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Industrial Disputes Act, 1947- Section 2 (s)- Workmen- Determination of- Organisation and Control Test- Applicability of- Lifting of veil- Applicability of- Marketing yard of a cooperative society for sale of farmers’ produce- Porters and graders carrying on jobs at the yard- Their services hired directly by farmers and merchants and paid by them- Society: only supervising the work- Held, not workmen. Industrial Dispute Act, 1947- Section 2 (j)- Industry- Meaning of- Farmers’ cooperative society-for marketing their produce- Services only to its members- Platform provided to the farmers and the merchants for sale and purchase of agricultural produce by auction- No control on either farmer or merchants- Commission charged from parties for rendering service- Held, not an industry:. Certain small and economically weak farmers formed a Co-operative Society for sale of their produce. The Society had two big marketing yards where produce were brought by the farmers in trucks and lorries, unloaded, unpacked, graded, weighed, packed into stitched gunny bags and auctioned. For the convenience of the farmers as well as the merchants (who came to the marketing yards to purchase the produce), porters and graders were always available at the yards. The porters did the job of unloading, unpacking, stitching and loading the bags of produce whereas the graders performed the job of grading, weighing and packing the produce. It was open to the farmers as well as the merchants to get the work done either through their own men or to engage the services of the porters and graders. The farmers and the merchants paid the porters and graders directly for the work done by them. The Society also made payment to the porters and workmen on behalf of farmers in case of financial difficulty which was reimbursed to the Society by the workmen. The Society charged commission for its services from its members as well as the merchants. The Society did not maintain any attendance register of the porters and graders and no working hours were fixed or insisted. However, the Society gave gifts to the porters and graders during the festival season. In 1982 the porters and graders claimed permanency in service and other benefits from the Society. As attempts at conciliation failed, in 1984, the State Government referred the dispute to the Industrial Tribunal. The Industrial Tribunal was to decide “whether the non-employment of the workmen referred to in the reference (was) justified”. The Industrial Tribunal opined that there was no relationship of employer and employee between the parties. The porters and graders thereafter filed writ petitions before the High Court, which were dismissed by the High Court. The Letters Patent Appeals filed by the porters and graders were also dismissed. Being aggrieved, the porters and graders filed appeals before the Court. Before the Court, the appellant, inter alia, contended that the High Court erred: (i) in not applying the `organisation test'; (ii) in holding that the supervision and control exercised by the Society on the workmen were not on its own behalf but on behalf of its members.

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CASE NO.:
Appeal (civil) 1351-53 of 2002

PETITIONER:
Workmen of Nilgiri Coop. Mkt.Society Ltd. 

RESPONDENT:
State of Tamil Nadu & Ors. 

DATE OF JUDGMENT: 05/02/2004

BENCH:
Y.K. Sabharwal & S.B. Sinha.

JUDGMENT:
JUDGMENT

S.B. SINHA, J :

BACKGROUND FACTS:

 'Nilgiris' is a hill district in the State of Tamil 
Nadu. Mettupalayam is a small town situate in Nilgiris. 
The villagers of the surrounding villages for their 
livelihood depend on growing of vegetables and tea. With a 
view to see that the small vegetable growers are not 
exploited by the vegetable merchants, a society known as 
'Nilgiris Cooperative Marketing Society Limited' (Society 
for short) was formed as far back as in 1935 with only 116 
members. 

 The Society, however, grew in course of time and at 
present it has about 22000 members. The memberships of the 
Society are of two categories. In the first category only 
the vegetable or food growers, agricultural cooperative 
credit societies and agricultural improvement societies are 
A-class members having voting rights; whereas traders, 
commission agents and merchants dealing in the commodities 
grown by the agriculturists are classified as B-class 
members. They have no right to vote or participate in the 
management of the Society. The B-class members only, 
however, are entitled to take part in auctions held in the 
marketing yards of the Society. Any dispute between the 
seller member and the purchaser member is resolved through 
arbitration in terms of the provisions of the Tamil Nadu 
Cooperative Societies Act, 1961.

 The land holdings of the members of the society varies 
from 1/4th acre to five acres averaging two acres per 
member. They mainly depend on the rainfall as irrigational 
facilities are not available. The small farmers are 
economically weak and have no holding power. Many of them 
have to take loans for their subsistence, when the weather 
is not good. Many of them are illiterate. The vegetables 
produced from their lands being subjected to the vagaries of 
the weather, the merchants with a view to pressurize them 
either used to force them to sell that at a very low price 
or would make them wait for days so that the vegetables 
become useless. The majority of the members belong to 
'Badaga' community which had been declared to be a backward 
class by the Government of Tamil Nadu. Mettupalayam is a 
centre for potatoes and vegetables trade.

The Society has two big marketing yards at 
Mettupalayam. In the said yards, auction of vegetables 
takes place. Infrastructure therefor such as offices, 
godowns yards, weighing machines etc. are provided by the 
Society. There are two separate yards with pucca godowns, 
one for potatoes and another for vegetables. The primary 
members of the Society bring their agricultural produce to 
the yards by hired lorries or trucks. They remain present 
till the agricultural produce brought by them is auction- 
sold and they receive the sale price. The number of primary 
members visiting the marketing yards of the Society, 
depending upon the season varies from 100 to 200 members per 
day. The number of merchants coming to purchase these 
commodities also varies from 30 to 100. The Society 
provides for accommodation to the members on a nominal rent. 
It also provides dormitory type of accommodation free of 
charge. The months of July to October of year are said to 
be a peak season. Whereas during the peak season about 100 
lorries arrive everyday; during the 'off season' average 
number of lorries arriving at the yard would be around 10. 
For the purpose of bringing potatoes gunny bags are supplied 
by the Society free of cost. 

The following main jobs are carried out in the said 
premises: 

i) unloading of the gunny bags containing 
potatoes from the lorries;

ii) unpacking the gunny bags and keeping the 
potatoes in lots inside the godown;

iii) grading the potatoes into different sorts;

iv) weighing the auctioned potatoes in 45 kgs. 
and packing them into gunny bags brought by 
the merchants;

v) stitching the gunny bags and loading them 
into lorries hired by the merchants.

 Throughout the process, lots brought by the primary 
members are kept separate with clear demarcation as regard 
the ownership theref. Sometimes small farmers unload the 
bags of potatoes themselves; some of them bring their 
potatoes upon proper grading in their farms and place it in 
the yard in a sorted condition. However, if proper grading 
is not done by the vegetable growers, they are graded into 
the different sorts. 

 The number of persons undertaking the job varies 
depending upon the quantum of work. 

 Admittedly an industrial dispute was raised by 407 
persons; of whom 73 are potters and 335 are graders. The 
job of unloading, unpacking of gunny bags, stitching the 
gunny bags and putting them into lorries are done by porters 
whereas gradation of potatoes, weighing the auctioned 
potatoes in 45 kgs. and packing them into gunny bags are 
done by graders. Most of them are women. 

 It is stated that the members of the Society or their 
authorized representatives remain present throughout the 
auction. The auction is confirmed only with the consent of 
the members. The member has a right to decline to sell his 
produce, if he is not satisfied with the highest rate 
offered by the merchants and is entitled to hold over the 
same till the next auction takes place. 

 The Society contends that for doing various items of 
work in the yards, services of certain third parties are 
made available to the members. They are always available in 
the yards and any member whether producer or merchant may 
engage them. The work is done through the workers of the 
concerned third parties. Payment therefor is to be made by 
the persons engaging them to the said third parties 
(contractors). However, sometimes as the producer members 
may not have enough money with them, the Society makes the 
payment on their behalf by way of advance, wherefor 
allegedly written authority is obtained. The Society 
further contends that the farmers and merchants are at 
liberty to engage their own men for doing these items of 
work and some of them do the work themselves. There is no 
obligation on the part of the member to bring his produce to 
the Society's yards. He is free to sell is produce in any 
manner thought it.

It is not in dispute that the Society does not maintain 
any attendance register or wages register. The third parties 
are free to engage men of their own choice and no working 
hours are fixed or insisted. Any person normally doing the 
job may come on any day to work. The third parties engage 
more number of persons during peak season and during lean 
season less number of persons are engaged. The porters and 
graders may take up any other job.

DISPUTE BETWEEN THE PARTIES:

The appellant-Union, however, on or about 19.4. 1982 
served a charter of demands upon the Society claiming, inter 
alia, permanency in service and other benefits. A strike 
notice was also given wherefor a conciliation proceeding was 
initiated. The Society thereafter filed a suit being O.S. 
No.2293 of 1982. A writ petition was filed before this 
Court being W.P. No.23 of 1983 praying for minimum 
facilities like drinking water, toilet, rest-room, maternity 
benefits etc. The Society is said to have declared a lock 
out and a conciliation proceeding thereupon started again. 
The writ petition was thereafter withdrawn. The conciliation 
proceeding ended in a failure. 

REFERENCE:

On or about 19.5.1984, the State of Tamil Nadu issued a 
notification in exercise of its power under Section 10(1)(d) 
of the Industrial Disputes Act, 1947 referring the 
following disputes for adjudication of the Industrial 
Tribunal :

"i) Whether the non-employment of the 
workmen referred in the reference 
is justified ?

ii) To what relief ?"

PROCEEDINGS BEFORE THE TRIBUNAL:

In the aforementioned industrial reference before the 
Tribunal, witnesses were examined on behalf of the parties. 
Documents were also produced. By reason of an award dated 
5.9.1989, the Tribunal opined that there did not exist any 
relationship of employer and employee between the Society 
and the concerned persons, observing :

"36. In view of the above finding, if 
we approach this case, there is no 
convincing evidence placed by the 
petitioner to establish the master and 
servant relationship to hold that the 
persons referred in this dispute are 
only workmen of the Respondent-Society.

37. Viewed from any angle, either on 
facts or on law, the petitioner-Union 
has not substantiated that the persons 
mentioned in the Annexure are workmen 
and therefore their non-employment is 
not justified. Hence this point is 
found against the Petitioner Union."

On the said findings the reference was rejected. 

PROCEEDINGS BEFORE THE HIGH COURT:

Aggrieved thereby the appellant preferred a writ 
petition before the High Court marked as Writ Petition 
No.14659 of 1989. 

During the pendency of the said proceeding, other 
disputes also ensued resulting in closure of the yards; 
whereafter, again conciliation proceedings were initiated on 
or about 3.8.1985. The respondent-Society issued an 
advertisement in a Tamil newspaper inviting tenders for 
operations. Questioning the said action on the part of the 
Society, a writ petition was filed in the Madras High Court 
which was marked as W.P. No.9333 of 1985 praying therein for 
issuance of writ of mandamus directing the State to prohibit 
introduction of contract labour system in the Society. 
Another writ petition being W.P. No.9334 of 1985 was also 
filed wherein the petitioners prayed for issuance of a writ 
of or in the nature of mandamus directing the Society not to 
engage contract labour purported to be on the ground that 
the same is contrary to Sections 25-O and 25-T of the 
Industrial Disputes Act and Sections 7 and 12 of the 
Contract Labour (Regulation and Abolition) Act, 1970. 
Certain interim orders were passed by the High Court and 
some appeals were also filed and the matter came up before 
this Court also, being Civil Appeal No.5381 of 1985 on or 
about 26.9.1986 wherein this Court passed the following 
order :

"On behalf of the Marketing Society, 
Dr. Y.S. Chitale, learned Counsel 
assures us that hereafter workmen will 
not be permitted to be employed by 
contractors to work within the yard of 
the Society. He also assures us that 
the 407 workers previously employed may 
come back and work in the yard without 
any objection. It is open to any worker 
to go and seek employment, but 
contractors will be excluded. The case 
now pending before Industrial Tribunal 
may be disposed of expeditiously. Civil 
Misc. Petition is disposed of 
accordingly." 

By another interim order passed in Writ Petition 
No.19310 and 19311 of 1986, a learned Single Judge of the 
Madras High Court directed :

"The third respondent shall give 
employment directly to all the 407 
workers. If, after providing employment 
to these 407 workers, any more lands are 
required, then the management is free to 
give employment to such of these 
persons. The Collector of Coimbatore 
will see to it that the order of the 
Supreme Court extracted above is 
implemented in its true spirit." 

In an appeal carried out by the Society being W.A. No. 
1372 of 1986, the High Court of Madras issued the following 
directions :

"Apparently it appears to us that the 
order made by the learned single Judge 
runs counter to the order of the Supreme 
Court dated 4.12.1985. Therefore, the 
order of the learned Single Judge is 
stayed. Since the order which is in 
controversy is that of the Supreme Court, 
this is eminently a fit case where the 
parties are at liberty to get necessary 
clarification from the Supreme Court. 
Till the order is clarified by the 
Supreme Court, if the parties approach 
the Supreme Court for this, the appellant 
will implement the order dated 4.12.1985 
by way of an interim arrangement." 

On an application, this Court by an order dated 
13.4.1987, observed :

"The interim arrangement will continue 
till disposal of the writ petition in 
the High Court. Meanwhile the trial of 
the industrial dispute will be stayed. 
No order on the application for 
impleading party. All the CMPs are 
disposed of accordingly."

Another interim order was passed on 29.8.1988 in Writ 
Petition NO.9334 of 1985 in the following terms :

"In the result, the 3rd respondent is 
directed to give employment directly to 
all the 407 workers and pay the wages 
directly to them as per the order of the 
Supreme Court dated 4.12.1988. This 
petition is ordered accordingly." 

On an appeal preferred by the Society before a Division 
Bench marked as W.A. No.1261 of 1988, it was directed :

"To give quietus to the controversy in 
the writ petition, we direct that W.P. 
9334/85 along with the connected writ 
petition viz. W.P. No.9333/85 be listed 
for final hearing on 26.10.1988 at the 
top of the list before the learned 
Single Judge, who hears the date-fixed 
writ petitions." 

JUDGMENT OF THE HIGH COURT:

All the three writ petitions came up for hearing before 
a learned Single Judge of the Madras High Court. The said 
writ petitions were dismissed observing :

"The writ petitions are liable to be 
dismissed. However, having regard to 
the fact that the petitioner has made an 
application to the State Government as 
early as on 9.8.1985 as seen from 
paragraph 13 of the affidavit to 
prohibit the employment of contract 
labour under section 10 of the Act for 
loading, unloading and other activities 
of the 3rd respondent society, a 
reference to the counter affidavit filed 
by the government is necessary. 
Paragraphs 12 and 13 of the counter 
affidavit are extracted :

 "It submit that the averments in 
paragraph 13 are not correct. The 
Union has applied to the State 
Advisory Contract Labour Board to 
issue directions to the Management 
prohibiting the employment of 
contract labour under Sec.10 of the 
Act. I submit that after consultation 
with State Advisory Contract Labour 
Board the Government will take a 
decision in this matter."

This counter affidavit has been sworn to 
on 5th December, 1986. Even though 
there was no order pending these W.Ps. 
Prohibiting the Government from passing 
orders under Sec. 10 of the Act, the 
Government has not taken any action in 
spite of the averments contained in 
paragraphs 12 and 13 of the counter 
affidavits. It is for the Government to 
pass orders under Sec. 10 of the Act as 
expeditiously as possible, one way or 
other." 

Three letters patent appeals were preferred by the 
appellant herein being aggrieved by and dissatisfied 
therewith. By reason of the impugned judgment the said 
appeals were dismissed. 

The appellant is, thus, before us in these appeals. 
Civil Appeal No.1351-52 arise out of Writ Petition No.109 
and 110 of 1989 wherein certain interim orders were passed. 
Civil Appeal No.1353 of 2001 is the main appeal which arises 
out of an award of the Industrial Tribunal.

SUBMISSIONS:

Mr. N.G.R. Prasad, learned counsel appearing on behalf 
of the appellant would take us through the evidences adduced 
by the parties both oral and documentary as also the 
findings of the Industrial Tribunal and would submit that it 
and consequently the High Court committed a manifest error:

(i) in passing the impugned award insofar as they 
failed to apply the 'organisation test' in the 
light of the decisions of this court;
(ii) despite having arrived at the conclusion that the 
respondents society exercises supervision and 
control over the concerned workmen, in concluding 
that such supervision and control were not on its 
own behalf but on behalf of its members; 
(iii) in arriving at the finding that as the society 
does not carry out any manufacturing activities; 
it is not industry, inasmuch as supply of the 
services by an organisation would also give rise 
to formation of relationship of an employer and 
employees. 

 Elaborating his submissions, Mr. Prasad would contend 
that it is not in dispute that the 407 workmen had been 
working in the market yard on a daily wage basis and 
although they are said to have been employed by the third 
parties but indisputably, the society pays wages to them 
although the same is said to be reimbursed by the members of 
the society. It was pointed out that the dispute between 
the members and members are resolved by the society and 
furthermore as the concerned persons have been given token 
and are given gifts during festival season, would lead to an 
irresistible inference that the concerned workmen are 
employees of the society. 

 Mr. Prasad would argue that the principal question 
which was required to be asked was for whom do the workmen 
work and to whom they look up for their wages. It was 
submitted that the relationship between the Society and the 
workmen was required to be determined having regard to the 
following fact:

(i) work is being carried out in the premises 
belonging to the society;
(ii) wages are paid by the society;
(iii) from Ex. W7 and W8, it would appear, that the 
society exercises control over the workmen;
(iv) on festival occasions, the workmen look to the 
society for gift. 

 It was contended that the Tribunal and the High Court 
overlooked the evidences on record as regard nature of the 
job performed by the workmen as has been admitted by MW1 and 
furthermore no finding has been arrived at to the effect 
that the so-called third parties are contractors.

 The learned counsel would submit that the Tribunal has 
committed a manifest error also in holding that only because 
the society takes commission from its members, it cannot be 
an employer. It was contended that for determining the 
question as regard existence of the relationship of employer 
and employee what is required to be considered is as to 
whether the concerned workmen are part and parcel of the 
organisation. Economic reality, the learned counsel would 
contend, has also some role to play. 

 The learned counsel would urge that this Court in a 
large number of cases lifted the veil so as to come to the 
conclusion that the engagement of third parties or 
contractors may be a camouflage and there existed a 
relationship of employer and employee. Determination of 
such relationship, Mr. Prasad would aruge, do not depend 
upon the statutory liability of the employer as even in 
relation to non-statutory canteens this Court has held that 
the so-called workmen of the contractors are in effect and 
substance the workmen of the principal employer.

 Mr. Sudarsh Menon, learned counsel appearing on behalf 
of the respondent society, on the other hand, would submit 
that the society is a service society and having regard to 
the fact that the members are both growers and merchants and 
as the porters and the graders are appointed by both growers 
and merchants independently, it cannot be said that the 
society is the employer of the concerned workmen. The 
learned counsel would contend that the Industrial Tribunal, 
the learned Single Judge as also the Division Bench of the 
High Court having arrived at a finding of fact that there 
does not exist any relationship of employer and employee, 
this Court should not interfere therewith.

DETERMINATION OF RELATIONSHIP:

 Determination of the vexed questions as to whether a 
contract is a contract of service or contract for service 
and whether the concerned employees are employees of the 
contractors has never been an easy task. No decision of 
this Court has laid down any hard and fast rule nor it is 
possible to do so. The question in each case has to be 
answered having regard to the fact involved therein. No 
single test - be it control test, be it organisation or any 
other test - has been held to be the determinative factor 
for determining the jural relationship of employer and 
employee. 

There are cases arising on the borderline between what 
is clearly an employer-employee relation and what is clearly 
the independent entrepreneurial dealing. 

TESTS:

This Court beginning from Shivanandan Sharma Vs. Punjab 
National Bank Ltd. [1955] 1 L.L.J. 688 : AIR 1955 SC 404 and 
Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra 
and others [1957] 1 L.L.J. 477 : AIR 1957 SC 264 observed 
that supervision and control test is the prima facie test 
for determining the relationship of employment. The nature 
or extent of control required to establish such relationship 
would vary from business to business and, thus, cannot be 
given a precise definition. The nature of business for the 
said purpose is also a relevant factor. Instances are 
galore there where having regard to conflict in decisions in 
relation to the similar set of facts, the Parliament has to 
intervene as, for example, in the case of workers rolling 
bidis.

 In a given case it may not be possible to infer that a 
relationship of employer and employee has come into being 
only because some persons had been more or less continuously 
working in a particular premises inasmuch as even in 
relation thereto the actual nature of work done by them 
coupled with other circumstances would have a role to play. 

 In V.P. Gopala Rao Vs. Public Prosecutor, Andhra 
Pradesh [1970] 2 L.L.J. 59 : AIR 1970 SC 66, this Court said 
that it is a question of fact in each case whether the 
relationship of master and servant exists between the 
management and the workmen and there is no abstract a priori 
test of the work control required for establishing the 
control of service. A brief resume of the development of 
law in this point was necessary only for the purpose of 
showing that it would not be prudent to search for a formula 
in the nature of a single test for determining the vexed 
question. 

RELEVANT FACTORS:

 The control test and the organization test, therefore, 
are not the only factors which can be said to decisive. 
With a view of elicit the answer, the court is required to 
consider several factors which would have a bearing on the 
result : (a) who is appointing authority; (b) who is the pay 
master; (c) who can dismiss; (d) how long alternative 
service lasts; e) the extent of control and supervision; (f) 
the nature of the job, e.g. whether, it is professional or 
skilled work; (g) nature of establishment; (h) the right to 
reject.

 With a view to find out reasonable solution in a 
problematic case of this nature, what is needed is an 
integrated approach meaning thereby integration of the 
relevant tests wherefor it may be necessary to examine as to 
whether the workman concerned was fully integrated into the 
employer's concern meaning thereby independent of the 
concern although attached therewith to some extent. 

I.T. Smith and J.C. Wood in 'Industrial Law', third 
edition, at page 8-10 stated:

"In spite of the obvious importance of 
the distinction between an employee and 
an independent contractor, the tests to 
be applied are vague and may, in a 
borderline case, be difficult to apply. 
Historically, the solution lay in 
applying the 'control' test, i.e., could 
the employer control not just what the 
person was to do, but also the manner of 
this doing it - if so, that person was 
his employee. In the context in which 
it mainly arose in the nineteenth 
century, of domestic, agricultural and 
manual workers, this test had much to 
commend it, but with the increase 
sophistication of industrial processes 
and the greater numbers of professional 
and skilled people being in salaried 
employment, it soon became obvious that 
the test was insufficient (for example 
in the case of a doctor, architect, 
skilled engineer, pilot, etc.) and so, 
despite certain attempts to modernise 
it, it is now accepted that in itself 
control is no longer the sole test, 
though it does remain a factor and 
perhaps, in some cases, a decisive one. 
In the search for a substitute test, 
ideas have been put forward of an 
'integration' test, i.e. whether the 
person was fully integrated into the 
employer's concern, or remained apart 
from and independent of it. Once again, 
this is not now viewed as a sufficient 
test in itself, but rather as a 
potential factor (which may be useful in 
allowing a court to take a wider and 
more realistic view). The modern 
approach has been to abandon the search 
for a single test, and instead to take a 
multiple or 'pragmatic' approach, 
weighing upon all the factors for and 
against a contract of employment and 
determining on which side the scales 
eventually settle. Factors which are 
usually of importance are as follows - 
the power to select and dismiss, the 
direct payment of some form of 
remuneration, deduction of PAYE and 
national insurance contributions, the 
organisation of the workplace, the 
supply of tools and materials (though 
there can still be a labour-only sub-
contract) and the economic realities (in 
particular who bears the risk of loss 
and has the chance of profit and whether 
the employee could be said to be 'in 
business on his own account'). A 
further development in the recent case 
law (particularly concerning atypical 
employments) has been the idea of 
'mutuality of obligations' as a possible 
factor, i.e. whether the course of 
dealings between the parties 
demonstrates sufficient such mutuality 
for there to be an overall employment 
relationship."

(See also Ram Singh and Others Vs. Union Territory, 
Chandigarh & Ors. JT 2003 (8) SC 345)

 In Mersey Docks and Harbour Board Vs. Coggins & 
Griffith Liverpool Ltd. [1947] A.C. 1, Lord Porter pointed 
out:

"Many factors have a bearing on the 
result. Who is paymaster, who can 
dismiss, how long the alternative 
service lasts, what machinery is 
employed, have all to be kept in mind. 
The expressions used in any individual 
case must always be considered in regard 
to the subject-matter under discussion 
but amongst the many tests suggested I 
think that the most satisfactory, by 
which to ascertain who is the employer 
at any particular time is to ask who is 
entitled to tell the employee the way in 
which he is to do the work upon which he 
is engaged."

 If the provisions of the contract as a whole are 
inconsistent with its being a contract of service, it will 
be some other kind of contract and the person doing the work 
will not be a servant. (See Ready Mixed Concrete (South 
East) Ltd. Vs. Minister of Pensions and National Insurance, 
1 [1968] 2 W.L.R. 775)

 The decisions of this Court lead to one conclusion that 
law in this behalf is not static. In Punjab National Bank 
vs. Ghulam Dastagir [(1978) 1 I.L.J. 312 = (1978) 2 SCC 
358], Krishna Iyer, J. observed "to crystalise criteria 
conclusively is baffling but broad indications may be 
available from decisions".

 The case at hand, as noticed hereinbefore, poses 
intricate question having regard to the facts and 
circumstance of the case. 

 In our endevour to find out an answer, let us at the 
first instance look at the object of the Society.
SOCIETY:

 The Society had a humble beginning but it had a 
laudable object, as would appear from its bye-laws. The 
objects of the Society are stated as under :

"a) To encourage self help, thrift and 
cooperation among members;

b) To purchase seeds, manure, 
implements and other agricultural 
requirements for sale or 
distribution to members or members 
of the affiliated cooperative 
societies or to other cooperative 
societies;

c) To arrange for sale of potatoes, 
other vegetables and fruits of the 
members and the members of 
affiliated cooperative societies to 
their best advantage;

d) To advance loans to members and 
members of affiliated cooperative 
societies on the pledge of their 
agricultural produce and for the 
purchase of manure to deserving 
members of primary societies 
provided the loans are given to 
such members through the societies 
concerned;

e) To act as agents of the cooperative 
institutions in marketing their 
produce;

f) To act as agents for the joint 
purchase of the domestic and other 
requirements of its members and 
members of affiliated cooperative 
societies;

g) To act as agent of those members 
which are affiliated societies in 
the matter of disbursing and 
receiving loans sanctioned to 
individual members of such 
societies;

h) To act as the agent of those 
members which are affiliated 
societies in the matter of 
receiving for safe custody in its 
godowns or elsewhere the produce 
pledged to such societies by their 
individual members;

i) To propagate and supply pure seeds;

j) To own and hire lorries whenever 
necessary for the use of the 
members, members of affiliated 
cooperative societies and other 
public for hire, for the transport 
of manure, potatoes, other 
vegetables, fruits, implements 
etc.;

k) To disseminate among the members 
and members of the affiliated 
cooperative societies a knowledge 
of the latest improvement in 
agriculture by arranging actual 
demonstration carried out by each 
individual member in his own land 
according to the advice of the 
agricultural department;

l) To process raw material belonging 
to the members and members of 
affiliated cooperative societies or 
purchased by the society; and

m) To arrange for packing and grading 
of agricultural produce of the 
members and members of the 
affiliated cooperative societies.

n) Economically weak and small farmers 
having no holding power, thus, 
subjected to exploitation of the 
trading community are the 
beneficiaries. 

o) Clause 34 of the bye-laws states :

"That the Board of Directors may 
arrange for the sale of produce of 
members and members of affiliated 
cooperative societies pledged to or 
deposited with the society and disburse 
sale proceeds to them immediately after 
such lots are sold. In arranging for 
the sale they shall act only as the 
agent of the members and members of 
affiliated cooperative societies 
concerned and shall not do the business 
as owner on behalf of the society. Any 
loss arising out of the business shall 
be borne by the members of the 
affiliated cooperative societies 
concerned and not by the society." 

 It is not in dispute that the Society is not a trading 
society. It cannot buy or sell the agricultural produce or 
the fruits except in a case where the proviso appended to 
bye-law 34 is attracted which is in the following terms :

"When the society enters into a 
contract with the Government of Military 
Department of cooperative institutes or 
with any firm which has entered into a 
contract with the Government or military 
department for supply of produce, the 
Board may purchase the produce outright 
whenever necessary and sell it as owner 
on behalf of the society."

BURDEN OF PROOF:

It is a well-settled principle of law that the person 
who sets up a plea of existence of relationship of employer 
and employee, the burden would be upon him. 

 In N.C. John Vs. Secretary Thodupuzha Taluk Shop and 
Commercial Establishment Workers' Union and Others [1973 
Lab. I.C. 398], the Kerala High Court held:

"The burden of proof being on the 
workmen to establish the employer-
employee relationship an adverse 
inference cannot be drawn against the 
employer that if he were to produce 
books of accounts they would have proved 
employer-employee relationship."

In Swapan das Gupta and Others Vs. The First Labour 
Court of West Bengal and Others [1975 Lab. I.C. 202] it has 
been held:

"Where a person asserts that he was a 
workmen of the Company, and it is denied 
by the Company, it is for him to prove 
the fact. It is not for the Company to 
prove that he was not an employee of the 
Company but of some other person." 

 The question whether the relationship between the 
parties is one of the employer and employee is a pure 
question of fact and ordinarily the High Court while 
exercising its power of judicial review shall not interfere 
therewith unless the finding is manifestly or obviously 
erroneous or perverse.

APPLICATION OF LAW IN THE PRESENT CASE: 

 Having regard to the materials on records, we may at 
the outset notice the findings of the Industrial Tribunal 
which are : (1) having regard to the object of the Society, 
there is no need to employ labourers far less giving 
continuous employment to them. Exs.W-7, W-8 and W-12 do not 
show that superintendence control in respect of grading, 
weighing etc. is absolute. The memo. dated 27.8.1982 
appears to have been issued having regard to a complaint 
made by traders who participate in the auction to the effect 
that the staff are not showing proper care in grading, 
weighing and stacking the goods in the Society and they have 
to purchase the under-quality and under-weight vegetables 
resulting in continuous loss to them. It is in that 
situation a direction was issued. A further complain was 
made that the Society employs small boys in grading, 
weighing and stacking of goods. In that situation the 
Godown Assistants were directed to see that no person who is 
less than 18 years is engaged for unloading, grading and 
stacking of cabbage and the workmen should be classified 
into two groups, one for unloading and another for grading, 
weighing and stacking. 

 The Tribunal in this behalf observed :

"...Incidentally it is also significant 
to note that the society has been formed 
to protect the interest of the members. 
The society cannot keep quiet by stating 
it is the contractors job and it has no 
responsibility. In my opinion nothing 
is wrong in issuing the circular Ex.W-8, 
only to pull up the irresponsible of the 
staff and other workers. Therefore it 
would not amount to that the Respondent-
Society has exercised its powers on 
their own workers and therefore they are 
employees." 

 Although in the said letter, the word 'workmen' of the 
Society had been used, in all probability, the said 
expression had been used loosely. The Office Order dated 
22.8.1963 provides for the job assigned to their regular 
staff. 

The job of the Marketing Supervisor is as under :

"7. Marketing supervisor :

 He should attend to the speedy 
disposal of the potato stocks of the 
members to their best advantage. He 
*should see that all the stocks 
purchased by the Merchants are taken 
delivery of without delay. He should 
control the staff working in the potato 
godowns and see that no complaints are 
received from members and merchants 
etc., regarding purchase or sale of 
potatoes. He should supervise grading, 
weighing and packing of potatoes 
promptly and properly."

 The job of the Marketing Supervisor, therefore, do not 
show that complete control and supervision is upon the 
society. The Marketing Supervisor was allotted the job to 
see that the work is carried out smoothly so that neither 
the purchaser members nor the merchant members are put to 
any disadvantage.

 Having regard to the interest of the farmers as also 
the merchants, the Marketing Supervisor was asked to 
supervise grading, weighing and packing of potatoes promptly 
and properly.

 The purported decision of the Society to give certain 
benefits to the workmen too is not decisive as the same had 
become a conciliation proceeding. The said conciliation 
proceeding, as noticed hereinbefore, had to be initiated 
having regard to the consequence upon a strike notice given 
by the workmen which could be averted due to conciliatory 
efforts. It would appear from the same that the 
conciliation efforts were made by the concerned Conciliation 
Officer. However, despite conciliation, graders and porters 
went on strike on 19.10.1982 whereafter again a conciliation 
proceeding was held pursuant whereto or in furtherance 
whereof certain advises and suggestions had been given by 
the conciliation officer based on agreement between the 
parties.

The finding of the Tribunal in respect of Ex.W-12 is in 
the following terms : 

"...Even under Ex.W-12 it has been 
stated to pay the festival advance to 
the graders through the representatives. 
Therefore it cannot be said they have 
been asked to pay directly the festival 
advance amount. That apart, it is 
relevant to note at this stage that this 
document has not been signed by any 
party. Considering these above facts 
and mianly taking into account the 
object of the society coupled with the 
duties envisaged under Clause 34 under 
Ex.M-22 bye-laws, it is impossible to 
come to a conclusion that the society 
has exercised these powers under Ex.W-7, 
Ex.W-8 and Ex.W-12 as an employer..." 

 The Tribunal has further come to the conclusion that 
token number had been given to the porters during emergency 
to save them from police harassment and no such token was 
issued after cessation of emergency. 

 It is true, as contended by Mr. Prasad, that the 
Tribunal sought to distinguish certain cases relied upon by 
the learned counsel for the parties holding that in those 
cases, the employers were manufacturing units and were doing 
regular work but the observation of the Tribunal must be 
understood having regard to the totality of the 
circumstances as it has observed that in such cases 
employers being manufacturing units and were doing regular 
work and the nature of business was such which required 
continuous supervision and furthermore the workmen who were 
required to work on fixed hours which was not the case in 
the present one.

 The learned Tribunal has further found that the volume 
of job as also the number of persons working depend upon the 
season inasmuch in the peak season a large number of persons 
would be appointed whereas in the off season the number of 
appointments would be less. The Tribunal had further held 
that the Society acts as a commission agent. The submission 
of Mr. Prasad to the effect that the Tribunal has ignored 
the question of employment of contractor, some of whom may 
be under a legal incapacity to do so but the same again 
would not be decisive. Furthermore, even in terms of 
Section 21 of the Contract Labour (Regulation and Abolition) 
Act, the principal employer has a statutory obligation to 
see that the concerned employees are paid their wages and 
deduct the same from the bills of the contractors. It has 
also come on records that the remuneration paid by the 
Society on behalf of its members are done through Maistry 
and not directly to the concerned workers. We have noticed 
hereinbefore in details the nature of the services rendered 
by the Society to the different categories of its members, 
as also the right of the members to approach the third 
parties to take the services of the workmen working under 
them for unloading, grading and loading. 

 In nutshell, the following can be deduced :

1. Growers and merchants are free to engage 
their own porters and graders or can do the 
work by themselves. There is, thus, no 
obligation on the societies godown or engage 
service of the workers, waiting in the yard.

2. No attendance registers or wage registers are 
maintained in respect of graders and porters.

3. The society has no control as who should do 
the work and the members are free to engage 
any worker available in the yard.

4. No working hours are fixed for porters and 
graders. They are free to come and go at 
will.

5. The workmen have no obligation to report to 
work everyday.

6. Society has no control regarding the number 
of workers to be engaged and the work to be 
turned out by the porters and graders.

7. No appointment order is issued by the 
society.

8. No disciplinary control over the porters and 
graders is exercised by the Society.

9. Total supervision or control is not exercised 
by the Society over the work done by porters 
or graders.

10. Porters and graders can go for other work and 
there is no obligation to work only in the 
yards.

11. Payment is normally made to a worker by the 
member. No direct payment is made to workers 
by the society. The society makes payment 
only on the authorization on behalf of that 
member.

12. Under the price guarantee scheme introduced 
by the society if the prices offered by the 
merchants are not acceptable to the members 
then the society guarantees the minimum 
price. If the produce sold by the society 
fetches more than the minimum guaranteed 
price excess is passed on to the member, if 
the price is less than the minimum price, the 
loss therefor is borne by the society.

13. Porters and graders also work under the 
supervision of members and merchants. 
Amounts paid by the society to a 
worker/authorized by a member is distributed 
by him to other workmen and the Society is 
not concerned with the number of workers 
engaged and amounts distributed to them. 

The farmers themselves are indigent persons. It is not 
a case where the concerned workmen are without any master. 
The third parties employ and pay them their salary or wages 
invariably. They have the right to appoint or not to 
appoint and the little amount of supervision made by the 
officers of the Society are for the purpose of overseeing 
the smooth transactions and not for its own benefit. The 
contract is entered into by different parties for different 
purposes. The services of the workmen by the farmers or 
traders may or may not be taken. There may be disputes 
between one class of members with the other which 
incidentally may have some bearing on the performance of job 
by the concerned workmen. 

 We may further notice that the learned counsel 
appearing on behalf of the respondents has drawn our 
attention to the statements made in the counter affidavit to 
the effect that the President of Petitioner Association runs 
the biggest private mundy in Mettupalayam and adopts the 
same procedure of engaging workers and the job of unloading, 
cleaning, sorting, grading etc. is done by the Respondent 
society. It has further been stated that there are about 60 
such private mundies at Mettupalayam and although every 
mundy adopts the same pattern of engaging workers but except 
in the case of the respondent no industrial dispute had been 
raised in respect of any other mundy.

EMPLOYMENT AND NON-EMPLOYMENT :

 Employment and non-employment indisputably is a matter 
which is specified in the Second and the Third Schedules of 
the Industrial Disputes Act. The concept of employment 
involves three ingredients, which are : (i) Employer - one 
who employs, i.e. engages the services of other persons; 
(ii) Employee - one who works for another for hire; and 
(iii) Contract of employment - the contract of service 
between the employer and the employee whereunder the 
employee agrees to serve the employer subject to his control 
and supervision. On the other hand, non-employment being 
negative of the expression "employment" would ordinarily 
mean a dispute when the workmen is out of service. When 
non-employment is referable to an employment which at one 
point of time was existing would be a matter required to be 
dealt with differently than a situation where non-employment 
would mean a contemplated employment. 

 The question of non-employment in the later category 
would arise only when the employer refuses to give work to a 
person who pleads and proves to the satisfaction of the 
management that he was entitled thereto. However, the 
dispute regarding the refusal to employ the persons who were 
promised to be employed is not connected with the employment 
or non-employment within the meaning of Section 2(k) of the 
Act. (See Workers of Sagar Talkies VS. Odean Cinema [1957] 
1 L.L.J. 639) 

 The reference made by the State of Tamil Nadu was 
absolutely vague. The very fact that reference suggests 
that the workmen are not being employed by the Society is 
itself a pointer to the fact that it is not the case where 
the State Government has proceeded on the basis that there 
existed such a relationship. Save and except in certain 
situations, as for example when there exists a provision in 
the standing order certified under Industrial Employment 
(Standing Orders) Act, 1946 or a memorandum of settlement 
require the employer to employ certain persons, directions 
ordinarily cannot be issued by the Tribunal directing the 
employer to give employment.
CAMOUFLAGE:

 Whether a contract is a sham or camouflage is not a 
question of law which can be arrived at having regard to the 
provisions of Contract Labour (Regulation and Abolition) 
Act, 1970. It is for the industrial adjudicator to decide 
the said question keeping in view the evidences brought on 
records. 

 In Municipal Corporation of Greater Mumbai Vs. K.V. 
Sharamik Sangh and Others [(2002) 4 SCC 609], non-
maintenance of records by the contractors was held to be not 
conclusive for determination as to whether the workmen were 
working under the contractor. The Court held that such 
disputed questions of fact cannot be gone into in a civil 
proceeding.

 In Sarva Shramik Sangh vs. M/s Indian Smelting & 
Refining Co. Ltd. & Ors. [JT 2003 (8) SC 243], this Court 
observed :

"...A jurisdictional fact is one on the 
existence or otherwise of which depends 
assumption or refusal to assume 
jurisdiction by a court, tribunal or the 
authority. Said fact has to be 
established and its existence proved 
before a Court under the Maharashtra Act 
can assume jurisdiction of a particular 
case. If the complaint is made prima 
facie accepting existence of the 
contractor in such a case what has to be 
first established is whether the 
arrangement or agreement between the 
complainant and the contractor is sham 
or bogus. There is an inherence 
admission in such a situation that 
patently the arrangement is between the 
complainant and the contractor and the 
claim for a new and different 
relationship itself is a disputed fact. 
To put it differently, the complainant 
seeks for a declaration that such 
arrangement is not a real one but 
something which is a fagade. There is 
no direct agreement between the 
complainant and the principal employer 
and one such is sought to be claimed but 
not substantiated in accordance with 
law. The relief in a sense relates to a 
legal assumption that the hidden 
agreement or arrangement has to be 
surfaced..."

It was also observed :

"The common thread passing through all 
these judgments is that the threshold 
question to be decided is whether the 
industrial dispute could be raised for 
abolition of the contractor labour 
system in view of the provisions of the 
Maharashtra Act. What happens to an 
employee engaged by the contractor if 
the contract made is abolished is not 
really involved in the dispute. There 
can be no quarrel with the proposition 
as contended by the appellants that the 
jurisdiction to decide a matter would 
essentially depend upon pleadings in the 
plaint. But in a case like the present 
one, where the fundamental fact decides 
the jurisdiction to entertain the 
complaint itself the position would be 
slightly different. In order to 
entertain a complaint under the 
Maharashtra Act, it has to be 
established that the claimant was an 
employee of the employer against whom 
complaint is made, under the ID Act. 
When there is no dispute about such 
relationship, as noted in paragraph 9 of 
CIPLA's case (supra) the Maharashtra Act 
would have full application. When that 
basic claim is disputed obviously the 
issue has to be adjudicated by the forum 
which is competent to adjudicate..." 

CASE LAWS :

 In the aforementioned backdrop, let us take note of 
certain decisions operating in the field vis-`-vis the 
factual matrix obtaining therein.

 D.C. Dewan Mohideen Sahib & Sons vs. The Industrial 
Tribunal, Madras [(1964 (7) SCR 646 = 1964 (2) LLJ 633] is a 
case which involved workers who used to take leaves home for 
cutting them in proper shape. However, the actual rolling 
by filling the leaves with tobacco took place in places 
what were called contractors' factories. The bidis so 
rolled would be delivered to the appellant and nobody-else. 
The price of the raw-material as also the finished product 
would remain the same as fixed by the appellant therein. 
This Court having regard to the materials on records arrived 
at a finding of fact that the intermediaries were mere 
agents or branch managers appointed by the management and 
the relationship of employer and employee subsisted between 
the appellant and the bidis rollers, inter alia, on the 
ground that the so-called independent contractors served no 
particular duties and discharged no special functions and 
had no independence at all. They were impecunious persons 
who could hardly afford to have any factory of their own and 
in fact some of them were ex-employees of the appellant. 

 In Silver Jubilee Tailoring House and Others vs. Chief 
Inspector of Shops and Establishments and Another [(1974) 3 
SCC 498], the job required to be performed was skilled and 
professional in nature. Mathew, J. speaking for the Bench 
observed that the test of right to control the manner of 
doing the work as traditionally formulated cannot be treated 
as an exclusive test. The court applied organization test 
in the fact situation obtaining therein laying importance on 
the fact that the employer provides the equipment and 
stating that where a person hires out a piece of work to an 
independent contractor, he expects the contractor to 
provided all the necessary tools and equipments, whereas if 
he employs a servant he expects to provide the same himself. 
The supply of machine was highlighted having regard to that 
fact that the sewing machine on which the workers do the 
work generally belong to the employer is an important 
consideration for deciding the relationship of master and 
servant. Besides the same the right of the employer to 
reject the end product and directing the worker to restitch 
it also led this court to conclude that the element of 
control and supervision was also present.

 However, in a slightly different fact situation where a 
person working as a part-time accountant for a long number 
of years who used to look after his own partnership business 
after working hours, was held to be not a workman. (See 
W.H.D. Cruz & Sons Vs. M.E. Thomas [1996] 1 L.L.J. 706 
(Ker.)) 

 In M/s Shining Tailors vs. Industrial Tribunal II, 
U.P., Lucknow and Others [(1983) 4 SCC 464], payments used 
to be made to the workmen on piece-rates in a big tailoring 
establishment. Desai, J. in the facts and circumstances of 
the case observed that right of removal of the workmen or 
not to give the work had the element of control and 
supervision which had been amply satisfied in that case. 
The question which arose for consideration was as to whether 
only because the concerned workman was paid on piece rate 
was itself indicative of the fact that there existed a 
relationship of principal employer and independent 
contractor. 

It is, however, relevant to note that therein also an 
observation was made to the effect that the method of 
payment in various occupations is different in different 
industries.

 In Indian Overseas Bank vs. I.O.B. Staff Canteen 
Workers' Union and Another [(2000) 4 SCC 245], this Court 
observed :

"The standards and nature of tests to 
be applied for finding out the existence 
of master and servant relationship 
cannot be confined to or concretized 
into fixed formula(e) for universal 
application, invariably in all class or 
category of cases. Though some common 
standards can be devised, the mere 
availability of any one or more or their 
absence in a given case cannot by itself 
be held to be decisive of the whole 
issue, since it may depend upon each 
case to case and the peculiar device 
adopted by the employer to get his needs 
fulfilled without rendering him liable. 
That being the position, in order to 
safeguard the welfare of the workmen, 
the veil may have to be pierced to get 
at the realities. Therefore, it would 
be not only impossible but also not 
desirable to lay down abstract 
principles or rules to serve as a ready 
reckoner for all situations and thereby 
attempt to compartmentalize and peg them 
into any pigeonhole formulae, to be 
insisted upon as proof of such 
relationship. This would only help to 
perpetuate practicing unfair labour 
practices than rendering substantial 
justice to the class of persons who are 
invariably exploited on account of their 
inability to dictate terms relating to 
conditions of their service. Neither 
all the tests nor guidelines indicated 
as having been followed in the decisions 
noticed above should be invariably 
insisted upon in every case, nor the 
mere absence of any one of such criteria 
could be held to be decisive of the 
matter. A cumulative consideration of a 
few or more of them, by themselves or in 
combination with any other relevant 
aspects, may also serve to be a safe and 
effective method to ultimately decide 
this often agitated question. Expecting 
similarity or identity of facts in all 
such variety or class of cases involving 
different type of establishments and in 
dealing with different employers would 
mean seeking for things, which are only 
impossible to find." 

 Having regard to the fact that therein a cooperative 
canteen was promoted with the consent of the management by 
serving members of the Bank staff, which was running within 
the bank's premises and with the funds, subsidy and 
infrastructural facilities provided exclusively by the Bank, 
it was held that there existed a relationship of master and 
servant. 

However, we may notice that almost in a similar 
situation in Employers in relation to the Management of 
Reserve Bank of India vs. Workmen [(1996) 3 SCC 267], it was 
held that in the absence of statutory or other legal 
obligations and in the absence of any right in the Bank to 
supervise and control the work or details there in any 
manner regarding the canteen workers employed in the three 
types of canteens, it cannot be said that relationship of 
master and servant existed between the Bank and the various 
persons employed in the three types of canteens and in that 
situation, the demand for regularization was considered to 
be unsustainable.

In our opinion, the statutory canteen or other canteen 
run by the employer in his premises stands absolutely on a 
different footing. In determining the relationship of 
employer and employee, as has been noticed by this Court in 
Steel Authority of India Ltd. & Others vs. National Union 
Waterfront Workers and Others [(2001) 7 SCC 1], the said 
question has no relevance. 

In Mishra Dhatu Nigam Ltd., etc. vs. M. Venkataiah & 
Ors. etc. etc. [JT 2003 (7) SC 95], as the appellants were 
required by the Factories Act to provide canteen facilities 
and since the workers engaged through the contractors had 
been held to be the employees of the principal employers, 
this Court held that the workers engaged through contractors 
were entitled for regularization of their services. 
Although we have reservation about the correctness or 
otherwise of the said decision but we need not go into the 
said question inasmuch even therein, the court noticed that 
the decision in Steel Authority of India Ltd. (supra) stands 
on a different footing.

In Indian Banks Association vs. Workmen of Syndicate 
Bank and Others [(2001) 3 SCC 36], the question which arose 
for consideration was as to whether the deposit collectors 
who received commission is in reality a wage which would 
depend on the productivity. Such commission was paid for 
promoting the business of the bank. Having regard to the 
fact that the banks have control over the deposit 
collectors, they were considered to be their own workers.

In Indian Banks Association (supra) the reference which 
was made for adjudication of the Industrial Tribunal was as 
follows :

"Whether the demands of the Commission 
Agents or as the case may be Deposit 
Collectors employed in the banks listed 
in the annexure that they are entitled 
to pay scales, allowances and other 
service conditions available to regular 
clerical employees of those banks is 
justified ? If not, to what relief are 
the workmen concerned entitled and from 
which date ?" 

Having regard to the evidences both oral and 
documentary led by the parties, the Tribunal directed :

"All those Deposit Collectors and 
Agents who are below the age of 45 years 
on 3.10.1980 (the date of the first 
reference of this industrial dispute) 
shall be considered for regular 
absorption for the post of clerks and 
cashiers if they are matriculates and 
above including qualified graduates and 
postgraduates. They may be taken to 
banks services as regular employees if 
they pass the qualifying examinations 
conducted by the banks. Those who are 
absorbed shall be treated on a par with 
regular clerical employees of the Bank. 
Those who have qualified 8th class and 
below matriculation shall be considered 
for absorption as sub-staff by 
conducting qualifications examination.

 As regards the Deposit Collectors 
and Agents who are above 45 years of age 
on the date 3.10.1980 and also those who 
are unwilling to be absorbed in regular 
banks service shall be paid the full 
back wage of Rs.750.00 per month linked 
with a minimum deposit of Rs.7500.00 per 
month and they should be paid incentive 
remuneration at 2% for collection of 
over and above 7500.00 per month and 
they should also pay uniform conveyance 
of Rs.50 per month for deposit of less 
than Rs.10,000.00 and Rs.100.00 per 
month for deposits of more than 
Rs.10,000.00 up to or above Rs.30,000.00 
per month they should be paid gratuity 
of 15 days' commission for each year of 
service rendered." 

Thus in that decision, a scheme was formulated.

However, we may notice that in Union of India and 
Others vs. K.V. Baby and Another [(1998) 9 SCC 252], this 
Court observed :

"...However, persons who are engaged on 
the basis of individual contracts to 
work on a commission basis cannot, by 
the very nature of their engagement, be 
equated with regular employees doing 
similar work..." 

In Bharat Heavy Electricals Ltd. vs. State of U.P. & 
Others [(2003) 6 SCC 528], the concerned workmen were 
engaged as gardeners to sweep, clean, maintain and look 
after the lawns and parks inside factory premises and campus 
of the residential colony of the appellant through the 
agencies of the Respondent Nos.3 to 5; therein their 
services were terminated pursuant whereto an industrial 
dispute was raised before the Tribunal, the employer did not 
produce any records. Having applied the control test and in 
view of the fact that the records of the concerned workmen 
had not been produced, this Court did not interfere with the 
award of the Tribunal and the judgment of the High Court.

In Shri Chintaman Rao and Another vs. The State of 
Madhya Pradesh [1958 SCR 1340], this Court observed :

"...The concept of employment involves 
three ingredients (1) employer (2) 
employee and (3) the contract of 
employment. The employer is one who 
employs, i.e. one who engages the 
services of other persons. The employee 
is one who works for another for hire. 
The employment is the contract of 
service between the employer and the 
employee whereunder the employee agrees 
to serve the employer subject to his 
control and supervision..." 

Following the decision of this Court in Shri Chintaman 
Rao (supra), this Court in Shankar Balaji Waje vs. The State 
of Maharashtra [AIR 1962 SC 517], held:

"Employment brings in the contract of 
service between the employer and the 
employed. We have mentioned already that 
in this case there was no agreement or 
contract of service between the 
appellant and Pandurang. What can be 
said at the most is that whenever 
Pandurang went to work, the appellant 
agreed to supply him tobacco for rolling 
bidis and that Pandurang agreed to roll 
bidis on being paid at a certain rate 
for the bidis turned out. The appellant 
exercised no control and supervision 
over Pandurang" 

In Dharangadhara Chemical Works Ltd. Vs. State of 
Saurashtra & Ors. [AIR 1957 SC 264], this Court upon 
noticing several authorities held :
"The principle which emerges from these 
authorities is that the prima facie test 
for the determination of the 
relationship between master and servant 
is the existence of the right in the 
master to supervise and control the work 
done by the servant not only in the 
matter of directing what work the 
servant is to do but also the manner in 
which he shall do his work, or to borrow 
the words of Lord Uthwatt at page 23 in 
Mersey Docks and Harbour Board v. 
Coggins & Griffith (Liverpool) Ltd., 
[[1947] 1 A.C. 1, at p. 23.], "The 
proper test is whether or not the hirer 
had authority to control the manner of 
execution of the act in question". 
The nature or extent of control 
which is requisite to establish the 
relationship of employer and employee 
must necessarily vary from business to 
business and is by its very nature 
incapable of precise definition. As has 
been noted above, recent pronouncements 
of the Court of Appeal in England have 
even expressed the view that it is not 
necessary for holding that a person is 
an employee, that the employer should be 
proved to have exercised control over 
his work, that the test of control was 
not one of universal application and 
that there were many contracts in which 
the master could not control the manner 
in which the work was done (Vide 
observations of Somervell, L.J., in 
Cassidy v. Ministry of Health (supra), 
and Denning, L.J., in Stevenson, Jordan 
and Harrison Ltd. v. MacDonald and Evans 
(supra).) 
The correct method of approach, 
therefore, would be to consider whether 
having regard to the nature of the work 
there was due control and supervision by 
the employer or to use the words of 
Fletcher Moulton, L.J., at page 549 in 
Simmons v. Health Laundry Company 
[[1910] 1 K.B. 543 at pp. 549, 550] :- 
"In my opinion it is impossible to 
lay down any rule of law 
distinguishing the one from the 
other. It is a question of fact to 
be decided by all the circumstances 
of the case. The greater the amount 
of direct control exercised over 
the person rendering the services 
by the person contracting for them 
the stronger the grounds for 
holding it to be a contract of 
service, and similarly the greater 
the degree of independence of such 
control the greater the probability 
that the services rendered are of 
the nature of professional services 
and that the contract is not one of 
service." 

In Management of M/s Puri Urban Cooperative Bank vs. 
Madhusudan Sahu and Another [AIR 1992 SC 1452], this Court 
observed :

"...It stands established that 
Industrial Law revolves on the axis of 
master and servant relationship and by a 
catena of precedents it stands 
established that the prima facie test of 
relationship of master and servant is 
the existence of the right in the master 
to supervise and control the work done 
by the servant (the measure of 
supervision and control apart) not only 
in the matter of directing what work the 
servant is to do but also the manner in 
which he shall do his work..." 

However, we may note that in Workmen of the Canteen of 
Coates of India Ltd. vs. Coates of India Ltd. (Civil Appeal 
No.3479/1987 disposed of on 28.8.1996, this Court observed :

"...some requirement under the 
Factories Act of providing a canteen in 
the industrial establishment, is by 
itself not decisive of the question or 
sufficient to determine the status of 
the persons employed in the canteen. 
The effect, if any, relating to 
compliance of the provisions of 
Factories Act is a different matter 
which does not arise for consideration 
in the present case." 

[See also Bombay Canteen Employees' Association vs. 
Union of India, [(1997) 6 SCC 723].

On the aforementioned backdrop of legal principles, We 
may now consider the Constitution Bench judgment of this 
Court in Steel Authority of India Limited (supra). The 
principal question which arose for consideration therein was 
as to whether having regard to the provisions contained in 
Section 10 of the Contract Labour (Regulation and 
Abolition) Act, the workmen employed by the contractors in 
the event of abolition of contract labour were entitled to 
be automatically absorbed in the services of the principal 
employer. While answering the question in the negative the 
court reversed the earlier decision of this Court in Air 
India Statutory Corporation and Others vs. United Labour 
Union and Others [(1997) 9 SCC 377]. This Court referring 
to a large number of decisions and tracing the history of 
the Contract Labour (Regulation and Abolition) Act, noticed 
that the Industrial Tribunal although prior to coming into 
force could issue directions for such regularization but 
such directions could not be issued after coming into force 
of the Act. In view of the Constitution Bench decision in 
M/s Gammon India Ltd. and Others etc. vs. Union of India and 
Others [(1974) 1 SCC 596], the Court held that although the 
principle that a beneficial legislation needs to be 
construed liberally in favour of the class for whose favour 
it is intended, the same would not extend to reading in the 
provisions of the Act what the legislature has not provided 
whether expressly or by necessary implication, or 
substituting remedy or benefits for that provided by the 
legislature. Upon analyzing the case law, the categories 
of cases were sub-divided into three stating :

"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."

The instant case although was sought to be put in 
category (ii) as referred to Steel Authority (supra) by Mr. 
Prasad, he, as noticed hereinbefore, took us also to the 
case law falling in Class (i) and Class (iii) 
aforementioned. 

There cannot be any doubt whatsoever that where a 
person is engaged through an intermediary or otherwise for 
getting a job done, a question may arise as the appointment 
of an intermediary was merely sham and nominal and rather 
than camouflage where a definite plea is raised in 
Industrial Tribunal or the Labour Court, as the case may be, 
and in that event, it would be entitled to pierce the veil 
and arrive at a finding that the justification relating to 
appointment of a contractor is sham or nominal and in effect 
and substance there exists a direct relationship of employer 
and employee between the principal employer and the workman. 
The decision of this Court in Hussainbhai, Calicut vs. The 
Allath Factory Thezhilali Union, Kozhikode and Others 
[(1978) 4 SCC 257] will fall in that category. 

ANALYSIS:

 Having regard to the aforementioned findings, we are of 
the opinion, the High Court has rightly affirmed the award 
of the Industrial Tribunal. The Tribunal as also the High 
Court further rightly arrived at a finding to the effect 
that the concerned workmen were not able to discharge their 
burden of proof that they were employed by the Society. 

 The decisions referred to hereinbefore are indicative 
of the fact that the different tests have been applied in 
different cases having regard to the nature of the problem 
arising in the fact situation obtaining therein. Emphasis 
on application of control test and organization test have 
been laid keeping in view the question as to whether the 
matter involves a contract of service vis-`-vis contract for 
service; or whether the employer had set up a contractor for 
the purpose of employment of workmen by way of a smoke 
screen with a view to avoid its statutory liability. 

In the present case we are faced with a peculiar 
situation. The society is a service society which has been 
formed with the object of protecting the growers from being 
exploited at the hands of the traders. 
It has been found that the employment of the workmen 
for doing a particular piece of work is at the instance of 
the producer or the merchants on an ad hoc basis or job to 
job basis and, thus, the same may not lead to the conclusion 
that relationship of employer and employee has come into 
being. Furthermore, when an employee has a right to work or 
not when an offer is made to him in this behalf by the 
producer or by the merchants will also assume significance.

 For the purpose of earning livelihood, a person has to 
involve himself into certain kinds of activities wherefor, 
he must subject himself to some sort of discipline or 
control, which is even otherwise implicit.

The findings arrived at by the learned Tribunal as well 
as the High Court would clearly go to show that the 
concerned workmen are engaged both by the growers as also 
the traders. Only on some occasions, payment is made to the 
concerned workmen through the third parties only in a case 
where the grower is not immediately in a position to pay the 
same as he was yet to receive the price of the vegetables to 
be auctioned. We must bear in mind that the Society deals 
with small and marginal farmers who themselves look after 
the Society for obtaining such assistance as may be 
necessary from not being exploited by the traders and had 
been facing the problem of a forced sale of their produce at 
the throw away price. The totality of the circumstances as 
opined by the Tribunal and affirmed by the High Court would 
clearly go to show that although certain activities are 
carried out in the market yards wherefor requisite 
infrastructures are provided, the Society in general does 
not have the necessity of employing any workman either for 
the purpose of loading, unloading or grading. Ultimately, 
the remuneration to the concerned workmen are borne either 
by the farmers or by the merchants. Presumably the amount 
paid to the loaders, unloaders and the graders would vary, 
as for example whereas there would be cases where the 
growers themselves would unload their merchandise either 
from trucks or carts. In case growers take the assistance 
of the concerned persons for unloading after the auction is 
held the payment would be made by the traders. In a 
situation of this nature and particularly having regard to 
the fact that the respondent is a cooperative society which 
only renders services to its own members and despite the 
fact that in relation thereto it receives commission at the 
rate of one per cent both from the farmers as also the 
traders; it does not involve in any trading activity. 
Although rendition of such service may amount to carrying 
out an industrial activity within the meaning of the 
provisions of the Industrial Disputes Act, 1947 but we are 
in this case not concerned with the said question. What we 
are concerned with is as to whether the concerned workmen 
have been able to prove that they are workmen of the 
Society. They have not. 
CONCLUSION :

In view of what has been found hereinbefore, we are of 
the opinion that the decision of the Tribunal as affirmed by 
the High Court cannot be said to be perverse warranting our 
interference.

For the reasons aforementioned, we do not find any 
merit in these appeals which are dismissed accordingly. No 
costs.However, before parting with the matter, we may observe 
that we have no doubt in our mind keeping in view the 
assurances given to the High Court by the Society, as 
recorded in its order dated 12.12.2000, the Respondent will 
continue to see that the concerned employees are provided 
with employment.
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