Page 1 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

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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,

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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.

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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

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Rule 65 of the Rules, the Lieutenant-Governor of

the Union Territory of Delhi, by notification in

the Official Gazette, dated 21

st

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

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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

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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

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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

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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

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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.”

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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

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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

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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

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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

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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

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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.

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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

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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

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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

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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.”

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(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

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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

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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:

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(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

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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

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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

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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

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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.

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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

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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

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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

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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

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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

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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.”

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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.

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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)

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NEW DELHI,

NOVEMBER 13, 2013

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Page 38 C.A.Nos.10264-10266/2013 @ SLP(C)Nos. 24946-24948/2011

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

38

Page 39 C.A.Nos.10264-10266/2013 @ SLP(C)Nos. 24946-24948/2011

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 2

nd

May, 2011

passed in L.P.A. Nos.388 of 2010, 390 of 2010 and 391

of 2010 confirming the judgment and order dated 8

th

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 5

th

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

39

Page 40 C.A.Nos.10264-10266/2013 @ SLP(C)Nos. 24946-24948/2011

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 2

nd

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.

1

1990 (Supp) SCC 191

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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

41

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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

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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

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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

44

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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

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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

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labour practice as defined under Section 2(ra) of

the I.D. Act enumerated in the V

th

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 V

th

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

21

st

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

47

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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

2

1995 suppl. (2) SCC 611

3

AIR 1964 SC 355

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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

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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

4

(2001) 1 SCC 720

50

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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

5

1897 AC 22

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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

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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

6

(1999) 6 SCC 439,

7

(2001)7 SCC 1

8

(2009)13 SCC 374

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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

9

(2002) 1 SCC 337

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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

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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

10

(1988) 4 SCC 59,

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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

11

(1996) 4 SCC 622

12

(2003) 6 SCC 1

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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

58

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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

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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

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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

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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

13

(2004) 3 SCC 514

14

(2005) 5 SCC 51

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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

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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

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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

15

(1992) 1 SCC 695

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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

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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

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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

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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 5

th

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:

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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 21

st

January,

1991 issued in pursuance of the provisions of sub-

rule (1) of Rule 65 of the Delhi Factories Rules

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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

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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

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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

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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

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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 V

th

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

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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

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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

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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’ subsis -

tence, 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 rela -

tionship ex contractu is of no consequence

when, on lifting the veil or looking at

the conspectus of factors governing em -

ployment, we discern the naked truth,

though draped in different perfect paper

arrangement, that the real employer is the

16

(1978) 4 SCC 257

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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 indus -

try, the local conditions and the like may

be resorted to when labour legislation

casts welfare obligations on the real em -

ployer, 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 25

th

July, 1981

accorded sanction to treat all employees of the

canteen established in defence industrial

17

(1988) 4 SCC 478

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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 fac -

tories run by government and the factories

run by other private companies, organisa -

tions, 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 Govern -

ment may make rules requiring that in

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any specified factory wherein more

than two hundred and fifty workers are

ordinarily employed, a canteen or can -

teens shall be provided and maintained

by the occupier for the use of the

workers.

(2) Without prejudice to the gener -

ality 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 con -

struction, 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 repre -

sentation of the workers in the man -

agement 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 In -

spector, 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 associa -

tion of individuals, any one of the indi -

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vidual 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 lo -

cal 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 per -

sons 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 fac -

tory of the Central Government is under an

obligation to comply with Section 46 of the

Act by establishing a canteen for the bene -

fit of workers. The Canteen Managing Com -

mittee, as stated above, has to be estab -

lished 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 ar -

rangement 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

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Managing Committee. The accounts pertaining

to a canteen in a government factory may be

audited by its departmental Accounts Offi -

cers.”

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.”

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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

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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

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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

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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

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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

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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

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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 V

th

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

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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 V

th

Schedule of the I.D. Act,

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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

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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

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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 V

th

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

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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 estab -

lished pursuant to the said provision there

is no difficulty in holding that the can -

teens 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 Es -

tablishment Manual recognises the obliga -

tion on the railway Administration created

by the Act and as pointed out earlier para -

graph 2834 makes provision for meeting the

cost of the canteens. Paragraph 2832 ac -

knowledges that although the railway admin -

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istration may employ anyone such as a staff

committee or a co-operative society for the

management of the canteens, the legal re -

sponsibility for the proper management

rests not with such agency but solely with

the railway administration. If the manage -

ment 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-

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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 can -

teens cannot be treated as railway employ -

ees even for the purposes of the said Act,

we have referred to the various develop -

ments, 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

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varied welfare activities, and the employ -

ees engaged in these activities will also

have to be treated as railway employees, in

case, the canteen employees are 98recog-

nized 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 con-

clusion 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 dissimi -

larly situated may also claim the same sta -

tus. 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 disre -

garded.”

(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

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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

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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.

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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

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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

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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

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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

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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

18

(2010)3 SCC 192

19

(1973)4 SCC2 25

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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 attrac -

tive mantras of globalisation and liberali -

sation 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 work -

men, who are illegally retrenched from ser -

vice 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 employ -

ment for years together and that micro

wages earned by him may be the only source

of his livelihood.”

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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.

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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

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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

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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 V

th

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

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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 in -

significance. The relevant paragraph reads as under:

“Then, if the company was a real company,

fulfilling all the requirements of the Leg -

islature, 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 share -

holders holding the shares in trust for

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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 ob -

servations 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 inter -

esting observations which are worth re -

peating 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

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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. Profes -

sor Gower in his book on company law

says: ‘there is evidence of a gen -

eral 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 move -

ment of the subsidiaries. These sub -

sidiaries 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 vir -

tually 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 distur -

bance. 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 com -

pensation accordingly. It was not

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necessary for them to go through a

conveyancing device to get it……’

XXX XXX XXX

XXX XXX XXX

65. Mr. Justice O. Chinnappa Reddy speak -

ing for this Court in LIC v. Escorts Ltd.

had emphasised that the corporate veil

should be lifted where the associated com -

panies are inextricably connected as to

be, in reality, part of one concern. It is

neither necessary nor desirable to enumer -

ate the classes of cases where lifting the

veil is permissible, since that must nec -

essarily depend on the relevant statutory

or other provisions, the object sought to

be achieved, the impugned conduct, the in -

volvement of the element of the public in -

terest, the effect on parties who may be

affected. After referring to several Eng -

lish and Indian cases, this Court observed

that ever since A. Salomon & Co. Ltd. case

a company has a legal independent exis -

tence distinct from individual members. It

has since been held that the corporate

veil may be lifted and corporate personal -

ity 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 jurispru -

dence, lifting of corporate veil is per -

missible. Its frontiers are unlimited. It

must, however, depend primarily on the re -

alities of the situation. The aim of the

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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 or -

der 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 Elec -

tricity Board. As the facts make it abun -

dantly clear that all the steps for estab -

lishing 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 Hin -

dalco.

XXX XXX XXX

68. The veil on corporate personality even

though not lifted sometimes, is becoming

more and more transparent in modern com -

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pany 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 cate -

gories of cases where the veil of a

corporate body has been lifted. But, it

would not be possible to evolve a ra -

tional, consistent and inflexible prin -

ciple which can be invoked in determin -

ing the question as to whether the veil

of the corporation should be lifted or

not. Broadly stated, where fraud is in -

tended to be prevented, or trading with

an enemy is sought to be defeated, the

veil of a corporation is lifted by ju -

dicial decisions and the shareholders

are held to be the persons who actually

work for the corporation. ’

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27. In DHN Food Distributors Ltd. v. Lon-

don 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 compa -

nies 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 con -

cerned. 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 en -

tity 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

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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 al -

though may have only one shareholder will

be a distinct juristic person as adum -

brated in Salomon v. Salomon and Co., has

time and again been visited by the appli -

cation of doctrine of lifting the corpo -

rate veil in revenue and taxation matters.

(See Dal Chand and Sons v. CIT and Juggi-

lal Kamlapat v. CIT.)

27. The corporate veil indisputably can be

pierced when the corporate personality is

found to be opposed to justice, conve -

nience 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:

20

(1999) 3 SCC 601

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“6. In order to keep the said plants and

stations clean and hygienic, the appel -

lant-Board, upon tenders being floated,

awards contracts to contractors who under -

take 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 en -

gage minimum 42 Safai Karamcharis with ef -

fect 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 Karam -

charis.

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 di -

rected 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 ap -

plicability in the present context cannot

be doubted, since the law court invariably

has to rise up to the occasion to do jus -

tice between the parties in a manner as it

deems fit. Roscoe Pound stated that the

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greatest virtue of the law court is flexi -

bility 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 con -

tractor 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 di -

rect, and resultantly a direct employee.

This aspect of the matter has been dealt

with great lucidity, by one of us (Majmu -

dar, 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 Aboli -

tion) Act being a beneficial piece of leg -

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islation as engrafted in the statute-book,

ought to receive the widest possible in -

terpretation in regard to the words used

and unless words are taken to their maxi -

mum amplitude, it would be a violent in -

justice 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 benefi -

cial piece of legislation, question of in -

terpreting 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 ex -

pressions 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 Aboli -

tion 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 Kash -

mir Singh was a mere name lender and had

procured labour for the Board from the

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open market. He was almost a broker or an

agent of the Board for that purpose. The

Labour Court also noted that the manage -

ment 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 contrac -

tor. Under these circumstances, it has to

be held that factually there was no gen -

uine 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 em -

ploying 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 regis -

tered 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 contrac -

tor under the Act, the inevitable conclu -

sion that had to be reached was to the ef -

fect 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 visu -

alised.”

(Emphasis laid by the Court)

42. The legal principle laid down by this Court by

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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

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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

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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

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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

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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

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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.

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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

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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

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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 V

th

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

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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

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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

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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

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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

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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

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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

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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

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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

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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.

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55. Accordingly, I allow the appeals of the

concerned workmen in the above said terms.

…………………………………………………………… J.

[V. GOPALA GOWDA]

New Delhi,

November 13, 2013

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