2002 JTR(SC) 354
2002 AIR(SC) 1444 ; 2002 AIR(SCW) 1301 ; 2002 3 JT 71 ; 2002 2 LLJ 262 ; 2002 2 Scale 601 ; 2002 3 SCC 433 ; 2002 1 UJ 756 ; 2002 2 Supreme 406
2002(2) Supreme 406
SUPREME COURT OF INDIA
(From Gujarat High Court)
S.N. Phukan and K.G. Balakrishnan, JJ.
Nitinkumar Nathalal Joshi & Ors. Appellants
versus
Oil & Natural Gas Corporation Ltd. & Ors. -Respondent
Civil Appeal No. 2078 of 2002
(arising out of SLP (C) No. 20498/2000)
Decided on 14-3-2002
Counsel for the Parties :
For the Appellants : T.R. Andhyarujina, Sr. Advocate, Devang S. Nanavati, Deepak Shukla, Mrs. V.D. Khanna, Mrs. Nirmala Gupta, Advocates for M/s. I.M. Nanavati Associates, Advocates.
For the Respondents : Mukul Rohtgi, Additional Solicitor General, Ms. Nina Gupta, Uday Gupta, Ms. Arpita Mahajan, Ms. Shalini Rai and Vineet Kumar, Advocates.
IMPORTANT POINT
To decide the claims of contract labour employed with Oil and Natural Gas Corporation Limited, for regularisation of their services consequent upon the notification issued under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, directions issued by the Supreme Court in Steel Authority of India case held applicable.
Act
Referred
:CONSTITUTION OF INDIA : Art.136, Art.226
CONTRACT LABOUR REGULATION AND ABOLITION ACT : S.10(1)
INDUSTRIAL DISPUTES ACT : S.10, S.12
(A) The notification issued under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 operates as a prohibition on the employment of contract labour in certain processes or operations within an establishment. When such a prohibition is in place, any dispute concerning the terms and conditions of service of the affected workmen must be determined by the appropriate industrial adjudicator under the Industrial Disputes Act, 1947. The interplay between Sections 10(1) of the Contract Labour Act and the provisions of the Industrial Disputes Act, including the jurisdiction of High Courts under Article 226 and the specific role of Industrial Tribunals under Section 10, is central to determining the rights of the workmen to be treated as employees of the principal employer. The interpretation of whether a contract is genuine or a camouflage to evade statutory obligations, as detailed in the Steel Authority of India Ltd. case, is critical in ascertaining direct employment status.
(B) Key legal principles include that a prohibition notification under Section 10(1) of the Contract Labour Act does not automatically result in absorption but triggers an adjudication process where the contract's genuineness is examined. If a contract is found to be a sham, the contract labour must be treated as employees of the principal employer. The decision in the Steel Authority of India Ltd. case is prospective and applies to cases where directions for absorption have not yet been given effect to. The Industrial Tribunal and Conciliation Officer have primary jurisdiction to investigate facts and resolve disputes before a Labour Court.
Facts of the case:
Following a notification under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970, workmen engaged as contract labour by a contractor for boiler operations at the establishment of the principal employer ceased to operate. The workmen claimed they should be deemed direct employees of the principal employer and entitled to their terms of service. While the facts regarding the cessation of the contract and subsequent re-engagement were disputed, the lower forum directed an investigation by the Conciliation Officer and Industrial Tribunal rather than granting immediate relief.
Findings of Court:
The Division Bench found that there were disputed questions of fact regarding the service conditions of the contract labour. It held that an investigation by the Industrial Tribunal was necessary and that the proceedings under Article 226 were not the appropriate forum to decide the matter. The court emphasized that the principles laid down in the Steel Authority of India Ltd. case must be considered by the Industrial Tribunal/Labour Court.
Issues:
Whether the workmen engaged through a contractor are to be deemed as employees of the principal employer consequent upon the prohibition notification; whether the High Court was the appropriate forum to grant relief or if the matter should be decided by an Industrial Tribunal; and whether the decision in Steel Authority of India Ltd. case is prospective or retrospective in application.
Ratio Decidendi:
The court refrained from interfering with the Division Bench's directions because the facts were disputed and an investigation by the Industrial Tribunal was deemed necessary. The court clarified that the principles from the Steel Authority of India Ltd. case apply, and the ultimate decision on the workmen's status and terms of service must be made by the Industrial Tribunal/Labour Court after considering the genuineness of the contract and the prohibition notification.
Result:
The appeal is disposed of, with the impugned judgment of the Division Bench being upheld. The matter is directed to be complied with, subject to the observations made and the decision in the Steel Authority of India Ltd. case, leaving the factual investigation to the Industrial Tribunal.
(A) The notification issued under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 operates as a prohibition on the employment of contract labour in certain processes or operations within an establishment. When such a prohibition is in place, any dispute concerning the terms and conditions of service of the affected workmen must be determined by the appropriate industrial adjudicator under the Industrial Disputes Act, 1947. The interplay between Sections 10(1) of the Contract Labour Act and the provisions of the Industrial Disputes Act, including the jurisdiction of High Courts under Article 226 and the specific role of Industrial Tribunals under Section 10, is central to determining the rights of the workmen to be treated as employees of the principal employer. The interpretation of whether a contract is genuine or a camouflage to evade statutory obligations, as detailed in the Steel Authority of India Ltd. case, is critical in ascertaining direct employment status.
(B) Key legal principles include that a prohibition notification under Section 10(1) of the Contract Labour Act does not automatically result in absorption but triggers an adjudication process where the contract's genuineness is examined. If a contract is found to be a sham, the contract labour must be treated as employees of the principal employer. The decision in the Steel Authority of India Ltd. case is prospective and applies to cases where directions for absorption have not yet been given effect to. The Industrial Tribunal and Conciliation Officer have primary jurisdiction to investigate facts and resolve disputes before a Labour Court.
Facts of the case:
Following a notification under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970, workmen engaged as contract labour by a contractor for boiler operations at the establishment of the principal employer ceased to operate. The workmen claimed they should be deemed direct employees of the principal employer and entitled to their terms of service. While the facts regarding the cessation of the contract and subsequent re-engagement were disputed, the lower forum directed an investigation by the Conciliation Officer and Industrial Tribunal rather than granting immediate relief.
Findings of Court:
The Division Bench found that there were disputed questions of fact regarding the service conditions of the contract labour. It held that an investigation by the Industrial Tribunal was necessary and that the proceedings under Article 226 were not the appropriate forum to decide the matter. The court emphasized that the principles laid down in the Steel Authority of India Ltd. case must be considered by the Industrial Tribunal/Labour Court.
Issues:
Whether the workmen engaged through a contractor are to be deemed as employees of the principal employer consequent upon the prohibition notification; whether the High Court was the appropriate forum to grant relief or if the matter should be decided by an Industrial Tribunal; and whether the decision in Steel Authority of India Ltd. case is prospective or retrospective in application.
Ratio Decidendi:
The court refrained from interfering with the Division Bench's directions because the facts were disputed and an investigation by the Industrial Tribunal was deemed necessary. The court clarified that the principles from the Steel Authority of India Ltd. case apply, and the ultimate decision on the workmen's status and terms of service must be made by the Industrial Tribunal/Labour Court after considering the genuineness of the contract and the prohibition notification.
Result:
The appeal is disposed of, with the impugned judgment of the Division Bench being upheld. The matter is directed to be complied with, subject to the observations made and the decision in the Steel Authority of India Ltd. case, leaving the factual investigation to the Industrial Tribunal.
ContractLabour - The judgment cites this case for the principle that on issuance of prohibition notification under Section 10(1) of the CLRA Act, the industrial adjudicator must consider whether the contractor was a genuine arm of the principal employer or a mere camouflage to evade compliance.
JUDGMENT
K.G. Balakrishnan, J.-Leave granted.
2. The Judgment of the Division Bench of the High Court of Gujarat at Ahmedabad in Letters Patent Appeal No. 395 of 1999 is challenged before us. The appellants alleged that they were workmen employed as contract labourers in the capacity of Boiler Operators through the Contractor, Ahmedabad Electricity Co. Limited. According to these appellant workmen, they were employed on contract labour with the first respondent-principal employer, namely, Oil & Natural Gas Corporation Limited (hereinafter being called as "ONGC Limited"). Consequent upon the notification dated 8.9.1994 under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 by the Central Government, the contract labour in the posts of Boiler Operators, Attendants, Helpers and Peons was prohibited and these appellants claimed that they should be treated as the employees of the first respondent. They filed a Writ Petition before the High Court of Gujarat and learned Single Judge held that these appellants were persons engaged for attending different operations of the boiler in the boiler house of ONGC Ltd. through the contractor, which was clearly in breach of the provisions of the Act. It was held that these appellants must be deemed to be performing duties directly under the first respondent ONGC Limited and they must be given the terms of service as applicable to other employees of ONGC Limited with effect from the date of notification.
3. The Judgment of the learned Single Judge was challenged before the Division Bench and the Division Bench was of the view that there were some disputed question of fact and an investigation into facts regarding service conditions of contract labour was necessary before granting them the relief of direct employment with the principal employer and that the proceedings under Article 226 of the Constitution were not appropriate. It also held that there should be an investigation by the Industrial Tribunal and these appellants were directed to approach the Conciliation Officer of the concerned area and further direction was given to the Conciliation Officer to complete the conciliation proceedings within three months and if the dispute survived, the matter be referred to the Industrial Tribunal under Section 10 of the Industrial Dispute Act and the Industrial Tribunal/Labour court to take a final decision in the matter within a period of four months thereafter. These directions are challenged before us.
4. We heard Shri T.R. Andhyarujina, learned senior Counsel on behalf of the appellants and Mr. Mukul Rohtgi, learned ASG on behalf of the respondents. What is the effect of abolition of contract labour by virtue of the notification issued by Central Government under Section 10 of the Industrial Disputes Act was considered in detail in Steel Authority of India Ltd. and Others vs. National Union Waterfront Workers and Others (2001) 7 SCC 1. The main question that arose for consideration in that case was whether there should be an automatic absorption of contract labourers working in the establishment of principal employer as regular employees consequent upon the notification under Section 10(1) of the Act. This Court held in clause (5) and (6) of paragraph 125 at page 63 as under:-
"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.
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."
5. In the present case, the appellants have alleged that after the filing of the said appeal, the contract between first respondent ONGC Limited and the second respondent Ahmedabad Electricity Co. Limited came to an end on 30-11-2000 for operation of boilers and first respondent ONGC Limited entered into a contract with M/s. S.S. Construction, Mumbai and M/s. Essel Engineering Services, Mumbai for operation of the boilers at ONGC Limited with effect from 1.12.2000. They have also alleged that some of the appellants were given employment with a lesser payment but these facts have been denied by the first respondent. As these are disputed questions of fact, we do not propose to go into these questions and do not interfere with the directions given in the impugned judgment. However, we make it clear that the Industrial Tribunal/Labour Court shall also consider these allegations and shall give appropriate direction. We may also emphasise that the Constitution Bench of this Court in Steel Authority of India Ltd. case (supra) in paragraph 107 observed as under:-
"An analysis of the cases, discussed above, shows that they fall in three classes: (i) where contract labour is engaged in or in connection with the work of an establishment and employment of contract labour is prohibited either because the industrial adjudicator/court ordered abolition of contract labour or because the appropriate Government issued notification under Section 10(1) of the CLRA Act, no automatic absorption of the contract labour working in the establishment was ordered; (ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case the contract labour working in the establishment of the principal employer were held, in fact and in reality, the employees of the principal employer himself. Indeed such cases do not relate to abolition of contract labour but present instances wherein the Court pierced the veil and declared the correct position as a fact at the stage after employment of contract labour stood prohibited; (iii) where in discharge of a statutory obligation of maintaining a canteen in an establishment the principal employer availed the services of a contractor the courts have held that the contract labour would indeed be the employees of the principal employer."
6. These matters are also to be considered by the Industrial Court/Labour Court if reference ultimately reaches before that forum.
7. The learned Counsel for the appellants contended that the decision in Steel Authority of India Ltd. case (supra), is prospective in operation, therefore these appellants should have been given the benefit of employment under the principal employer, the first respondent ONGC Limited. It is true that in Steel Authority of India Ltd. case (supra), it was specifically made clear in clause (4) of paragraph 125 as follows:-
"We overrule the judgment of this Court in Air India case prospectively and declare that any direction issued by any industrial adjudicator/any court including the High Court, for absorption of contract labour following the judgment in Air India case shall hold good and that the same shall not be set aside, altered or modified on the basis of this judgment in cases where such a direction has been given effect to and it has become final."
8. In the present case, the appellants were not absorbed by the principal employer. Therefore, it cannot be said that the decision in Steel Authority of India Ltd. case (supra) cannot be applied. The directions issued by the learned Single Judge were modified by the Division Bench of the High Court and never given effect to. Therefore, the directions issued by this Court in the Steel Authority of India Ltd. case (supra) are applicable on all force.
9. We do not find any reason to interfere with the directions given in the impugned Judgment. They are to be complied with subject to the observations made above and also having due regard to the decision rendered by this Court in Steel Authority of India Ltd. case (supra). The appeal is disposed of accordingly.
Appeal disposed of accordingly.
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