http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

PETITIONER: THE STANDARD-VACUUM REFINING CO.OF INDIA LTD.

       Vs.

RESPONDENT: ITS WORKMEN AND OTHERS.

DATE OF JUDGMENT: 06/04/1960

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. GUPTA, K.C. DAS

CITATION:  1960 AIR  948            1960 SCR  (3) 466  CITATOR INFO :  F          1967 SC1206  (10)  R          1972 SC 319  (15)  F          1972 SC1942  (24,95)  R          1987 SC 777  (6)  RF         1990 SC 532  (6)  E          1992 SC 457  (19,20)

ACT:        Industrial  Dispute-Abolition of contract system of  labour-        Dispute  raised by regular workmen of  company-Reference  to        Tribunal, if competent-Industrial Disputes Act, 1947 (14  of        1947), SS. 2 (k), 10.

HEADNOTE: A dispute was raised by the respondents, the workmen of  the appellant company, with respect to contract labour  employed by  it  for  cleaning  maintenance  work  at  the   refinery including  premises and plant belonging to it.  They made  a demand  for  abolition  of  the  contract  system  and   for absorbing the workmen employed through the contractors  into the regular service of the company.  The matter was referred to the Tribunal under s. 10 of the Industrial Disputes  Act, 1947.  The company objected to the reference on the  grounds (1) that it was incompetent inasmuch as there was no dispute between  it and the respondents and it was not open to  them to raise a dispute with respect to the workmen of some other employer, viz., the contractor, and (2) in any case, it  was for  the  company  to decide what was  the  best  method  of carrying  on  its  business  and  the  Tribunal  could   not interfere  with  that  function  of  the  management.    The Tribunal  held that the reference was competent and  on  the merits it was of opinion that the work which was being  done through  the contractor was necessary for the company to  be done  daily, that doing this work through  annual  contracts resulted in the deprivation of security of service and other benefits,  privileges,  leave, etc., of the workmen  of  the contractor  and  that  therefore the  contract  system  with respect to this work should be abolished: Held,  (1)  that  the dispute in the  present  case  was  an industrial  dispute  within the meaning of s.  2(k)  of  the Industrial Disputes Act, 1947, as interpreted in Workmen  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

Dimakuchi  Tea  Estate v. The Management  of  Dimakuchi  Tea Estate, [1958], 467 S.C.R. 1156, because (i) the respondents had a community  of interest with the workmen of the contractor, (ii) they  hall also  a  substantial interest in-the subject-matter  of  the dispute in the sense that the class to which they  belonged, namely,  workmen,  was substantially affected  thereby,  and (iii) the company could give relief in the matter. The reference was, accordingly, competent. (2)  that  the  direction  given by the  Tribunal  that  the contract  system  should  be  abolished  was  just  in   the circumstances of the case and should not be interfered with. D.   Macropollo  and Co. (P) Ltd. v. D. Macropollo  and  Co. (P) Ltd.  Employees’ Union, A.I.R. 1958 S.C. 1012,

JUDGMENT:        CIVIL  APPELLATE  JURISDICTION: Civil   Appeal  No.  130  of        1959.        Appeal  by special leave from the Award dated  September  5,        1958,  of  the  Industrial Tribunal,  Bombay,  in  Reference        (I.T.) No. 187 of 1958.        C.   K. Daphtary, Solicitor-General of India, G. B. Pai  and        Sardar Bahadur, for the appellants.        H.   R.  Gokhale,  S.  B.  Naik and  K.  R.  Chaudhury,  for        respondent No. 1.        1960.  April 6. The Judgment of the Court was delivered by        WANCHOO,  J.-This  is  an  appeal by  special  leave  in  an        industrial  matter.   The appellant is The  Standard  Vacuum        Refining  Company of India Limited (hereinafter  called  the        company).   A  dispute  was raised by  the  workmen  of  the        company (hereinafter called the respondents) with respect to        contract  labour  employed  by  the  company  for   cleaning        maintenance of the refinery, (plant and premises)  belonging        to the company.  The system in force in the company is  that        this  work is given to contractors for a period of one  year        from  October  1  to September 30.  At  the  time  when  the        reference was made the contract. was with Ramji Gordhan  and        Company  for the period from October 1, 1957,  to  September        30, 1958.  On April 27, 1957, the respondents made a  demand        for  abolition of the contract system that prevailed in  the        company  and for absorbing the workmen employed through  the        contractors  into  the regular service of the  company  with        retrospective  effect from the date of their  employment  in        the  company  through  the contractors.   The  case  of  the        respondents was that the contractor used to change sometimes        from year to year with the        468        result that the workmen employed by the previous  contractor        were thrown out of employment.  As an instance, it was  said        that  previous  to October 1, 1957, the  contract  was  with        Gowri  Construction  Company.   That  company  employed   67        workmen to do the work.  But when the contract was given  to        Ramji Gordhan and Company, all these 67 workmen were  thrown        out  of employment, though 40 of them were subsequently  re-        employed  as fresh employees by Ramji Gordhan  and  Company.        The  result  of the system therefore was that there  was  no        security of service to the workmen who were in effect  doing        the  work  of  the company.  Besides  the  contractors  were        paying much less to the workmen than the amount paid by  the        company  to  its unskilled regular  workmen.   Further,  the        workmen  of  the  contractors were  not  entitled  to  other        benefits  and  amenities such as provident  fund,  gratuity,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

      bonus,  privilege leave, medical facilities  and  subsidised        food and housing to which the regular workmen of the company        were entitled.  The work was of a permanent nature, but  the        contract  system  was  introduced to deny  the  workmen  the        rights  and  benefits  which the company  gave  to  its  own        workmen.        The  dispute  was taken to the conciliation  officer.   When        conciliation  failed,  the  Government of  Bombay  made  the        following reference on May 13, 1958.        "  The contract system for cleaning the premises  and  plant        should  be  abolished and workers working  in  the  refinery        through  the Ramji Gordhan and Company should be treated  as        workers  of  the Standard Vacuum Refining Company  of  India        Limited,  Bombay,  and wage-scales, conditions  of  service,        etc., that are applicable to the workers of the refinery  be        made  applicable  to them.  Past service  of  these  workers        should be counted and they should be treated as continuously        in  the  service of the Stanvac refinery from  the  date  of        their entertainment."        The   company  resisted  the  claim  and  raised  two   main        contentions.   In the first place it was contended that  the        reference under s. 10 of the Industrial Disputes Act, No. 14        of  1947 (hereinafter called the Act), was incompetent.   In        the second place it was contended        469        that  the  work  done by the contractor’s  workmen  was  not        germane  to  the  manufacturing process  and  was  therefore        entrusted  to  the  contractor.   If  the  workmen  of   the        contractor  were  not  satisfied  with  the  conditions   of        service, they could take up the, matter with the  contractor        and  the  company  had  nothing to do with  it.  As  to  the        difference  between the wages and benefits and amenities  of        the  regular  workmen of the company  and  the  contractor’s        workmen,  it  was  said that the work of  the  two  sets  of        workmen  was very different and that in any case this was  a        matter   between  the  contractor  and  its  workmen.    The        contractor was an independent employer and it was  incorrect        to  say that the real employer was the company.  It was  for        the  company to decide what was the best method of  carrying        on  its  business  and the industrial  tribunal  should  not        interfere with that function of the management.        The tribunal held that the reference was competent.  On  the        merits it was of -opinion that the work which was being done        through the contractor was necessary for the company and had        to  be  done  daily,  though  it  was  not  a  part  of  the        manufacturing  process.  It further held that doing of  this        work through annual contracts resulted in the deprivation of        security  of service and other benefits, privileges,  leave,        etc.,   for  the  workmen  of  the  contractor.    Therefore        considering  the nature of the case it was of  opinion  that        this was a proper case where a direction should be given  to        the  company to abolish the contract system with respect  to        this  work.   In the result the company  was  directed  with        effect from November 1, 1958, to discontinue the practice of        getting  this work done through contractors and to  have  it        done  through workmen engaged by itself.  The other part  of        the  demand, namely, that all the workmen of the  contractor        should be taken over by the company and their past  services        should  be  counted and that they should be given  the  same        wage  scale  and  conditions of service,  etc.,  which  were        applicable  to  the  regular  workmen  of  the  company  was        rejected.   The  company  was  further  directed  to  engage        regular workmen for this work and in so doing it was to give        preference to the workmen employed by Ramji        60

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

      470        Gordhan  and Company.  Wage-scale and other benefits  to  be        given  to  these  workmen were left to  the  company  to  be        determined by it.        Learned.  Solicitor-General appearing for the company raised        two  contentions before us, namely, (i) is this  dispute  an        industrial dispute and therefore the reference was competent        ? and (ii) is the tribunal justified in interfering with the        management function as to how it should get its work done ?        Re. (i) :        The  contention under this head is that there is no  dispute        between the company and the respondents and that it was  not        open  to the respondents to raise a dispute with respect  to        the  workmen  of some other employer (in  this  case,  Ramji        Gordhan  and  Company).   Reliance in  this  connection  was        placed  on the definition of " industrial dispute " in s.  2        (k) of the Act and the judgment of this Court in Workmen  of        Dimakuchi  Tea  Estate v. The Management -of  Dimakuchi  Tea        Estate (1).  The definition of " industrial dispute " in        s.   2 (k) requires three things-        (i)  There should be a dispute or difference;        (ii) The  dispute or difference should be between  employers        and  employers, or between employers and workmen or  between        workmen and workmen;        (iii)     The  dispute or difference must be connected  with        the employment or non-employment or the terms of  employment        or with the conditions of labour, of any person.        The  first  part  thus refers to the factum of  a  real  and        substantial  dispute, the second part to the parties to  the        dispute and the third to the subject-matter of the  dispute.        The contention of the learned Solicitor General is  two-fold        in  this  connection, namely, (i) that there is no  real  or        substantial dispute between the company and the respondents,        and (ii) that the subject matter of the dispute is such that        it  cannot come within the terms of the definition in  s.  2        (k).        The  first submission can be disposed of shortly.  There  is        undoubtedly  a  real  and substantial  dispute  between  the        company   and  the  respondents  on  the  question  of   the        employment of contract-labour for the        (1)  [1958] S.C.R. 1156.        471        work of the company.  The fact that the respondents who have        raised this dispute are not employed on contract basis  will        not  make  the dispute any the less a  real  or  substantial        dispute  between  them and the company as to the  manner  in        which  the  work of the company should be carried  on.   The        dispute  in  this  case is that the  company  should  employ        workmen directly and not through contractors in carrying  on        its  work and this dispute is undoubtedly real and  substan-        tial even though the regular workmen (i.e., the respondents)        who have raised it are not employed on contract labour.   In        Dimakuchi  case  (1) to which reference has been  made,  the        dispute  was relating to an employee of the tea  estate  who        was not a workman.  It was nevertheless held that this was a        real  and  substantial dispute between the workmen  and  the        company.   How the work should be carried on is certainly  a        matter  of  some  importance  to  the  workmen  and  in  the        circumstances it cannot be said that this is not a real  and        substantial  dispute  between the company and  its  workmen.        Thus  out of the three ingredients of s. 2(k) the  first  is        satisfied; the second also is ,satisfied because the dispute        is between the company and the respondents ; it is the third        ingredient which really calls for determination in the light        of the decision in Dimakuchi case (1).

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

      Section  2(k),  as it is worded, would allow  workmen  of  a        particular  employer to raise a dispute connected  with  the        employment or non-employment, or the terms of employment  or        with  the conditions of labour of any person.  It  was  this        aspect of the matter which was considered in Dimakuchi  case        (1) and it was held that the words " any person " used in s.        2(k) would not justify the workmen of a particular  employer        to  raise a dispute about any one in the world, though-  the        words  " any person " in that provision may not  be  equated        with  the  words " any workman ". The test therefore  to  be        applied in determining the scope of the words " any person "        in  s.  2(k)  was  stated in  the  following  words  at  pp.        1174-75:-        "  If, therefore, the dispute is a collective  dispute,  the        party raising the dispute must have either a direct interest        in the subject-matter of dispute or a        (1) [1958] S. C. R. 1156.        472        substantial interest therein in the sense that the class  to        which the aggrieved party belongs is substantially  affected        thereby.  It is the community of interest of the class as  a        whole-class of employers or class of workmen-which furnishes        the  real nexus between the dispute and the parties  to  the        dispute.  We see no insuperable difficulty in the  practical        application  of this test.  In a case where the party  to  a        dispute is composed of aggrieved workmen themselves and  the        subject-matter  of  the dispute relates to them  or  any  of        them,  they clearly have a direct interest in  the  dispute.        Where,  however, the party to the dispute also  composed  of        workmen espouse the cause of another person whose employment        or  non-employment,  etc., may  prejudicially  affect  their        interest,  the  workmen have a substantial interest  in  the        subject-matter  of dispute.  In both such cases the  dispute        is an industrial dispute.  "        We  have therefore to see whether the respondents  who  have        raised  this dispute have a direct interest in the  subject-        matter  of the dispute or a substantial interest therein  in        the sense that the class to which the respondents belong  is        substantially   affected  thereby  and  whether   there   is        community  of  interest between the  respondents  and  those        whose cause they have espoused.  There can be no doubt  that        there  is  (community of interest in this case  between  the        respondents  and the workmen of Ramji Gordhan  and  Company.        They  belong to the same class and they do the work  of  the        same  employer and it is possible for the -company  to  give        the   relief  which  the  respondents  are  claiming.    The        respondents have in our opinion also a substantial  interest        in the subject-matter of the dispute, namely, the  abolition        of  the  contract system in doing work of  this  kind.   The        learned Solicitor-General particularly emphasised that there        was  no  question of the interest of the  respondents  being        prejudicially affected by the employment or nonemployment or        the terms of service or conditions of labour of the  workmen        of  Ramji  Gordhan and Company and placed  reliance  on  the        words " may prejudicially affect their interest "  appearing        in the observations quoted above.  We may, however,  mention        that        473        the  test laid down is that the workmen espousing the  cause        should  have a substantial interest in the subjectmatter  of        the dispute, and it was only when illustrating the practical        application of the test that this Court used the words  "may        prejudicially  affect  their  interest  ".  Besides  it   is        contended  by Mr. Gokhale for the respondents that  even  if        prejudicial effect on the interest of the workmen  espousing

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

      the   cause  is  necessary,  this  is  a,  case  where   the        respondents’  interest  may  be  prejudicially  affected  in        future  in  case the contract system of work is  allowed  to        prevail  in  this  branch of the work of  the  company.   He        submits  that if the company can carry on this part  of  the        work by contract system it may introduce the same system  in        other  branches of its work which are now being done by  its        regular  workmen.  We do not think it necessary to  go  into        this aspect of the matter as we have already indicated  that        prejudicial  effect is only one of the illustrations of  the        practical  application  of the test laid down  in  Dimakuchi        case  (1), viz., substantial interest in the sense that  the        class to which the aggrieved party belongs is  substantially        affected  thereby.   It  seems  to  us  therefore  that  the        respondents have a community of interest with the workmen of        Ramji Gordhan and Company who are in effect working for  the        same employer.  They have also a substantial interest in the        subject-matter of the dispute in the sense that the class to        which   they  belong  (namely,  workmen)  is   substantially        affected  thereby.  Finally the company can give  relief  in        the  matter.   We  are therefore of  opinion  that  all  the        ingredients  of s. 2(k) as interpreted in Dimakuchi  case(1)        are present in this case and the dispute between the parties        is an industrial dispute and the reference was competent.        Re. (ii) :        We  now  come  to  the question  whether  the  tribunal  was        justified  in giving the direction for the abolition of  the        contract  system in the manner in which it has done  so.  In        dealing  with  this question it may be relevant to  bear  in        mind   that  industrial  adjudication  generally  does   not        encourage the employment of contract labour in modern times.        As  has  been observed by the Royal Commission on  Labour  "        whatever the merits of the system        (1) [1958] S. C. R. 1156.        474        in  primitive times, it is now desirable, if the  management        is  to discharge completely the complex responsibility  laid        upon  it by law and by equity, that the manager should  have        full  control over the selection, hours of work and  payment        of  the  workers ". The same opinion has been  expressed  by        several  Labour  Enquiry Committees appointed  in  different        States.   We  agree-that  whenever a dispute  is  raised  by        workmen  in regard to the employment of contract  labour  by        any  employer  it  would be necessary for  the  tribunal  to        examine  the  merits of the dispute apart from  the  general        consideration that contract labour should not be encouraged,        and that in a given case the decision should rest not merely        on theoretical or abstract objections to contract labour but        also on the terms and conditions on which contract labour is        employed and the grievance made by the employees in  respect        thereof.  As in other matters of industrial adjudication  so        in  the  case  of contract labour  theoretical  or  academic        considerations  may be relevant but their importance  should        not  be  overestimated.  Let us then consider  the  contract        labour system in the present case.        The contract in this case related to four matters.  But  the        reference   is   confined  to  one  only,   viz.,   cleaning        maintenance  work  at the refinery  including  premises  and        plant  and  we shall deal with that only.  So far  as’  this        work  is  concerned, it is incidental to  the  manufacturing        process  and is necessary for it and of a  perennial  nature        which  must be done every day.  Such work is generally  done        by  workmen in the regular employ of the employer and  there        should  be no difficulty in having regular workmen for  this        kind of work.  The matter would be different if the work was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

      of intermittent or temporary nature or was so little that it        would  not be possible to employ full-time workmen  for  the        purpose.  Under the circumstances the order of the  tribunal        appears  to  be  just  and there are  no  good  reasons  for        interfering with it.        Our attention in this connection was drawn to D.  Macropollo        And  Co.  (P)  Ltd.  v.  D.  Macropollo  And  Co.  (P)  Ltd.        Employees’  Union  (1) and it was urged  that  the  tribunal        should not have interfered with the        (1)  A.I.R. 1958 S.C. 1012.        475        management’s  manner  of having its work done  in  the  most        economical  and convenient way that it thought  proper.   It        was pointed out that this was not a case where the  contract        system  was a camouflage and the workmen of  the  contractor        were really the workmen of the company.  It may be  accepted        that  the contractor in the present case is  an  independent        person and the system is genuine and there is no question of        the company carrying on this work itself and camouflaging it        as  if it was done through contractors in order to pay  less        to the workmen.  But the fact that the contract in this case        is  a bona fide contract would not necessarily mean that  it        should  not be touched by the industrial tribunals.  If  the        contract had been mala fide and a cloak for suppressing  the        fact  that  the  workmen  were really  the  workmen  of  the        company, the tribunal would have been justified in  ordering        the  company  to take over the entire body  of  workmen  and        treat  it as its own workmen.  But because the  contract  in        this  case  was bona fide the tribunal has not  ordered  the        company  to  take over the entire body of workmen.   It  has        left  to it to decide for itself how many workmen it  should        employ  and on what terms and has merely directed that  when        selection  is being made preference should be given  to  the        workmen  employed by the present contractor.  In  Macropollo        case  (1), this Court held that the reorganisation had  been        adopted by the employer for reasons of economy and  conveni-        ence  and was bona fide.  In that case the main business  of        the  concern  was the selling agency  of  various  cigarette        manufacturing  concerns.   Before 1946 the concern  used  to        employ  distributors for the purpose and these  distributors        used to employ salesmen.  In 1946 there were communal  riots        in Calcutta and therefore the concern took over the salesmen        in  its  direct employment in order to  reorganise  them  on        communal  basis  in the then prevailing  circumstances.   In        1954 the concern decided to close down its own outdoor sales        department and revert to the distributor system.  It was  in        that context that certain workmen had to be retrenched,  and        this  Court held that the reorganisation scheme  adopted  in        1954 for reasons of economy and convenience was bona fide        (1)  A.I.R. 1958 S.C. 1012.        476        and  if  it resulted in retrenchment  that  was  inevitable.        These  facts  would  show  that  in  that  case  there   was        reorganisation  of the business resulting  in  retrenchment.        In  the  present  case no such thing  arises  and  the  only        question for decision is whether the work which is perennial        and  must go on from day to day and which is incidental  and        necessary  for  the  work  of  the  refinery  and  which  is        sufficient  to  employ a considerable  number  of  wholetime        workmen  and  which is being done in most  concerns  through        regular workmen should be allowed to be done by contractors.        Considering  the  nature of the work and the  conditions  of        service  in  the  present case we are of  opinion  that  the        tribunal’s  decision is right and no interference is  called        for, except that the date ;should now be changed, for such a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

      direction cannot be put into force with retrospective effect        from November 1, 1958.  It appears that a few months  remain        before  the present contract will come to an end.  We  think        that  for these few months the present system may  continue.        We therefore dismiss the appeal with this modification  that        the  order of the tribunal will be carried into effect  from        such  date  on which the present contract in  force  in  the        company  comes  to an end.  The respondents will  get  their        costs from the company.        Appeal dismissed subject to modification.