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CASE NO.:

Appeal (civil) 658 of 2002

PETITIONER:

Haldia Refinery Canteen Emps. Union & others

RESPONDENT:

M/s. Indian Oil Corporation Ltd. & others

DATE OF JUDGMENT: 29/04/2005

BENCH:

ASHOK BHAN & A.K. MATHUR

JUDGMENT:

J U D G M E N T

BHAN, J.

This appeal by grant of leave is directed

against the judgment dated 31.03.2000 passed

by the Division Bench of the High Court of

Calcutta at Calcutta in M.A.T. No.4310 of

1998. By the impugned order the Division

Bench has set aside the judgment and order of

the Single Judge of the same High Court in

C.O. No.6266 (W) of 1990 with C.O. No.6274 (W)

of 1990. The Single Judge had allowed the

writ application filed by the appellants and

directed the Indian Oil Corporation Limited,

Haldia Oil Refinary (hereinafter referred to

as "the respondent") to absorb the appellants

in its service and regularise their services.

Division Bench has set aside the aforesaid

direction given by the learned Single Judge

and held that the appellants were neither

entitled to be absorbed nor regularised in the

service of the respondent.

Short facts of the case are as under:-

Two sets of writ applications were filed

in the High Court of Calcutta involving common

question of law and fact, both of them were

taken up together by the Single Judge and

disposed of by the common judgment.

Admittedly, the appellants are working in the

statutory canteen run by the respondent

through contractor in its factory at Haldia,

District Midnapore, West Bengal. Respondent

was treating the appellants as the employees

of the contractor. Aggrieved against this,

the appellants filed the writ applications in

the High Court contending therein that the

factory of the respondent where the workmen

are employed is governed by the provisions of

Indian Factories Act, 1948 (for short "the

Factories Act") and the canteen where the said

workman are employed is a statutory canteen

established by the respondent as required

under the provisions of the Act. It is

averred in the petition that the canteen is

maintained for the benefit of the workmen

employed in the factory and the respondent has

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direct control over them. Contractor though

shown as a contractor has no control over the

management, administration and functioning of

the canteen. That the canteen is a part of

the establishment of the management and the

workers in the canteen are the employees of

the management. That the work carried on is

perennial in nature and the canteen is

incidental to and is connected with the

establishment of the management. It was

contended that the appellants were the regular

employees of the respondent. The management

had refused to grant the status of regular

employees to the appellants and treated them

as employees of the canteen contractor

contrary to the statutory provisions and

judicial pronouncements of this Court. Writ

applications were filed seeking issuance of

mandamus to the respondent to absorb the

appellants in its service and to regularise

them as such.

Respondents in their written statement

denied that the appellants were its employees

or they were entitled to be regularised as

such. None of the appellants was appointed by

the respondents. All of them were appointed

by the contractor and therefore, they were the

employees of the contractor. Under the

Factories Act, a factory employing more than

250 workers is required to provide the

facility of a canteen. The Factories Act or

the Rules framed thereunder do not require

that such a canteen should be managed and run

by regular employees of the establishment. In

law it is open and permissible to the

management to entrust the same to a

contractor. It was contended that the

respondent being a public sector undertaking

has devised and put in place rigid employment

strategies for its core activities based on

employment strengths derived on the basis of

production and output norms and requirement

studies. All recruitment by and within the

corporation is made strictly according to

those norms on the basis of staff strength and

quotas fixed for direct recruitment on the

basis of job qualifications, employment norms,

reservation of posts to be filled by internal

promotion pursuant to settlements arrived at

by the corporation with its recognised unions

and such employment can only be made against

existing vacancies. It cannot appoint any

person in contravention of the recruitment

policy which requires the management to follow

the system. Therefore, apart from the fact

that the appellants were not in regular

employment of the respondent, the absorption

or regularisation of their services would

contravene Article 16(4) of the Constitution

as well as the reservation policy which is

applicable for recruitment in the

establishment managed by it.

The learned Single Judge before whom the

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writ applications came up for hearing relying

upon the two judgments of this Court in M.M.R.

Khan & Others Vs. Union of India & Others

[1990 (Supp) SCC 191] and Parimal Chandra

Raha & Others Vs. Life Insurance Corporation

of India & Others [1995 Supp (2) SCC 611]

held that under the provisions of the

Factories Act, it is the statutory obligation

of the employer to provide and maintain a

canteen for the use of its employees. The

canteen becomes a part of the establishment

and, therefore, the workers employed in such

canteen are the employees of the management.

After referring to the various provisions

including the rules framed under the Factories

Act the learned Single Judge came to the

conclusion that the respondent exercises a

very high degree of control over the

contractor who has been given the contract of

running the canteen. The obligation to

provide canteen being statutory the facility

became a part of service condition of the

employees. It was held that the appellants

were in fact the employees of the respondent

and were being wrongly treated as employees of

the contractor. Accordingly, a direction was

given to the respondents to absorb the

appellants in its service and regularise them

with effect from the date of filing of the

writ application.

Aggrieved against the judgment and order

of the Single Judge, the respondent-management

filed intra court appeal which has been

accepted. The Division Bench relying upon a

later Three-Judge Bench judgment of this Court

in Indian Petrochemicals Corporation Ltd. &

Another Vs. Shramik Sena & Others [(1999) 6

SCC 439] reversed the judgment of the Single

Judge and dismissed the writ applications

filed by the appellants. Aggrieved against

the aforesaid judgment of the Division Bench,

the present appeal has been filed.

We have carefully considered the

submissions made by the learned counsels for

the parties. In Indian Petrochemicals

Corporation Ltd. & Another (supra) this Court

while disposing of an identical and similar

question of law and fact with regard to the

status of the employees working in the canteen

and the status of the contractor who was

running the canteen on the contract basis

elaborately dealt with the scope of Section 46

of the Factories Act, 1948, particularly with

reference to the definition of 'worker' as

occurring in Section 2(1) of the Factories

Act. After elaborate analysis of the earlier

two judgments of this Court in M.M.R. Khan &

Others and Parimal Chandra Raha & Others

cases (supra), it was held that what has been

held in these cases is that the workmen were

the employees of the management for the

purposes of Factories Act alone and did not

become the employees of the establishment for

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any other purpose. After referring the

arguments advanced it was held:-

"If the argument of the workmen in

regard to the interpretation of

'Raha' case is to be accepted then

the same would run counter to the

law laid down by a larger Bench of

this Court in Khan case. On this

point similar is the view of

another three-Judge Bench of this

Court in the case of Reserve Bank

of India v. Workmen. Therefore,

following the judgment of this

Court in the cases of Khan and

R.B.I., we hold that the workmen

of a statutory canteen would be

the workmen of the establishment

for the purpose of the Factories

Act only and not for all other

purposes."

[Emphasis supplied]

Further it was observed:-

"It is clear from this definition

that a person employed either

directly or by or through any

contractor in a place where

manufacturing process is carried

on, is a "workman" for the purpose

of this Act. Section 46 of the

Act empowers the State Government

to make rules requiring any

specified factory wherein more

than 250 workers are ordinarily

employed to provide and maintain a

canteen by the occupier for the

use of the workers. It is not in

dispute, pursuant to this

requirement of law, the Management

has been providing canteen

facilities wherein the respondent

employees are working. Hence, it

is fairly conceded by the learned

counsel for the Management that

the respondent workmen by virtue

of the definition of the "workman"

under the Act, are the employees

of the appellant Management for

purposes of the Act."

After having gone into the question of

worker being declared the employee of the

management for the purpose of Factories Act,

the Court further analysed the question as to

whether such relationship as existed between

the worker and the employer under the

Factories Act could be extended to wider

arenas. It was held that the status of a

workman under the Factories Act confine the

relationship of employer and the employees to

the requirements of Factories Act alone and

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does not extend for any other purpose. It was

observed as under:-

"The question however is: does

this status of a workman under the

Factories Act confine the

relationship of the employer and

the employees to the requirements

of the Factories Act alone or does

this definition extend for all

other purposes which include

continuity of service, seniority,

pension and other benefits which a

regular employee enjoys. The

Factories Act does not govern the

rights of employees with reference

to recruitment, seniority,

promotion, retirement benefits

etc. These are governed by other

statutes, rules, contracts or

policies. Therefore, the

workmen's contention that

employees of a statutory canteen

ipso facto become the employees of

the establishment for all purposes

cannot be accepted."

[Emphasis supplied]

After having declared in unequivocal terms

the employees working in the canteen can be

treated as the employees of the principal

employer only for the limited purposes of the

Factories Act, the Court went on to examine

further as to whether on the basis of material

present on the record, the employees could be

treated as the employees of the principal

employer for all/any other purpose. After

noticing the fact that the employees in the

said case were entitled to continue in the

employment of the company irrespective of the

change in the contractor in view of an order

passed by the Industrial Court and the fact

that the management was reimbursing the wages

of the canteen workers and certain other

peculiar features of the case came to the

conclusion that the respondents in that case

were in fact the workmen of the management.

These factors were summarised as:-

"(a) The canteen has been there since the

inception of the appellant's factory.

(b) The workmen have been employed for

long years and despite a change of

contractors the workers have continued

to be employed in the canteen.

(c) The premises, furniture, fixture,

fuel, electricity, utensils etc. have

been provided for by the appellant.

(d) The wages of the canteen workers have

to be reimbursed by the appellant.

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(e) The supervision and control on the

canteen is exercised by the appellant

through its authorised officer, as can

be seen from the various clauses of

the contract between the appellant and

the contractor.

(f) The contractor is nothing but an agent

or a manager of the appellant, who

works completely under the

supervision, control and directions of

the appellant.

(g) The workmen have the protection of

continuous employment in the

establishment."

Considering these factors cumulatively in

addition to the fact that the canteen in the

establishment of the management is a statutory

canteen the workmen were held to be the

employees of the management. On the question

of fact it was concluded that the contractor

in that case was engaged only for the purpose

of record and for all other purposes the

workers were in fact the workmen of the

management. It was observed in para 27 as

under:-

"At this stage, it is necessary to

note another argument of Mr.

Andhyarujina that in view of the

fact that there is no abolition of

contract labour in the canteen of

the appellant's establishment, it

is open to the Management to

manage its canteen through a

contractor. Hence, he contends

that by virtue of the contract

entered into by the Management

with the contractor, the

respondent workmen cannot be

treated as the employees of the

Management. This argument would

have had some substance if in

reality the Management had engaged

a contractor who was wholly

independent of the Management, but

we have come to the conclusion on

facts that the contractor in the

present case is engaged only for

the purpose of record and for all

purposes the workmen in this case

are in fact the workmen of the

Management. In the background of

this finding, the last argument of

Mr. Andhyarujina should also

fail."

The Division Bench with reference to the

facts of the present case came to the

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conclusion that the appellants were not the

employees of the management.

During the course of hearing, the learned

advocates on both the sides extensively

referred to the terms and conditions of the

contract between the canteen contractor and

the respondent and also to the various

statutory provisions of the Factories Act and

the rules framed thereunder to point out their

respective points of view about the nature of

the contract and as to whether the canteen is

run by the contractor in his capacity and

status of a contractor or that the contractor

was merely an agent or servant of the

respondent and was functioning merely for the

sake of record.

We have gone through the terms and

conditions of the contract agreement entered

between the parties and in particular the

following terms and conditions on which lot of

emphasis was laid by the counsel for the

appellant to show the extent of control

exercised by the management over the

contractor in the running of the canteen:-

"5. CATERING STAFF:

5.1 The contractor shall at his cost

maintain adequate number of catering

staff such as Cooks, helpers, service

boys, sweepers and other persons for

smooth and efficient running of the

canteen services. The contractor

shall engage required number of

persons in the canteen with the

explicit permission/approval of the

Owner.

5.2 The present man power in the canteen

is 119 covering all categories of

personnel as mentioned below:

However, if at any time it is decided

to increase or decrease the manpower,

the contractor shall get

proportionate increase or decrease of

monetary compensation in this respect

provided such increase or decrease in

the manpower should be done only with

the express approval of the owner. If

any manpower is added without approval

of the Owner, it will be at the cost

of the contractor and no liability for

compensation whatsoever shall accrue

on the Owner for such act/acts. No

person below the age of 18 years or

found to be medically unfit, will be

allowed employment in the canteen.

Also if, at any time, any canteen

employee is found involved in moral

turpitude in any court of law, the

services of such canteen employee will

be immediately terminated by the

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Contractor and no liability for

compensation whatsoever will accrue on

the owner for such act/acts.

5.3 The contractor shall maintain a

register showing names and addresses

of the persons so engaged along with

photographs of each person and shall

produce the same for inspection on

demand by Welfare Officer or such

other person so authorised by the

owner. The contractor shall not use

or allow to be authorised to be used

canteen building or any part thereof

for dwelling purpose and shall not

allow any outsiders to loiter in or

around the canteen without valid

authority."

With regard to the nature of employment of

the employees working in the canteen,

stipulation at S.No.4.6 reads thus:-

"4.6 The contractor, shall be

required to employ/engage only

that member of employees/workers

as may be specifically authorised

by the owner from time to time and

shall maintain complete records of

such employees/workers with regard

to their names, address,

qualifications, experience and

other required details. The owner

shall have absolute right to test,

interview of otherwise assess or

determine skills, knowledge

proficiency, capability etc. so as

to ensure that such

employees/workers are competent,

qualified or otherwise suitable

for efficiently and safely

performing the work covered by

this contract. Any

employee/worker rejected not

authorised by the owner shall not

be employed/engaged by the

contractor on the work covered by

this contract."

No doubt, the respondent management does

exercise effective control over the contractor

on certain matters in regard to the running of

the canteen but such control is being

exercised to ensure that the canteen is run in

an efficient manner and to provide wholesome

and healthy food to the workmen of the

establishment. This however does not mean

that the employees working in the canteen have

become the employees of the management.

A free hand has been given to the

contractor with regard to the engagement of

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the employees working in the canteen. There

is no clause in the agreement stipulating that

the canteen contractor unlike in the case of

Indian Petrochemicals Corporation Ltd. &

Another (supra) shall retain and engage

compulsorily the employees who were already

working in the canteen under the previous

contractor. There is no stipulation of the

contract that the employees working in the

canteen at the time of the commencement of the

contract must be retained by the contractor.

The management unlike in Indian Petrochemicals

Corporation Ltd. case (supra) is not

reimbursing the wages of the workmen engaged

in the canteen. Rather the contractor has

been made liable to pay provident fund

contribution, leave salary, medical benefits

to his employees and to observe statutory

working hours. The contractor has also been

made responsible for the proper maintenance of

registers, records and accounts so far as

compliance of any statutory

provisions/obligations are concerned. A duty

has been cast on the contractor to keep proper

records pertaining to payment of wages etc.

and also for depositing the provident fund

contributions with authorities concerned.

Contractor has been made liable to defend,

indemnify and hold harmless the employer from

any liability or penalty which may be imposed

by the Central, State or local authorities by

reason of any violation by the contractor of

such laws, regulations and also from all

claims, suits or proceedings that may be

brought against the management arising under

or incidental to or by reason of the work

provided/assigned under the contract brought

by employees of the contractor, third party or

by Central or State Government Authorities.

The management has kept with it the right

to test, interview or otherwise assess or

determine the quality of the employees/workers

with regard to their level of skills,

knowledge, proficiency, capability etc. so as

to ensure that the employees/workers are

competent and qualified and suitable for

efficient performance of the work covered

under the contract. This control has been

kept by the management to keep a check over

the quality of service provided to its

employees. 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 employee of the management. Such

supervisory control is being exercised by the

management to ensure that the workers employed

are well qualified and capable of rendering

the proper service to the employees of the

management.

In Indian Petrochemicals Corporation Ltd.

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(supra) this Court after analysing the earlier

judgments on the same point has held that the

workmen working in the canteen becomes the

workers of the establishment for the purposes

of Factories Act only and not for any other

purpose. They do not become the employees of

the management for any other purpose entitling

them for absorption into the service of the

principal employer. Factors which persuaded

this Court in Indian Petrochemicals

Corporation Ltd. case (supra) to take the view

that the workmen in that case were employees

of the management are missing in the present

case. No power vests in the management

either to make the appointment or to take

disciplinary action against the erring workmen

and their dismissal or removal from service.

The management is not reimbursing to the

contractor the wages of the workmen. On these

facts, it cannot be concluded that the

contractor was nothing but an agent or a

manager of the respondent working completely

under the supervision and control of the

management.

Another fact which goes to show that the

appellants are the employees of the canteen

contractor is that a settlement was arrived at

between the contractor and the workmen of the

canteen in the presence of Assistant Labour

Commissioner of the area which was valid for

the period from 01.12.1987 to 30.11.1990

wherein certain terms and conditions were

agreed upon between these parties with regard

to some labour issues relating to the workmen

employed by the contractor. Another

settlement between the same parties was also

arrived at which was valid upto 01.12.1993

concerning once again the labour issues

between the workmen and the contractor.

Respondent-management was not a party to

either of these two settlements. This clearly

goes to show that the workmen were treating

themselves to be the employees of the

contractor and not that of the management.

For the reasons stated above, we agree

with the view taken by the Division Bench that

the appellants did not become the workers of

the management for a purpose other than the

Factories Act. We do not find any merit in

this appeal and dismiss the same with no

orders as to costs.