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Whether the workers appointed on temporary basis in the canteens of AIR INDIA are employees of AIR INDIA or not and are entitled for the benefits – CONTROVERSIAL JUDGMENTS AROSE BETWEEN DIVISION BENCH OF APEX COURT = BALWANT RAI SALUJA & ANR. ETC. ETC. … APPELLANTS VERSUS AIR INDIA LTD. & ORS. …RESPONDENTS = published in http://judis.nic.in/supremecourt/imgst.aspx?filename=40967

 

Whether the workers appointed on temporary basis in the canteens of AIR INDIA are employees of AIR INDIA or not and are entitled for the benefits  – CONTROVERSIAL JUDGMENTS AROSE BETWEEN DIVISION BENCH OF APEX COURT =

 

 

CHANDRAMAULI KR. PRASAD, J.

Confirmed the single judge and Division Bench judgment and dismissed the appeal.

whether the demand  of  the  workmen  employed  by

Chef Air to provide canteen service to be treated  as  deemed  employees  of the management of Air India  is  justified  and,  if  so,  what  relief  the workmen are entitled to?

 

V. GOPALA GOWDA, J. – set aside the judgments of single and Division Bench of High court and confirmed  Award passed by Tribunal 

 

1) Whether the canteen which is run through HCI  from  its  Chefair

           unit by the Management of Air India, is the statutory canteen of

           it under Rules 65 to 70 of the Delhi Factories Rules of 1950?

        2) Whether engaging the contract workmen in the canteen situated in

           the premises of Air  India  through  HCI  amounts  to  sham  and

           camouflage by Air India to deprive the legitimate statutory  and

           fundamental rights of the concerned workmen  as  provided  under

           the  provisions  of  the  Industrial  Disputes   Act   and   the

           Constitution and can this Court pierce the veil to find out  and

           ascertain the real and correct facts as to whether they are  the

           workmen of Air India?

        3) Whether the findings and reasons recorded by  the  CGIT  on  the

           points of disputes in the common award dated 5th May, 2004 in ID

           Nos. 97, 98, 99, 107 and 108 of 1996 are legal and valid?

  4) Whether the findings recorded by the learned single Judge in CWP

           No.14178, 14181 and 14182 of 2004 which are  concurred  with  by

           the Division Bench in LPA Nos.388, 390 and 391  of  2010  suffer

           from  erroneous  reasoning  and  error  in   law   and   warrant

           interference by this Court?

        5) What award the concerned workmen are entitled to?

 

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL Nos.10264-10266 OF 2013
(@SPECIAL LEAVE PETITION (C) NOS. 24946-24948 OF 2011)

BALWANT RAI SALUJA
& ANR. ETC. ETC. … APPELLANTS

VERSUS

AIR INDIA LTD. & ORS. …RESPONDENTS

 

J U D G M E N T
CHANDRAMAULI KR. PRASAD, J.

Leave granted.
Air India Limited was constituted under the Air Corporations Act,
1953. By virtue of Section 3 of the Air Corporations (Transfer of
Undertakings and Repeal) Act, 1994, Air India has vested in Indian Airlines
Limited. It has Ground Services Department at Indira Gandhi International
Airport, Delhi. Respondent No. 2 is Hotel Corporation of India, which is a
Government Company incorporated under the Companies Act. The authorized
share capital of the Hotel Corporation of India, hereinafter referred to as
the Corporation, is Rupees 10 crores, divided into 10 lakhs equity shares
of Rs. 100/- each. The Corporation is a wholly owned subsidiary of Air
India and its entire share capital is held by Air India and its nominee.
Excepting 6 shares, 4,99,994 shares have been subscribed by Air India and
rest by its nominees. Air India controls the composition of the Board of
Directors and appoints Directors in consultation with the Government of
India. The power to remove the Directors from office before the expiry of
the term is vested with Air India, in consultation with the Government of
India, so also the power to fill up the vacancies caused by death,
resignation, retirement or otherwise. General management of the
Corporation is vested in the hands of the Managing Director.
Notwithstanding that, Air India is conferred with the power to issue such
directions or instructions as it may think fit in regard to the finances
and the conduct of the business and affairs of the Corporation. Duty has
been cast upon the Corporation to comply with and give effect to such
directions and instructions. The main objects for which the Corporation is
incorporated are large and include carrying the business of hotels, motels,
restaurants, cafés, kitchens, refreshment rooms, canteens and depots etc.
in general and its incidental and ancillary objects are establishment of
catering and opening hotels, which would tend to promote or assist in Air
India’s business as an international air carrier. Respondent No. 3, Chef
Air Flight Catering, hereinafter referred to as ‘Chef Air’, is one of the
units of the Corporation.

Section 46 of the Factories Act, inter alia, confers power on the
State Government to make rules requiring a specified factory where more
than 250 workers are ordinarily employed, to provide and maintain a canteen
for the use of the workers. In exercise of the aforesaid power, Rules 65
to 71 have been incorporated in the Delhi Factory Rules, 1950, hereinafter
referred to as ‘the Rules’. Rule 65(1) was to come into force in respect
of any class or description of factories on such dates as the Chief
Commissioner may by notification in the Official Gazette appoint. Rule
65(2) of the Rules, inter alia, contemplates that the occupier of every
factory notified by the Chief Commissioner, where more than 250 workers are
ordinarily employed, shall provide in or near the factory an adequate
canteen in accordance with the standard prescribed in those Rules. In
pursuance of the provisions of sub-rule (1) of Rule 65 of the Rules, the
Lieutenant-Governor of the Union Territory of Delhi, by notification in the
Official Gazette, dated 21st of January, 1991, directed that Rules 65 to 70
of the Rules shall apply to the factories specified in the said Rules with
effect from the date of publication of the notification in the Official
Gazette. It included M/s. Air India Ground Services Department, Indira
Gandhi International Airport, Delhi (Engineering Unit).

The workmen working in Air India Ground Services Department Canteen,
hereinafter referred to as ‘the Canteen’, raised an industrial dispute and
the competent Government made a reference to the Central Government
Industrial Tribunal as to whether the demand of the workmen employed by
Chef Air to provide canteen service to be treated as deemed employees of
the management of Air India is justified and, if so, what relief the
workmen are entitled to? The workmen laid their claim and, according to
them, they were employed by Air India on casual basis in the Canteen and
their employment was through Chef Air, which is a unit of the Corporation.
According to the workmen, the Corporation has entered into a contract with
Air India to run and maintain the canteen and for that purpose, they were
initially appointed for a period of 40 days and said period used to be
extended from time to time and in this way each of them had completed
service for 240 days in a year. According to the workmen, they were called
for interview on several occasions but had not been selected and on the
contrary, persons junior to them have been regularized. The workmen have
further alleged that Air India had entered into a contract with the
Corporation to deny the workmen their legitimate right by circumventing the
various provisions of the Contract Labour (Regulation and Abolition) Act,
1970. According to them, they were performing duties of a permanent and
perennial nature required by Air India but were being paid wages less than
the regular employees. Case of the workmen further is that issuance of
letters of appointment for 40 days with artificial break in service is an
unfair labour practice and on the aforesaid grounds they sought
regularization of the services with back wages in Air India.

Air India resisted the claim of the workmen, inter alia, stating that
they were not their employees and relationship of employer and employee
does not exist between them. According to them, Chef Air is a unit of the
Corporation engaged in various businesses including establishing and
running of canteens. According to Air India, the Canteen is being run and
maintained by the Corporation on the basis of a fixed subsidy per employee
provided by them. It is a specific assertion of Air India that they have
no control over the workmen and that their conditions of service are
governed by the Rules and Regulations of the Corporation. Air India has
admitted that the infrastructure of the Canteen was provided by them but
its management is in the hands of the Corporation. Air India has further
pointed out that letters of appointment, token numbers, ESI cards etc. have
been issued to the workmen by the Corporation and, hence, the prayer for
regularizing their services by Air India is misconceived. Air India has
denied that the Canteen in question is a statutory canteen and was
employing more than 250 workers.

On the basis of the materials placed on record, the Central
Government Industrial Tribunal, hereinafter referred to as “the Tribunal”,
came to the conclusion that the Corporation is 100% subsidiary of Air India
and the Canteen in question is a statutory Canteen established for the
welfare of more than 2,000 workers. The Tribunal also came to the
conclusion that the Canteen is established within the premises of Air India
and the Corporation carries on its business under the control and
administration of Air India. According to the Tribunal, the running of the
Canteen by the Corporation in respect of the statutory duty of Air India
cannot be said to be its independent act. Accordingly, the Tribunal
observed that hiring of employees for running the statutory canteen by the
Corporation is a camouflage and the workmen employed in the Canteen are
deemed employees of Air India. Thus, the Tribunal held the demand of the
workers to be justified and finding that the workmen have been terminated
from their services during the pendency of the dispute held that the
termination is illegal and, accordingly, set aside the termination of their
employment and directed reinstatement with 50% back wages.

Assailing the aforesaid award of the Tribunal, Air India preferred
writ petition before the High Court.

The learned Single Judge held that Air India is the sole holder of
the shares of the Corporation but it is a separate legal entity which is
independent of its shareholders. The authority to issue directions does
not merge the identity of the Corporation with the shareholder. The
learned Single Judge accordingly held as follows:

“……Thus, in my view the mere fact of HCI being a 100% subsidiary
of Air India and the aforesaid peculiar Articles of Association
would not be decisive of whether the employees aforesaid of HCI
and working in the canteen of Air India are to be treated as
employees of Air India or not.”

As regards the grievance of the workmen that Air India had devised to
employ the workmen through a unit of the Corporation to defeat their
rights, the learned Single Judge observed as follows:

“19. One thing which emerges is that in the present case, no
motive to defeat any rights of the employees, in Air India
entering into a contract with Chef Air (a unit of HCI) for
operating its canteen, even if it be a statutory canteen have
been established. It was not as if by employing workmen in HCI
instead of in Air India, the workmen were being made employees
of a weaker entity against whom they can claim no rights. After
all HCI is also a Government of India company as Air India is.”
The learned Single Judge further came to the conclusion that the
Corporation was not incorporated for the sole purpose of operating the
Canteen for Air India but was set up as a legal entity to carry on business
in diverse fields. According to the learned Single Judge, Air India
engaged the Corporation which has expertise in the field to run and operate
the Canteen and that will not make the workmen employees of Air India. The
learned Single Judge ultimately held as follows:

“23. HCI in the present case is seen as one such expert. It has
been providing flight catering services to Air India and other
airlines besides carrying on other allied businesses. As
aforesaid, HCI was not incorporated merely to run the canteen of
Air India so as to keep the employees of the said canteen,
managed through the medium of HCI, at arm’s length from Air
India. HCI is a business entity in its own right and no mala
fides have been established in Air India entrusting the
operation and management of the canteen aforesaid to HCI. As
aforesaid, in spite of repeated asking, no prejudice is shown to
have been caused to the workmen in them being the employees of
the HCI instead of Air India. Of my own I can only gauge that
may be as employees of Air India they may be entitled to a free
flight once in a while and which they may not be entitled to as
an employee of HCI. However, that is hardly determinative of the
matter in controversy. Again it is not as if Air India is
attaining to offload its canteen employees to an entity which is
sick or near the stage of being closed down. HCI is informed to
be a running concern.”

Accordingly, it set aside the award passed by the Tribunal.
The workmen, aggrieved by the same, preferred an appeal before the
Division Bench of the High Court. The Division Bench framed the following
question for its consideration:

“11. The core issue that emanates for consideration is whether
in the obtaining factual matrix it can be held that the
employees of the canteen established by Air India in its
premises and run by the HCI be treated as regular employees of
Air India. Before we advert to the factual canvas, we think it
appropriate to refer to the citations in the field, cull out the
principles and analyse whether they are applicable to the
material brought on record.”

The Division Bench of the High Court analysed the facts, referred to
the various decisions of this Court and ultimately came to the conclusion
that the Corporation is a separate entity and not a part of Air India as
found by the Tribunal. It endorsed the finding of the learned Single Judge
that merely because the Articles of Association confer power on Air India
to issue such directions or instructions as it may think fit in regard to
conduct of the business and affairs of the Corporation and make it
obligatory for the Corporation to carry on the direction of Air India,
would not merge the identity of the shareholders with the Corporation. The
Division Bench ultimately affirmed the decision of the learned Single Judge
and, while doing so, observed as follows:
“20. On the basis of the aforesaid enunciation of law, the
factual matrix is required to be tested. As is manifest, there
is no material on record to show that the respondent – Air India
had any role in the appointment of the employees in the canteen.
No administrative or disciplinary action could be taken by the
respondent against the canteen workers. The respondent had
itself not undertaken the obligation to run the canteen but had
only provided facility so that its employees could avail the
canteen facilities. It is not a case where the employees of the
canteen were enlisted under a welfare fund scheme, provident
fund scheme and medical scheme of the respondent – management.
The responsibility to run the canteen was absolutely with the
HCI and it was totally a contractual relationship between the
two. Air India had no say in the selection or other affairs of
the canteen workers.”
Mr. Jayant Bhushan, Senior Advocate appearing on behalf of the
appellants submits that the obligation to provide for the Canteen is with
Air India and, therefore, the workmen are entitled to be treated as their
employees and Air India their employer. It is further contended that Air
India has a large role to play in the operation and management of the
Canteen and, in the circumstances, the veil of the contract has to be
lifted and this Court is competent to do so to arrive at the truth. In
support of the submission reliance has been placed on a large number of
decisions of this Court. I do not have the slightest hesitation in
accepting this broad submission of Mr. Bhushan and, hence, I deem it
unnecessary to refer to all those decisions. It is well settled that the
court can lift the veil, look to the conspectus of factors governing
employment, discern the naked truth though concealed intelligently. The
court has to be astute in piercing the veil to avoid the mischief and
achieve the purpose of law. It cannot be swayed by legal appearance. The
court’s duty is to find out whether contract between the principal employer
and the contractor is sham, nominal or merely a camouflage to deny
employment benefits to the workmen.

Once the veil is pierced, the control of Air India is writ large over
the Corporation, submits Mr. Bhushan. He points out that the Corporation
is a wholly owned subsidiary of Air India which controls the composition of
the Board of Directors and appoints and removes Directors in consultation
with the Government of India. According to him, the general management of
the Corporation is vested in its Managing Director. Notwithstanding that,
Air India is conferred with the power to issue directions or instructions
as it may think fit in regard to the finances and the conduct of the
business and affairs of the Corporation and, hence, the workmen employed by
the Corporation are, in fact, the employees of Air India. Mr. C.U. Singh,
however, submits that notwithstanding the aforesaid power vested in Air
India, the Corporation is still a separate legal entity. The fact that its
entire share is held by Air India or Air India has the power to appoint the
Board of Directors, issue directions etc., will not denude the legal status
of the Corporation as a Government company. The fact that the Canteen
required to be provided by Air India is being run by the Corporation
through one of its units Chef Air will not make Air India its principal
employer. He points out that in order to determine the principal employer
one is required to see as to who is paying the salary, who is supervising
the work, the role played in selection and appointment of the workmen,
disciplinary control over them and whether such employees are covered under
the welfare scheme of Air India etc. He points out that the responsibility
to run the Canteen is with the Corporation and, hence, Air India cannot be
treated as its principal employer. According to him, the Corporation is a
separate legal entity and even though Air India is a holding company, the
Corporation shall still be a separate legal entity. Further, the
Corporation is not subservient to Air India but is a servant to its
Memorandum of Association and Articles of Association. In support of the
submission, reliance has been placed on a decision of this Court in the
case of Heavy Engineering Mazdoor Union v. State of Bihar, (1969) 1 SCC
765. Paragraph 5 of the judgment reads as under:
“5. It is true that besides the Central Government having
contributed the entire share capital, extensive powers are
conferred on it, including the power to give directions as to
how the company should function, the power to appoint directors
and even the power to determine the wages and salaries payable
by the company to its employees. But these powers are derived
from the company’s memorandum of association and the articles of
association and not by reason of the company being the agent of
the Central Government. The question whether a corporation is an
agent of the State must depend on the facts of each case. Where
a statute setting up a corporation so provides, such a
corporation can easily be identified as the agent of the State
as in Graham v. Public Works Commissioners, 1901 (2) KB 781,
where Phillimore J. said that the Crown does in certain cases
establish with the consent of Parliament certain officials or
bodies who are to be treated as agents of the Crown even though
they have the power of contracting as principals. In the absence
of a statutory provision, however, a commercial corporation
acting on its own behalf, even though it is controlled wholly or
partially by a Government Department, will be ordinarily
presumed not to be a servant or agent of the State. The fact
that a minister appoints the members or directors of a
corporation and he is entitled to call for information, to give
directions which are binding on the directors and to supervise
over the conduct of the business of the corporation does not
render the corporation an agent of the Government. (See The
State Trading Corporation of India Ltd. v. The Commercial Tax
Officer, Visakhapatnam, 1964 (4) SCR 99 at 188, per Shah, J. and
Tamlin v. Hannaford, 1950 (1) KB 18 at 25, 26). Such an
inference that the corporation is the agent of the Government
may be drawn where it is performing in substance governmental
and not commercial functions. (Cf. London County Territorial and
Auxiliary Forces Association v. Nichol’s., 1948 (2) All ER 432.”
(underlining mine)
Mr. Singh has also drawn my attention to a Constitution Bench judgment
of this Court in the case of Steel Authority of India Ltd. v. National
Union Waterfront Workers, (2001) 7 SCC 1, in which it has been held as
follows:
“41. …………The President of India appoints Directors of the Company
and the Central Government gives directions as regards the
functioning of the Company. When disputes arose between the workmen
and the management of the Company, the Government of Bihar referred
the disputes to the Industrial Tribunal for adjudication. The union
of the workmen raised an objection that the appropriate Government
in that case was the Central Government, therefore, reference of
the disputes to the Industrial Tribunal for adjudication by the
State Government was incompetent. A two-Judge Bench of this Court
elaborately dealt with the question of appropriate Government and
concluded that the mere fact that the entire share capital was
contributed by the Central Government and the fact that all its
shares were held by the President of India and certain officers of
the Central Government, would not make any difference. It was held
that in the absence of a statutory provision, a commercial
corporation acting on its own behalf, even though it was
controlled, wholly or partially, by a government department would
be ordinarily presumed not to be a servant or agent of the
State……….”

 
I have considered the rival submissions and find substance in the
submission of Mr. Singh and the authorities relied on do support his
contention. The Corporation undisputedly is a Government Corporation
incorporated under the Companies Act. It is a legal entity altogether
different from its shareholders. In my opinion, the fact that Air India or
its nominee are the shareholders of the Corporation and in the management
of business and finances, it is subject to the directions issued by Air
India in terms of the Memorandum of Association and Articles of Association
shall not merge the Corporation’s identity in shareholders. In my opinion,
the Corporation is a separate legal entity, not subservient to Air India
but a servant to its Memorandum of Association and Articles of Association.

 

Mr. Bhushan, then submits that the Corporation may be a separate legal
entity but Air India’s control over the affairs of the Canteen makes it the
principal employer. He points out that many of the articles for running
the Canteen were purchased by Air India and, in fact, grievances pertaining
to running of the Canteen were entertained by it. These, according to the
learned counsel, clearly show that Air India is the principal employer.
I have bestowed my consideration to the aforesaid submission, but find
no substance in the same. Few of the well recognized tests to find out the
real relationship are whether the principal employer:
1) pays the salary to the workmen instead of the contractor,
2) controls and supervises the work of the employees,
3) has role in selection and appointment of the employees, and
4) acts as a disciplinary authority over the conduct and discipline
of the employees.
Reference in this connection can be made to a decision of this Court
in the case of Haldia Refinery Canteen Employees Union and Others v. Indian
Oil Corporation Ltd. & Ors. (2005) 5 SCC 51, wherein it has been held as
follows:
“16…..It has nothing to do with either the appointment or taking
disciplinary action or dismissal or removal from service of the
workmen working in the canteen. Only because the management
exercises such control does not mean that the employees working
in the canteen are the employees of the management. Such
supervisory control is being exercised by the management to
ensure that the workers employed are well qualified and capable
of rendering proper service to the employees of the management.”
(underlining mine)

 
In the case of International Airport Authority of India v.
International Air Cargo Workers’ Union, (2009) 13 SCC 374, this Court
echoed the same view and observed as follows:
“38. The tests that are applied to find out whether a person is
an employee or an independent contractor may not automatically
apply in finding out whether the contract labour agreement is a
sham, nominal and is a mere camouflage. For example, if the
contract is for supply of labour, necessarily, the labour
supplied by the contractor will work under the directions,
supervision and control of the principal employer but that would
not make the worker a direct employee of the principal employer,
if the salary is paid by a contractor, if the right to regulate
the employment is with the contractor, and the ultimate
supervision and control lies with the contractor.
39. The principal employer only controls and directs the work to
be done by a contract labour, when such labour is
assigned/allotted/sent to him. But it is the contractor as
employer, who chooses whether the worker is to be
assigned/allotted to the principal employer or used otherwise.
In short, worker being the employee of the contractor, the
ultimate supervision and control lies with the contractor as he
decides where the employee will work and how long he will work
and subject to what conditions. Only when the contractor
assigns/sends the worker to work under the principal employer,
the worker works under the supervision and control of the
principal employer but that is secondary control. The primary
control is with the contractor.”
This Court has taken the same view in General Manager, (OSD), Bengal
Nagpur Cotton Mills, Rajnandgaon v. Bharat Lal, (2011) 1 SCC 635, in which
it has been held as follows:
“10. It is now well settled that if the industrial adjudicator
finds that the contract between the principal employer and the
contractor to be a sham, nominal or merely a camouflage to deny
employment benefits to the employee and that there was in fact a
direct employment, it can grant relief to the employee by
holding that the workman is the direct employee of the principal
employer. Two of the well-recognised tests to find out whether
the contract labourers are the direct employees of the principal
employer are: (i) whether the principal employer pays the salary
instead of the contractor; and (ii) whether the principal
employer controls and supervises the work of the employee. In
this case, the Industrial Court answered both questions in the
affirmative and as a consequence held that the first respondent
is a direct employee of the appellant.”
Bearing in mind the principles aforesaid, when I proceed to consider
the facts of the present case, I find that Air India does not fulfill the
test laid down so as to treat it as the principal employer. It is not the
case of the workmen that it is Air India which pays their emoluments
instead of the Corporation. Air India has neither any role in selection
and appointment of the workmen nor it controls and supervises their work.
It is further not their case that Air India is their disciplinary authority
over their conduct and discipline. In my opinion, Air India, by giving
subsidy at a specified rate or for that matter purchasing few articles for
the Canteen on its behalf and further bringing to the notice of the
Corporation the complaint in regard to the functioning of the Canteen, will
not make it the principal employer. As has rightly been observed by the
High Court, the Corporation is a Government company like Air India and the
workmen in no way will be prejudiced if they continue to be the employees
of the Corporation. In my opinion, there does not seem to be any mala fide
or oblique motive in Air India entering into a contract with Chef Air, a
unit of the Corporation for operating its Canteen. Certainly, it is not to
defeat the rights of the workmen.
Mr. Bhushan, lastly submits that the workmen were engaged in the
Canteen provided by Air India in compliance of Rule 65(2) of the Rules
framed in exercise of powers under Section 46 of the Factories Act.
According to him, the workmen of a statutory canteen have to be treated as
employees of such establishment whose obligation is to provide for the
Canteen. In the case in hand, according to Mr. Bhushan, the
obligation to provide for the Canteen is with Air India and, therefore, the
workmen are entitled to be treated as their employees and Air India their
employer. In support of the submission reliance has been placed on a
decision of this Court in the case of M.M.R. Khan v. Union of India, 1990
Supp SCC 191, and my attention has been drawn to Paragraph 39 of the
judgment which reads as follows:
“39. The result, therefore, is that the workers engaged in the
statutory canteens as well as those engaged in non-statutory
recognised canteens in the railway establishments are railway
employees and they are entitled to be treated as such. The
Railway Board has already treated the employees of all statutory
and 11 Delhi based non-statutory recognised canteens as
railway employees w.e.f. October 22, 1980. The employees of the
other non-statutory recognised canteens will, however, be
treated as railway employees w.e.f. April 1, 1990. They would,
therefore, be entitled to all benefits as such railway employees
with effect from the said date, according to the service
conditions prescribed for them under the relevant rules/orders.”

Reliance has also been placed on a Constitution Bench decision of
this Court in the case of Steel Authority of India Ltd. (supra) referred to
by the learned counsel for Air India also and my attention has been drawn
to paragraph 107 thereof, which records as follows:

“107. 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.”

 
According to Mr. Bhushan, the Constitution Bench judgment clinches
the issue. I do not find any substance in the submission of Mr. Bhushan
and the authorities relied on are clearly distinguishable. In my opinion,
the obligation to provide Canteen is by itself not decisive to determine
the status of workmen employed in the Canteen. Reference in this
connection can be made to a decision of this Court in Workmen of the
Canteen of Coates of India Ltd. v. Coates of India Ltd. & Ors. (2004) 3 SCC
547 wherein it has been held as follows:
“4………..It is sufficient for us to state that 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.”
(underlining mine)

The aforesaid submission has squarely been dealt with by this Court
in the case of Hari Shankar Sharma v. Artificial Limbs Manufacturing
Corpn., (2002) 1 SCC 337, and this Court in no uncertain terms has held
that as an absolute proposition of law it cannot be said that “whenever in
discharge of statutory mandate a canteen is set up or other facilities
provided by the establishment, the employee of the canteen or such other
facility become the employee of that establishment”. Relevant portion of
the judgment reads as follows:

“5. The submission of the appellants that because the canteen
had been set up pursuant to a statutory obligation under Section
46 of the Factories Act therefore the employees in the canteen
were the employees of Respondent 1, is unacceptable. First,
Respondent 1 has disputed that Section 46 of the Factories Act
at all applies to it. Indeed, the High Court has noted that this
was never the case of the appellants either before the Labour
Court or the High Court. Second, assuming that Section 46 of the
Factories Act was applicable to Respondent 1, it cannot be said
as an absolute proposition of law that whenever in discharge of
a statutory mandate, a canteen is set up or other facility is
provided by an establishment, the employees of the canteen or
such other facility become the employees of that establishment.
It would depend on how the obligation is discharged by the
establishment. It may be carried out wholly or substantially by
the establishment itself or the burden may be delegated to an
independent contractor. There is nothing in Section 46 of the
Factories Act, nor has any provision of any other statute been
pointed out to us by the appellants, which provides for the mode
in which the specified establishment must set up a canteen.
Where it is left to the discretion of the establishment
concerned to discharge its obligation of setting up a canteen
either by way of direct recruitment or by employment of a
contractor, it cannot be postulated that in the latter event,
the persons working in the canteen would be the employees of the
establishment. Therefore, even assuming that Respondent 1 is a
specified industry within the meaning of Section 46 of the
Factories Act, 1946, this by itself would not lead to the
inevitable conclusion that the employees in the canteen are the
employees of Respondent 1.”

Now referring to the authority of this Court in the case of M.M.R.
Khan (supra), the same is clearly distinguishable. In this case, it has
been held that the workmen engaged in the statutory canteens as well as
those engaged in non-statutory recognized canteens are railway employees
and they have to be treated as such. This Court came to the aforesaid
conclusion as, on fact, it was found that though the workmen were employed
in the canteen through the device of a labour contract, they were
essentially working under the control and supervision of the railway
establishment. Further, the provision for running and operating the
canteen was in the Establishment Manual of the Railways. Under these
circumstances, this Court came to the conclusion that the workmen engaged
in the statutory canteens were, in fact, the railway employees. No such
facts exist in the present case.
In the Steel Authority of India Ltd.(supra), the Constitution Bench
observed that the authorities of this Court show that they fall in three
classes including the aforesaid class but it has not endorsed the said
view. In fact, the decisions which I have referred to in the earlier
paragraphs of this judgment negate this contention. I have tested the case
of the workmen on the touchstone of the principles laid down by this Court
and find that they do not satisfy those tests so as to hold that Air India
is the principal employer.
Having found no substance in any of the submissions made on behalf of
the appellants, I do not find any merit in these appeals and they are
dismissed accordingly, but without any order as to costs.
……………..………..………………………..J.
(CHANDRAMAULI KR. PRASAD)

 
NEW DELHI,
NOVEMBER 13, 2013

 
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.10264-10266 OF 2013
(Arising out of SLP (C) Nos. 24946-24948 of 2011)

 

BALWANT RAI SALUJA & ANR.ETC. ETC. … APPELLANTS

VS.

AIR INDIA LTD. & ORS. … RESPONDENTS

 

J U D G M E N T

V. GOPALA GOWDA, J.

Leave granted.

2. I have gone through the judgment of my learned brother Judge in these
civil appeals, in which my learned brother Judge has concurred with the
impugned judgment. However, I am in respectful disagreement with the
opinion of my learned brother and I am recording my reasons for the same.

These appeals have been filed by the appellants challenging the
judgment and order dated 2nd May, 2011 passed in L.P.A. Nos.388 of 2010,
390 of 2010 and 391 of 2010 confirming the judgment and order dated 8th
April, 2010 of the learned single Judge of the Delhi High Court passed in
WP Nos.14178 of 2004, 14181/2004 and 14182 of 2004, wherein the learned
single Judge has set aside the common award dated 5th May, 2004 of the
Central Government Industrial Tribunal (for short ‘CGIT’) passed in
Industrial Disputes case Nos. 97, 98 and 99 of 1996. The CGIT recorded that
the concerned workmen of Chefair, a unit of Hotel Corporation of India (for
short HCI) with which Air India had entered into a contract to provide
canteen services at its establishment, are entitled to be treated as being
employees of it and consequently held that they are entitled to the relief
sought for by them. The said judgment of CGIT was set aside by the Division
Bench of the Delhi High Court in LPA Nos.388 of 2010, 390 of 2010 and 391
of 2010 vide its judgment dated 2nd May, 2011 after adverting to certain
relevant facts, legal contentions and cases like M.M.R. Khan & Ors. v.
Union of India & Ors.[1], and some other decisions of this Court and
concurred with the finding of facts and reasons recorded by the learned
single Judge in setting aside the award and consequently dismissed the
appeals of the concerned workmen. That is how these Civil Appeals are
filed by the workmen urging various factual and legal contentions in
support of their claims with a request to set aside the impugned judgments
and orders of the Division Bench and the learned single Judge of the Delhi
High Court in the aforesaid Letter Patent Appeals and the writ petitions.
3. Since my learned brother Judge has referred to certain facts and
legal contentions to decide the points that arose for consideration of this
Court, I also refer to certain relevant necessary facts and rival legal
contentions urged on behalf of the parties with a view to answer the
contentious points that would arise in these appeals to answer the same.

4. Three industrial disputes case Nos. 97, 98 and 99 of 1996 were
registered by CGIT pursuant to the order of references made by the Central
Government in the Ministry of Labour vide its order No.L-11012/23/96-IR
(Coal-I) dated 23.10.96 for adjudication on the points of dispute referred
to it in relation to the workmen mentioned in the respective orders of
references made by it and in relation to other industrial disputes namely
ID Case Nos. 107/96 and 108/96 which are individual cases of industrial
disputes filed by the concerned workmen since their services were illegally
terminated by the employer Air India during pendency of the industrial
disputes referred to supra in relation to the absorption of the services of
the concerned workmen by the Management of Air India before the CGIT
without obtaining the approval from the CGIT, despite the order dated
04.12.1996 passed by CGIT wherein an undertaking was given by the
Management of Air India that neither it will change the contractor Chefair
without permission of/intimation to the Tribunal nor will it take any
action against the workmen listed in the reference order made to the CGIT
for an adjudication of their dispute. Despite the same, the services of
the concerned workmen in the Industrial disputes in case ID Nos.97, 98 and
99/1996 were terminated. The action of the Management of Air India in
terminating the services of the concerned workmen in the complaint ID Nos.
107 and 108/1996 is in contravention of Section 33(2)(b) of the Industrial
Disputes Act, 1947 (in short ‘I.D. Act’). Therefore, the complaints were
filed by the said workmen under Section 33(A) of the I.D. Act to adjudicate
the existing industrial dispute between the concerned workmen and the
Management of Air India regarding their illegal order of termination during
the pendency of the industrial disputes referred by the Central Government
which are registered as reference Nos.97, 98 and 99 of 1996 with regard to
the absorption of the services of the contract labour employees, employed
by the HCI on behalf of M/s Air India and made them to work in the
Chefair. The aforesaid canteen is the statutory canteen in terms of the
definition of Section 46 of the Factories Act, according to the appellants
herein and they requested the CGIT for answering the points of dispute
which was referred to in the order of references made by the Central
Government in ID Nos.97 to 99, to treat them as the deemed employees of the
Management of Air India and also to set aside the orders of termination
passed against individual concerned workmen and requested the CGIT to pass
an order of reinstatement with all consequential benefits including the
award of back-wages.

5. In support of their respective claims and counter claims on behalf of
the workmen and the Management of Air India, they filed their statements
respectively in the cases referred to supra before the CGIT. In the claim
petition, the workmen contended that the canteen which is being run by the
Air India through HCI through Chefair has engaged the concerned workmen in
these cases as contract employees in various capacities and they have been
working in the canteen run by the Management of Air India through Chefair
ranging from 3 to 20 years on the date of references made by the Central
Government to the CGIT which in turn is run by its subsidiary Company HCI.
Delhi State Government in exercise of its power under Section 46 of the
Factories Act, 1948 framed Rules 65 to 70 called Delhi Factories Rules of
1950 (hereinafter referred to as ‘the Rules’). A Notification was issued by
the Lt. Governor of the Union Territory of Delhi under Rule 65(2) of the
Rules stating that the Rules of the Factories Act shall apply to the
factories specified in the Schedule to the said notification. In the
Schedule to the notification, the description of the factory at serial No.
9- M/s. Air India Ground Services Deptt. IGI, Air Port Delhi (Engineering
Unit) F.D.1725 is one of the specified factories, the same is marked as –
Ex.P. 4 in the Industrial dispute cases before the CGIT.

6. Rule 65 states for providing canteen, Rule 66 speaks of Dining Hall,
Rule 67 provides Equipment, Rule 68 for fixing the prices to be charged,
Rule 69 deals with Accounts and Rule 70 deals with Managing Committee to
manage the affairs of the statutory canteen. The relevant Rules will be
adverted to in the reasoning portion of my judgment while answering the
relevant contentious points that will be framed shortly.

7. Strong reliance was placed upon the Rules and the Notification
referred to supra by the learned senior counsel Mr. Jayant Bhushan inter
alia contending that the canteen is being run by the Air India through HCI
by Chefair where the concerned workmen have been working in different
capacities for number of years such as cook, ground cleaning staff,
servicing, washing staff etc. etc.

The HCI employed them on contract basis as canteen workers though they
have been discharging their duties which are in perennial nature. Then
action of the Management of Air India in employing the concerned workmen on
contract basis is an unfair labour practice as defined under Section 2(ra)
of the I.D. Act enumerated in the Vth Schedule to the Act, which provision
was inserted by way of an amendment by Act No. 46 of 1982 w.e.f. 21.8.1984
at serial No. 10 to the Vth Schedule which states that “to employ workmen
as casual or temporary workers and to continue them as such for years with
the object to deprive them of the status and privileges of permanent
workmen is an unfair labour practice on the part of the employer”. It is
further stated that Management of Air India has employed more than 2000
employees in its factory and therefore notification issued by the Lt.
Governor of Delhi on 21st January, 1991 applying Rules 65 to 70 of Rules
1950 to the said establishment framed under Section 46 of the Factories
Act will be applicable to the canteen in question run by the HCI on behalf
of Air India. It is the case pleaded and proved before the CGIT by the
concerned workmen and it has recorded the finding in this regard in their
favour by placing reliance upon three judge bench decision of this Court in
the cases of M.M.R. Khan (supra), Parimal Chandra Raha & Ors. v. Life
Insurance Corporation of India and Ors.[2], and another decision of this
Court in Basti Sugar Mills Ltd. v. Ram Ujagar & Ors.[3] in support of the
legal contention urged on behalf of the workmen that employees of statutory
canteens i.e. canteens which are required to be compulsorily provided to
its workmen in the factory as per Section 46 of the Factories Act are
employees of the establishment not only for the purpose of Factories Act
but also for all other purposes. In the case of Parimal Chandra Raha
referred to supra, this Court has held that for canteen workers of
contractor who runs the canteen, it must pass the relevant test to
determine on the facts as to whether providing canteen to its workmen by a
factory was obligatory on its part. In Basti Sugar Mills Ltd.’s case, this
Court has held that the work of removal of press mud was given to the
contractor and the workmen in that case were employed by the contractor to
do that work, the contractor terminated their services on completion of the
work. The stand taken in the said case by the establishment was that they
had nothing to do with the workmen. The workmen in the case approached this
Court for relief against the termination of their services. This Court
held that the workmen were employed in the industry to do manual work for
reward and therefore it is held that the Company was their employer, as the
workmen were employed by the contractor with whom the Company had
contracted in the course of conducting its business for execution of the
said work of removal of the press mud which is ordinarily part of the
industry. Further reliance was placed by the learned counsel upon the
decision of this Court in Union of India & Ors. v. M. Aslam & Ors.[4]
wherein this Court has held that for the unit run canteens of Army, Navy
and Air Forces, the employees of such canteens are entitled to service
benefits as government servants. Finding of fact was recorded by the CGIT
in favour of the concerned workmen while answering the points of dispute
referred to it by the Central Government with reference to the factual
legal aspects and evidence on record from the aforesaid cases. This finding
is found fault with by the Single Judge and Division Bench of the Delhi
High Court and they had set aside the finding recorded by CGIT. Strong
reliance was placed by the Delhi High Court upon the plea taken by Air
India and HCI with regard to the fact that though HCI is subsidiary Company
of the Air India, it is governed by its own Memorandum and Articles of
Association as existed in the Companies Act and is governed by the
provisions of the said Act. HCI is an independent legal entity from that
of the Air India. The learned single Judge while accepting the factual and
legal contentions urged on behalf of Air India, has referred to paragraph
17 of his judgment and stated with reference to the Memorandum and Articles
of Association, and observed that the general management of business of HCI
vests with its Board of Directors, no doubt, the same is subject to the
directions, if any, that will be issued from time to time from Air India
with regard to the finance and conduct of its business affairs. However,
the composition of the Board of Directors of HCI is constituted by Air
India in consultation with the Government of India. In view of the said
reason, it cannot be said that the concerned contract employees employed by
HCI to do work in the canteen are employees of Air India in the face of the
first principle of Corporate law with reference to Salomon v. Salomon & Co.
Ltd.[5], wherein it was held that Company is a person all together
different from its shareholders though Air India is the sole holder of the
shares of the HCI. The HCI is a legal entity independent of its
shareholders with reference to Section 46 in Chapter V of the Factories Act
under the heading “welfare”. The mandatory provision is provided to
maintain a canteen in the establishment, which is a measure for the welfare
of the workers, the statutory obligation on the part of the industrial
establishment to provide and maintain a canteen in the factory. If it is
found that the operation of such canteen has been entrusted to such an
expert, it cannot be said that the employees deployed by such expert in
such canteen becomes employees of the factory/establishment. Further, it is
held by him that HCI was not incorporated merely to run the canteen of Air
India so as to keep the employees of the canteen maintained by it at arm’s
length from Air India. The HCI is a business entity on its own rights and
no malafide have been established by the concerned workmen in the
Management of Air India in entrusting the operation and management of its
canteen to the HCI and no prejudice is shown to have been caused to the
concerned workmen being the employees of the HCI instead of Air India,
except that they may be entitled to a free flight once in a while from it,
which they may not be entitled to get as workmen of the HCI. Therefore, he
has held that it is hardly determinative of the matter in controversy and
thereafter he has referred to the judgments of this Court in Indian
Petrochemicals Corporation Ltd. & Anr. v. Shramik Sena & Ors.[6], Steel
Authority of India Ltd. & Ors. v. National Union Waterfront Workers &
Ors.[7], International Airport Authority of India v. International Air
Cargo Workers’ Union & Anr.[8], in support of his conclusion laid down by
applying the test laid down in those cases to the fact situation and held
that there is no relationship of employer and employee and hence no
existing industrial dispute would arise within the meaning of Section 2(k)
of the I.D. Act between the concerned workmen and the Management of Air
India. Therefore, he has quashed the award of the CGIT which was affirmed
by the Division Bench of the Delhi High Court in the aforesaid L.P.As by
accepting the reasons recorded by the learned single Judge and also after
extracting certain relevant paragraphs from the decisions of this Court in
the cases of M.M.R. Khan, Parimal Chandra Raha, Indian Petrochemicals
Corporation Ltd., (all referred to supra) Hari Shanker Sharma and Ors. v.
Artificial Limbs Manufacturing Corporation and Ors[9]. The Division Bench
of Delhi High court has concurred with the finding and reasons recorded by
the learned single Judge in the impugned judgment and dismissed the letter
patent appeals of the concerned workmen. The correctness of the said
judgment and order are impugned in these civil appeals by the concerned
workmen reiterating their factual and legal contentions as has been
adverted to before the CGIT and the High Court in the writ petition and the
appeals. Therefore, the same need not be adverted to once again in this
judgment with a view to avoid repetition.
8. It is contended by the learned senior counsel Mr. Jayant Bhushan on
behalf of the concerned workmen, placing strong reliance upon Section 46 of
the Factories Act and notification of the year 1991 referred to supra
issued by Lt. Governor of the Union Territory of Delhi upon the Rules 65 to
70 of the Rules that the Management of Air India is enumerated at serial
No.9 in the Schedule to the said notification. Therefore, the Management of
Air India was required to provide a statutory canteen to its workmen in its
industrial establishment and the learned senior counsel also placed strong
reliance upon the Memorandum and Articles of Association of HCI
particularly clause 33 in Chapter XIII to substantiate his contentions that
the control and directions that will be issued from time to time with
regard to running of the canteen and managing the canteen is on the
Management of Air India to HCI wherein, the Management of Air India was the
occupier. The learned senior counsel has further placed strong reliance
upon the findings recorded by the CGIT in its award in answer to the points
of disputes referred to it holding that the concerned workmen were employed
by HCI to work in the statutory canteen of the Management of Air India and
placed strong reliance upon the judgment of this Court in State of U.P. &
Ors. v. Renusagar Power Co. & Ors.[10], which is followed by two other
judgments of this Court in Delhi Development Authority v. Skipper
Construction Co. (P.) Ltd. & Anr.[11], Kapila Hingorani v. State of
Bihar[12], wherein this court has laid down the legal principles by
following the judgment of Salomon v. Salomon (supra) with a view to find
out as to whether the contract employment of the concerned workmen by the
HCI on behalf of the Management of Air India is a sham or a camouflage. The
CGIT has pierced the veil with reference to the existing factual situation
and found that the concerned workmen had been working in the statutory
canteen required to be established and managed by the Management of the Air
India as per Rule 65(2) of the Rules and the HCI is a subsidiary Company of
the Air India as it holds 100% share holding and therefore, the Air India
has got the control and supervision of its business under clause 33 of the
Memorandum and Articles of Association. Therefore he has requested this
Court to set aside the findings of fact recorded by the learned single
judge, which are concurred with by the Division Bench in the impugned
judgment and order as it is vitiated not only on account of erroneous
finding for non consideration of the proved facts and legal evidence on
record but also suffers from error of law as has been laid down by this
Court in catena of cases referred to supra upon which the learned senior
counsel has placed strong reliance in support of the case of the concerned
workmen in these appeals.

9. Further he has placed strong reliance upon the judgment of this Court
in M.M.R. Khan’s case particularly paragraphs 25, 27 and 30 in support of
the proposition of law wherein this Court has held that rules framed by
the State Government of Delhi under Section 46 of the Factories Act are
obligatory on the part of the Railway Administration to provide and
maintain statutory canteen. In pursuant to the above rules and
notifications, this Court has held that canteens were incidental and
connected with the manufacturing process and is subject to the
manufacturing process. The nature of the canteen is deemed to be the
statutory, since it is a necessary concomitant of the manufacturing
activity and further railway establishment has recognized the obligation of
the Railway Administration by the Act which makes provision for meeting the
cost of the canteen though Railway Administration to employ any staff
committee or cooperative society for the management of the canteen. The
legal responsibility for the proper management of such canteen rests not
with such agency but solely with the Railway Administration. With reference
to paragraph 27 of the said decision and also having regard to the
undisputed fact of the case in hand that the Chefair unit of the HCI in
which canteen is being run is situated in the premises of the Air India and
that it is also the statutory duty of the Air India under Rules 65(2) and
65(4) of the Delhi Factories Rules, that the canteen building should be
situated not less than fifty feet from any latrine, urinals, boiler house,
coal stacks, ash dumps and any other source of dust, smoke or obnoxious
fumes etc. and that the manager of the factory shall submit for the
approval of Chief Inspector of plans and site plan as provided under sub-
rule (3) of Rule 65 and further that the construction of the canteen
building is in accordance with Rules 65, 66, 67 and 70 which would clearly
go to show that the said canteen is established by Air India to discharge
its welfare statutory obligation to its workmen/employees as provided under
the Factories Act and Rules framed under by the State government of Delhi.
Also, the managing committee constituted under the Rules should consult
from time to time regarding the quality and quantity of food stuff to be
prepared and served in the canteen to its workmen/employees and for other
purposes. Therefore, he has contended that the legal principles laid down
by this Court in M.M.R. Khan’s case with all fours are applicable to the
present fact situation. Hence, it is contended by the learned senior
counsel that the findings and reasons recorded by the learned single Judge
and the Division Bench in the impugned judgments after setting aside the
finding of facts recorded in the award on this aspect of the matter by CGIT
in answer to the points referred to it is not only erroneous but also
suffers from error in law and is liable to be set aside and the common
award passed by CGIT should be restored.

10. Another ground urged by the learned senior counsel is that the High
Court failed to appreciate the fact that the canteen has been in existence
since 1945. It is a deemed statutory canteen under Section 46 of the
Factories Act vide notification of 1991 referred to supra. Therefore, the
CGIT has come to the right conclusion and held that the canteen is
incidental to and running the canteen and the work of the workmen is
subject to the supervision and control of Air India. It is further
contended that the Division Bench of the Delhi High Court has erroneously
applied the judgments in Indian Petrochemicals Corporation Ltd., Parimal
Chandra Raha and referred to para 22 of M.M.R. Khan’s case, Workmen of
Nilgiri Coop. Mkt. Society Ltd. v. State of Tamil Nadu & Ors.[13], Haldia
Refinery Canteen Employees Union & Ors. v. Indian Oil Corporation &
Ors.[14], and Hari Shanker Sharma (supra) to set aside the findings of the
CGIT and concurred with the finding of learned single Judge. Therefore, the
learned senior counsel has urged this Court for quashing of the impugned
judgments of both the learned single judge and the Division Bench since the
same are not only based on erroneous reasoning but also suffer from error
in law in view of the clear pronouncement of law laid down by this Court in
the three Judge Bench decision of this Court in the case of M.M.R. Khan
(supra) on the question of providing and maintaining statutory canteen to
its workmen/employees in support of his contentions that the employment of
contract employees by Air India through HCI to run the statutory canteen in
its premises is a sham and camouflage to deprive the legitimate statutory
and fundamental rights of the concerned workmen. Therefore, he submits that
the CGIT was justified in lifting the veil or piercing the veil from the
nature of employment to provide and maintain the statutory canteen by Air
India through HCI and the finding by CGIT is supported by plethora of
judgments of this Court referred to supra. It is further submitted by him
that there is direct control and supervision on the functioning of the
canteen and its employees by Air India being a statutory canteen which is
required to be maintained by it in conformity with Rules 65 to 70 of the
Delhi Factories Rules 1950 and under Section 46 of the Factories Act and
notification has been rightly issued enlisting the Management of Air India
in the Schedule to the said notification for providing and maintaining the
statutory canteen which notification has not been questioned by Air India.
Therefore, the decisions of the Supreme Court referred to supra regarding
piercing the veil for the purpose of finding out the real facts and to give
effect to the object and intendment of the statute while recruiting the
workmen on contract basis which is in violation of the statutory provisions
of the Industrial Disputes Act has been rightly arrived at by the CGIT on
proper appreciation of pleadings and evidence on record to answer the
points in the affirmative. Therefore, the learned senior counsel has
requested this Court to interfere with the impugned judgments and for
restoration of the award passed by the CGIT.

11. Mr. C.U. Singh, learned senior counsel for the respondent sought to
justify the impugned judgment of the Division Bench of the Delhi High Court
in affirming the judgment of the learned single Judge by placing strong
reliance upon the decisions of this Court in Dena Nath & Ors. v. National
Fertilisers & Ors.[15], and Steel Authority of India (supra). It is
contended by the learned senior counsel for the respondent that the
Division Bench after adverting to the rival legal contentions has
elaborately referred to the decision of M.M.R. Khan’s case and the various
other decisions referred to in the impugned judgment rightly concurred with
the findings and reasons recorded by the learned single judge in reversing
the findings and reasons recorded in the Award by the CGIT on the points of
dispute referred to it by the Central Government for its adjudication. On
appreciation of facts pleaded and evidence on record, keeping in view the
fact that the concerned workmen are employed in the canteen by the HCI
which is the statutory Corporation, therefore, the Management of Air India
has no power of recruitment, disciplinary control on the employees and no
control and supervision on functioning of the workmen of the canteen.
Therefore, the High Court has rightly arrived at the conclusion and held
that there is no relationship of master and servant or employer and
employee between the concerned workmen of the canteen and the Air India.
The HCI is an independent legal entity which has been carrying on with its
business strictly in conformity with the Memorandum and Articles of
Association and therefore he contends that there is no need for this Court
to interfere with the impugned judgments. Further, he has urged that the
canteen in which the concerned workmen were employed by HCI is not a
statutory canteen and the finding recorded by the CGIT on the points of
dispute by placing reliance upon the Notification of 1991 and that Air
India has employed more than 2000 employees and that the said canteen is
the statutory canteen and that there is an obligation on the part of the
Management of Air India to cater the food stuff to its workers and
employees, is an erroneous finding and also suffers from error in law.
Therefore, the said finding has been rightly set aside by the learned
single Judge, the same is affirmed by the Division Bench of the Delhi High
Court by concurring with decision of the learned single judge. Hence, he
further contends that there is no questions of law much less the questions
of law framed by the workmen in the appeals involved which require to be
considered and answered by this Court in exercise of its jurisdiction.
Hence he has prayed for dismissal of these appeals.

12. On the basis of rival factual and legal contentions, the following
questions of law would arise for consideration:
1) Whether the canteen which is run through HCI from its Chefair
unit by the Management of Air India, is the statutory canteen of
it under Rules 65 to 70 of the Delhi Factories Rules of 1950?
2) Whether engaging the contract workmen in the canteen situated in
the premises of Air India through HCI amounts to sham and
camouflage by Air India to deprive the legitimate statutory and
fundamental rights of the concerned workmen as provided under
the provisions of the Industrial Disputes Act and the
Constitution and can this Court pierce the veil to find out and
ascertain the real and correct facts as to whether they are the
workmen of Air India?
3) Whether the findings and reasons recorded by the CGIT on the
points of disputes in the common award dated 5th May, 2004 in ID
Nos. 97, 98, 99, 107 and 108 of 1996 are legal and valid?
4) Whether the findings recorded by the learned single Judge in CWP
No.14178, 14181 and 14182 of 2004 which are concurred with by
the Division Bench in LPA Nos.388, 390 and 391 of 2010 suffer
from erroneous reasoning and error in law and warrant
interference by this Court?
5) What award the concerned workmen are entitled to?
Answer to Point Nos. 1 and 2:

13. First two points are answered together by assigning the following
reasons since they are inter-related. At the very outset it is critically
useful to place on record certain relevant questions of fact which are on
record and are not in dispute with a view to determine the nature of
dispute between the parties that is referred to by the CGIT for
adjudication in exercise of its power and examine the rights and
obligations of the parties to find out as to what relief the concerned
workmen in the appeals are entitled to, keeping in view the provisions of
Factories Act read with the Delhi Factories Rules of 1950, The Contract
Labour (Regulations and Abolition) Act, 1970 and the Industrial Disputes
Act, 1947.

14. It is an undisputed fact that the Labour Department vide its
notification dated 21st January, 1991 issued in pursuance of the provisions
of sub-rule (1) of Rule 65 of the Delhi Factories Rules wherein Lt.
Governor of Union Territory of Delhi directed that Rules 65 to 70 of the
Rules which shall apply to the factories which are mentioned in the
Schedule to the said Notification at serial No.9 – M/s. Air India Ground
Services Deptt. IGI, Air Port Delhi (Engineering Unit) F.D.1725 is
enlisted. In view of the aforesaid notification, the Air India is
statutorily required to maintain and provide a canteen in its factory
premises to cater the food stuff to its employees/ workmen. It is the case
of the concerned workmen that there are 2000 workmen working in the
establishment of Air India which plea is accepted by the CGIT and the
finding of fact is recorded on the basis of evidence on record by it,
particularly, the admission made by the witness examined on behalf of Air
India before CGIT.

15. Rules 65 to 70 of the Rules framed by the Union Territory of Delhi
under Section 46 of the Factories Act are applicable in respect of Air
India as it is enlisted in the Schedule to the Notification issued by the
Labour Department referred to supra, to provide a statutory canteen by a
factory where 250 workmen are employed by it. The case of the concerned
workmen in the industrial disputes raised by them is that Air India has
employed more than 2000 workmen and on the basis of the pleadings and
evidence on record has proved the points of dispute referred to it in the
Industrial disputes referred to supra. The Air India has now challenged the
applicability of the Notification and the Rules framed by the Delhi Union
Territory under Section 46 of the Factories Act. The case pleaded by the
workmen on the other hand is that they are working in Chefair which belongs
to the HCI which is wholly owned subsidiary Company of Air India with
expertise in food preparation and catering to the employees/workmen and
traveling passengers in their domestic and international Air Crafts, and it
is bound by its Memorandum and Articles of Association, which is
comprehensive enough to regulate the conduct of its business for Air India
including the nature of employer and employee relationship. The service
conditions prevailing in the HCI vis-a-vis its employees are comparable to
the relation between the workers and Air India and Chefair in terms of
monetary benefits and the same are largely similar. The cost of providing
the canteen services to its employees/workmen was provided by Air India on
the basis of ‘per employee subsidy’. The CGIT, with reference to Factories
Rules and Notification referred to supra has held that Air India has to
provide food stuff to its employees/workmen at the subsidiary rate. The
pleadings of Air India in its counter statement filed before the CGIT are
cleverly designed and drafted stating that there were not more than 250
employees/workmen of Air India in order to apply the relevant provisions of
the Factories Act and Rules in relation to a statutory canteen run by HCI
through Chefair and therefore the notification is not applicable to the Air
India. The said pleadings of M/s Air India on a jurisdictional fact was
demolished by the concerned workmen of the canteen by cross examining the
witness of Air India, who is its designated officer. He has stated in his
evidence unequivocally that the actual number of workmen/employees
availing the canteen facilities in the factory premises were in the range
of 2000 persons – a figure which was at least not less than eight times the
number contained in the original pleadings of Air India. Air India, in
spite of being the statutory corporation did not consider it necessary to
come to the court with clean hands but on the other hand, it has suppressed
relevant material fact regarding the number of employees/workmen working in
its establishment. Therefore, the CGIT, on the basis of admission made by
the witness examined on behalf of the Air India as MW1, has recorded the
finding of fact holding that a total figure of 2000 employees/workmen are
working in its establishment and they are availing the canteen facilities,
which is run through the HCI from its Chefair unit in the premise of Air
India. The wholly owned subsidiary corporation- HCI has adopted unfair
labour practice as defined under Section 2(ra) of the I.D. Act at serial
No. 10 entry in the Vth Schedule under the heading of the Unfair Labour
Practices practiced by the employer, by keeping workers in employment in
the canteen for 40 days at a time and thereafter employing them on contract
basis after a break though the nature of work to be performed by them in
the canteen have been perennial in nature, for the reason that they were
required to provide and maintain the statutory canteen in the factory
premises to cater the food stuff to its employees/ workmen. Therefore, they
have committed a statutory offence punishable under the provision of
Section 25U of the I.D. Act for employing the concerned workmen on contract
basis with a break in their service which constitutes unfair labour
practice and is prohibited under Section 25T of the I.D. Act either by the
employer or the workmen under the above Schedule to the I.D. Act. The
concerned workmen got the Industrial Disputes referred to the CGIT for
adjudication on the points of the dispute referred to it by the Central
Government in the orders of reference who are covered in the award passed
by the CGIT. They have been discharging the permanent nature of work in
different capacities working continuously ranging from 3 years to 20 years
with an artificial break after 40 days of employment by the employer with
an oblique motive to deprive them of their legitimate statutory right of
regularizing them as permanent workmen in the statutory canteen which is
being run by the Air India in its factory premises through HCI from its
Chefair unit.

16. Mr. Jayant Bhushan, the learned senior counsel on behalf of the
appellants- concerned workmen with reference to the pleadings of the
parties and the evidence on record, has rightly placed strong reliance upon
the Notification of 1991 issued by the Labour Department enlisting Air
India in the Schedule to the Notification at serial No.9 to provide a
statutory canteen to the employees/ workmen of Air India which is being run
through HCI from its Chefair unit on its behalf which is its subsidiary
company as it has got 100% share holding as per Memorandum and Articles of
Association. On the basis of pleadings and evidence on record, the learned
senior counsel substantiated the finding of fact recorded by the CGIT,
wherein it has held that the concerned workmen are employed by Air India
through its subsidiary Corporation- HCI, which is a sham contract and this
veil is required to be pierced to find out the real facts involved in the
case as to whether they are working for Air India or the HCI. The learned
senior counsel has rightly placed strong reliance upon the decision of
three Judge Bench decision of this Court in Hussainbhai, Calicut v. Alath
Factory Thezhilali Union, Kozhikode and Ors.[16], the relevant paragraph of
which reads as under:

“5. The true test may, with brevity, be indicated once again. Where
a worker or group of workers labours to produce goods or services and
these goods or services are for the business of another, that other
is, in fact, the employer. He has economic control over the workers’
subsistence, skill, and continued employment. If he, for any reason,
chokes off, the worker is, virtually, laid off. The presence of
intermediate contractors with whom alone the workers have immediate or
direct relationship ex contractu is of no consequence when, on lifting
the veil or looking at the conspectus of factors governing employment,
we discern the naked truth, though draped in different perfect paper
arrangement, that the real employer is the Management, not the
immediate contractor. Myriad devices, half-hidden in fold after fold
of legal form depending on the degree of concealment needed, the type
of industry, the local conditions and the like may be resorted to when
labour legislation casts welfare obligations on the real employer,
based on Articles 38, 39, 42, 43 and 43-A of the Constitution. The
court must be astute to avoid the mischief and achieve the purpose of
the law and not be misled by the maya of legal appearances.”
(Emphasis laid by this Court)

17. He has further very rightly placed reliance upon the three Judge Bench
decision of this Court in the case of Kanpur Suraksha Karamchari Union v.
Union of India & Ors.[17] wherein this Court has held with reference to
interpreting Section 2(n) and Section 46 of the Factories Act read with
Rules of UP Factories Rules 1950 -Rule 1968, Section 7 and after adverting
to the Government of India Notification order No. 18/(1)80/D(JCM) dated
25th July, 1981 accorded sanction to treat all employees of the canteen
established in defence industrial establishments under Section 46 of the
Act as the government employees with immediate effect and further made
observations in the said case that in certain cases, canteens are run by
either contractors or co-operative societies or some other bodies.

18. The legal question that arose for consideration of this Court in that
case was whether the services of the workers, before they were declared to
be government employees should be taken into consideration for purposes of
calculating their pension dues on retirement. E.S. Venkataramiah J., as he
then was, in Kanpur Suraksha Karamchari Union (supra), speaking for the
Court observed as under:
“4. The Act is applicable both to the factories run by government and
the factories run by other private companies, organisations, persons
etc. It was enacted for the purpose of improving the conditions of the
workers in the factories. Section 46 of the Act reads thus:
‘46. Canteens.—(1) The State Government may make rules requiring
that in any specified factory wherein more than two hundred and
fifty workers are ordinarily employed, a canteen or canteens shall
be provided and maintained by the occupier for the use of the
workers.
(2) Without prejudice to the generality of the foregoing power,
such rules may provide for—
(a) the date by which such canteen shall be provided;
(b) the standards in respect of construction, accommodation,
furniture and other equipment of the canteen;
(c) the foodstuffs to be served therein and the charges which
may be made therefor;
(d) the constitution of a managing committee for the canteen
and representation of the workers in the management of the
canteen;
(dd) the items of expenditure in the running of the canteen
which are not to be taken into account in fixing the cost of
foodstuffs and which shall be borne by the employer;
(e) the delegation to the Chief Inspector, subject to such
conditions as may be prescribed, of the power to make rules under
clause (c).’
5………The expression “occupier” of a factory is defined in Section 2(n)
of the Act as the person who has ultimate control over the affairs of
the factory, provided that (i) in the case of a firm or other
association of individuals, any one of the individual partners or
members thereof shall be deemed to be the occupier; (ii) in the case
of a company, any one of the directors shall be deemed to be the
occupier; and (iii) in the case of a factory owned or controlled by
the Central Government or any State Government, or any local
authority, the person or persons appointed to manage the affairs of
the factory by the Central Government, the State Government or the
local authority, as the case may be, shall be deemed to be the
occupier. Under clause (iii) of Section 2(n) of the Act, in the case
of a factory owned or controlled by the Central Government, the person
or persons appointed to manage the affairs of the factory by the
Central Government shall be deemed to be the occupier. The person so
appointed to manage the affairs of the factory of the Central
Government is under an obligation to comply with Section 46 of the Act
by establishing a canteen for the benefit of workers. The Canteen
Managing Committee, as stated above, has to be established under Rule
68 of the Rules to manage the affairs of the canteen. The functions of
the Canteen Managing Committee are merely advisory. It is appointed by
the Manager appointed under Section 7 of the Act and the Manager is
required to consult the Canteen Managing Committee from time to time
as to the quality and quantity of foodstuff served in the canteen, the
arrangement of the menus, times of meals in the canteen etc. The food,
drink and other items served in the canteen are required to be sold on
“no profit” basis and the prices charged are subject to the approval
of the Managing Committee. The accounts pertaining to a canteen in a
government factory may be audited by its departmental Accounts
Officers.”

Rule 67, sub-rules (1), (2) and (3), is traceable in this case which reads
thus:
“67. Equipment:
5) There shall be provided and maintained sufficient utensils,
crockery, cutlery, furniture and any other equipment necessary for
efficient running of the canteen. Suitable clean clothes for
employees serving in the canteen shall also be provided and
maintained.
6) The furniture utensils and other equipment shall be maintained in
a class and hygienic condition. A service counter, if provided,
shall have a top of smooth and impervious material. Suitable
facilities including an adequate supply of hot water shall be
provided for the cleaning of utensils and equipment.
7) Where the canteen is managed by a co-operative society, registered
under the Bombay Co-operative Societies Act, 1952, as in force in
the Union Territory of Delhi, the occupier shall provide and
maintain the equipment as required under sub-rule (1) for such
canteen.”

19. In the case in hand, it is an undisputed fact that the building for
running the canteen is situated in the Air India premises. It has got
statutory obligation under aforesaid rules read with the Notification of
1991 referred to supra to provide for necessary furniture and
infrastructure to run the statutory canteen in the premises of Air India.
In the case of Kanpur Suraksha Karmachari Union referred to supra, it was
urged on behalf of the management that before the government orders were
passed, the number of years of service rendered by the workmen under the
managing Committee before government officially absorbed them, could not be
counted as years of service rendered by them. The Court had rejected the
said contention urged on behalf of the management and held that even though
the management of the canteen may be by the Managing Committee, the workers
were employees of the factory and their services for the purposes of
pension would have to be calculated with effect from the date they started
working in the canteen. Further, in the said case on the basis of
pleadings and legal contentions urged on behalf of the parties it is held
that the management of the canteen could be with the certain committee for
determining the rights of the workers, it was the occupier of the factory
who is responsible for them. The said conclusion was arrived at by this
Court in that case after noticing the rights conferred on the workers
though the interpretation was not confined to the provisions of the
Factories Act but also regarding retirement benefits payable to the workmen
employed in the canteen in the said case. It was further observed by this
Court that one test which is derived is in relation to the question as to
who is the occupier of the relevant factory and whose responsibility is it
to see whether the canteen is provided and is running in accordance with
the provisions of the Factories Act?

20. Learned senior counsel on behalf of the workmen has also placed
reliance upon another judgment of this Court in Parimal Chandra Raha
(supra) upon which the CGIT placed reliance in arriving at the right
conclusion to hold that the concerned workmen are entitled for absorption.
In the above said case, this Court held that the appellant workmen working
in the canteens at different offices of LIC across the country were like
regular employees of the LIC as the canteens are run and managed by
different entities like Canteen Committees, Cooperative Society of the
employees and even contractors and directions about how to run the canteen
were issued by the LIC. In the said case, the infrastructure, the premises,
the furniture, electricity, water etc. were supplied by the LIC. The
working hours were also fixed by the LIC. Though LIC was obviously not a
factory, and the canteen established and run by it was not a statutory
canteen, still this Court held that whether the canteen was to be run under
an obligatory provision of the Factories Act or under a non-statutory
obligation to provide a canteen, the position is the same and that the
canteen workers become a part of the establishment. Therefore, in the
said case it is held that the workmen were entitled to the same wages as
Class-IV employees of the LIC.

21. In another decision rendered by three judge Bench of this Court in
the M.M.R.Khan’s case, demands were made by the canteen workers in many
manufacturing establishments like textiles, sugar mills, rope factories and
also in service establishments like RBI, LIC, Railways and Airways for
establishment of a statutory canteen where there are more than 250 workmen
working in such factory. In public sector undertaking like Airways, there
are different types of situations. One of them is the statutory canteen
which must be provided by such Industrial establishment which is a factory
in terms of the definition of the Factories Act, since manufacturing
activities are involved. In the instant case the Air India falls under the
category of factory where the occupier is defined under Section 2(n) of the
Factories Act and therefore, it is duty bound to provide a canteen to its
employees/ workmen which is known as the statutory canteen. It is the
statutory obligation on the part of Air India to provide a statutory
canteen under the provisions of Factories Act and Rules and therefore, it
is one more strong circumstance in favour of the concerned workmen for
regularization in their services as permanent workmen by the Air India. The
most important legal aspect of the case which is required to be considered
by me in this case is that the law stipulates statutory obligation on the
part of Air India to provide and maintain statutory canteen to cater the
food stuff to its employees/ workmen as per notification referred to supra.
Therefore, the canteen facility to be provided to the employees/ workmen
cannot be withdrawn by the owner of the establishment, namely, the
principal employer. Therefore, the necessary corollary to this condition
is the fact that in such a situation the nature of employment involved in
the canteen in question is perennial in nature. The need for workers to
run the canteen by the Management of Air India is permanent. The vacancies
of various posts in the canteen are permanent in nature.

22. From the review of case law on this aspect, two kinds of situations
arise, one in which the contractor is changed but not the workers employed.
In the Parimal Chandra Raha and the Indian Petrochemicals cases referred
to supra, such were the situations, upon which strong reliance is placed by
the learned single Judge and the Division Bench of the High Court to set
aside the finding of fact recorded by the CGIT in its award on the points
of disputes referred to it. This Court has taken a note of this relevant
fact and considered the same in the instant case to decide as to whether
the canteen workers should be regularized by the principal employer? The
other situation is where the contractor is changed and along with him the
workers also get the boot. The effect of this situation appears that the
workers have been temporary. In reality they are kept temporary in order to
perpetuate ‘unfair labour practice by the employer, which is not
permissible in view of Section 25T of the I.D. Act read with entry at
Serial No. 10 in the Vth Schedule of the I.D. Act regarding unfair labour
practices on the part of the employer. In the case in hand, I hold that
Air India is the principal employer and Chefair – an unit under HCI is the
contractor, on the basis of the pleadings of the parties and law laid down
by this Court referred to supra in the earlier paragraph of this judgment.
The CGIT has rightly arrived at the finding that Chefair is the unit of HCI
which renews the contract of canteen workers every forty days.
Unfortunately, the said workers, have been continued as contract workers in
the canteen though they have completed 240 days of continuous service in a
year as defined under Section 25B of the I.D. Act which action of the Air
India is unfair labour practice and is prohibited under Section 25T of the
I.D. Act. In spite of statutory prohibition of employing the concerned
workmen in the canteen on contract basis in permanent nature of work, the
Chefair – a unit of HCI and Air India have indulged in unfair labour
practices as defined under Section 2(ra) read with Section 25T and the Vth
Schedule of the I.D. Act, with a deliberate intention to deprive the
statutory rights of the concerned workmen which is a glaring patent
illegality committed by them for which they are liable to be punished under
Section 25U of the I.D. Act read with the Rules.

23. If the case pleaded by Air India and HCI is accepted by the single
Judge and the Division Bench of the High Court, it amounts to giving a
reward to Air India, who is the principal employer. It also amounts to
holding that the concerned workmen are contract employees of the contractor
and they are not put in the continuous service which amounts to conferring
reward upon the HCI and AIR India who have committed illegality. Both the
learned single Judge and the Division Bench of the High Court have
erroneously accepted the case pleaded by Air India and HCI which suffers
from error in law as it goes against the statutory provisions of the
Factories Act, Rules and the I.D. Act. The concerned workmen who are
working in the canteen at the relevant time have been working in the
vacancies which are permanent in nature. Therefore, they are required to be
regularized by the principal employer as permanent workmen and they are
also entitled to the consequential benefits since they have rendered their
services for more than 3 to 20 years continuously saving the artificial
breaks imposed on them by the employer from time to time to deprive them
from regularization as permanent employees of the establishment as has been
held by the CGIT in its award by accepting the claim of the workmen.

24. Further, it is clear from the Rules of 1950 and the Notification of
1991 referred to supra that Air India is the occupier under Section 2(n) of
the Factories Act and it must provide and maintain a statutory canteen for
its employees/ workmen. The vacancies in various posts that exist for
canteen workers are permanent in nature but the Management of HCI on behalf
of Air India has continued them as contract workers for a long period with
a break after 40 days, which is an unfair labour practice on their part
though it is prohibited under Section 25T of the I.D. Act. The temporary
rotation of concerned workers in the vacancies of the canteen by the HCI,
which is an instrumentality of the state is to countenance a situation
where two statutory entities of the above nature collude together to
perpetuate ‘unfair labour practices’ as defined under Section 2(ra) which
is enumerated at serial no. 10 under the heading of ‘unfair labour
practice’ on the part of the employer in the Vth Schedule to the I.D. Act.
Therefore, this Court is bound to ensure the implementation of all relevant
laws, especially those enacted by the Legislature to fulfil the
constitutional obligations under the Directive Principles of State Policy
and bring this unholy alliance between Air India and HCI to an end by
declaring the canteen workers as employees of the principal employer.

25. The M.M.R. Khan’s case referred to supra, fully supports the finding
recorded by the CGIT on the points of dispute in favour of the concerned
workmen by directing the Air India to regularize them as canteen workers.
At Para 25 of the said judgment the observations made by this Court which
are very relevant for our purpose read thus:
“25. Since in terms of the Rules made by the State Governments under
Section 46 of the Act, it is obligatory on the railway administration
to provide a canteen, and the canteens in question have been
established pursuant to the said provision there is no difficulty in
holding that the canteens are incidental to or connected with the
manufacturing process or the subject of the manufacturing process. The
provision of the canteen is deemed by the statute as a necessary
concomitant of the manufacturing activity. Paragraph 2829 of the
Railway Establishment Manual recognises the obligation on the railway
Administration created by the Act and as pointed out earlier paragraph
2834 makes provision for meeting the cost of the canteens. Paragraph
2832 acknowledges that although the railway administration may employ
anyone such as a staff committee or a co-operative society for the
management of the canteens, the legal responsibility for the proper
management rests not with such agency but solely with the railway
administration. If the management of the canteen is handed over to a
consumer cooperative society the bye-laws of such society have to be
amended suitably to provide for an overall control by the railway
administration.”
26. Before applying the legal principles laid down in the above paragraph
of the case to the case in hand, it is pertinent to note that at the very
outset three kinds of canteens exist in the Railways. They are: (i)
Statutory canteens as required under Section 46 of the Factories Act, 1948
where more than 250 employees are working, (ii) Non-statutory non-
recognized canteens which employ 250 or less than 250 employees and hence
there is no statutory obligation on the part of the employer to maintain
them, where workers exceed hundred and such canteens are set up with prior
approval of the Railway Board, and (iii) Non-Statutory non-recognized
canteens where 100 or less than hundred workers work and are set up without
prior approval of the Railway Board.

27. In the decision of this Court in M.M.R. Khan(supra), the workers
engaged in the first and second category of canteens mentioned above were
treated as Railway employees after considering the relevant facts and
statutory provisions of the Factories Act and the Rules. Thus, this Court
held that the workmen would be entitled to all service conditions
prescribed for them under relevant rules/orders. The relevant paragraph
from the said decision reads as under:
”30. While discussing above the contention that the employees in the
statutory canteens cannot be treated as railway employees even for the
purposes of the said Act, we have referred to the various
developments, and documents on record including the court decisions.
It is not necessary to repeat them here. In view of the same, the
contention advanced by Mr Ramaswamy that the railway administration is
engaged in varied welfare activities, and the employees engaged in
these activities will also have to be treated as railway employees, in
case, the canteen employees are 2recognized as railway employees does
not appeal to us. We express no opinion on the subject as to whether
the employees engaged in other welfare activities will or will not be
entitled to the status of the railway employees, since neither they
nor the facts pertaining to them are before us. Our conclusion that
the employees in the statutory canteens are entitled to succeed in
their claim is based purely on facts peculiar to them as discussed
above. If by virtue of all these facts they are entitled to the status
of railway employees and they cannot be deprived of that status merely
because some other employees similarly or dissimilarly situated may
also claim the same status. The argument to say the least can only be
described as one in terrorem, and as any other argument of the kind
has to be disregarded.”
(Emphasis laid by the Court)
28. I have carefully analysed the law enunciated by this Court in M.M.R.
Khan’s case which throws interesting light on the history of the canteen
workers’ litigation which I have carefully considered and applied the legal
principle laid down in that case to the fact situation of the case in hand.
The canteen workers of the canteen of Railways in Kharagpur approached the
High Court of Calcutta praying that they be recognized as Railway workers
and that all service conditions available to railway workers be made
available to them. The learned single Judge dismissed the petition. The
Division Bench directed the respondents to recognize the workers as Railway
employees but rejected their plea for similar service conditions. The
matter came before this Court and the Court was inclined to agree with the
Division Bench decision of the Calcutta High Court and left it open to the
Union of India. The railway board acted on the initiative of this Court
and declared that all Kharagpur canteen workers, soon followed by all
statutory canteen workers across India would be deemed railway workers, but
governed by their earlier service conditions. The prime mover therefore
was not the Railway Establishment Manual (REM) but a judicial
interpretation clubbed with judicial nudging, to achieve the constitutional
goals for canteen workers. Therefore the contention urged by Mr. C.U.
Singh, learned senior counsel on behalf of Air India that the decision
rendered by this Court in M.M.R. Khan’s case is distinguishable from the
facts of the instant case, as this Court placed reliance upon the REM and
the circulars issued by the Railway Board in the above referred case is
wholly untenable in law, for the reason that REM is also invoked by the
Railways. I have to state that this Court has not given relief to railway
canteen workers because of the REM. On the contrary, it is the statutory
status of one type of canteen that was the prime mover, not only for
workers to claim their rights, but also for the railways to find a basis
for classification and then create a suitable administrative system to
govern all kinds of canteen workers using a reasonable basis for
classification. Indeed the distinguishing feature adopted by the Railways
in the above referred case is primarily the one provided by the Factories
Act and the Rules. The relevant fact has been duly recognized by this
Court in the aforesaid case without in any way watering down the importance
of a statutory canteen to be provided to the employees/ workmen by the
occupier of a factory. The learned single Judge and Division Bench have
unjustly refused the claim of the canteen workmen by accepting the
untenable arguments advanced by the learned senior counsel on behalf of the
Air India that the canteen run through HCI from Chefair is not the
statutory canteen and Air India is not the principal employer. This
conclusion is not only erroneous but is also contrary to the law laid down
by this Court in the cases referred to supra which are binding upon it.

29. The presence of a statutory obligation on the part of Air India to run
a canteen must always be seen as one more strong circumstance for me to
determine the wider question of regularization of the concerned workmen
involved in this case. In Indian Petrochemicals Corpn.’s case, referred to
supra we noticed the facts of that case which are quite similar to the case
in hand. This Court was greatly influenced in determinative way of the
finding of fact and recorded that the workers were in continuous employment
in the canteen for a considerable length of time. The underlying test is
what is the nature of employment of the concerned workmen in the case in
hand? Is it a temporary or casual vacancy or is it perennial and permanent
in nature? The answer to the aforesaid queries by me is that in all
statutory canteens, the nature of employment, of vacancies, is indeed of a
permanent nature and those who deploy the workmen on contract basis to
discharge statutory duties of an employer amounts to unfair labour
practice. In the nature of rotational hire and fire, policy adopted by the
employer must not be rewarded for the illegalities perpetuated by them.
This is more so when the principal employer is a statutory corporation
coupled with the fact that the contractor also is one such entity and the
two should not be allowed to continue their unfair labour practices to
employ the workmen on contract basis in the canteen to discharge the
statutory duty by the occupier to provide and maintain a statutory canteen
for its employees/workmen in its factory. Both Air India and HCI have
colluded with each other to perpetuate unfair labour practices by engaging
the concerned workmen in the statutory canteen of the principal employer-
Air India.

30. Another important angle is examined by me in relation to the nature of
test to be used to determine employment relations between the parties.
Classically jurists like Salmond and others while developing the
jurisprudence relating to Torts have laid down the test to determine the
relationships between ‘master and servant’. In such situations the
predominant test deployed was the test of control and supervision. It is
needless to state that post constitutional jurisprudence in India must no
longer be allowing practice of the traditional master and servant
relationship but should be facilitating employer-employee relationships
mediated by constitutional jurisprudence which is relevant to the area of
labour law jurisprudence in our country in the interest of maintaining
industrial peace and harmony which is in larger public interest.

31. Further there has been considerable discussion in the area of
determining the relevant test relating to the jurisprudence of employer-
employee relationship. Sometimes, we have fallen back on the old principles
of master and servant and quite often when we find that these were not
capable of delivering justice to the workers keeping with the principles
contained in our Directive Principles of State Policy as enshrined in Part
IV of the Constitution, this Court has taken note of this difficult
situation and has devised new tests to meet the challenges of the new
times.

32. That is why the legal principle has been enunciated by this Court right
from the Hussainbhai Calicut, M.M.R. Khan, Parimal Chandra Raha to
Harjinder Singh v. Punjab State Warehousing Corporation[18] establishing
the trend of healthy constitutional jurisprudence and its application to
labour law keeping in mind the basic feature of the constitution namely to
render social justice to the weaker sections of the society as has been
held by this Court in Kesvananda Bharati v. State of Kerala[19]. The
concept of social justice has been vividly explained in the case of
Harjinder Singh, the relevant paragraph of which is extracted hereunder:

“30. Of late, there has been a visible shift in the courts’ approach
in dealing with the cases involving the interpretation of social
welfare legislations. The attractive mantras of globalisation and
liberalisation are fast becoming the raison d’être of the judicial
process and an impression has been created that the constitutional
courts are no longer sympathetic towards the plight of industrial and
unorganised workers. In large number of cases like the present one,
relief has been denied to the employees falling in the category of
workmen, who are illegally retrenched from service by creating by-
lanes and side-lanes in the jurisprudence developed by this Court in
three decades. The stock plea raised by the public employer in such
cases is that the initial employment/engagement of the
workman/employee was contrary to some or the other statute or that
reinstatement of the workman will put unbearable burden on the
financial health of the establishment. The courts have readily
accepted such plea unmindful of the accountability of the wrong doer
and indirectly punished the tiny beneficiary of the wrong ignoring the
fact that he may have continued in the employment for years together
and that micro wages earned by him may be the only source of his
livelihood.”
33. Courts in this country have been faced with the problem to resolve
the dilemma as to who is really independent contractor and who is not? In
the light of the Constitution Bench decision in Steel Authority of India’s
case (supra) on the subject, the crucial test is to determine whether the
nature of the contractual relationship between the parties that is
juristically introduced is a genuine one or a sham contract. It must be
noted that employers and their organizations and indeed all parties to
labour litigation keep close watch on the evolving jurisprudence and tailor
legal agreement and paper contracts accordingly to suit the purpose of
finding the cheapest and most exploitable labour with honourable exceptions
as we have seen in the case of the railway management. This craze for
facilitating ‘flexible labour’ which is another phrase for ‘hire and fire’
deserves no constitutional sympathy.

34. Two broad judicial approaches have manifested themselves in the above
background – one that responds to constitutional jurisprudence, as pointed
out in Harjinder Singh’s case (supra) and the other that abides by the new
dogmas of globalisation and liberalisation. It is my considered view that I
must abide by the former jurisprudence keeping in view the mandate we find
in the judgments of this Court referred to supra.

35. The test which I come across is almost universal in its application
to address the wide range of fact situations which has been discussed by me
in this judgment. In the case of Hussainbhai (supra), this Court has held
that the test of economic control in contrast to the test of control and
supervision is the test to ascertain the employer-employee relationship. I
am inclined to apply the above test to the fact situation of the case in
hand to determine the fact as to whether a genuine contract or a sham
contract exists between Air India and the Hotel Corporation of India.
Indeed if I pierce the veil of legal appearances that is contained in the
contractual arrangement between the two public sector corporations named
above, I must come to the conclusion that what I see is a sham contract
between them behind which many unfair labour practices like the 40 days
contract of employment of the concerned workmen in the canteen has been
perpetuated by them in order to deny permanent employment to the workmen in
the canteen which is of permanent and statutory in nature and therefore
carries with it permanent vacancies.

36. The learned senior counsel on behalf of Air India, placing reliance
upon the decision of this Court referred to supra urged that the concerned
workmen in the canteen are ‘workmen’ only for the purpose of Factories Act.
I disagree with the said contention and the view point for the reason that
the same workers are also ‘workers’ as defined under Section 2(s) of the
I.D. Act and permanently keeping them on a temporary status is against
entries at serial numbers 5 and 10 of the Vth Schedule of the I.D. Act
pertains to “Unfair Labour Practices” under the I.D. Act which prohibits
employers from committing such illegalities, for which the statutory penal
action is prescribed under Section 25U of the I.D. Act on such persons. The
existing practice that is followed by either the Hotel Corporation of India
or Air India independent of each other or in collusion thereof is
unbecoming of a model employer. Interestingly, this position would remain
the same irrespective of whether the canteen worker is an employee of the
‘independent contractor’ or the ‘principal employer’.

37. Further question is whether the above two legal entities are
independent of each other or not, has become central focus to stay within
the confines of the test of ‘control and supervision’. I am prompted to
find out whether the wholly owned subsidiary, the HCI is acting at the
behest of Air India and if so to what extent. If, however, I have to apply
the other tests already laid down by this Court as, I propose to do in this
case in Hussainbhai’s case, then the independence of the separate legal
personalities and the interpretation made in Salomon v. Salomon, on which
the learned single judge relies, pales into insignificance. The relevant
paragraph reads as under:
“Then, if the company was a real company, fulfilling all the
requirements of the Legislature, it must be treated as a company, as
an entity, consisting indeed of certain corporators, but a distinct
and independent corporation. The Court of Appeal seem to treat the
company sometimes as substantial and sometimes as shadowy and unreal:
it must be one or the other, it cannot be both. A Court cannot impose
conditions not imposed by the Legislature, and say that the
shareholders must not be related to each other, or that they must hold
more than one share each. There is nothing to prevent one shareholder
or all the shareholders holding the shares in trust for some one
person. What is prohibited is the entry of a trust on the register: s.
30 . If all the shares were held in trust that would not make the
company a trustee.”

 
38. The said principle has been followed by this Court in catena of cases
namely, Kanpur Suraksha Karamchari Union and Basti Sugar Mills Ltd.
referred to supra. In the case of State of UP v. Renusagar Power Co.
(supra), this Court held as under:
“55. ……On the other hand these English cases have often pierced the
veil to serve the real aim of the parties and for public purposes. See
in this connection the observations of the Court of appeal in DHN Food
Distributors Ltd. v. London Borough of Tower Hamlets. It is not
necessary to take into account the facts of that case. We may,
however, note that in that case the corporate veil was lifted to
confer benefit upon a group of companies under the provisions of the
Land Compensation Act, 1961 of England. Lord Denning at p. 467 of the
report has made certain interesting observations which are worth
repeating in the context of the instant case. The Master of the Rolls
said at p. 467 as follows:
‘Third, lifting the corporate veil. A further very interesting
point was raised by counsel for the claimants on company law. We
all know that in many respects a group of companies are treated
together for the purpose of general accounts, balance sheet and
profit and loss account. They are treated as one concern.
Professor Gower in his book on company law says: ‘there is
evidence of a general tendency to ignore the separate legal
entities of various companies within a group, and to look instead
at the economic entity of the whole group’. This is especially the
case when a parent company owns all the shares of the
subsidiaries, so much so that it can control every movement of the
subsidiaries. These subsidiaries are bound hand and foot to the
parent company and must do just what the parent company says. A
striking instance is the decision of the House of Lords in Harold
Holdsworth & Co. (Wakefield) Ltd. v. Caddies. So here. This group
is virtually the same as a partnership in which all the three
companies are partners. They should not be treated separately so
as to be defeated on a technical point. They should not be
deprived of the compensation which should justly be payable for
disturbance. The three companies should, for present purposes, be
treated as one, and the parent company, DHN, should be treated as
that one. So that DHN are entitled to claim compensation
accordingly. It was not necessary for them to go through a
conveyancing device to get it……’
XXX XXX XXX
XXX XXX XXX
65. Mr. Justice O. Chinnappa Reddy speaking for this Court in LIC v.
Escorts Ltd. had emphasised that the corporate veil should be lifted
where the associated companies are inextricably connected as to be, in
reality, part of one concern. It is neither necessary nor desirable to
enumerate the classes of cases where lifting the veil is permissible,
since that must necessarily depend on the relevant statutory or other
provisions, the object sought to be achieved, the impugned conduct,
the involvement of the element of the public interest, the effect on
parties who may be affected. After referring to several English and
Indian cases, this Court observed that ever since A. Salomon & Co.
Ltd. case a company has a legal independent existence distinct from
individual members. It has since been held that the corporate veil may
be lifted and corporate personality may be looked in. Reference was
made to Pennington and Palmer’s Company Laws.
66. It is high time to reiterate that in the expanding horizon of
modern jurisprudence, lifting of corporate veil is permissible. Its
frontiers are unlimited. It must, however, depend primarily on the
realities of the situation. The aim of the legislation is to do
justice to all the parties. The horizon of the doctrine of lifting of
corporate veil is expanding. Here, indubitably, we are of the opinion
that it is correct that Renusagar was brought into existence by
Hindalco in order to fulfil the condition of industrial licence of
Hindalco through production of aluminium. It is also manifest from the
facts that the model of the setting up of power station through the
agency of Renusagar was adopted by Hindalco to avoid complications in
case of take over of the power station by the State or the Electricity
Board. As the facts make it abundantly clear that all the steps for
establishing and expanding the power station were taken by Hindalco,
Renusagar is wholly owned subsidiary of Hindalco and is completely
controlled by Hindalco. Even the day-to-day affairs of Renusagar are
controlled by Hindalco. Renusagar has at no point of time indicated
any independent volition. Whenever felt necessary, the State or the
Board have themselves lifted the corporate veil and have treated
Renusagar and Hindalco as one concern and the generation in Renusagar
as the own source of generation of Hindalco. In the impugned order the
profits of Renusagar have been treated as the profits of Hindalco.
XXX XXX XXX
68. The veil on corporate personality even though not lifted
sometimes, is becoming more and more transparent in modern company
jurisprudence. The ghost of Salomon case still visits frequently the
hounds of Company Law but the veil has been pierced in many cases.
Some of these have been noted by Justice P.B. Mukharji in the New
Jurisprudence.”
(Emphasis laid by the Court)

 

39. The above said judgment is followed by this Court in D.D.A. v.
Skipper Construction Co.(supra). The relevant paragraphs read as under:
“26. The law as stated by Palmer and Gower has been approved by this
Court in TELCO v. State of Bihar. The following passage from the
decision is apposite:
‘… Gower has classified seven categories of cases where the veil of
a corporate body has been lifted. But, it would not be possible to
evolve a rational, consistent and inflexible principle which can be
invoked in determining the question as to whether the veil of the
corporation should be lifted or not. Broadly stated, where fraud is
intended to be prevented, or trading with an enemy is sought to be
defeated, the veil of a corporation is lifted by judicial decisions
and the shareholders are held to be the persons who actually work
for the corporation.’
27. In DHN Food Distributors Ltd. v. London Borough of Tower Hamlets
the court of appeal dealt with a group of companies. Lord Denning
quoted with approval the statement in Gower’s Company Law that
“there is evidence of a general tendency to ignore the separate legal
entities of various companies within a group, and to look instead at
the economic entity of the whole group”.
The learned Master of Rolls observed that “this group is virtually the
same as a partnership in which all the three companies are partners”.
He called it a case of “three in one” — and, alternatively, as “one in
three”.
28. The concept of corporate entity was evolved to encourage and
promote trade and commerce but not to commit illegalities or to
defraud people. Where, therefore, the corporate character is employed
for the purpose of committing illegality or for defrauding others, the
court would ignore the corporate character and will look at the
reality behind the corporate veil so as to enable it to pass
appropriate orders to do justice between the parties concerned. The
fact that Tejwant Singh and members of his family have created several
corporate bodies does not prevent this Court from treating all of them
as one entity belonging to and controlled by Tejwant Singh and family
if it is found that these corporate bodies are merely cloaks behind
which lurks Tejwant Singh and/or members of his family and that the
device of incorporation was really a ploy adopted for committing
illegalities and/or to defraud people.
The concept of resulting trust and equity”
(Emphasis laid by the Court)

 
40. In Kapila Hingorani v. State of Bihar (supra), this Court held as
under:
“26. The proposition that a company although may have only one
shareholder will be a distinct juristic person as adumbrated in
Salomon v. Salomon and Co., has time and again been visited by the
application of doctrine of lifting the corporate veil in revenue and
taxation matters. (See Dal Chand and Sons v. CIT and Juggilal Kamlapat
v. CIT.)
27. The corporate veil indisputably can be pierced when the corporate
personality is found to be opposed to justice, convenience and
interest of the revenue or workman or against public interest. (See
CIT v. Sri Meenakshi Mills Ltd., Workmen v. Associated Rubber Industry
Ltd., New Horizons Ltd. v. Union of India, State of U.P. v. Renusagar
Power Co., Hussainbhai v. Alath Factory Thezhilali Union and Secy.,
H.S.E.B. v. Suresh.)”
(Emphasis laid by the Court)
41. This Court in Secretary, HSEB v. Suresh & Ors.[20] has held as under:
“6. In order to keep the said plants and stations clean and hygienic,
the appellant-Board, upon tenders being floated, awards contracts to
contractors who undertake the work of keeping the same clean and
hygienic. One such contract was awarded to one Kashmir Singh, for
“proper, complete and hygienic cleaning, sweeping and removal of
garbage from the Main Plant Building” at Panipat, at the rate of Rs
33,000 per month with a stipulation to engage minimum 42 Safai
Karamcharis with effect from 15-5-1987 for a period of one year and in
terms therewith the contractor took over the work and performed the
said work through the above-stated Safai Karamcharis.
XXX XXX XXX
9. The High Court did in fact note with care and caution the doctrine
of “lifting of the veil” in industrial jurisprudence and recorded that
in the contextual facts and upon lifting of the veil, question of
having any contra opinion as regards the exact relationship between
the contesting parties would not arise and as such directed
reinstatement though, however, without any back wages. While it is
true that the doctrine enunciated in Saloman v. Saloman & Co. Ltd.
came to be recognised in the corporate jurisprudence but its
applicability in the present context cannot be doubted, since the law
court invariably has to rise up to the occasion to do justice between
the parties in a manner as it deems fit. Roscoe Pound stated that the
greatest virtue of the law court is flexibility and as and when the
situation so demands, the law court ought to administer justice in
accordance therewith and as per the need of the situation.
XXX XXX XXX
13. There is, however, a total unanimity of judicial pronouncements to
the effect that in the event the contract labour is employed in an
establishment for seasonal workings, question of abolition would not
arise but in the event of the same being perennial in nature, that is
to say, in the event of the engagement of labour force through an
intermediary which is otherwise in the ordinary course of events and
involves continuity in the work, the legislature is candid enough to
record its abolition since involvement of the contractor may have its
social evil of labour exploitation and thus the contractor ought to go
out of the scene bringing together the principal employer and the
contract labourers rendering the employment as direct, and resultantly
a direct employee. This aspect of the matter has been dealt with great
lucidity, by one of us (Majmudar, J.) in Air India Statutory Corpn. v.
United Labour Union.
XXX XXX XXX
17. Needless to note at this juncture that the Contract Labour
(Regulation and Abolition) Act being a beneficial piece of legislation
as engrafted in the statute-book, ought to receive the widest possible
interpretation in regard to the words used and unless words are taken
to their maximum amplitude, it would be a violent injustice to the
framers of the law. As a matter of fact the law is well settled by
this Court and we need not dilate much by reason therefor to the
effect that the law courts exist for the society and in the event of
there being a question posed in the matter of interpretation of a
beneficial piece of legislation, question of interpreting the same
with a narrow pedantic approach would not be justified. On the
contrary, the widest possible meaning and amplitude ought to be
offered to the expressions used as otherwise the entire legislation
would lose its efficacy and contract labour would be left at the mercy
of the intermediary.
XXX XXX XXX
20. It has to be kept in view that this is not a case in which it is
found that there was any genuine contract labour system prevailing
with the Board. If it was a genuine contract system, then obviously it
had to be abolished as per Section 10 of the Contract Labour
Regulation and Abolition Act after following the procedure laid down
therein. However, on the facts of the present case, it was found by
the Labour Court and as confirmed by the High Court that the so-called
contractor Kashmir Singh was a mere name lender and had procured
labour for the Board from the open market. He was almost a broker or
an agent of the Board for that purpose. The Labour Court also noted
that the management witness Shri A.K. Chaudhary also could not tell
whether Shri Kashmir Singh was a licensed contractor or not. That
workman had made a statement that Shri Kashmir Singh was not a
licensed contractor. Under these circumstances, it has to be held that
factually there was no genuine contract system prevailing at the
relevant time wherein the Board could have acted as only the principal
employer and Kashmir Singh as a licensed contractor employing labour
on his own account. It is also pertinent to note that nothing was
brought on record to indicate that even the Board at the relevant time
was registered as the principal employer under the Contract Labour
Regulation and Abolition Act. Once the Board was not a principal
employer and the so-called contractor Kashmir Singh was not a licensed
contractor under the Act, the inevitable conclusion that had to be
reached was to the effect that the so-called contract system was a
mere camouflage, smoke and a screen and disguised in almost a
transparent veil which could easily be pierced and the real
contractual relationship between the Board, on the one hand, and the
employees, on the other, could be clearly visualised.”
(Emphasis laid by the Court)

 

42. The legal principle laid down by this Court by following the
exposition of law for lifting the veil to find out real facts is very much
necessary to the facts of the case in hand having the law laid down in the
case of Salomon v. Salomon (supra) to examine the correctness of the
findings of the High Court in reversing the finding of fact recorded in
favour of the concerned workmen by the CGIT in its award with a view to
find out whether the arrangement with or without the consent of the owner
company facilitated the violation of the basic principles of labour
jurisprudence established in this country over a period of more than six
decades, especially principles relating to security of tenure,
retrenchment, natural justice, and many other standards relating to “decent
conditions at work”. If two statutory corporations owned by the Government
of India are governed by Rule of law, namely Factories Act and Industrial
Disputes Act, in the manner in which they contended, it would be opposed to
the labour jurisprudence and constitute a clear case of unfair labour
practice which is against the law enunciated by this Court in plethora of
cases referred to supra whose relevant paragraphs are extracted as above in
support of my conclusion to hold that the finding in the impugned judgments
of the High Court that is, the HCI, though it is a subsidiary company of
Air India, yet it is a separate and distinct legal entity and that the
concerned workmen have been employed by the HCI and not Air India and
hence, there is no relationship of employer and employee and disciplinary
control upon them by Air India, which has been reached at by the High Court
and setting aside the findings recorded by the CGIT in favour of the
concerned workmen, is not only erroneous but also suffers from error in law
as the same is opposed to the law laid down by this Court in catena of
cases referred to supra.
43. Any other test required to be applied to the question of the legal
entity of the so called ‘independent contractor’, is irrelevant to the
critical issues which arise in this case. The view taken by the Delhi High
Court regarding the separate legal identity of both these corporations, and
erroneously setting aside the findings of the CGIT is not the determining
factor in this case. There have been varying practices in vogue in this
regard. In the Parimal Chandra Raha’s case (supra), it is noticed that
there were ‘Managing Committees’, and ‘Cooperative Societies’ which could
not exist without a separate legal personality that is, ‘Contractors’, many
of them also create convenient legal personalities under garb of different
legal entities. The presence of a contractor clothed with a legal
personality or not as in the case of the defence establishments referred to
above in the Suraksha Karamchari Union’s case (supra) also has hardly ever
been considered to be a determinative test pertaining to canteen workers on
contract.
44. For the reasons recorded by me on the contentious points with
reference to the facts, legal evidence and law laid down by this Court in
plethora of cases, I am in agreement with the CGIT on the finding of facts
recorded by it on the question of the relationship between the concerned
workmen and the Air India on proper appreciation of pleadings and the legal
evidence on record and piercing the veil to the fact situation to find out
true facts which is rightly answered by CGIT on the points of disputes and
the said finding is in conformity with the law laid down by this Court in
Hussainbhai’ case and M.M.R. Khan and other cases referred to supra for the
reason that the contract with the HCI which is a subsidiary Company of Air
India and employing the contract workers to work in the statutory canteen,
is a sham contract. They have been engaged in permanent nature of work
continuously for number of years. The finding of fact recorded by the CGIT
on the points of dispute holding that they are entitled for regularization
and to be absorbed as employees of Air India, without prejudice to any
managerial arrangement to avail the expertise of the HCI of India through
existing arrangements. Indeed that would be a win-win situation for all the
stake holders concerned in this case- the corporates, the Air India
employees numbering more than 2000 in this case and the disempowered
canteen workers and that would also be in harmony with our constitutional
jurisprudence.
45. However it must be clarified that the requirement of reservation as
provided for in Articles 14 and 16 of the Constitution must be complied
with while regularizing the canteen workers as employees of Air India. This
can be achieved by complying with relevant provisions of the I.D. Act in
contrast to the action taken by the HCI in violation of the said statute.
It is also further relevant to note that the only relief the workers have
sought is one of regularization on the rolls of Air India. This does not
itself impose any additional expenditure for it. Therefore, the concern of
the learned single Judge of the High Court, on this count is not attracted
in the context of the relief sought for by the concerned workmen.
46. The special facts which are intermingled with questions of fact
relevant to the case at hand may once again be noticed by me to hold that
the concerned workmen have completed 240 days despite attempt of the
contractor by giving break in service of the concerned workmen by the
statutory corporation which is an instrumentality of the state which is
not permissible in law.
47. The wages of the canteen workers and other costs are paid through the
arrangement of per head subsidy @ of Rs.340/- for over 2000 employees, to
the contractor that is, HCI by the principal employer -Air India. The
supervision and control of the establishment is adequately provided for
through the ‘Memorandum and Articles of Association’ which binds both the
‘sole owner’ and the ‘wholly owned subsidiary’. The service of running the
statutory canteen is provided for the benefit of the employees of Air
India. The statutory obligation on the part of Air India to run the canteen
is squarely placed on the shoulders of the occupier of the factory as per
Section 2(n) of the Factories Act, because they employ more than 2000
employees despite resorting to pleadings stating that it did not employ
more than 250 workers, thus seeking to escape from the consequences that
may follow in case of a ‘statutory canteen’ without challenging the
Notification of the Labour Department issued by the Lt. Governor of Delhi
under Rules 65 to 70 of the Rules.
48. For the above reasons, in addition to the test of economic control,
as held by this Court in Hussainbhai’s case, I am of the view that the
relief sought for by the concerned workmen which is accepted by the CGIT is
legal and valid. Therefore, I have to accept the finding and reasons
recorded by the CGIT though the reasons which I have assigned are not the
reasons assigned by it but the conclusions arrived at by the CGIT while
determining the points of dispute referred to it are legal and valid.
Therefore, the reasons assigned by me in this judgment must be read into
the reasons of the award of the CGIT. The aforesaid reasons are assigned
by me in this judgment after careful examination of the rival legal
contentions urged by the learned senior counsel on behalf of the parties
with reference to the provisions of the Factories Act, Rules, Contract
Labour Act and Industrial Disputes Act and law laid down by this Court in
catena of cases. These points are accordingly answered in favour of the
workmen.
Answer to point No. 3:
49. In view of the foregoing reasons recorded by me in answering the point
Nos. 1 and 2 after adverting to the relevant facts and interpretation of
certain provisions of the Factories Act, Rules and the Industrial Disputes
Act, particularly Sections 2(k), 2(s) read with the provisions of Section
25(T) and Section 25(U) of the Industrial Disputes Act and Entry No.10 in
the Vth Schedule under the definition of unfair labour practices as
defined in Section 2(ra) regarding the employment of the workmen on
contract basis against the permanent nature of employment in the statutory
canteen I have held that this practice by Air India constitutes unfair
labour practice. The decisions rendered by this Court which have been
extensively referred to by me and some of the cases referred to by the CGIT
have rightly answered the points of dispute in favour of the concerned
workmen, on proper appreciation of the facts pleaded, legal evidence on
record and I have applied the legal principles laid down by this Court in
the cases of Basti Sugar Mills Ltd., Parimal Chandra Raha, Kanpur Suraksha
Karamchari Union and M.M.R. Khan (all referred to supra) to the fact
situation of the case on hand to restore the award of the CGIT. The CGIT
has rightly come to the conclusion and recorded the finding of fact
assigning valid and cogent reasons. Therefore, I have to answer that the
findings and reasons recorded by CGIT on the points of dispute in relation
to the concerned employees declaring that the concerned contract workers of
the canteen are deemed employees of Air India is a right decision which has
been reached after appreciation of evidence on record and adhering to the
legal principles laid down by this Court in catena of cases. Further,
setting aside the termination orders passed against some of the concerned
workmen covered in the industrial dispute case Nos.97 to 99 of 1996 is also
justified for the reason that the services of the concerned workmen in the
above cases were terminated during pendency of the industrial disputes
before CGIT regarding absorption of the concerned workmen as permanent
employees, without obtaining approval from the CGIT as required under
Section 33(2)(b) of the I.D. Act. Apart from the above reason, the
termination of services of the workmen involved in the above industrial
dispute cases is unsustainable in law for the reason that they have not
complied with the mandatory provisions of Section 25F, clauses (a) and (b)
of the I.D. Act and have not obtained the permission from the Central
Government as required under Section 25N of Chapter VB of the I.D. Act.
Therefore, the orders of termination passed against the concerned workmen
are void ab initio in law and the same are liable to be set aside. I have
to hold that the CGIT has rightly passed an award in favour of all the
workmen in all the Industrial Disputes on the file of CGIT on findings and
reasons recorded on the points of dispute referred to it by the Central
Government upon which adjudication is made by the CGIT. The same cannot be
termed either as erroneous or error in law. Accordingly, I answer the point
No.3 in favour the concerned workmen.

Answer to point No.4:

50. The findings and reasons recorded on the contentious points by both
the learned single Judge and the Division Bench of the Delhi High Court in
the impugned judgment that no better service conditions than the Management
of HCI would be provided to the canteen workers except to get free air
tickets which apparently some employees of Air India are entitled to, is
untenable in law. Incidentally this is another aspect which may have a
bearing on the question of viability in terms of prevailing practice in
industry. Perhaps, Air India must explore the significance of the region
cum industry principle so well developed in our labour jurisprudence. It is
seriously concerned about competition and viability rather than focus on
the handful of canteen workers.

51. The learned single Judge and the Division Bench have interfered with
the finding of fact recorded in the common award passed by the CGIT by
disagreeing with the findings and reasons recorded by the CGIT and holding
that the HCI is a subsidiary corporation of Air India and it has got 100%
share holding and power to appoint the Directors of the HCI and after
referring to the decisions of this Court in Kanpur Suraksha Karamchari
Union case (supra), it held that it is a separate legal entity which
finding of fact and reason has been concurred with by the Division Bench by
assigning the similar reasons placing reliance on the decision of this
Court in M.M.R. Khan’s case which decision supports the case of the
concerned workmen. The said decision is distinguished by the Division Bench
of the High Court after adverting to certain paragraphs without considering
the relevant paragraph Nos. 25 and 30 which has laid down the legal
principle and also referred to other judgments namely Indian Petrochemicals
Corporation Ltd. and Hari Shanker Sharma referred to supra without piercing
the veil to the real facts of the case.

52. Both the learned single Judge and the Division Bench have exceeded in
their jurisdiction in exercising their extraordinary and supervisory
jurisdiction in the Writ Petitions and the Letter Patent Appeals, while
examining the correctness and findings recorded by the CGIT in the common
award which the High Court has disagreed with and has set aside the common
award impugned in the Writ Petitions filed by Air India. Both the learned
single Judge and the Division Bench have exceeded their jurisdiction in
interfering with findings of fact recorded by the CGIT on the points of
dispute and the contentious issues on proper appreciation of pleadings,
evidence on record and law laid down by this Court in the cases referred to
in the award I have referred to the relevant factual aspects and legal
evidence and the statutory provisions of the Factories Act, Rules and the
Industrial Disputes Act, while answering to Point Nos.1, 2 and 3 in favour
of the concerned workmen by recording my reasons in this judgment.
Therefore, I have to hold that the learned single Judge and the Division
Bench exceeded in their jurisdiction to interfere with the finding of fact
recorded by the CGIT on the points of dispute which were referred to by the
Central Government. For the reasons recorded by me on point Nos. 1 and 2 in
this judgment and further answering the point No.3 in affirmative in favour
of the concerned workmen holding that findings and reasons recorded by the
CGIT on the point of dispute referred to it by the Central government are
neither erroneous nor suffers from error in law. Also I have to hold while
answering to point No. 4 that both the learned single Judge and the High
Court have disagreed with the correct finding of fact recorded by the CGIT
in its award. The findings recorded by the learned Singh Judge and
Division Bench in the impugned judgment are not only erroneous but suffers
from error in law as the same is contrary to the statutory provisions and
law laid down by this Court which have been extensively referred to by me
in the reasoning portion of this judgment in answer to point Nos. 1 and
2. Hence, I have to hold that findings and reasons recorded in the
impugned judgment is wholly untenable and liable to be set aside and
accordingly set aside by answering point no. 4 in affirmative in
favour of the concerned workmen.

Answer to Point No.5:

53. Since I have answered point No. 4 in favour of the concerned workmen
and against Air India, the appellants are entitled for the reliefs as
prayed for in these appeals. Accordingly, these appeals are allowed and
common award dated 5.5.2004 passed in I.D. Nos.97 to 99 of 1996 in favour
of the workmen is restored. Further, I direct the Management of Air India
to absorb all the concerned workmen covered in the I.D. Nos.97 to 99 of
1996 as permanent workmen on its rolls from the date of their appointment
and grant all the consequential benefits such as salary for which they are
entitled for after computing properly, taking into consideration the pay
scale and periodical wage revision that has taken place and are applicable
to the respective posts of the concerned workmen as per the notification
issued by the Lt. Governor, Union Territory of Delhi and on the basis of
similar notifications applicable for them.

54. Since I have allowed I.D. Nos. 97 to 99 of 1996, the Industrial Dispute
case Nos. 107 and 108 of 1996 involving the workmen whose services were
terminated during the pendency of petition before CGIT, must also be
treated as permanent workmen at par with the concerned workmen involved in
the instant case. The award for their reinstatement to their posts shall be
passed with all consequential benefits with full back wages.

 

 
55. Accordingly, I allow the appeals of the concerned workmen in the
above said terms.

 

 

 
……………………………………………………………J. [V. GOPALA
GOWDA]

 
New Delhi,
November 13, 2013

 

 

 

 

 

 

 

———————–
[1] 1990 (Supp) SCC 191
[2] 1995 suppl. (2) SCC 611
[3] AIR 1964 SC 355
[4] (2001) 1 SCC 720
[5] 1897 AC 22
[6] (1999) 6 SCC 439,
[7] (2001)7 SCC 1
[8] (2009)13 SCC 374
[9] (2002) 1 SCC 337
[10] (1988) 4 SCC 59,
[11] (1996) 4 SCC 622
[12] (2003) 6 SCC 1
[13] (2004) 3 SCC 514
[14] (2005) 5 SCC 51
[15] (1992) 1 SCC 695
[16] (1978) 4 SCC 257
[17] (1988) 4 SCC 478
[18] (2010)3 SCC 192
[19] (1973)4 SCC2 25
[20] (1999) 3 SCC 601

———————–
2

 

 

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