 Act.

For the reasons aforementioned, the impugned judgment cannot be  sustained, which is set aside accordingly.  The appeal is allowed.  In the  facts and circumstances of this case, however, there shall be no order as to  costs.