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CASE NO.:

Appeal (civil) 1351-53 of 2002

PETITIONER:

Workmen of Nilgiri Coop. Mkt.Society Ltd.

RESPONDENT:

State of Tamil Nadu & Ors.

DATE OF JUDGMENT: 05/02/2004

BENCH:

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

JUDGMENT:

JUDGMENT

S.B. SINHA, J :

BACKGROUND FACTS:

'Nilgiris' is a hill district in the State of Tamil

Nadu. Mettupalayam is a small town situate in Nilgiris.

The villagers of the surrounding villages for their

livelihood depend on growing of vegetables and tea. With a

view to see that the small vegetable growers are not

exploited by the vegetable merchants, a society known as

'Nilgiris Cooperative Marketing Society Limited' (Society

for short) was formed as far back as in 1935 with only 116

members.

The Society, however, grew in course of time and at

present it has about 22000 members. The memberships of the

Society are of two categories. In the first category only

the vegetable or food growers, agricultural cooperative

credit societies and agricultural improvement societies are

A-class members having voting rights; whereas traders,

commission agents and merchants dealing in the commodities

grown by the agriculturists are classified as B-class

members. They have no right to vote or participate in the

management of the Society. The B-class members only,

however, are entitled to take part in auctions held in the

marketing yards of the Society. Any dispute between the

seller member and the purchaser member is resolved through

arbitration in terms of the provisions of the Tamil Nadu

Cooperative Societies Act, 1961.

The land holdings of the members of the society varies

from 1/4th acre to five acres averaging two acres per

member. They mainly depend on the rainfall as irrigational

facilities are not available. The small farmers are

economically weak and have no holding power. Many of them

have to take loans for their subsistence, when the weather

is not good. Many of them are illiterate. The vegetables

produced from their lands being subjected to the vagaries of

the weather, the merchants with a view to pressurize them

either used to force them to sell that at a very low price

or would make them wait for days so that the vegetables

become useless. The majority of the members belong to

'Badaga' community which had been declared to be a backward

class by the Government of Tamil Nadu. Mettupalayam is a

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centre for potatoes and vegetables trade.

The Society has two big marketing yards at

Mettupalayam. In the said yards, auction of vegetables

takes place. Infrastructure therefor such as offices,

godowns yards, weighing machines etc. are provided by the

Society. There are two separate yards with pucca godowns,

one for potatoes and another for vegetables. The primary

members of the Society bring their agricultural produce to

the yards by hired lorries or trucks. They remain present

till the agricultural produce brought by them is auction-

sold and they receive the sale price. The number of primary

members visiting the marketing yards of the Society,

depending upon the season varies from 100 to 200 members per

day. The number of merchants coming to purchase these

commodities also varies from 30 to 100. The Society

provides for accommodation to the members on a nominal rent.

It also provides dormitory type of accommodation free of

charge. The months of July to October of year are said to

be a peak season. Whereas during the peak season about 100

lorries arrive everyday; during the 'off season' average

number of lorries arriving at the yard would be around 10.

For the purpose of bringing potatoes gunny bags are supplied

by the Society free of cost.

The following main jobs are carried out in the said

premises:

i) unloading of the gunny bags containing

potatoes from the lorries;

ii) unpacking the gunny bags and keeping the

potatoes in lots inside the godown;

iii) grading the potatoes into different sorts;

iv) weighing the auctioned potatoes in 45 kgs.

and packing them into gunny bags brought by

the merchants;

v) stitching the gunny bags and loading them

into lorries hired by the merchants.

Throughout the process, lots brought by the primary

members are kept separate with clear demarcation as regard

the ownership theref. Sometimes small farmers unload the

bags of potatoes themselves; some of them bring their

potatoes upon proper grading in their farms and place it in

the yard in a sorted condition. However, if proper grading

is not done by the vegetable growers, they are graded into

the different sorts.

The number of persons undertaking the job varies

depending upon the quantum of work.

Admittedly an industrial dispute was raised by 407

persons; of whom 73 are potters and 335 are graders. The

job of unloading, unpacking of gunny bags, stitching the

gunny bags and putting them into lorries are done by porters

whereas gradation of potatoes, weighing the auctioned

potatoes in 45 kgs. and packing them into gunny bags are

done by graders. Most of them are women.

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It is stated that the members of the Society or their

authorized representatives remain present throughout the

auction. The auction is confirmed only with the consent of

the members. The member has a right to decline to sell his

produce, if he is not satisfied with the highest rate

offered by the merchants and is entitled to hold over the

same till the next auction takes place.

The Society contends that for doing various items of

work in the yards, services of certain third parties are

made available to the members. They are always available in

the yards and any member whether producer or merchant may

engage them. The work is done through the workers of the

concerned third parties. Payment therefor is to be made by

the persons engaging them to the said third parties

(contractors). However, sometimes as the producer members

may not have enough money with them, the Society makes the

payment on their behalf by way of advance, wherefor

allegedly written authority is obtained. The Society

further contends that the farmers and merchants are at

liberty to engage their own men for doing these items of

work and some of them do the work themselves. There is no

obligation on the part of the member to bring his produce to

the Society's yards. He is free to sell is produce in any

manner thought it.

It is not in dispute that the Society does not maintain

any attendance register or wages register. The third parties

are free to engage men of their own choice and no working

hours are fixed or insisted. Any person normally doing the

job may come on any day to work. The third parties engage

more number of persons during peak season and during lean

season less number of persons are engaged. The porters and

graders may take up any other job.

DISPUTE BETWEEN THE PARTIES:

The appellant-Union, however, on or about 19.4. 1982

served a charter of demands upon the Society claiming, inter

alia, permanency in service and other benefits. A strike

notice was also given wherefor a conciliation proceeding was

initiated. The Society thereafter filed a suit being O.S.

No.2293 of 1982. A writ petition was filed before this

Court being W.P. No.23 of 1983 praying for minimum

facilities like drinking water, toilet, rest-room, maternity

benefits etc. The Society is said to have declared a lock

out and a conciliation proceeding thereupon started again.

The writ petition was thereafter withdrawn. The conciliation

proceeding ended in a failure.

REFERENCE:

On or about 19.5.1984, the State of Tamil Nadu issued a

notification in exercise of its power under Section 10(1)(d)

of the Industrial Disputes Act, 1947 referring the

following disputes for adjudication of the Industrial

Tribunal :

"i) Whether the non-employment of the

workmen referred in the reference

is justified ?

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ii) To what relief ?"

PROCEEDINGS BEFORE THE TRIBUNAL:

In the aforementioned industrial reference before the

Tribunal, witnesses were examined on behalf of the parties.

Documents were also produced. By reason of an award dated

5.9.1989, the Tribunal opined that there did not exist any

relationship of employer and employee between the Society

and the concerned persons, observing :

"36. In view of the above finding, if

we approach this case, there is no

convincing evidence placed by the

petitioner to establish the master and

servant relationship to hold that the

persons referred in this dispute are

only workmen of the Respondent-Society.

37. Viewed from any angle, either on

facts or on law, the petitioner-Union

has not substantiated that the persons

mentioned in the Annexure are workmen

and therefore their non-employment is

not justified. Hence this point is

found against the Petitioner Union."

On the said findings the reference was rejected.

PROCEEDINGS BEFORE THE HIGH COURT:

Aggrieved thereby the appellant preferred a writ

petition before the High Court marked as Writ Petition

No.14659 of 1989.

During the pendency of the said proceeding, other

disputes also ensued resulting in closure of the yards;

whereafter, again conciliation proceedings were initiated on

or about 3.8.1985. The respondent-Society issued an

advertisement in a Tamil newspaper inviting tenders for

operations. Questioning the said action on the part of the

Society, a writ petition was filed in the Madras High Court

which was marked as W.P. No.9333 of 1985 praying therein for

issuance of writ of mandamus directing the State to prohibit

introduction of contract labour system in the Society.

Another writ petition being W.P. No.9334 of 1985 was also

filed wherein the petitioners prayed for issuance of a writ

of or in the nature of mandamus directing the Society not to

engage contract labour purported to be on the ground that

the same is contrary to Sections 25-O and 25-T of the

Industrial Disputes Act and Sections 7 and 12 of the

Contract Labour (Regulation and Abolition) Act, 1970.

Certain interim orders were passed by the High Court and

some appeals were also filed and the matter came up before

this Court also, being Civil Appeal No.5381 of 1985 on or

about 26.9.1986 wherein this Court passed the following

order :

"On behalf of the Marketing Society,

Dr. Y.S. Chitale, learned Counsel

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assures us that hereafter workmen will

not be permitted to be employed by

contractors to work within the yard of

the Society. He also assures us that

the 407 workers previously employed may

come back and work in the yard without

any objection. It is open to any worker

to go and seek employment, but

contractors will be excluded. The case

now pending before Industrial Tribunal

may be disposed of expeditiously. Civil

Misc. Petition is disposed of

accordingly."

By another interim order passed in Writ Petition

No.19310 and 19311 of 1986, a learned Single Judge of the

Madras High Court directed :

"The third respondent shall give

employment directly to all the 407

workers. If, after providing employment

to these 407 workers, any more lands are

required, then the management is free to

give employment to such of these

persons. The Collector of Coimbatore

will see to it that the order of the

Supreme Court extracted above is

implemented in its true spirit."

In an appeal carried out by the Society being W.A. No.

1372 of 1986, the High Court of Madras issued the following

directions :

"Apparently it appears to us that the

order made by the learned single Judge

runs counter to the order of the Supreme

Court dated 4.12.1985. Therefore, the

order of the learned Single Judge is

stayed. Since the order which is in

controversy is that of the Supreme Court,

this is eminently a fit case where the

parties are at liberty to get necessary

clarification from the Supreme Court.

Till the order is clarified by the

Supreme Court, if the parties approach

the Supreme Court for this, the appellant

will implement the order dated 4.12.1985

by way of an interim arrangement."

On an application, this Court by an order dated

13.4.1987, observed :

"The interim arrangement will continue

till disposal of the writ petition in

the High Court. Meanwhile the trial of

the industrial dispute will be stayed.

No order on the application for

impleading party. All the CMPs are

disposed of accordingly."

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Another interim order was passed on 29.8.1988 in Writ

Petition NO.9334 of 1985 in the following terms :

"In the result, the 3rd respondent is

directed to give employment directly to

all the 407 workers and pay the wages

directly to them as per the order of the

Supreme Court dated 4.12.1988. This

petition is ordered accordingly."

On an appeal preferred by the Society before a Division

Bench marked as W.A. No.1261 of 1988, it was directed :

"To give quietus to the controversy in

the writ petition, we direct that W.P.

9334/85 along with the connected writ

petition viz. W.P. No.9333/85 be listed

for final hearing on 26.10.1988 at the

top of the list before the learned

Single Judge, who hears the date-fixed

writ petitions."

JUDGMENT OF THE HIGH COURT:

All the three writ petitions came up for hearing before

a learned Single Judge of the Madras High Court. The said

writ petitions were dismissed observing :

"The writ petitions are liable to be

dismissed. However, having regard to

the fact that the petitioner has made an

application to the State Government as

early as on 9.8.1985 as seen from

paragraph 13 of the affidavit to

prohibit the employment of contract

labour under section 10 of the Act for

loading, unloading and other activities

of the 3rd respondent society, a

reference to the counter affidavit filed

by the government is necessary.

Paragraphs 12 and 13 of the counter

affidavit are extracted :

"It submit that the averments in

paragraph 13 are not correct. The

Union has applied to the State

Advisory Contract Labour Board to

issue directions to the Management

prohibiting the employment of

contract labour under Sec.10 of the

Act. I submit that after consultation

with State Advisory Contract Labour

Board the Government will take a

decision in this matter."

This counter affidavit has been sworn to

on 5th December, 1986. Even though

there was no order pending these W.Ps.

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Prohibiting the Government from passing

orders under Sec. 10 of the Act, the

Government has not taken any action in

spite of the averments contained in

paragraphs 12 and 13 of the counter

affidavits. It is for the Government to

pass orders under Sec. 10 of the Act as

expeditiously as possible, one way or

other."

Three letters patent appeals were preferred by the

appellant herein being aggrieved by and dissatisfied

therewith. By reason of the impugned judgment the said

appeals were dismissed.

The appellant is, thus, before us in these appeals.

Civil Appeal No.1351-52 arise out of Writ Petition No.109

and 110 of 1989 wherein certain interim orders were passed.

Civil Appeal No.1353 of 2001 is the main appeal which arises

out of an award of the Industrial Tribunal.

SUBMISSIONS:

Mr. N.G.R. Prasad, learned counsel appearing on behalf

of the appellant would take us through the evidences adduced

by the parties both oral and documentary as also the

findings of the Industrial Tribunal and would submit that it

and consequently the High Court committed a manifest error:

(i) in passing the impugned award insofar as they

failed to apply the 'organisation test' in the

light of the decisions of this court;

(ii) despite having arrived at the conclusion that the

respondents society exercises supervision and

control over the concerned workmen, in concluding

that such supervision and control were not on its

own behalf but on behalf of its members;

(iii) in arriving at the finding that as the society

does not carry out any manufacturing activities;

it is not industry, inasmuch as supply of the

services by an organisation would also give rise

to formation of relationship of an employer and

employees.

Elaborating his submissions, Mr. Prasad would contend

that it is not in dispute that the 407 workmen had been

working in the market yard on a daily wage basis and

although they are said to have been employed by the third

parties but indisputably, the society pays wages to them

although the same is said to be reimbursed by the members of

the society. It was pointed out that the dispute between

the members and members are resolved by the society and

furthermore as the concerned persons have been given token

and are given gifts during festival season, would lead to an

irresistible inference that the concerned workmen are

employees of the society.

Mr. Prasad would argue that the principal question

which was required to be asked was for whom do the workmen

work and to whom they look up for their wages. It was

submitted that the relationship between the Society and the

workmen was required to be determined having regard to the

following fact:

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(i) work is being carried out in the premises

belonging to the society;

(ii) wages are paid by the society;

(iii) from Ex. W7 and W8, it would appear, that the

society exercises control over the workmen;

(iv) on festival occasions, the workmen look to the

society for gift.

It was contended that the Tribunal and the High Court

overlooked the evidences on record as regard nature of the

job performed by the workmen as has been admitted by MW1 and

furthermore no finding has been arrived at to the effect

that the so-called third parties are contractors.

The learned counsel would submit that the Tribunal has

committed a manifest error also in holding that only because

the society takes commission from its members, it cannot be

an employer. It was contended that for determining the

question as regard existence of the relationship of employer

and employee what is required to be considered is as to

whether the concerned workmen are part and parcel of the

organisation. Economic reality, the learned counsel would

contend, has also some role to play.

The learned counsel would urge that this Court in a

large number of cases lifted the veil so as to come to the

conclusion that the engagement of third parties or

contractors may be a camouflage and there existed a

relationship of employer and employee. Determination of

such relationship, Mr. Prasad would aruge, do not depend

upon the statutory liability of the employer as even in

relation to non-statutory canteens this Court has held that

the so-called workmen of the contractors are in effect and

substance the workmen of the principal employer.

Mr. Sudarsh Menon, learned counsel appearing on behalf

of the respondent society, on the other hand, would submit

that the society is a service society and having regard to

the fact that the members are both growers and merchants and

as the porters and the graders are appointed by both growers

and merchants independently, it cannot be said that the

society is the employer of the concerned workmen. The

learned counsel would contend that the Industrial Tribunal,

the learned Single Judge as also the Division Bench of the

High Court having arrived at a finding of fact that there

does not exist any relationship of employer and employee,

this Court should not interfere therewith.

DETERMINATION OF RELATIONSHIP:

Determination of the vexed questions as to whether a

contract is a contract of service or contract for service

and whether the concerned employees are employees of the

contractors has never been an easy task. No decision of

this Court has laid down any hard and fast rule nor it is

possible to do so. The question in each case has to be

answered having regard to the fact involved therein. No

single test - be it control test, be it organisation or any

other test - has been held to be the determinative factor

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for determining the jural relationship of employer and

employee.

There are cases arising on the borderline between what

is clearly an employer-employee relation and what is clearly

the independent entrepreneurial dealing.

TESTS:

This Court beginning from Shivanandan Sharma Vs. Punjab

National Bank Ltd. [1955] 1 L.L.J. 688 : AIR 1955 SC 404 and

Dharangadhara Chemical Works Ltd. Vs. State of Saurashtra

and others [1957] 1 L.L.J. 477 : AIR 1957 SC 264 observed

that supervision and control test is the prima facie test

for determining the relationship of employment. The nature

or extent of control required to establish such relationship

would vary from business to business and, thus, cannot be

given a precise definition. The nature of business for the

said purpose is also a relevant factor. Instances are

galore there where having regard to conflict in decisions in

relation to the similar set of facts, the Parliament has to

intervene as, for example, in the case of workers rolling

bidis.

In a given case it may not be possible to infer that a

relationship of employer and employee has come into being

only because some persons had been more or less continuously

working in a particular premises inasmuch as even in

relation thereto the actual nature of work done by them

coupled with other circumstances would have a role to play.

In V.P. Gopala Rao Vs. Public Prosecutor, Andhra

Pradesh [1970] 2 L.L.J. 59 : AIR 1970 SC 66, this Court said

that it is a question of fact in each case whether the

relationship of master and servant exists between the

management and the workmen and there is no abstract a priori

test of the work control required for establishing the

control of service. A brief resume of the development of

law in this point was necessary only for the purpose of

showing that it would not be prudent to search for a formula

in the nature of a single test for determining the vexed

question.

RELEVANT FACTORS:

The control test and the organization test, therefore,

are not the only factors which can be said to decisive.

With a view of elicit the answer, the court is required to

consider several factors which would have a bearing on the

result : (a) who is appointing authority; (b) who is the pay

master; (c) who can dismiss; (d) how long alternative

service lasts; e) the extent of control and supervision; (f)

the nature of the job, e.g. whether, it is professional or

skilled work; (g) nature of establishment; (h) the right to

reject.

With a view to find out reasonable solution in a

problematic case of this nature, what is needed is an

integrated approach meaning thereby integration of the

relevant tests wherefor it may be necessary to examine as to

whether the workman concerned was fully integrated into the

employer's concern meaning thereby independent of the

concern although attached therewith to some extent.

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I.T. Smith and J.C. Wood in 'Industrial Law', third

edition, at page 8-10 stated:

"In spite of the obvious importance of

the distinction between an employee and

an independent contractor, the tests to

be applied are vague and may, in a

borderline case, be difficult to apply.

Historically, the solution lay in

applying the 'control' test, i.e., could

the employer control not just what the

person was to do, but also the manner of

this doing it - if so, that person was

his employee. In the context in which

it mainly arose in the nineteenth

century, of domestic, agricultural and

manual workers, this test had much to

commend it, but with the increase

sophistication of industrial processes

and the greater numbers of professional

and skilled people being in salaried

employment, it soon became obvious that

the test was insufficient (for example

in the case of a doctor, architect,

skilled engineer, pilot, etc.) and so,

despite certain attempts to modernise

it, it is now accepted that in itself

control is no longer the sole test,

though it does remain a factor and

perhaps, in some cases, a decisive one.

In the search for a substitute test,

ideas have been put forward of an

'integration' test, i.e. whether the

person was fully integrated into the

employer's concern, or remained apart

from and independent of it. Once again,

this is not now viewed as a sufficient

test in itself, but rather as a

potential factor (which may be useful in

allowing a court to take a wider and

more realistic view). The modern

approach has been to abandon the search

for a single test, and instead to take a

multiple or 'pragmatic' approach,

weighing upon all the factors for and

against a contract of employment and

determining on which side the scales

eventually settle. Factors which are

usually of importance are as follows -

the power to select and dismiss, the

direct payment of some form of

remuneration, deduction of PAYE and

national insurance contributions, the

organisation of the workplace, the

supply of tools and materials (though

there can still be a labour-only sub-

contract) and the economic realities (in

particular who bears the risk of loss

and has the chance of profit and whether

the employee could be said to be 'in

business on his own account'). A

further development in the recent case

law (particularly concerning atypical

employments) has been the idea of

'mutuality of obligations' as a possible

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factor, i.e. whether the course of

dealings between the parties

demonstrates sufficient such mutuality

for there to be an overall employment

relationship."

(See also Ram Singh and Others Vs. Union Territory,

Chandigarh & Ors. JT 2003 (8) SC 345)

In Mersey Docks and Harbour Board Vs. Coggins &

Griffith Liverpool Ltd. [1947] A.C. 1, Lord Porter pointed

out:

"Many factors have a bearing on the

result. Who is paymaster, who can

dismiss, how long the alternative

service lasts, what machinery is

employed, have all to be kept in mind.

The expressions used in any individual

case must always be considered in regard

to the subject-matter under discussion

but amongst the many tests suggested I

think that the most satisfactory, by

which to ascertain who is the employer

at any particular time is to ask who is

entitled to tell the employee the way in

which he is to do the work upon which he

is engaged."

If the provisions of the contract as a whole are

inconsistent with its being a contract of service, it will

be some other kind of contract and the person doing the work

will not be a servant. (See Ready Mixed Concrete (South

East) Ltd. Vs. Minister of Pensions and National Insurance,

1 [1968] 2 W.L.R. 775)

The decisions of this Court lead to one conclusion that

law in this behalf is not static. In Punjab National Bank

vs. Ghulam Dastagir [(1978) 1 I.L.J. 312 = (1978) 2 SCC

358], Krishna Iyer, J. observed "to crystalise criteria

conclusively is baffling but broad indications may be

available from decisions".

The case at hand, as noticed hereinbefore, poses

intricate question having regard to the facts and

circumstance of the case.

In our endevour to find out an answer, let us at the

first instance look at the object of the Society.

SOCIETY:

The Society had a humble beginning but it had a

laudable object, as would appear from its bye-laws. The

objects of the Society are stated as under :

"a) To encourage self help, thrift and

cooperation among members;

b) To purchase seeds, manure,

implements and other agricultural

requirements for sale or

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distribution to members or members

of the affiliated cooperative

societies or to other cooperative

societies;

c) To arrange for sale of potatoes,

other vegetables and fruits of the

members and the members of

affiliated cooperative societies to

their best advantage;

d) To advance loans to members and

members of affiliated cooperative

societies on the pledge of their

agricultural produce and for the

purchase of manure to deserving

members of primary societies

provided the loans are given to

such members through the societies

concerned;

e) To act as agents of the cooperative

institutions in marketing their

produce;

f) To act as agents for the joint

purchase of the domestic and other

requirements of its members and

members of affiliated cooperative

societies;

g) To act as agent of those members

which are affiliated societies in

the matter of disbursing and

receiving loans sanctioned to

individual members of such

societies;

h) To act as the agent of those

members which are affiliated

societies in the matter of

receiving for safe custody in its

godowns or elsewhere the produce

pledged to such societies by their

individual members;

i) To propagate and supply pure seeds;

j) To own and hire lorries whenever

necessary for the use of the

members, members of affiliated

cooperative societies and other

public for hire, for the transport

of manure, potatoes, other

vegetables, fruits, implements

etc.;

k) To disseminate among the members

and members of the affiliated

cooperative societies a knowledge

of the latest improvement in

agriculture by arranging actual

demonstration carried out by each

individual member in his own land

according to the advice of the

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agricultural department;

l) To process raw material belonging

to the members and members of

affiliated cooperative societies or

purchased by the society; and

m) To arrange for packing and grading

of agricultural produce of the

members and members of the

affiliated cooperative societies.

n) Economically weak and small farmers

having no holding power, thus,

subjected to exploitation of the

trading community are the

beneficiaries.

o) Clause 34 of the bye-laws states :

"That the Board of Directors may

arrange for the sale of produce of

members and members of affiliated

cooperative societies pledged to or

deposited with the society and disburse

sale proceeds to them immediately after

such lots are sold. In arranging for

the sale they shall act only as the

agent of the members and members of

affiliated cooperative societies

concerned and shall not do the business

as owner on behalf of the society. Any

loss arising out of the business shall

be borne by the members of the

affiliated cooperative societies

concerned and not by the society."

It is not in dispute that the Society is not a trading

society. It cannot buy or sell the agricultural produce or

the fruits except in a case where the proviso appended to

bye-law 34 is attracted which is in the following terms :

"When the society enters into a

contract with the Government of Military

Department of cooperative institutes or

with any firm which has entered into a

contract with the Government or military

department for supply of produce, the

Board may purchase the produce outright

whenever necessary and sell it as owner

on behalf of the society."

BURDEN OF PROOF:

It is a well-settled principle of law that the person

who sets up a plea of existence of relationship of employer

and employee, the burden would be upon him.

In N.C. John Vs. Secretary Thodupuzha Taluk Shop and

Commercial Establishment Workers' Union and Others [1973

Lab. I.C. 398], the Kerala High Court held:

"The burden of proof being on the

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workmen to establish the employer-

employee relationship an adverse

inference cannot be drawn against the

employer that if he were to produce

books of accounts they would have proved

employer-employee relationship."

In Swapan das Gupta and Others Vs. The First Labour

Court of West Bengal and Others [1975 Lab. I.C. 202] it has

been held:

"Where a person asserts that he was a

workmen of the Company, and it is denied

by the Company, it is for him to prove

the fact. It is not for the Company to

prove that he was not an employee of the

Company but of some other person."

The question whether the relationship between the

parties is one of the employer and employee is a pure

question of fact and ordinarily the High Court while

exercising its power of judicial review shall not interfere

therewith unless the finding is manifestly or obviously

erroneous or perverse.

APPLICATION OF LAW IN THE PRESENT CASE:

Having regard to the materials on records, we may at

the outset notice the findings of the Industrial Tribunal

which are : (1) having regard to the object of the Society,

there is no need to employ labourers far less giving

continuous employment to them. Exs.W-7, W-8 and W-12 do not

show that superintendence control in respect of grading,

weighing etc. is absolute. The memo. dated 27.8.1982

appears to have been issued having regard to a complaint

made by traders who participate in the auction to the effect

that the staff are not showing proper care in grading,

weighing and stacking the goods in the Society and they have

to purchase the under-quality and under-weight vegetables

resulting in continuous loss to them. It is in that

situation a direction was issued. A further complain was

made that the Society employs small boys in grading,

weighing and stacking of goods. In that situation the

Godown Assistants were directed to see that no person who is

less than 18 years is engaged for unloading, grading and

stacking of cabbage and the workmen should be classified

into two groups, one for unloading and another for grading,

weighing and stacking.

The Tribunal in this behalf observed :

"...Incidentally it is also significant

to note that the society has been formed

to protect the interest of the members.

The society cannot keep quiet by stating

it is the contractors job and it has no

responsibility. In my opinion nothing

is wrong in issuing the circular Ex.W-8,

only to pull up the irresponsible of the

staff and other workers. Therefore it

would not amount to that the Respondent-

Society has exercised its powers on

their own workers and therefore they are

employees."

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Although in the said letter, the word 'workmen' of the

Society had been used, in all probability, the said

expression had been used loosely. The Office Order dated

22.8.1963 provides for the job assigned to their regular

staff.

The job of the Marketing Supervisor is as under :

"7. Marketing supervisor :

He should attend to the speedy

disposal of the potato stocks of the

members to their best advantage. He

*should see that all the stocks

purchased by the Merchants are taken

delivery of without delay. He should

control the staff working in the potato

godowns and see that no complaints are

received from members and merchants

etc., regarding purchase or sale of

potatoes. He should supervise grading,

weighing and packing of potatoes

promptly and properly."

The job of the Marketing Supervisor, therefore, do not

show that complete control and supervision is upon the

society. The Marketing Supervisor was allotted the job to

see that the work is carried out smoothly so that neither

the purchaser members nor the merchant members are put to

any disadvantage.

Having regard to the interest of the farmers as also

the merchants, the Marketing Supervisor was asked to

supervise grading, weighing and packing of potatoes promptly

and properly.

The purported decision of the Society to give certain

benefits to the workmen too is not decisive as the same had

become a conciliation proceeding. The said conciliation

proceeding, as noticed hereinbefore, had to be initiated

having regard to the consequence upon a strike notice given

by the workmen which could be averted due to conciliatory

efforts. It would appear from the same that the

conciliation efforts were made by the concerned Conciliation

Officer. However, despite conciliation, graders and porters

went on strike on 19.10.1982 whereafter again a conciliation

proceeding was held pursuant whereto or in furtherance

whereof certain advises and suggestions had been given by

the conciliation officer based on agreement between the

parties.

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

the following terms :

"...Even under Ex.W-12 it has been

stated to pay the festival advance to

the graders through the representatives.

Therefore it cannot be said they have

been asked to pay directly the festival

advance amount. That apart, it is

relevant to note at this stage that this

document has not been signed by any

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party. Considering these above facts

and mianly taking into account the

object of the society coupled with the

duties envisaged under Clause 34 under

Ex.M-22 bye-laws, it is impossible to

come to a conclusion that the society

has exercised these powers under Ex.W-7,

Ex.W-8 and Ex.W-12 as an employer..."

The Tribunal has further come to the conclusion that

token number had been given to the porters during emergency

to save them from police harassment and no such token was

issued after cessation of emergency.

It is true, as contended by Mr. Prasad, that the

Tribunal sought to distinguish certain cases relied upon by

the learned counsel for the parties holding that in those

cases, the employers were manufacturing units and were doing

regular work but the observation of the Tribunal must be

understood having regard to the totality of the

circumstances as it has observed that in such cases

employers being manufacturing units and were doing regular

work and the nature of business was such which required

continuous supervision and furthermore the workmen who were

required to work on fixed hours which was not the case in

the present one.

The learned Tribunal has further found that the volume

of job as also the number of persons working depend upon the

season inasmuch in the peak season a large number of persons

would be appointed whereas in the off season the number of

appointments would be less. The Tribunal had further held

that the Society acts as a commission agent. The submission

of Mr. Prasad to the effect that the Tribunal has ignored

the question of employment of contractor, some of whom may

be under a legal incapacity to do so but the same again

would not be decisive. Furthermore, even in terms of

Section 21 of the Contract Labour (Regulation and Abolition)

Act, the principal employer has a statutory obligation to

see that the concerned employees are paid their wages and

deduct the same from the bills of the contractors. It has

also come on records that the remuneration paid by the

Society on behalf of its members are done through Maistry

and not directly to the concerned workers. We have noticed

hereinbefore in details the nature of the services rendered

by the Society to the different categories of its members,

as also the right of the members to approach the third

parties to take the services of the workmen working under

them for unloading, grading and loading.

In nutshell, the following can be deduced :

1. Growers and merchants are free to engage

their own porters and graders or can do the

work by themselves. There is, thus, no

obligation on the societies godown or engage

service of the workers, waiting in the yard.

2. No attendance registers or wage registers are

maintained in respect of graders and porters.

3. The society has no control as who should do

the work and the members are free to engage

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any worker available in the yard.

4. No working hours are fixed for porters and

graders. They are free to come and go at

will.

5. The workmen have no obligation to report to

work everyday.

6. Society has no control regarding the number

of workers to be engaged and the work to be

turned out by the porters and graders.

7. No appointment order is issued by the

society.

8. No disciplinary control over the porters and

graders is exercised by the Society.

9. Total supervision or control is not exercised

by the Society over the work done by porters

or graders.

10. Porters and graders can go for other work and

there is no obligation to work only in the

yards.

11. Payment is normally made to a worker by the

member. No direct payment is made to workers

by the society. The society makes payment

only on the authorization on behalf of that

member.

12. Under the price guarantee scheme introduced

by the society if the prices offered by the

merchants are not acceptable to the members

then the society guarantees the minimum

price. If the produce sold by the society

fetches more than the minimum guaranteed

price excess is passed on to the member, if

the price is less than the minimum price, the

loss therefor is borne by the society.

13. Porters and graders also work under the

supervision of members and merchants.

Amounts paid by the society to a

worker/authorized by a member is distributed

by him to other workmen and the Society is

not concerned with the number of workers

engaged and amounts distributed to them.

The farmers themselves are indigent persons. It is not

a case where the concerned workmen are without any master.

The third parties employ and pay them their salary or wages

invariably. They have the right to appoint or not to

appoint and the little amount of supervision made by the

officers of the Society are for the purpose of overseeing

the smooth transactions and not for its own benefit. The

contract is entered into by different parties for different

purposes. The services of the workmen by the farmers or

traders may or may not be taken. There may be disputes

between one class of members with the other which

incidentally may have some bearing on the performance of job

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by the concerned workmen.

We may further notice that the learned counsel

appearing on behalf of the respondents has drawn our

attention to the statements made in the counter affidavit to

the effect that the President of Petitioner Association runs

the biggest private mundy in Mettupalayam and adopts the

same procedure of engaging workers and the job of unloading,

cleaning, sorting, grading etc. is done by the Respondent

society. It has further been stated that there are about 60

such private mundies at Mettupalayam and although every

mundy adopts the same pattern of engaging workers but except

in the case of the respondent no industrial dispute had been

raised in respect of any other mundy.

EMPLOYMENT AND NON-EMPLOYMENT :

Employment and non-employment indisputably is a matter

which is specified in the Second and the Third Schedules of

the Industrial Disputes Act. The concept of employment

involves three ingredients, which are : (i) Employer - one

who employs, i.e. engages the services of other persons;

(ii) Employee - one who works for another for hire; and

(iii) Contract of employment - the contract of service

between the employer and the employee whereunder the

employee agrees to serve the employer subject to his control

and supervision. On the other hand, non-employment being

negative of the expression "employment" would ordinarily

mean a dispute when the workmen is out of service. When

non-employment is referable to an employment which at one

point of time was existing would be a matter required to be

dealt with differently than a situation where non-employment

would mean a contemplated employment.

The question of non-employment in the later category

would arise only when the employer refuses to give work to a

person who pleads and proves to the satisfaction of the

management that he was entitled thereto. However, the

dispute regarding the refusal to employ the persons who were

promised to be employed is not connected with the employment

or non-employment within the meaning of Section 2(k) of the

Act. (See Workers of Sagar Talkies VS. Odean Cinema [1957]

1 L.L.J. 639)

The reference made by the State of Tamil Nadu was

absolutely vague. The very fact that reference suggests

that the workmen are not being employed by the Society is

itself a pointer to the fact that it is not the case where

the State Government has proceeded on the basis that there

existed such a relationship. Save and except in certain

situations, as for example when there exists a provision in

the standing order certified under Industrial Employment

(Standing Orders) Act, 1946 or a memorandum of settlement

require the employer to employ certain persons, directions

ordinarily cannot be issued by the Tribunal directing the

employer to give employment.

CAMOUFLAGE:

Whether a contract is a sham or camouflage is not a

question of law which can be arrived at having regard to the

provisions of Contract Labour (Regulation and Abolition)

Act, 1970. It is for the industrial adjudicator to decide

the said question keeping in view the evidences brought on

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records.

In Municipal Corporation of Greater Mumbai Vs. K.V.

Sharamik Sangh and Others [(2002) 4 SCC 609], non-

maintenance of records by the contractors was held to be not

conclusive for determination as to whether the workmen were

working under the contractor. The Court held that such

disputed questions of fact cannot be gone into in a civil

proceeding.

In Sarva Shramik Sangh vs. M/s Indian Smelting &

Refining Co. Ltd. & Ors. [JT 2003 (8) SC 243], this Court

observed :

"...A jurisdictional fact is one on the

existence or otherwise of which depends

assumption or refusal to assume

jurisdiction by a court, tribunal or the

authority. Said fact has to be

established and its existence proved

before a Court under the Maharashtra Act

can assume jurisdiction of a particular

case. If the complaint is made prima

facie accepting existence of the

contractor in such a case what has to be

first established is whether the

arrangement or agreement between the

complainant and the contractor is sham

or bogus. There is an inherence

admission in such a situation that

patently the arrangement is between the

complainant and the contractor and the

claim for a new and different

relationship itself is a disputed fact.

To put it differently, the complainant

seeks for a declaration that such

arrangement is not a real one but

something which is a fagade. There is

no direct agreement between the

complainant and the principal employer

and one such is sought to be claimed but

not substantiated in accordance with

law. The relief in a sense relates to a

legal assumption that the hidden

agreement or arrangement has to be

surfaced..."

It was also observed :

"The common thread passing through all

these judgments is that the threshold

question to be decided is whether the

industrial dispute could be raised for

abolition of the contractor labour

system in view of the provisions of the

Maharashtra Act. What happens to an

employee engaged by the contractor if

the contract made is abolished is not

really involved in the dispute. There

can be no quarrel with the proposition

as contended by the appellants that the

jurisdiction to decide a matter would

essentially depend upon pleadings in the

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plaint. But in a case like the present

one, where the fundamental fact decides

the jurisdiction to entertain the

complaint itself the position would be

slightly different. In order to

entertain a complaint under the

Maharashtra Act, it has to be

established that the claimant was an

employee of the employer against whom

complaint is made, under the ID Act.

When there is no dispute about such

relationship, as noted in paragraph 9 of

CIPLA's case (supra) the Maharashtra Act

would have full application. When that

basic claim is disputed obviously the

issue has to be adjudicated by the forum

which is competent to adjudicate..."

CASE LAWS :

In the aforementioned backdrop, let us take note of

certain decisions operating in the field vis-`-vis the

factual matrix obtaining therein.

D.C. Dewan Mohideen Sahib & Sons vs. The Industrial

Tribunal, Madras [(1964 (7) SCR 646 = 1964 (2) LLJ 633] is a

case which involved workers who used to take leaves home for

cutting them in proper shape. However, the actual rolling

by filling the leaves with tobacco took place in places

what were called contractors' factories. The bidis so

rolled would be delivered to the appellant and nobody-else.

The price of the raw-material as also the finished product

would remain the same as fixed by the appellant therein.

This Court having regard to the materials on records arrived

at a finding of fact that the intermediaries were mere

agents or branch managers appointed by the management and

the relationship of employer and employee subsisted between

the appellant and the bidis rollers, inter alia, on the

ground that the so-called independent contractors served no

particular duties and discharged no special functions and

had no independence at all. They were impecunious persons

who could hardly afford to have any factory of their own and

in fact some of them were ex-employees of the appellant.

In Silver Jubilee Tailoring House and Others vs. Chief

Inspector of Shops and Establishments and Another [(1974) 3

SCC 498], the job required to be performed was skilled and

professional in nature. Mathew, J. speaking for the Bench

observed that the test of right to control the manner of

doing the work as traditionally formulated cannot be treated

as an exclusive test. The court applied organization test

in the fact situation obtaining therein laying importance on

the fact that the employer provides the equipment and

stating that where a person hires out a piece of work to an

independent contractor, he expects the contractor to

provided all the necessary tools and equipments, whereas if

he employs a servant he expects to provide the same himself.

The supply of machine was highlighted having regard to that

fact that the sewing machine on which the workers do the

work generally belong to the employer is an important

consideration for deciding the relationship of master and

servant. Besides the same the right of the employer to

reject the end product and directing the worker to restitch

it also led this court to conclude that the element of

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control and supervision was also present.

However, in a slightly different fact situation where a

person working as a part-time accountant for a long number

of years who used to look after his own partnership business

after working hours, was held to be not a workman. (See

W.H.D. Cruz & Sons Vs. M.E. Thomas [1996] 1 L.L.J. 706

(Ker.))

In M/s Shining Tailors vs. Industrial Tribunal II,

U.P., Lucknow and Others [(1983) 4 SCC 464], payments used

to be made to the workmen on piece-rates in a big tailoring

establishment. Desai, J. in the facts and circumstances of

the case observed that right of removal of the workmen or

not to give the work had the element of control and

supervision which had been amply satisfied in that case.

The question which arose for consideration was as to whether

only because the concerned workman was paid on piece rate

was itself indicative of the fact that there existed a

relationship of principal employer and independent

contractor.

It is, however, relevant to note that therein also an

observation was made to the effect that the method of

payment in various occupations is different in different

industries.

In Indian Overseas Bank vs. I.O.B. Staff Canteen

Workers' Union and Another [(2000) 4 SCC 245], this Court

observed :

"The standards and nature of tests to

be applied for finding out the existence

of master and servant relationship

cannot be confined to or concretized

into fixed formula(e) for universal

application, invariably in all class or

category of cases. Though some common

standards can be devised, the mere

availability of any one or more or their

absence in a given case cannot by itself

be held to be decisive of the whole

issue, since it may depend upon each

case to case and the peculiar device

adopted by the employer to get his needs

fulfilled without rendering him liable.

That being the position, in order to

safeguard the welfare of the workmen,

the veil may have to be pierced to get

at the realities. Therefore, it would

be not only impossible but also not

desirable to lay down abstract

principles or rules to serve as a ready

reckoner for all situations and thereby

attempt to compartmentalize and peg them

into any pigeonhole formulae, to be

insisted upon as proof of such

relationship. This would only help to

perpetuate practicing unfair labour

practices than rendering substantial

justice to the class of persons who are

invariably exploited on account of their

inability to dictate terms relating to

conditions of their service. Neither

all the tests nor guidelines indicated

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as having been followed in the decisions

noticed above should be invariably

insisted upon in every case, nor the

mere absence of any one of such criteria

could be held to be decisive of the

matter. A cumulative consideration of a

few or more of them, by themselves or in

combination with any other relevant

aspects, may also serve to be a safe and

effective method to ultimately decide

this often agitated question. Expecting

similarity or identity of facts in all

such variety or class of cases involving

different type of establishments and in

dealing with different employers would

mean seeking for things, which are only

impossible to find."

Having regard to the fact that therein a cooperative

canteen was promoted with the consent of the management by

serving members of the Bank staff, which was running within

the bank's premises and with the funds, subsidy and

infrastructural facilities provided exclusively by the Bank,

it was held that there existed a relationship of master and

servant.

However, we may notice that almost in a similar

situation in Employers in relation to the Management of

Reserve Bank of India vs. Workmen [(1996) 3 SCC 267], it was

held that in the absence of statutory or other legal

obligations and in the absence of any right in the Bank to

supervise and control the work or details there in any

manner regarding the canteen workers employed in the three

types of canteens, it cannot be said that relationship of

master and servant existed between the Bank and the various

persons employed in the three types of canteens and in that

situation, the demand for regularization was considered to

be unsustainable.

In our opinion, the statutory canteen or other canteen

run by the employer in his premises stands absolutely on a

different footing. In determining the relationship of

employer and employee, as has been noticed by this Court in

Steel Authority of India Ltd. & Others vs. National Union

Waterfront Workers and Others [(2001) 7 SCC 1], the said

question has no relevance.

In Mishra Dhatu Nigam Ltd., etc. vs. M. Venkataiah &

Ors. etc. etc. [JT 2003 (7) SC 95], as the appellants were

required by the Factories Act to provide canteen facilities

and since the workers engaged through the contractors had

been held to be the employees of the principal employers,

this Court held that the workers engaged through contractors

were entitled for regularization of their services.

Although we have reservation about the correctness or

otherwise of the said decision but we need not go into the

said question inasmuch even therein, the court noticed that

the decision in Steel Authority of India Ltd. (supra) stands

on a different footing.

In Indian Banks Association vs. Workmen of Syndicate

Bank and Others [(2001) 3 SCC 36], the question which arose

for consideration was as to whether the deposit collectors

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who received commission is in reality a wage which would

depend on the productivity. Such commission was paid for

promoting the business of the bank. Having regard to the

fact that the banks have control over the deposit

collectors, they were considered to be their own workers.

In Indian Banks Association (supra) the reference which

was made for adjudication of the Industrial Tribunal was as

follows :

"Whether the demands of the Commission

Agents or as the case may be Deposit

Collectors employed in the banks listed

in the annexure that they are entitled

to pay scales, allowances and other

service conditions available to regular

clerical employees of those banks is

justified ? If not, to what relief are

the workmen concerned entitled and from

which date ?"

Having regard to the evidences both oral and

documentary led by the parties, the Tribunal directed :

"All those Deposit Collectors and

Agents who are below the age of 45 years

on 3.10.1980 (the date of the first

reference of this industrial dispute)

shall be considered for regular

absorption for the post of clerks and

cashiers if they are matriculates and

above including qualified graduates and

postgraduates. They may be taken to

banks services as regular employees if

they pass the qualifying examinations

conducted by the banks. Those who are

absorbed shall be treated on a par with

regular clerical employees of the Bank.

Those who have qualified 8th class and

below matriculation shall be considered

for absorption as sub-staff by

conducting qualifications examination.

As regards the Deposit Collectors

and Agents who are above 45 years of age

on the date 3.10.1980 and also those who

are unwilling to be absorbed in regular

banks service shall be paid the full

back wage of Rs.750.00 per month linked

with a minimum deposit of Rs.7500.00 per

month and they should be paid incentive

remuneration at 2% for collection of

over and above 7500.00 per month and

they should also pay uniform conveyance

of Rs.50 per month for deposit of less

than Rs.10,000.00 and Rs.100.00 per

month for deposits of more than

Rs.10,000.00 up to or above Rs.30,000.00

per month they should be paid gratuity

of 15 days' commission for each year of

service rendered."

Thus in that decision, a scheme was formulated.

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However, we may notice that in Union of India and

Others vs. K.V. Baby and Another [(1998) 9 SCC 252], this

Court observed :

"...However, persons who are engaged on

the basis of individual contracts to

work on a commission basis cannot, by

the very nature of their engagement, be

equated with regular employees doing

similar work..."

In Bharat Heavy Electricals Ltd. vs. State of U.P. &

Others [(2003) 6 SCC 528], the concerned workmen were

engaged as gardeners to sweep, clean, maintain and look

after the lawns and parks inside factory premises and campus

of the residential colony of the appellant through the

agencies of the Respondent Nos.3 to 5; therein their

services were terminated pursuant whereto an industrial

dispute was raised before the Tribunal, the employer did not

produce any records. Having applied the control test and in

view of the fact that the records of the concerned workmen

had not been produced, this Court did not interfere with the

award of the Tribunal and the judgment of the High Court.

In Shri Chintaman Rao and Another vs. The State of

Madhya Pradesh [1958 SCR 1340], this Court observed :

"...The concept of employment involves

three ingredients (1) employer (2)

employee and (3) the contract of

employment. The employer is one who

employs, i.e. one who engages the

services of other persons. The employee

is one who works for another for hire.

The employment is the contract of

service between the employer and the

employee whereunder the employee agrees

to serve the employer subject to his

control and supervision..."

Following the decision of this Court in Shri Chintaman

Rao (supra), this Court in Shankar Balaji Waje vs. The State

of Maharashtra [AIR 1962 SC 517], held:

"Employment brings in the contract of

service between the employer and the

employed. We have mentioned already that

in this case there was no agreement or

contract of service between the

appellant and Pandurang. What can be

said at the most is that whenever

Pandurang went to work, the appellant

agreed to supply him tobacco for rolling

bidis and that Pandurang agreed to roll

bidis on being paid at a certain rate

for the bidis turned out. The appellant

exercised no control and supervision

over Pandurang"

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In Dharangadhara Chemical Works Ltd. Vs. State of

Saurashtra & Ors. [AIR 1957 SC 264], this Court upon

noticing several authorities held :

"The principle which emerges from these

authorities is that the prima facie test

for the determination of the

relationship between master and servant

is the existence of the right in the

master to supervise and control the work

done by the servant not only in the

matter of directing what work the

servant is to do but also the manner in

which he shall do his work, or to borrow

the words of Lord Uthwatt at page 23 in

Mersey Docks and Harbour Board v.

Coggins & Griffith (Liverpool) Ltd.,

[[1947] 1 A.C. 1, at p. 23.], "The

proper test is whether or not the hirer

had authority to control the manner of

execution of the act in question".

The nature or extent of control

which is requisite to establish the

relationship of employer and employee

must necessarily vary from business to

business and is by its very nature

incapable of precise definition. As has

been noted above, recent pronouncements

of the Court of Appeal in England have

even expressed the view that it is not

necessary for holding that a person is

an employee, that the employer should be

proved to have exercised control over

his work, that the test of control was

not one of universal application and

that there were many contracts in which

the master could not control the manner

in which the work was done (Vide

observations of Somervell, L.J., in

Cassidy v. Ministry of Health (supra),

and Denning, L.J., in Stevenson, Jordan

and Harrison Ltd. v. MacDonald and Evans

(supra).)

The correct method of approach,

therefore, would be to consider whether

having regard to the nature of the work

there was due control and supervision by

the employer or to use the words of

Fletcher Moulton, L.J., at page 549 in

Simmons v. Health Laundry Company

[[1910] 1 K.B. 543 at pp. 549, 550] :-

"In my opinion it is impossible to

lay down any rule of law

distinguishing the one from the

other. It is a question of fact to

be decided by all the circumstances

of the case. The greater the amount

of direct control exercised over

the person rendering the services

by the person contracting for them

the stronger the grounds for

holding it to be a contract of

service, and similarly the greater

the degree of independence of such

control the greater the probability

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that the services rendered are of

the nature of professional services

and that the contract is not one of

service."

In Management of M/s Puri Urban Cooperative Bank vs.

Madhusudan Sahu and Another [AIR 1992 SC 1452], this Court

observed :

"...It stands established that

Industrial Law revolves on the axis of

master and servant relationship and by a

catena of precedents it stands

established that the prima facie test of

relationship of master and servant is

the existence of the right in the master

to supervise and control the work done

by the servant (the measure of

supervision and control apart) not only

in the matter of directing what work the

servant is to do but also the manner in

which he shall do his work..."

However, we may note that in Workmen of the Canteen of

Coates of India Ltd. vs. Coates of India Ltd. (Civil Appeal

No.3479/1987 disposed of on 28.8.1996, this Court observed :

"...some requirement under the

Factories Act of providing a canteen in

the industrial establishment, is by

itself not decisive of the question or

sufficient to determine the status of

the persons employed in the canteen.

The effect, if any, relating to

compliance of the provisions of

Factories Act is a different matter

which does not arise for consideration

in the present case."

[See also Bombay Canteen Employees' Association vs.

Union of India, [(1997) 6 SCC 723].

On the aforementioned backdrop of legal principles, We

may now consider the Constitution Bench judgment of this

Court in Steel Authority of India Limited (supra). The

principal question which arose for consideration therein was

as to whether having regard to the provisions contained in

Section 10 of the Contract Labour (Regulation and

Abolition) Act, the workmen employed by the contractors in

the event of abolition of contract labour were entitled to

be automatically absorbed in the services of the principal

employer. While answering the question in the negative the

court reversed the earlier decision of this Court in Air

India Statutory Corporation and Others vs. United Labour

Union and Others [(1997) 9 SCC 377]. This Court referring

to a large number of decisions and tracing the history of

the Contract Labour (Regulation and Abolition) Act, noticed

that the Industrial Tribunal although prior to coming into

force could issue directions for such regularization but

such directions could not be issued after coming into force

of the Act. In view of the Constitution Bench decision in

M/s Gammon India Ltd. and Others etc. vs. Union of India and

Others [(1974) 1 SCC 596], the Court held that although the

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principle that a beneficial legislation needs to be

construed liberally in favour of the class for whose favour

it is intended, the same would not extend to reading in the

provisions of the Act what the legislature has not provided

whether expressly or by necessary implication, or

substituting remedy or benefits for that provided by the

legislature. Upon analyzing the case law, the categories

of cases were sub-divided into three stating :

"An analysis of the cases, discussed

above, shows that they fall in three

classes : (i) where contract labour is

engaged in or in connection with the

work of an establishment and employment

of contract labour is prohibited either

because the industrial adjudicator/court

ordered abolition of contract labour or

because the appropriate Government

issued notification under Section 10(1)

of the CLRA Act, no automatic absorption

of the contract labour working in the

establishment was ordered; (ii) where

the contract was found to be a sham and

nominal, rather a camouflage, in which

case the contract labour working in the

establishment of the principal employer

were held, in fact and in reality, the

employees of the principal employer

himself. Indeed, such cases do not

relate to abolition of contract labour

but present instances wherein the Court

pierced the veil and declared the

correct position as a fact at the stage

after employment of contract labour

stood prohibited; (iii) where in

discharge of a statutory obligation of

maintaining a canteen in an

establishment the principal employer

availed the services of a contractor the

courts have held that the contract

labour would indeed be the employees of

the principal employer."

The instant case although was sought to be put in

category (ii) as referred to Steel Authority (supra) by Mr.

Prasad, he, as noticed hereinbefore, took us also to the

case law falling in Class (i) and Class (iii)

aforementioned.

There cannot be any doubt whatsoever that where a

person is engaged through an intermediary or otherwise for

getting a job done, a question may arise as the appointment

of an intermediary was merely sham and nominal and rather

than camouflage where a definite plea is raised in

Industrial Tribunal or the Labour Court, as the case may be,

and in that event, it would be entitled to pierce the veil

and arrive at a finding that the justification relating to

appointment of a contractor is sham or nominal and in effect

and substance there exists a direct relationship of employer

and employee between the principal employer and the workman.

The decision of this Court in Hussainbhai, Calicut vs. The

Allath Factory Thezhilali Union, Kozhikode and Others

[(1978) 4 SCC 257] will fall in that category.

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ANALYSIS:

Having regard to the aforementioned findings, we are of

the opinion, the High Court has rightly affirmed the award

of the Industrial Tribunal. The Tribunal as also the High

Court further rightly arrived at a finding to the effect

that the concerned workmen were not able to discharge their

burden of proof that they were employed by the Society.

The decisions referred to hereinbefore are indicative

of the fact that the different tests have been applied in

different cases having regard to the nature of the problem

arising in the fact situation obtaining therein. Emphasis

on application of control test and organization test have

been laid keeping in view the question as to whether the

matter involves a contract of service vis-`-vis contract for

service; or whether the employer had set up a contractor for

the purpose of employment of workmen by way of a smoke

screen with a view to avoid its statutory liability.

In the present case we are faced with a peculiar

situation. The society is a service society which has been

formed with the object of protecting the growers from being

exploited at the hands of the traders.

It has been found that the employment of the workmen

for doing a particular piece of work is at the instance of

the producer or the merchants on an ad hoc basis or job to

job basis and, thus, the same may not lead to the conclusion

that relationship of employer and employee has come into

being. Furthermore, when an employee has a right to work or

not when an offer is made to him in this behalf by the

producer or by the merchants will also assume significance.

For the purpose of earning livelihood, a person has to

involve himself into certain kinds of activities wherefor,

he must subject himself to some sort of discipline or

control, which is even otherwise implicit.

The findings arrived at by the learned Tribunal as well

as the High Court would clearly go to show that the

concerned workmen are engaged both by the growers as also

the traders. Only on some occasions, payment is made to the

concerned workmen through the third parties only in a case

where the grower is not immediately in a position to pay the

same as he was yet to receive the price of the vegetables to

be auctioned. We must bear in mind that the Society deals

with small and marginal farmers who themselves look after

the Society for obtaining such assistance as may be

necessary from not being exploited by the traders and had

been facing the problem of a forced sale of their produce at

the throw away price. The totality of the circumstances as

opined by the Tribunal and affirmed by the High Court would

clearly go to show that although certain activities are

carried out in the market yards wherefor requisite

infrastructures are provided, the Society in general does

not have the necessity of employing any workman either for

the purpose of loading, unloading or grading. Ultimately,

the remuneration to the concerned workmen are borne either

by the farmers or by the merchants. Presumably the amount

paid to the loaders, unloaders and the graders would vary,

as for example whereas there would be cases where the

growers themselves would unload their merchandise either

from trucks or carts. In case growers take the assistance

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of the concerned persons for unloading after the auction is

held the payment would be made by the traders. In a

situation of this nature and particularly having regard to

the fact that the respondent is a cooperative society which

only renders services to its own members and despite the

fact that in relation thereto it receives commission at the

rate of one per cent both from the farmers as also the

traders; it does not involve in any trading activity.

Although rendition of such service may amount to carrying

out an industrial activity within the meaning of the

provisions of the Industrial Disputes Act, 1947 but we are

in this case not concerned with the said question. What we

are concerned with is as to whether the concerned workmen

have been able to prove that they are workmen of the

Society. They have not.

CONCLUSION :

In view of what has been found hereinbefore, we are of

the opinion that the decision of the Tribunal as affirmed by

the High Court cannot be said to be perverse warranting our

interference.

For the reasons aforementioned, we do not find any

merit in these appeals which are dismissed accordingly. No

costs.

However, before parting with the matter, we may observe

that we have no doubt in our mind keeping in view the

assurances given to the High Court by the Society, as

recorded in its order dated 12.12.2000, the Respondent will

continue to see that the concerned employees are provided

with employment.