BALWANT RAI SALUJA & ANR ETC.ETC. Vs AIR INDIA LTD..
Bench: CHANDRAMAULI KR. PRASAD,V. GOPALA GOWDA
Case number: C.A. No.-010264-010266 / 2013
Diary number: 24797 / 2011
Advocates: ANIRUDDHA P. MAYEE Vs
RUCHI KOHLI
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REPORTABLE
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos.10264-10266 OF 2013 (@SPECIAL LEAVE PETITION (C) NOS. 24946-24948 OF 2011)
BALWANT RAI SALUJA & ANR. ETC. ETC. … APPELLANTS
VERSUS
AIR INDIA LTD. & ORS. …RESPONDENTS
J U D G M E N T
CHANDRAMAULI KR. PRASAD, J.
Leave granted.
Air India Limited was constituted under the
Air Corporations Act, 1953. By virtue of Section
3 of the Air Corporations (Transfer of
Undertakings and Repeal) Act, 1994, Air India has
vested in Indian Airlines Limited. It has Ground
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Services Department at Indira Gandhi International
Airport, Delhi. Respondent No. 2 is Hotel
Corporation of India, which is a Government
Company incorporated under the Companies Act. The
authorized share capital of the Hotel Corporation
of India, hereinafter referred to as the
Corporation, is Rupees 10 crores, divided into 10
lakhs equity shares of Rs. 100/- each. The
Corporation is a wholly owned subsidiary of Air
India and its entire share capital is held by Air
India and its nominee. Excepting 6 shares,
4,99,994 shares have been subscribed by Air India
and rest by its nominees. Air India controls the
composition of the Board of Directors and appoints
Directors in consultation with the Government of
India. The power to remove the Directors from
office before the expiry of the term is vested
with Air India, in consultation with the
Government of India, so also the power to fill up
the vacancies caused by death, resignation,
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retirement or otherwise. General management of
the Corporation is vested in the hands of the
Managing Director. Notwithstanding that, Air India
is conferred with the power to issue such
directions or instructions as it may think fit in
regard to the finances and the conduct of the
business and affairs of the Corporation. Duty has
been cast upon the Corporation to comply with and
give effect to such directions and instructions.
The main objects for which the Corporation is
incorporated are large and include carrying the
business of hotels, motels, restaurants, cafés,
kitchens, refreshment rooms, canteens and depots
etc. in general and its incidental and ancillary
objects are establishment of catering and opening
hotels, which would tend to promote or assist in
Air India’s business as an international air
carrier. Respondent No. 3, Chef Air Flight
Catering, hereinafter referred to as ‘Chef Air’,
is one of the units of the Corporation.
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Section 46 of the Factories Act, inter alia,
confers power on the State Government to make
rules requiring a specified factory where more
than 250 workers are ordinarily employed, to
provide and maintain a canteen for the use of the
workers. In exercise of the aforesaid power,
Rules 65 to 71 have been incorporated in the Delhi
Factory Rules, 1950, hereinafter referred to as
‘the Rules’. Rule 65(1) was to come into force in
respect of any class or description of factories
on such dates as the Chief Commissioner may by
notification in the Official Gazette appoint.
Rule 65(2) of the Rules, inter alia, contemplates
that the occupier of every factory notified by the
Chief Commissioner, where more than 250 workers
are ordinarily employed, shall provide in or near
the factory an adequate canteen in accordance with
the standard prescribed in those Rules. In
pursuance of the provisions of sub-rule (1) of
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Rule 65 of the Rules, the Lieutenant-Governor of
the Union Territory of Delhi, by notification in
the Official Gazette, dated 21st of January, 1991,
directed that Rules 65 to 70 of the Rules shall
apply to the factories specified in the said Rules
with effect from the date of publication of the
notification in the Official Gazette. It included
M/s. Air India Ground Services Department, Indira
Gandhi International Airport, Delhi (Engineering
Unit).
The workmen working in Air India Ground
Services Department Canteen, hereinafter referred
to as ‘the Canteen’, raised an industrial dispute
and the competent Government made a reference to
the Central Government Industrial Tribunal as to
whether the demand of the workmen employed by Chef
Air to provide canteen service to be treated as
deemed employees of the management of Air India is
justified and, if so, what relief the workmen are
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entitled to? The workmen laid their claim and,
according to them, they were employed by Air India
on casual basis in the Canteen and their
employment was through Chef Air, which is a unit
of the Corporation. According to the workmen, the
Corporation has entered into a contract with Air
India to run and maintain the canteen and for that
purpose, they were initially appointed for a
period of 40 days and said period used to be
extended from time to time and in this way each of
them had completed service for 240 days in a year.
According to the workmen, they were called for
interview on several occasions but had not been
selected and on the contrary, persons junior to
them have been regularized. The workmen have
further alleged that Air India had entered into a
contract with the Corporation to deny the workmen
their legitimate right by circumventing the
various provisions of the Contract Labour
(Regulation and Abolition) Act, 1970. According
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to them, they were performing duties of a
permanent and perennial nature required by Air
India but were being paid wages less than the
regular employees. Case of the workmen further is
that issuance of letters of appointment for 40
days with artificial break in service is an unfair
labour practice and on the aforesaid grounds they
sought regularization of the services with back
wages in Air India.
Air India resisted the claim of the workmen,
inter alia, stating that they were not their
employees and relationship of employer and
employee does not exist between them. According
to them, Chef Air is a unit of the Corporation
engaged in various businesses including
establishing and running of canteens. According
to Air India, the Canteen is being run and
maintained by the Corporation on the basis of a
fixed subsidy per employee provided by them. It
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is a specific assertion of Air India that they
have no control over the workmen and that their
conditions of service are governed by the Rules
and Regulations of the Corporation. Air India has
admitted that the infrastructure of the Canteen
was provided by them but its management is in the
hands of the Corporation. Air India has further
pointed out that letters of appointment, token
numbers, ESI cards etc. have been issued to the
workmen by the Corporation and, hence, the prayer
for regularizing their services by Air India is
misconceived. Air India has denied that the
Canteen in question is a statutory canteen and was
employing more than 250 workers.
On the basis of the materials placed on
record, the Central Government Industrial
Tribunal, hereinafter referred to as “the
Tribunal”, came to the conclusion that the
Corporation is 100% subsidiary of Air India and
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the Canteen in question is a statutory Canteen
established for the welfare of more than 2,000
workers. The Tribunal also came to the conclusion
that the Canteen is established within the
premises of Air India and the Corporation carries
on its business under the control and
administration of Air India. According to the
Tribunal, the running of the Canteen by the
Corporation in respect of the statutory duty of
Air India cannot be said to be its independent
act. Accordingly, the Tribunal observed that
hiring of employees for running the statutory
canteen by the Corporation is a camouflage and the
workmen employed in the Canteen are deemed
employees of Air India. Thus, the Tribunal held
the demand of the workers to be justified and
finding that the workmen have been terminated from
their services during the pendency of the dispute
held that the termination is illegal and,
accordingly, set aside the termination of their
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employment and directed reinstatement with 50%
back wages.
Assailing the aforesaid award of the Tribunal,
Air India preferred writ petition before the
High Court.
The learned Single Judge held that Air India
is the sole holder of the shares of the
Corporation but it is a separate legal entity
which is independent of its shareholders. The
authority to issue directions does not merge the
identity of the Corporation with the shareholder.
The learned Single Judge accordingly held as
follows:
“……Thus, in my view the mere fact of HCI being a 100% subsidiary of Air India and the aforesaid peculiar Articles of Association would not be decisive of whether the employees aforesaid of HCI and working in the canteen of Air India are to be treated as employees of Air India or not.”
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As regards the grievance of the workmen that
Air India had devised to employ the workmen
through a unit of the Corporation to defeat their
rights, the learned Single Judge observed as
follows:
“19. One thing which emerges is that in the present case, no motive to defeat any rights of the employees, in Air India entering into a contract with Chef Air (a unit of HCI) for operating its canteen, even if it be a statutory canteen have been established. It was not as if by employing workmen in HCI instead of in Air India, the workmen were being made employees of a weaker entity against whom they can claim no rights. After all HCI is also a Government of India company as Air India is.”
The learned Single Judge further came to the
conclusion that the Corporation was not
incorporated for the sole purpose of operating the
Canteen for Air India but was set up as a legal
entity to carry on business in diverse fields.
According to the learned Single Judge, Air India
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engaged the Corporation which has expertise in the
field to run and operate the Canteen and that will
not make the workmen employees of Air India. The
learned Single Judge ultimately held as follows:
“23. HCI in the present case is seen as one such expert. It has been providing flight catering services to Air India and other airlines besides carrying on other allied businesses. As aforesaid, HCI was not incorporated merely to run the canteen of Air India so as to keep the employees of the said canteen, managed through the medium of HCI, at arm’s length from Air India. HCI is a business entity in its own right and no mala fides have been established in Air India entrusting the operation and management of the canteen aforesaid to HCI. As aforesaid, in spite of repeated asking, no prejudice is shown to have been caused to the workmen in them being the employees of the HCI instead of Air India. Of my own I can only gauge that may be as employees of Air India they may be entitled to a free flight once in a while and which they may not be entitled to as an employee of HCI. However, that is hardly determinative of the matter in controversy. Again it is not as if Air India is attaining to offload
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its canteen employees to an entity which is sick or near the stage of being closed down. HCI is informed to be a running concern.”
Accordingly, it set aside the award passed by
the Tribunal.
The workmen, aggrieved by the same, preferred
an appeal before the Division Bench of the High
Court. The Division Bench framed the following
question for its consideration:
“11. The core issue that emanates for consideration is whether in the obtaining factual matrix it can be held that the employees of the canteen established by Air India in its premises and run by the HCI be treated as regular employees of Air India. Before we advert to the factual canvas, we think it appropriate to refer to the citations in the field, cull out the principles and analyse whether they are applicable to the material brought on record.”
The Division Bench of the High Court analysed
the facts, referred to the various decisions of
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this Court and ultimately came to the conclusion
that the Corporation is a separate entity and not
a part of Air India as found by the Tribunal. It
endorsed the finding of the learned Single Judge
that merely because the Articles of Association
confer power on Air India to issue such directions
or instructions as it may think fit in regard to
conduct of the business and affairs of the
Corporation and make it obligatory for the
Corporation to carry on the direction of Air
India, would not merge the identity of the
shareholders with the Corporation. The Division
Bench ultimately affirmed the decision of the
learned Single Judge and, while doing so, observed
as follows:
“20. On the basis of the aforesaid enunciation of law, the factual matrix is required to be tested. As is manifest, there is no material on record to show that the respondent - Air India had any role in the appointment of the employees in the canteen. No administrative or disciplinary action could be
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taken by the respondent against the canteen workers. The respondent had itself not undertaken the obligation to run the canteen but had only provided facility so that its employees could avail the canteen facilities. It is not a case where the employees of the canteen were enlisted under a welfare fund scheme, provident fund scheme and medical scheme of the respondent – management. The responsibility to run the canteen was absolutely with the HCI and it was totally a contractual relationship between the two. Air India had no say in the selection or other affairs of the canteen workers.”
Mr. Jayant Bhushan, Senior Advocate appearing
on behalf of the appellants submits that the
obligation to provide for the Canteen is with Air
India and, therefore, the workmen are entitled to
be treated as their employees and Air India their
employer. It is further contended that Air India
has a large role to play in the operation and
management of the Canteen and, in the
circumstances, the veil of the contract has to be
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lifted and this Court is competent to do so to
arrive at the truth. In support of the submission
reliance has been placed on a large number of
decisions of this Court. I do not have the
slightest hesitation in accepting this broad
submission of Mr. Bhushan and, hence, I deem it
unnecessary to refer to all those decisions. It
is well settled that the court can lift the veil,
look to the conspectus of factors governing
employment, discern the naked truth though
concealed intelligently. The court has to be
astute in piercing the veil to avoid the mischief
and achieve the purpose of law. It cannot be
swayed by legal appearance. The court’s duty is to
find out whether contract between the principal
employer and the contractor is sham, nominal or
merely a camouflage to deny employment benefits to
the workmen.
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Once the veil is pierced, the control of Air
India is writ large over the Corporation, submits
Mr. Bhushan. He points out that the Corporation
is a wholly owned subsidiary of Air India which
controls the composition of the Board of Directors
and appoints and removes Directors in consultation
with the Government of India. According to him,
the general management of the Corporation is
vested in its Managing Director. Notwithstanding
that, Air India is conferred with the power to
issue directions or instructions as it may think
fit in regard to the finances and the conduct of
the business and affairs of the Corporation and,
hence, the workmen employed by the Corporation
are, in fact, the employees of Air India. Mr.
C.U. Singh, however, submits that notwithstanding
the aforesaid power vested in Air India, the
Corporation is still a separate legal entity. The
fact that its entire share is held by Air India or
Air India has the power to appoint the Board of
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Directors, issue directions etc., will not denude
the legal status of the Corporation as a
Government company. The fact that the Canteen
required to be provided by Air India is being run
by the Corporation through one of its units Chef
Air will not make Air India its principal
employer. He points out that in order to
determine the principal employer one is required
to see as to who is paying the salary, who is
supervising the work, the role played in selection
and appointment of the workmen, disciplinary
control over them and whether such employees are
covered under the welfare scheme of Air India etc.
He points out that the responsibility to run the
Canteen is with the Corporation and, hence, Air
India cannot be treated as its principal employer.
According to him, the Corporation is a separate
legal entity and even though Air India is a
holding company, the Corporation shall still be a
separate legal entity. Further, the Corporation
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is not subservient to Air India but is a servant
to its Memorandum of Association and Articles of
Association. In support of the submission,
reliance has been placed on a decision of this
Court in the case of Heavy Engineering Mazdoor
Union v. State of Bihar, (1969) 1 SCC 765.
Paragraph 5 of the judgment reads as under:
“5. It is true that besides the Central Government having contributed the entire share capital, extensive powers are conferred on it, including the power to give directions as to how the company should function, the power to appoint directors and even the power to determine the wages and salaries payable by the company to its employees. But these powers are derived from the company's memorandum of association and the articles of association and not by reason of the company being the agent of the Central Government. The question whether a corporation is an agent of the State must depend on the facts of each case. Where a statute setting up a corporation so provides, such a corporation can easily be identified as the agent of the State as in Graham v. Public Works
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Commissioners, 1901 (2) KB 781, where Phillimore J. said that the Crown does in certain cases establish with the consent of Parliament certain officials or bodies who are to be treated as agents of the Crown even though they have the power of contracting as principals. In the absence of a statutory provision, however, a commercial corporation acting on its own behalf, even though it is controlled wholly or partially by a Government Department, will be ordinarily presumed not to be a servant or agent of the State. The fact that a minister appoints the members or directors of a corporation and he is entitled to call for information, to give directions which are binding on the directors and to supervise over the conduct of the business of the corporation does not render the corporation an agent of the Government. (See The State Trading Corporation of India Ltd. v. The Commercial Tax Officer, Visakhapatnam, 1964 (4) SCR 99 at 188, per Shah, J. and Tamlin v. Hannaford, 1950 (1) KB 18 at 25, 26). Such an inference that the corporation is the agent of the Government may be drawn where it is performing in substance governmental and not commercial functions. (Cf. London County Territorial and Auxiliary Forces Association v. Nichol's., 1948 (2) All ER 432.”
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(underlining mine)
Mr. Singh has also drawn my attention to a
Constitution Bench judgment of this Court in the
case of Steel Authority of India Ltd. v. National
Union Waterfront Workers, (2001) 7 SCC 1, in which
it has been held as follows:
“41. …………The President of India appoints Directors of the Company and the Central Government gives directions as regards the functioning of the Company. When disputes arose between the workmen and the management of the Company, the Government of Bihar referred the disputes to the Industrial Tribunal for adjudication. The union of the workmen raised an objection that the appropriate Government in that case was the Central Government, therefore, reference of the disputes to the Industrial Tribunal for adjudication by the State Government was incompetent. A two-Judge Bench of this Court elaborately dealt with the question of appropriate Government and concluded that the mere fact that the entire share capital was contributed by the Central Government and the fact that all its shares were held by the President of India and
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certain officers of the Central Government, would not make any difference. It was held that in the absence of a statutory provision, a commercial corporation acting on its own behalf, even though it was controlled, wholly or partially, by a government department would be ordinarily presumed not to be a servant or agent of the State……….”
I have considered the rival submissions and
find substance in the submission of Mr. Singh and
the authorities relied on do support his
contention. The Corporation undisputedly is a
Government Corporation incorporated under the
Companies Act. It is a legal entity altogether
different from its shareholders. In my opinion,
the fact that Air India or its nominee are the
shareholders of the Corporation and in the
management of business and finances, it is subject
to the directions issued by Air India in terms of
the Memorandum of Association and Articles of
Association shall not merge the Corporation’s
identity in shareholders. In my opinion, the
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Corporation is a separate legal entity, not
subservient to Air India but a servant to its
Memorandum of Association and Articles of
Association.
Mr. Bhushan, then submits that the Corporation
may be a separate legal entity but Air India’s
control over the affairs of the Canteen makes it
the principal employer. He points out that many
of the articles for running the Canteen were
purchased by Air India and, in fact, grievances
pertaining to running of the Canteen were
entertained by it. These, according to the
learned counsel, clearly show that Air India is
the principal employer.
I have bestowed my consideration to the
aforesaid submission, but find no substance in the
same. Few of the well recognized tests to find
out the real relationship are whether the
principal employer:
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(1) pays the salary to the workmen instead of
the contractor,
(2) controls and supervises the work of the
employees,
(3) has role in selection and appointment of
the employees, and
(4) acts as a disciplinary authority over the
conduct and discipline of the employees.
Reference in this connection can be made to a
decision of this Court in the case of Haldia
Refinery Canteen Employees Union and Others v.
Indian Oil Corporation Ltd. & Ors. (2005) 5 SCC
51, wherein it has been held as follows:
“16…..It has nothing to do with either the appointment or taking disciplinary action or dismissal or removal from service of the workmen working in the canteen. Only because the management exercises such control does not mean that the employees working in the canteen are the employees of the management. Such supervisory
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control is being exercised by the management to ensure that the workers employed are well qualified and capable of rendering proper service to the employees of the management.”
(underlining mine)
In the case of International Airport
Authority of India v. International Air Cargo
Workers' Union, (2009) 13 SCC 374, this Court
echoed the same view and observed as follows:
“38. The tests that are applied to find out whether a person is an employee or an independent contractor may not automatically apply in finding out whether the contract labour agreement is a sham, nominal and is a mere camouflage. For example, if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a contractor, if the right to regulate the employment is with the contractor, and the ultimate
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supervision and control lies with the contractor.
39. The principal employer only controls and directs the work to be done by a contract labour, when such labour is assigned/allotted/sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, worker being the employee of the contractor, the ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor.”
This Court has taken the same view in General
Manager, (OSD), Bengal Nagpur Cotton Mills,
Rajnandgaon v. Bharat Lal, (2011) 1 SCC 635, in
which it has been held as follows:
“10. It is now well settled that if the industrial adjudicator finds
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that the contract between the principal employer and the contractor to be a sham, nominal or merely a camouflage to deny employment benefits to the employee and that there was in fact a direct employment, it can grant relief to the employee by holding that the workman is the direct employee of the principal employer. Two of the well-recognised tests to find out whether the contract labourers are the direct employees of the principal employer are: (i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee. In this case, the Industrial Court answered both questions in the affirmative and as a consequence held that the first respondent is a direct employee of the appellant.”
Bearing in mind the principles aforesaid, when
I proceed to consider the facts of the present
case, I find that Air India does not fulfill the
test laid down so as to treat it as the principal
employer. It is not the case of the workmen that
it is Air India which pays their emoluments
instead of the Corporation. Air India has neither
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any role in selection and appointment of the
workmen nor it controls and supervises their work.
It is further not their case that Air India is
their disciplinary authority over their conduct
and discipline. In my opinion, Air India, by
giving subsidy at a specified rate or for that
matter purchasing few articles for the Canteen on
its behalf and further bringing to the notice of
the Corporation the complaint in regard to the
functioning of the Canteen, will not make it the
principal employer. As has rightly been observed
by the High Court, the Corporation is a Government
company like Air India and the workmen in no way
will be prejudiced if they continue to be the
employees of the Corporation. In my opinion,
there does not seem to be any mala fide or oblique
motive in Air India entering into a contract with
Chef Air, a unit of the Corporation for operating
its Canteen. Certainly, it is not to defeat the
rights of the workmen.
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Mr. Bhushan, lastly submits that the workmen
were engaged in the Canteen provided by Air India
in compliance of Rule 65(2) of the Rules framed in
exercise of powers under Section 46 of the
Factories Act. According to him, the workmen of a
statutory canteen have to be treated as employees
of such establishment whose obligation is to
provide for the Canteen. In the case in hand,
according to Mr. Bhushan, the obligation to
provide for the Canteen is with Air India and,
therefore, the workmen are entitled to be treated
as their employees and Air India their employer.
In support of the submission reliance has been
placed on a decision of this Court in the case of
M.M.R. Khan v. Union of India, 1990 Supp SCC 191,
and my attention has been drawn to Paragraph 39 of
the judgment which reads as follows:
“39. The result, therefore, is that the workers engaged in the statutory canteens as well as those
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engaged in non-statutory recognised canteens in the railway establishments are railway employees and they are entitled to be treated as such. The Railway Board has already treated the employees of all statutory and 11 Delhi based non-statutory recognised canteens as railway employees w.e.f. October 22, 1980. The employees of the other non- statutory recognised canteens will, however, be treated as railway employees w.e.f. April 1, 1990. They would, therefore, be entitled to all benefits as such railway employees with effect from the said date, according to the service conditions prescribed for them under the relevant rules/orders.”
Reliance has also been placed on a
Constitution Bench decision of this Court in the
case of Steel Authority of India Ltd. (supra)
referred to by the learned counsel for Air India
also and my attention has been drawn to paragraph
107 thereof, which records as follows:
“107. An analysis of the cases, discussed above, shows that they fall in three classes: (i) where contract labour is engaged in or in connection with the work of an
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establishment and employment of contract labour is prohibited either because the industrial adjudicator/court ordered abolition of contract labour or because the appropriate Government issued notification under Section 10(1) of the CLRA Act, no automatic absorption of the contract labour working in the establishment was ordered; (ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case the contract labour working in the establishment of the principal employer were held, in fact and in reality, the employees of the principal employer himself. Indeed, such cases do not relate to abolition of contract labour but present instances wherein the Court pierced the veil and declared the correct position as a fact at the stage after employment of contract labour stood prohibited; (iii) where in discharge of a statutory obligation of maintaining a canteen in an establishment the principal employer availed the services of a contractor the courts have held that the contract labour would indeed be the employees of the principal employer.”
According to Mr. Bhushan, the Constitution
Bench judgment clinches the issue. I do not find
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any substance in the submission of Mr. Bhushan and
the authorities relied on are clearly
distinguishable. In my opinion, the obligation to
provide Canteen is by itself not decisive to
determine the status of workmen employed in the
Canteen. Reference in this connection can be made
to a decision of this Court in Workmen of the
Canteen of Coates of India Ltd. v. Coates of India
Ltd. & Ors. (2004) 3 SCC 547 wherein it has been
held as follows:
“4………..It is sufficient for us to state that some requirement under the Factories Act of providing a canteen in the industrial establishment, is by itself not decisive of the question or sufficient to determine the status of the persons employed in the canteen.”
(underlining mine)
The aforesaid submission has squarely been
dealt with by this Court in the case of Hari
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Shankar Sharma v. Artificial Limbs Manufacturing
Corpn., (2002) 1 SCC 337, and this Court in no
uncertain terms has held that as an absolute
proposition of law it cannot be said that
“whenever in discharge of statutory mandate a
canteen is set up or other facilities provided by
the establishment, the employee of the canteen or
such other facility become the employee of that
establishment”. Relevant portion of the judgment
reads as follows:
“5. The submission of the appellants that because the canteen had been set up pursuant to a statutory obligation under Section 46 of the Factories Act therefore the employees in the canteen were the employees of Respondent 1, is unacceptable. First, Respondent 1 has disputed that Section 46 of the Factories Act at all applies to it. Indeed, the High Court has noted that this was never the case of the appellants either before the Labour Court or the High Court. Second, assuming that Section 46 of the Factories Act was applicable to Respondent 1, it cannot be said as an absolute proposition of law that
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whenever in discharge of a statutory mandate, a canteen is set up or other facility is provided by an establishment, the employees of the canteen or such other facility become the employees of that establishment. It would depend on how the obligation is discharged by the establishment. It may be carried out wholly or substantially by the establishment itself or the burden may be delegated to an independent contractor. There is nothing in Section 46 of the Factories Act, nor has any provision of any other statute been pointed out to us by the appellants, which provides for the mode in which the specified establishment must set up a canteen. Where it is left to the discretion of the establishment concerned to discharge its obligation of setting up a canteen either by way of direct recruitment or by employment of a contractor, it cannot be postulated that in the latter event, the persons working in the canteen would be the employees of the establishment. Therefore, even assuming that Respondent 1 is a specified industry within the meaning of Section 46 of the Factories Act, 1946, this by itself would not lead to the inevitable conclusion that the employees in the canteen are the employees of Respondent 1.”
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Now referring to the authority of this Court
in the case of M.M.R. Khan (supra), the same is
clearly distinguishable. In this case, it has been
held that the workmen engaged in the statutory
canteens as well as those engaged in non-statutory
recognized canteens are railway employees and they
have to be treated as such. This Court came to
the aforesaid conclusion as, on fact, it was found
that though the workmen were employed in the
canteen through the device of a labour contract,
they were essentially working under the control
and supervision of the railway establishment.
Further, the provision for running and operating
the canteen was in the Establishment Manual of the
Railways. Under these circumstances, this Court
came to the conclusion that the workmen engaged in
the statutory canteens were, in fact, the railway
employees. No such facts exist in the present
case.
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In the Steel Authority of India Ltd.(supra),
the Constitution Bench observed that the
authorities of this Court show that they fall in
three classes including the aforesaid class but it
has not endorsed the said view. In fact, the
decisions which I have referred to in the earlier
paragraphs of this judgment negate this
contention. I have tested the case of the workmen
on the touchstone of the principles laid down by
this Court and find that they do not satisfy those
tests so as to hold that Air India is the
principal employer.
Having found no substance in any of the
submissions made on behalf of the appellants, I do
not find any merit in these appeals and they are
dismissed accordingly, but without any order as
to costs.
……………..………..………………………..J. (CHANDRAMAULI KR. PRASAD)
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NEW DELHI, NOVEMBER 13, 2013
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Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.10264-10266 OF 2013 (Arising out of SLP (C) Nos. 24946-24948 of 2011)
BALWANT RAI SALUJA & ANR.ETC. ETC. … APPELLANTS VS. AIR INDIA LTD. & ORS. … RESPONDENTS
J U D G M E N T
V. GOPALA GOWDA, J.
Leave granted.
2. I have gone through the judgment of my learned
brother Judge in these civil appeals, in which my
learned brother Judge has concurred with the impugned
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judgment. However, I am in respectful disagreement
with the opinion of my learned brother and I am
recording my reasons for the same.
These appeals have been filed by the appellants
challenging the judgment and order dated 2nd May, 2011
passed in L.P.A. Nos.388 of 2010, 390 of 2010 and 391
of 2010 confirming the judgment and order dated 8th
April, 2010 of the learned single Judge of the Delhi
High Court passed in WP Nos.14178 of 2004, 14181/2004
and 14182 of 2004, wherein the learned single Judge
has set aside the common award dated 5th May, 2004 of
the Central Government Industrial Tribunal (for short
‘CGIT’) passed in Industrial Disputes case Nos. 97,
98 and 99 of 1996. The CGIT recorded that the
concerned workmen of Chefair, a unit of Hotel
Corporation of India (for short HCI) with which Air
India had entered into a contract to provide canteen
services at its establishment, are entitled to be
treated as being employees of it and consequently
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held that they are entitled to the relief sought for
by them. The said judgment of CGIT was set aside by
the Division Bench of the Delhi High Court in LPA
Nos.388 of 2010, 390 of 2010 and 391 of 2010 vide its
judgment dated 2nd May, 2011 after adverting to
certain relevant facts, legal contentions and cases
like M.M.R. Khan & Ors. v. Union of India & Ors.1, and some other decisions of this Court and concurred
with the finding of facts and reasons recorded by the
learned single Judge in setting aside the award and
consequently dismissed the appeals of the concerned
workmen. That is how these Civil Appeals are filed
by the workmen urging various factual and legal
contentions in support of their claims with a request
to set aside the impugned judgments and orders of the
Division Bench and the learned single Judge of the
Delhi High Court in the aforesaid Letter Patent
Appeals and the writ petitions.
1 1990 (Supp) SCC 191
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3. Since my learned brother Judge has referred to
certain facts and legal contentions to decide the
points that arose for consideration of this Court, I
also refer to certain relevant necessary facts and
rival legal contentions urged on behalf of the
parties with a view to answer the contentious points
that would arise in these appeals to answer the
same.
4. Three industrial disputes case Nos. 97, 98 and
99 of 1996 were registered by CGIT pursuant to the
order of references made by the Central Government
in the Ministry of Labour vide its order No.L-
11012/23/96-IR (Coal-I) dated 23.10.96 for
adjudication on the points of dispute referred to it
in relation to the workmen mentioned in the
respective orders of references made by it and in
relation to other industrial disputes namely ID Case
Nos. 107/96 and 108/96 which are individual cases of
industrial disputes filed by the concerned workmen
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since their services were illegally terminated by
the employer Air India during pendency of the
industrial disputes referred to supra in relation to
the absorption of the services of the concerned
workmen by the Management of Air India before the
CGIT without obtaining the approval from the CGIT,
despite the order dated 04.12.1996 passed by CGIT
wherein an undertaking was given by the Management
of Air India that neither it will change the
contractor Chefair without permission of/intimation
to the Tribunal nor will it take any action against
the workmen listed in the reference order made to
the CGIT for an adjudication of their dispute.
Despite the same, the services of the concerned
workmen in the Industrial disputes in case ID
Nos.97, 98 and 99/1996 were terminated. The action
of the Management of Air India in terminating the
services of the concerned workmen in the complaint
ID Nos. 107 and 108/1996 is in contravention of
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Section 33(2)(b) of the Industrial Disputes Act,
1947 (in short ‘I.D. Act’). Therefore, the
complaints were filed by the said workmen under
Section 33(A) of the I.D. Act to adjudicate the
existing industrial dispute between the concerned
workmen and the Management of Air India regarding
their illegal order of termination during the
pendency of the industrial disputes referred by the
Central Government which are registered as reference
Nos.97, 98 and 99 of 1996 with regard to the
absorption of the services of the contract labour
employees, employed by the HCI on behalf of M/s Air
India and made them to work in the Chefair. The
aforesaid canteen is the statutory canteen in terms
of the definition of Section 46 of the Factories
Act, according to the appellants herein and they
requested the CGIT for answering the points of
dispute which was referred to in the order of
references made by the Central Government in ID
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Nos.97 to 99, to treat them as the deemed employees
of the Management of Air India and also to set aside
the orders of termination passed against individual
concerned workmen and requested the CGIT to pass an
order of reinstatement with all consequential
benefits including the award of back-wages.
5. In support of their respective claims and
counter claims on behalf of the workmen and the
Management of Air India, they filed their statements
respectively in the cases referred to supra before
the CGIT. In the claim petition, the workmen
contended that the canteen which is being run by the
Air India through HCI through Chefair has engaged
the concerned workmen in these cases as contract
employees in various capacities and they have been
working in the canteen run by the Management of Air
India through Chefair ranging from 3 to 20 years on
the date of references made by the Central
Government to the CGIT which in turn is run by its
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subsidiary Company HCI. Delhi State Government in
exercise of its power under Section 46 of the
Factories Act, 1948 framed Rules 65 to 70 called
Delhi Factories Rules of 1950 (hereinafter referred
to as ‘the Rules’). A Notification was issued by the
Lt. Governor of the Union Territory of Delhi under
Rule 65(2) of the Rules stating that the Rules of
the Factories Act shall apply to the factories
specified in the Schedule to the said notification.
In the Schedule to the notification, the description
of the factory at serial No. 9- M/s. Air India
Ground Services Deptt. IGI, Air Port Delhi
(Engineering Unit) F.D.1725 is one of the specified
factories, the same is marked as – Ex.P. 4 in the
Industrial dispute cases before the CGIT.
6. Rule 65 states for providing canteen, Rule 66
speaks of Dining Hall, Rule 67 provides Equipment,
Rule 68 for fixing the prices to be charged, Rule 69
deals with Accounts and Rule 70 deals with Managing
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Committee to manage the affairs of the statutory
canteen. The relevant Rules will be adverted to in
the reasoning portion of my judgment while answering
the relevant contentious points that will be framed
shortly.
7. Strong reliance was placed upon the Rules and
the Notification referred to supra by the learned
senior counsel Mr. Jayant Bhushan inter alia
contending that the canteen is being run by the Air
India through HCI by Chefair where the concerned
workmen have been working in different capacities
for number of years such as cook, ground cleaning
staff, servicing, washing staff etc. etc.
The HCI employed them on contract basis as
canteen workers though they have been discharging
their duties which are in perennial nature. Then
action of the Management of Air India in employing
the concerned workmen on contract basis is an unfair
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labour practice as defined under Section 2(ra) of
the I.D. Act enumerated in the Vth Schedule to the
Act, which provision was inserted by way of an
amendment by Act No. 46 of 1982 w.e.f. 21.8.1984 at
serial No. 10 to the Vth Schedule which states that
“to employ workmen as casual or temporary workers
and to continue them as such for years with the
object to deprive them of the status and privileges
of permanent workmen is an unfair labour practice on
the part of the employer”. It is further stated
that Management of Air India has employed more than
2000 employees in its factory and therefore
notification issued by the Lt. Governor of Delhi on
21st January, 1991 applying Rules 65 to 70 of Rules
1950 to the said establishment framed under Section
46 of the Factories Act will be applicable to the
canteen in question run by the HCI on behalf of Air
India. It is the case pleaded and proved before the
CGIT by the concerned workmen and it has recorded
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the finding in this regard in their favour by
placing reliance upon three judge bench decision of
this Court in the cases of M.M.R. Khan (supra), Parimal Chandra Raha & Ors. v. Life Insurance Corporation of India and Ors.2, and another decision of this Court in Basti Sugar Mills Ltd. v. Ram Ujagar & Ors.3 in support of the legal contention urged on behalf of the workmen that employees of
statutory canteens i.e. canteens which are required
to be compulsorily provided to its workmen in the
factory as per Section 46 of the Factories Act are
employees of the establishment not only for the
purpose of Factories Act but also for all other
purposes. In the case of Parimal Chandra Raha referred to supra, this Court has held that for
canteen workers of contractor who runs the canteen,
it must pass the relevant test to determine on the
facts as to whether providing canteen to its workmen
2 1995 suppl. (2) SCC 611 3 AIR 1964 SC 355
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by a factory was obligatory on its part. In Basti Sugar Mills Ltd.'s case, this Court has held that the work of removal of press mud was given to the
contractor and the workmen in that case were
employed by the contractor to do that work, the
contractor terminated their services on completion
of the work. The stand taken in the said case by the
establishment was that they had nothing to do with
the workmen. The workmen in the case approached this
Court for relief against the termination of their
services. This Court held that the workmen were
employed in the industry to do manual work for
reward and therefore it is held that the Company was
their employer, as the workmen were employed by the
contractor with whom the Company had contracted in
the course of conducting its business for execution
of the said work of removal of the press mud which
is ordinarily part of the industry. Further reliance
was placed by the learned counsel upon the decision
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of this Court in Union of India & Ors. v. M. Aslam & Ors.4 wherein this Court has held that for the unit run canteens of Army, Navy and Air Forces, the
employees of such canteens are entitled to service
benefits as government servants. Finding of fact
was recorded by the CGIT in favour of the concerned
workmen while answering the points of dispute
referred to it by the Central Government with
reference to the factual legal aspects and evidence
on record from the aforesaid cases. This finding is
found fault with by the Single Judge and Division
Bench of the Delhi High Court and they had set aside
the finding recorded by CGIT. Strong reliance was
placed by the Delhi High Court upon the plea taken
by Air India and HCI with regard to the fact that
though HCI is subsidiary Company of the Air India,
it is governed by its own Memorandum and Articles of
Association as existed in the Companies Act and is
governed by the provisions of the said Act. HCI is 4 (2001) 1 SCC 720
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an independent legal entity from that of the Air
India. The learned single Judge while accepting the
factual and legal contentions urged on behalf of Air
India, has referred to paragraph 17 of his judgment
and stated with reference to the Memorandum and
Articles of Association, and observed that the
general management of business of HCI vests with its
Board of Directors, no doubt, the same is subject to
the directions, if any, that will be issued from
time to time from Air India with regard to the
finance and conduct of its business affairs.
However, the composition of the Board of Directors
of HCI is constituted by Air India in consultation
with the Government of India. In view of the said
reason, it cannot be said that the concerned
contract employees employed by HCI to do work in the
canteen are employees of Air India in the face of
the first principle of Corporate law with reference
to Salomon v. Salomon & Co. Ltd.5, wherein it was 5 1897 AC 22
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held that Company is a person all together different
from its shareholders though Air India is the sole
holder of the shares of the HCI. The HCI is a legal
entity independent of its shareholders with
reference to Section 46 in Chapter V of the
Factories Act under the heading “welfare”. The
mandatory provision is provided to maintain a
canteen in the establishment, which is a measure for
the welfare of the workers, the statutory obligation
on the part of the industrial establishment to
provide and maintain a canteen in the factory. If it
is found that the operation of such canteen has been
entrusted to such an expert, it cannot be said that
the employees deployed by such expert in such
canteen becomes employees of the
factory/establishment. Further, it is held by him
that HCI was not incorporated merely to run the
canteen of Air India so as to keep the employees of
the canteen maintained by it at arm's length from
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Air India. The HCI is a business entity on its own
rights and no malafide have been established by the
concerned workmen in the Management of Air India in
entrusting the operation and management of its
canteen to the HCI and no prejudice is shown to have
been caused to the concerned workmen being the
employees of the HCI instead of Air India, except
that they may be entitled to a free flight once in a
while from it, which they may not be entitled to get
as workmen of the HCI. Therefore, he has held that
it is hardly determinative of the matter in
controversy and thereafter he has referred to the
judgments of this Court in Indian Petrochemicals Corporation Ltd. & Anr. v. Shramik Sena & Ors.6, Steel Authority of India Ltd. & Ors. v. National Union Waterfront Workers & Ors.7, International Airport Authority of India v. International Air Cargo Workers' Union & Anr.8, in support of his 6 (1999) 6 SCC 439, 7 (2001)7 SCC 1 8 (2009)13 SCC 374
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conclusion laid down by applying the test laid down
in those cases to the fact situation and held that
there is no relationship of employer and employee
and hence no existing industrial dispute would arise
within the meaning of Section 2(k) of the I.D. Act
between the concerned workmen and the Management of
Air India. Therefore, he has quashed the award of
the CGIT which was affirmed by the Division Bench of
the Delhi High Court in the aforesaid L.P.As by
accepting the reasons recorded by the learned single
Judge and also after extracting certain relevant
paragraphs from the decisions of this Court in the
cases of M.M.R. Khan, Parimal Chandra Raha, Indian Petrochemicals Corporation Ltd., (all referred to supra) Hari Shanker Sharma and Ors. v. Artificial Limbs Manufacturing Corporation and Ors9. The Division Bench of Delhi High court has concurred
with the finding and reasons recorded by the learned
single Judge in the impugned judgment and dismissed 9 (2002) 1 SCC 337
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the letter patent appeals of the concerned workmen.
The correctness of the said judgment and order are
impugned in these civil appeals by the concerned
workmen reiterating their factual and legal
contentions as has been adverted to before the CGIT
and the High Court in the writ petition and the
appeals. Therefore, the same need not be adverted to
once again in this judgment with a view to avoid
repetition.
8. It is contended by the learned senior counsel
Mr. Jayant Bhushan on behalf of the concerned
workmen, placing strong reliance upon Section 46 of
the Factories Act and notification of the year 1991
referred to supra issued by Lt. Governor of the
Union Territory of Delhi upon the Rules 65 to 70 of
the Rules that the Management of Air India is
enumerated at serial No.9 in the Schedule to the
said notification. Therefore, the Management of Air
India was required to provide a statutory canteen to
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its workmen in its industrial establishment and the
learned senior counsel also placed strong reliance
upon the Memorandum and Articles of Association of
HCI particularly clause 33 in Chapter XIII to
substantiate his contentions that the control and
directions that will be issued from time to time
with regard to running of the canteen and managing
the canteen is on the Management of Air India to HCI
wherein, the Management of Air India was the
occupier. The learned senior counsel has further
placed strong reliance upon the findings recorded by
the CGIT in its award in answer to the points of
disputes referred to it holding that the concerned
workmen were employed by HCI to work in the
statutory canteen of the Management of Air India and
placed strong reliance upon the judgment of this
Court in State of U.P. & Ors. v. Renusagar Power Co. & Ors.10, which is followed by two other judgments of this Court in Delhi Development Authority v. Skipper 10 (1988) 4 SCC 59,
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Construction Co. (P.) Ltd. & Anr.11, Kapila Hingorani v. State of Bihar12, wherein this court has laid down the legal principles by following the judgment of
Salomon v. Salomon (supra) with a view to find out as to whether the contract employment of the
concerned workmen by the HCI on behalf of the
Management of Air India is a sham or a camouflage.
The CGIT has pierced the veil with reference to the
existing factual situation and found that the
concerned workmen had been working in the statutory
canteen required to be established and managed by
the Management of the Air India as per Rule 65(2) of
the Rules and the HCI is a subsidiary Company of the
Air India as it holds 100% share holding and
therefore, the Air India has got the control and
supervision of its business under clause 33 of the
Memorandum and Articles of Association. Therefore he
has requested this Court to set aside the findings
11 (1996) 4 SCC 622 12 (2003) 6 SCC 1
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of fact recorded by the learned single judge, which
are concurred with by the Division Bench in the
impugned judgment and order as it is vitiated not
only on account of erroneous finding for non
consideration of the proved facts and legal evidence
on record but also suffers from error of law as has
been laid down by this Court in catena of cases
referred to supra upon which the learned senior
counsel has placed strong reliance in support of the
case of the concerned workmen in these appeals.
9. Further he has placed strong reliance upon the
judgment of this Court in M.M.R. Khan’s case particularly paragraphs 25, 27 and 30 in support of
the proposition of law wherein this Court has held
that rules framed by the State Government of Delhi
under Section 46 of the Factories Act are obligatory
on the part of the Railway Administration to provide
and maintain statutory canteen. In pursuant to the
above rules and notifications, this Court has held
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that canteens were incidental and connected with the
manufacturing process and is subject to the
manufacturing process. The nature of the canteen is
deemed to be the statutory, since it is a necessary
concomitant of the manufacturing activity and
further railway establishment has recognized the
obligation of the Railway Administration by the Act
which makes provision for meeting the cost of the
canteen though Railway Administration to employ any
staff committee or cooperative society for the
management of the canteen. The legal responsibility
for the proper management of such canteen rests not
with such agency but solely with the Railway
Administration. With reference to paragraph 27 of
the said decision and also having regard to the
undisputed fact of the case in hand that the Chefair
unit of the HCI in which canteen is being run is
situated in the premises of the Air India and that
it is also the statutory duty of the Air India under
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Rules 65(2) and 65(4) of the Delhi Factories Rules,
that the canteen building should be situated not
less than fifty feet from any latrine, urinals,
boiler house, coal stacks, ash dumps and any other
source of dust, smoke or obnoxious fumes etc. and
that the manager of the factory shall submit for the
approval of Chief Inspector of plans and site plan
as provided under sub-rule (3) of Rule 65 and
further that the construction of the canteen
building is in accordance with Rules 65, 66, 67 and
70 which would clearly go to show that the said
canteen is established by Air India to discharge its
welfare statutory obligation to its
workmen/employees as provided under the Factories
Act and Rules framed under by the State government
of Delhi. Also, the managing committee constituted
under the Rules should consult from time to time
regarding the quality and quantity of food stuff to
be prepared and served in the canteen to its
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workmen/employees and for other purposes. Therefore,
he has contended that the legal principles laid down
by this Court in M.M.R. Khan’s case with all fours are applicable to the present fact situation. Hence,
it is contended by the learned senior counsel that
the findings and reasons recorded by the learned
single Judge and the Division Bench in the impugned
judgments after setting aside the finding of facts
recorded in the award on this aspect of the matter
by CGIT in answer to the points referred to it is
not only erroneous but also suffers from error in
law and is liable to be set aside and the common
award passed by CGIT should be restored.
10. Another ground urged by the learned senior
counsel is that the High Court failed to appreciate
the fact that the canteen has been in existence
since 1945. It is a deemed statutory canteen under
Section 46 of the Factories Act vide notification of
1991 referred to supra. Therefore, the CGIT has come
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to the right conclusion and held that the canteen is
incidental to and running the canteen and the work
of the workmen is subject to the supervision and
control of Air India. It is further contended that
the Division Bench of the Delhi High Court has
erroneously applied the judgments in Indian Petrochemicals Corporation Ltd., Parimal Chandra Raha and referred to para 22 of M.M.R. Khan’s case, Workmen of Nilgiri Coop. Mkt. Society Ltd. v. State of Tamil Nadu & Ors.13, Haldia Refinery Canteen Employees Union & Ors. v. Indian Oil Corporation & Ors.14, and Hari Shanker Sharma (supra) to set aside the findings of the CGIT and concurred with the
finding of learned single Judge. Therefore, the
learned senior counsel has urged this Court for
quashing of the impugned judgments of both the
learned single judge and the Division Bench since
the same are not only based on erroneous reasoning
13 (2004) 3 SCC 514 14 (2005) 5 SCC 51
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but also suffer from error in law in view of the
clear pronouncement of law laid down by this Court
in the three Judge Bench decision of this Court in
the case of M.M.R. Khan (supra) on the question of providing and maintaining statutory canteen to its
workmen/employees in support of his contentions that
the employment of contract employees by Air India
through HCI to run the statutory canteen in its
premises is a sham and camouflage to deprive the
legitimate statutory and fundamental rights of the
concerned workmen. Therefore, he submits that the
CGIT was justified in lifting the veil or piercing
the veil from the nature of employment to provide
and maintain the statutory canteen by Air India
through HCI and the finding by CGIT is supported by
plethora of judgments of this Court referred to
supra. It is further submitted by him that there is
direct control and supervision on the functioning of
the canteen and its employees by Air India being a
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statutory canteen which is required to be maintained
by it in conformity with Rules 65 to 70 of the Delhi
Factories Rules 1950 and under Section 46 of the
Factories Act and notification has been rightly
issued enlisting the Management of Air India in the
Schedule to the said notification for providing and
maintaining the statutory canteen which notification
has not been questioned by Air India. Therefore, the
decisions of the Supreme Court referred to supra
regarding piercing the veil for the purpose of
finding out the real facts and to give effect to the
object and intendment of the statute while
recruiting the workmen on contract basis which is in
violation of the statutory provisions of the
Industrial Disputes Act has been rightly arrived at
by the CGIT on proper appreciation of pleadings and
evidence on record to answer the points in the
affirmative. Therefore, the learned senior counsel
has requested this Court to interfere with the
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impugned judgments and for restoration of the award
passed by the CGIT.
11. Mr. C.U. Singh, learned senior counsel for the
respondent sought to justify the impugned judgment
of the Division Bench of the Delhi High Court in
affirming the judgment of the learned single Judge
by placing strong reliance upon the decisions of
this Court in Dena Nath & Ors. v. National Fertilisers & Ors.15, and Steel Authority of India (supra). It is contended by the learned senior
counsel for the respondent that the Division Bench
after adverting to the rival legal contentions has
elaborately referred to the decision of M.M.R. Khan’s case and the various other decisions referred to in the impugned judgment rightly concurred with
the findings and reasons recorded by the learned
single judge in reversing the findings and reasons
recorded in the Award by the CGIT on the points of
15 (1992) 1 SCC 695
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dispute referred to it by the Central Government for
its adjudication. On appreciation of facts pleaded
and evidence on record, keeping in view the fact
that the concerned workmen are employed in the
canteen by the HCI which is the statutory
Corporation, therefore, the Management of Air India
has no power of recruitment, disciplinary control on
the employees and no control and supervision on
functioning of the workmen of the canteen.
Therefore, the High Court has rightly arrived at the
conclusion and held that there is no relationship of
master and servant or employer and employee between
the concerned workmen of the canteen and the Air
India. The HCI is an independent legal entity which
has been carrying on with its business strictly in
conformity with the Memorandum and Articles of
Association and therefore he contends that there is
no need for this Court to interfere with the
impugned judgments. Further, he has urged that the
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canteen in which the concerned workmen were employed
by HCI is not a statutory canteen and the finding
recorded by the CGIT on the points of dispute by
placing reliance upon the Notification of 1991 and
that Air India has employed more than 2000 employees
and that the said canteen is the statutory canteen
and that there is an obligation on the part of the
Management of Air India to cater the food stuff to
its workers and employees, is an erroneous finding
and also suffers from error in law. Therefore, the
said finding has been rightly set aside by the
learned single Judge, the same is affirmed by the
Division Bench of the Delhi High Court by concurring
with decision of the learned single judge. Hence, he
further contends that there is no questions of law
much less the questions of law framed by the workmen
in the appeals involved which require to be
considered and answered by this Court in exercise of
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its jurisdiction. Hence he has prayed for dismissal
of these appeals.
12. On the basis of rival factual and legal
contentions, the following questions of law would
arise for consideration:
(1) Whether the canteen which is run through HCI
from its Chefair unit by the Management of
Air India, is the statutory canteen of it
under Rules 65 to 70 of the Delhi Factories
Rules of 1950?
(2) Whether engaging the contract workmen in the
canteen situated in the premises of Air
India through HCI amounts to sham and
camouflage by Air India to deprive the
legitimate statutory and fundamental rights
of the concerned workmen as provided under
the provisions of the Industrial Disputes
Act and the Constitution and can this Court
pierce the veil to find out and ascertain
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the real and correct facts as to whether
they are the workmen of Air India?
(3) Whether the findings and reasons recorded by
the CGIT on the points of disputes in the
common award dated 5th May, 2004 in ID Nos.
97, 98, 99, 107 and 108 of 1996 are legal
and valid?
(4) Whether the findings recorded by the learned
single Judge in CWP No.14178, 14181 and
14182 of 2004 which are concurred with by
the Division Bench in LPA Nos.388, 390 and
391 of 2010 suffer from erroneous reasoning
and error in law and warrant interference by
this Court?
(5) What award the concerned workmen are
entitled to?
Answer to Point Nos. 1 and 2:
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13. First two points are answered together by
assigning the following reasons since they are
inter-related. At the very outset it is critically
useful to place on record certain relevant questions
of fact which are on record and are not in dispute
with a view to determine the nature of dispute
between the parties that is referred to by the CGIT
for adjudication in exercise of its power and
examine the rights and obligations of the parties to
find out as to what relief the concerned workmen in
the appeals are entitled to, keeping in view the
provisions of Factories Act read with the Delhi
Factories Rules of 1950, The Contract Labour
(Regulations and Abolition) Act, 1970 and the
Industrial Disputes Act, 1947.
14. It is an undisputed fact that the Labour
Department vide its notification dated 21st January,
1991 issued in pursuance of the provisions of sub-
rule (1) of Rule 65 of the Delhi Factories Rules
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wherein Lt. Governor of Union Territory of Delhi
directed that Rules 65 to 70 of the Rules which
shall apply to the factories which are mentioned in
the Schedule to the said Notification at serial No.9
– M/s. Air India Ground Services Deptt. IGI, Air
Port Delhi (Engineering Unit) F.D.1725 is enlisted.
In view of the aforesaid notification, the Air India
is statutorily required to maintain and provide a
canteen in its factory premises to cater the food
stuff to its employees/ workmen. It is the case of
the concerned workmen that there are 2000 workmen
working in the establishment of Air India which plea
is accepted by the CGIT and the finding of fact is
recorded on the basis of evidence on record by it,
particularly, the admission made by the witness
examined on behalf of Air India before CGIT.
15. Rules 65 to 70 of the Rules framed by the Union
Territory of Delhi under Section 46 of the Factories
Act are applicable in respect of Air India as it is
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enlisted in the Schedule to the Notification issued
by the Labour Department referred to supra, to
provide a statutory canteen by a factory where 250
workmen are employed by it. The case of the
concerned workmen in the industrial disputes raised
by them is that Air India has employed more than
2000 workmen and on the basis of the pleadings and
evidence on record has proved the points of dispute
referred to it in the Industrial disputes referred
to supra. The Air India has now challenged the
applicability of the Notification and the Rules
framed by the Delhi Union Territory under Section 46
of the Factories Act. The case pleaded by the
workmen on the other hand is that they are working
in Chefair which belongs to the HCI which is wholly
owned subsidiary Company of Air India with expertise
in food preparation and catering to the
employees/workmen and traveling passengers in their
domestic and international Air Crafts, and it is
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bound by its Memorandum and Articles of Association,
which is comprehensive enough to regulate the
conduct of its business for Air India including the
nature of employer and employee relationship. The
service conditions prevailing in the HCI vis-a-vis
its employees are comparable to the relation between
the workers and Air India and Chefair in terms of
monetary benefits and the same are largely similar.
The cost of providing the canteen services to its
employees/workmen was provided by Air India on the
basis of ‘per employee subsidy’. The CGIT, with
reference to Factories Rules and Notification
referred to supra has held that Air India has to
provide food stuff to its employees/workmen at the
subsidiary rate. The pleadings of Air India in its
counter statement filed before the CGIT are cleverly
designed and drafted stating that there were not
more than 250 employees/workmen of Air India in
order to apply the relevant provisions of the
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Factories Act and Rules in relation to a statutory
canteen run by HCI through Chefair and therefore the
notification is not applicable to the Air India. The
said pleadings of M/s Air India on a jurisdictional
fact was demolished by the concerned workmen of the
canteen by cross examining the witness of Air India,
who is its designated officer. He has stated in his
evidence unequivocally that the actual number of
workmen/employees availing the canteen facilities in
the factory premises were in the range of 2000
persons - a figure which was at least not less than
eight times the number contained in the original
pleadings of Air India. Air India, in spite of
being the statutory corporation did not consider it
necessary to come to the court with clean hands but
on the other hand, it has suppressed relevant
material fact regarding the number of
employees/workmen working in its establishment.
Therefore, the CGIT, on the basis of admission made
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by the witness examined on behalf of the Air India
as MW1, has recorded the finding of fact holding
that a total figure of 2000 employees/workmen are
working in its establishment and they are availing
the canteen facilities, which is run through the HCI
from its Chefair unit in the premise of Air India.
The wholly owned subsidiary corporation- HCI has
adopted unfair labour practice as defined under
Section 2(ra) of the I.D. Act at serial No. 10 entry
in the Vth Schedule under the heading of the Unfair
Labour Practices practiced by the employer, by
keeping workers in employment in the canteen for 40
days at a time and thereafter employing them on
contract basis after a break though the nature of
work to be performed by them in the canteen have
been perennial in nature, for the reason that they
were required to provide and maintain the statutory
canteen in the factory premises to cater the food
stuff to its employees/ workmen. Therefore, they
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have committed a statutory offence punishable under
the provision of Section 25U of the I.D. Act for
employing the concerned workmen on contract basis
with a break in their service which constitutes
unfair labour practice and is prohibited under
Section 25T of the I.D. Act either by the employer
or the workmen under the above Schedule to the I.D.
Act. The concerned workmen got the Industrial
Disputes referred to the CGIT for adjudication on
the points of the dispute referred to it by the
Central Government in the orders of reference who
are covered in the award passed by the CGIT. They
have been discharging the permanent nature of work
in different capacities working continuously ranging
from 3 years to 20 years with an artificial break
after 40 days of employment by the employer with an
oblique motive to deprive them of their legitimate
statutory right of regularizing them as permanent
workmen in the statutory canteen which is being run
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by the Air India in its factory premises through HCI
from its Chefair unit.
16. Mr. Jayant Bhushan, the learned senior counsel
on behalf of the appellants- concerned workmen with
reference to the pleadings of the parties and the
evidence on record, has rightly placed strong
reliance upon the Notification of 1991 issued by the
Labour Department enlisting Air India in the
Schedule to the Notification at serial No.9 to
provide a statutory canteen to the employees/
workmen of Air India which is being run through HCI
from its Chefair unit on its behalf which is its
subsidiary company as it has got 100% share holding
as per Memorandum and Articles of Association. On
the basis of pleadings and evidence on record, the
learned senior counsel substantiated the finding of
fact recorded by the CGIT, wherein it has held that
the concerned workmen are employed by Air India
through its subsidiary Corporation- HCI, which is a
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sham contract and this veil is required to be
pierced to find out the real facts involved in the
case as to whether they are working for Air India or
the HCI. The learned senior counsel has rightly
placed strong reliance upon the decision of three
Judge Bench decision of this Court in Hussainbhai, Calicut v. Alath Factory Thezhilali Union, Kozhikode and Ors.16, the relevant paragraph of which reads as under:
“5. The true test may, with brevity, be
indicated once again. Where a worker or group of workers labours to produce goods or services and these goods or services are for the business of another, that other is, in fact, the employer. He has economic control over the workers’ subsis- tence, skill, and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off. The presence of intermediate contractors with whom alone the workers have immediate or direct rela- tionship ex contractu is of no consequence when, on lifting the veil or looking at the conspectus of factors governing em- ployment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the
16 (1978) 4 SCC 257
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Management, not the immediate contractor. Myriad devices, half-hidden in fold after fold of legal form depending on the degree of concealment needed, the type of indus- try, the local conditions and the like may be resorted to when labour legislation casts welfare obligations on the real em- ployer, based on Articles 38, 39, 42, 43 and 43-A of the Constitution. The court must be astute to avoid the mischief and achieve the purpose of the law and not be misled by the maya of legal appearances.”
(Emphasis laid by this Court)
17. He has further very rightly placed reliance upon
the three Judge Bench decision of this Court in the
case of Kanpur Suraksha Karamchari Union v. Union of India & Ors.17 wherein this Court has held with reference to interpreting Section 2(n) and Section
46 of the Factories Act read with Rules of UP
Factories Rules 1950 -Rule 1968, Section 7 and after
adverting to the Government of India Notification
order No. 18/(1)80/D(JCM) dated 25th July, 1981
accorded sanction to treat all employees of the
canteen established in defence industrial
17 (1988) 4 SCC 478
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establishments under Section 46 of the Act as the
government employees with immediate effect and
further made observations in the said case that in
certain cases, canteens are run by either
contractors or co-operative societies or some other
bodies.
18. The legal question that arose for consideration
of this Court in that case was whether the services
of the workers, before they were declared to be
government employees should be taken into
consideration for purposes of calculating their
pension dues on retirement. E.S. Venkataramiah J.,
as he then was, in Kanpur Suraksha Karamchari Union (supra), speaking for the Court observed as under:
“4. The Act is applicable both to the fac- tories run by government and the factories run by other private companies, organisa- tions, persons etc. It was enacted for the purpose of improving the conditions of the workers in the factories. Section 46 of the Act reads thus:
‘46. Canteens.—(1) The State Govern- ment may make rules requiring that in
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any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or can- teens shall be provided and maintained by the occupier for the use of the workers.
(2) Without prejudice to the gener- ality of the foregoing power, such rules may provide for—
(a) the date by which such canteen shall be provided;
(b) the standards in respect of con- struction, accommodation, furniture and other equipment of the canteen;
(c) the foodstuffs to be served therein and the charges which may be made therefor;
(d) the constitution of a managing committee for the canteen and repre- sentation of the workers in the man- agement of the canteen;
(dd) the items of expenditure in the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs and which shall be borne by the employer;
(e) the delegation to the Chief In- spector, subject to such conditions as may be prescribed, of the power to make rules under clause (c).’
5………The expression “occupier” of a factory is defined in Section 2(n) of the Act as the person who has ultimate control over the affairs of the factory, provided that (i) in the case of a firm or other associa- tion of individuals, any one of the indi-
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vidual partners or members thereof shall be deemed to be the occupier; (ii) in the case of a company, any one of the directors shall be deemed to be the occupier; and (iii) in the case of a factory owned or controlled by the Central Government or any State Government, or any local authority, the person or persons appointed to manage the affairs of the factory by the Central Government, the State Government or the lo- cal authority, as the case may be, shall be deemed to be the occupier. Under clause (iii) of Section 2(n) of the Act, in the case of a factory owned or controlled by the Central Government, the person or per- sons appointed to manage the affairs of the factory by the Central Government shall be deemed to be the occupier. The person so appointed to manage the affairs of the fac- tory of the Central Government is under an obligation to comply with Section 46 of the Act by establishing a canteen for the bene- fit of workers. The Canteen Managing Com- mittee, as stated above, has to be estab- lished under Rule 68 of the Rules to manage the affairs of the canteen. The functions of the Canteen Managing Committee are merely advisory. It is appointed by the Manager appointed under Section 7 of the Act and the Manager is required to consult the Canteen Managing Committee from time to time as to the quality and quantity of foodstuff served in the canteen, the ar- rangement of the menus, times of meals in the canteen etc. The food, drink and other items served in the canteen are required to be sold on “no profit” basis and the prices charged are subject to the approval of the
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Managing Committee. The accounts pertaining to a canteen in a government factory may be audited by its departmental Accounts Offi- cers.”
Rule 67, sub-rules (1), (2) and (3), is traceable in
this case which reads thus:
“67. Equipment:
(5) There shall be provided and maintained sufficient utensils, crockery, cutlery, furniture and any other equipment necessary for efficient running of the canteen. Suitable clean clothes for employees serving in the canteen shall also be provided and maintained.
(6) The furniture utensils and other equipment shall be maintained in a class and hygienic condition. A service counter, if provided, shall have a top of smooth and impervious material. Suitable facilities including an adequate supply of hot water shall be provided for the cleaning of utensils and equipment.
(7) Where the canteen is managed by a co- operative society, registered under the Bombay Co-operative Societies Act, 1952, as in force in the Union Territory of Delhi, the occupier shall provide and maintain the equipment as required under sub-rule (1) for such canteen.”
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19. In the case in hand, it is an undisputed fact
that the building for running the canteen is
situated in the Air India premises. It has got
statutory obligation under aforesaid rules read with
the Notification of 1991 referred to supra to
provide for necessary furniture and infrastructure
to run the statutory canteen in the premises of Air
India. In the case of Kanpur Suraksha Karmachari Union referred to supra, it was urged on behalf of the management that before the government orders
were passed, the number of years of service rendered
by the workmen under the managing Committee before
government officially absorbed them, could not be
counted as years of service rendered by them. The
Court had rejected the said contention urged on
behalf of the management and held that even though
the management of the canteen may be by the Managing
Committee, the workers were employees of the factory
and their services for the purposes of pension would
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have to be calculated with effect from the date they
started working in the canteen. Further, in the
said case on the basis of pleadings and legal
contentions urged on behalf of the parties it is
held that the management of the canteen could be
with the certain committee for determining the
rights of the workers, it was the occupier of the
factory who is responsible for them. The said
conclusion was arrived at by this Court in that case
after noticing the rights conferred on the workers
though the interpretation was not confined to the
provisions of the Factories Act but also regarding
retirement benefits payable to the workmen employed
in the canteen in the said case. It was further
observed by this Court that one test which is
derived is in relation to the question as to who is
the occupier of the relevant factory and whose
responsibility is it to see whether the canteen is
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provided and is running in accordance with the
provisions of the Factories Act?
20. Learned senior counsel on behalf of the workmen
has also placed reliance upon another judgment of
this Court in Parimal Chandra Raha (supra) upon which the CGIT placed reliance in arriving at the
right conclusion to hold that the concerned workmen
are entitled for absorption. In the above said case,
this Court held that the appellant workmen working
in the canteens at different offices of LIC across
the country were like regular employees of the LIC
as the canteens are run and managed by different
entities like Canteen Committees, Cooperative
Society of the employees and even contractors and
directions about how to run the canteen were issued
by the LIC. In the said case, the infrastructure,
the premises, the furniture, electricity, water etc.
were supplied by the LIC. The working hours were
also fixed by the LIC. Though LIC was obviously not
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a factory, and the canteen established and run by it
was not a statutory canteen, still this Court held
that whether the canteen was to be run under an
obligatory provision of the Factories Act or under a
non-statutory obligation to provide a canteen, the
position is the same and that the canteen workers
become a part of the establishment. Therefore, in
the said case it is held that the workmen were
entitled to the same wages as Class-IV employees of
the LIC.
21. In another decision rendered by three judge
Bench of this Court in the M.M.R.Khan’s case, demands were made by the canteen workers in many
manufacturing establishments like textiles, sugar
mills, rope factories and also in service
establishments like RBI, LIC, Railways and Airways
for establishment of a statutory canteen where there
are more than 250 workmen working in such factory.
In public sector undertaking like Airways, there are
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different types of situations. One of them is the
statutory canteen which must be provided by such
Industrial establishment which is a factory in terms
of the definition of the Factories Act, since
manufacturing activities are involved. In the
instant case the Air India falls under the category
of factory where the occupier is defined under
Section 2(n) of the Factories Act and therefore, it
is duty bound to provide a canteen to its employees/
workmen which is known as the statutory canteen. It
is the statutory obligation on the part of Air India
to provide a statutory canteen under the provisions
of Factories Act and Rules and therefore, it is one
more strong circumstance in favour of the concerned
workmen for regularization in their services as
permanent workmen by the Air India. The most
important legal aspect of the case which is required
to be considered by me in this case is that the law
stipulates statutory obligation on the part of Air
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India to provide and maintain statutory canteen to
cater the food stuff to its employees/ workmen as
per notification referred to supra. Therefore, the
canteen facility to be provided to the employees/
workmen cannot be withdrawn by the owner of the
establishment, namely, the principal employer.
Therefore, the necessary corollary to this condition
is the fact that in such a situation the nature of
employment involved in the canteen in question is
perennial in nature. The need for workers to run
the canteen by the Management of Air India is
permanent. The vacancies of various posts in the
canteen are permanent in nature.
22. From the review of case law on this aspect, two
kinds of situations arise, one in which the
contractor is changed but not the workers employed.
In the Parimal Chandra Raha and the Indian Petrochemicals cases referred to supra, such were the situations, upon which strong reliance is placed
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by the learned single Judge and the Division Bench
of the High Court to set aside the finding of fact
recorded by the CGIT in its award on the points of
disputes referred to it. This Court has taken a
note of this relevant fact and considered the same
in the instant case to decide as to whether the
canteen workers should be regularized by the
principal employer? The other situation is where
the contractor is changed and along with him the
workers also get the boot. The effect of this
situation appears that the workers have been
temporary. In reality they are kept temporary in
order to perpetuate ‘unfair labour practice by the
employer, which is not permissible in view of
Section 25T of the I.D. Act read with entry at
Serial No. 10 in the Vth Schedule of the I.D. Act
regarding unfair labour practices on the part of the
employer. In the case in hand, I hold that Air
India is the principal employer and Chefair - an
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unit under HCI is the contractor, on the basis of
the pleadings of the parties and law laid down by
this Court referred to supra in the earlier
paragraph of this judgment. The CGIT has rightly
arrived at the finding that Chefair is the unit of
HCI which renews the contract of canteen workers
every forty days. Unfortunately, the said workers,
have been continued as contract workers in the
canteen though they have completed 240 days of
continuous service in a year as defined under
Section 25B of the I.D. Act which action of the Air
India is unfair labour practice and is prohibited
under Section 25T of the I.D. Act. In spite of
statutory prohibition of employing the concerned
workmen in the canteen on contract basis in
permanent nature of work, the Chefair - a unit of
HCI and Air India have indulged in unfair labour
practices as defined under Section 2(ra) read with
Section 25T and the Vth Schedule of the I.D. Act,
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with a deliberate intention to deprive the statutory
rights of the concerned workmen which is a glaring
patent illegality committed by them for which they
are liable to be punished under Section 25U of the
I.D. Act read with the Rules.
23. If the case pleaded by Air India and HCI is
accepted by the single Judge and the Division Bench
of the High Court, it amounts to giving a reward to
Air India, who is the principal employer. It also
amounts to holding that the concerned workmen are
contract employees of the contractor and they are
not put in the continuous service which amounts to
conferring reward upon the HCI and AIR India who
have committed illegality. Both the learned single
Judge and the Division Bench of the High Court have
erroneously accepted the case pleaded by Air India
and HCI which suffers from error in law as it goes
against the statutory provisions of the Factories
Act, Rules and the I.D. Act. The concerned workmen
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who are working in the canteen at the relevant time
have been working in the vacancies which are
permanent in nature. Therefore, they are required to
be regularized by the principal employer as
permanent workmen and they are also entitled to the
consequential benefits since they have rendered
their services for more than 3 to 20 years
continuously saving the artificial breaks imposed on
them by the employer from time to time to deprive
them from regularization as permanent employees of
the establishment as has been held by the CGIT in
its award by accepting the claim of the workmen.
24. Further, it is clear from the Rules of 1950 and
the Notification of 1991 referred to supra that Air
India is the occupier under Section 2(n) of the
Factories Act and it must provide and maintain a
statutory canteen for its employees/ workmen. The
vacancies in various posts that exist for canteen
workers are permanent in nature but the Management
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of HCI on behalf of Air India has continued them as
contract workers for a long period with a break
after 40 days, which is an unfair labour practice on
their part though it is prohibited under Section 25T
of the I.D. Act. The temporary rotation of concerned
workers in the vacancies of the canteen by the HCI,
which is an instrumentality of the state is to
countenance a situation where two statutory entities
of the above nature collude together to perpetuate
‘unfair labour practices’ as defined under Section
2(ra) which is enumerated at serial no. 10 under the
heading of ‘unfair labour practice’ on the part of
the employer in the Vth Schedule to the I.D. Act.
Therefore, this Court is bound to ensure the
implementation of all relevant laws, especially
those enacted by the Legislature to fulfil the
constitutional obligations under the Directive
Principles of State Policy and bring this unholy
alliance between Air India and HCI to an end by
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declaring the canteen workers as employees of the
principal employer.
25. The M.M.R. Khan’s case referred to supra, fully supports the finding recorded by the CGIT on the
points of dispute in favour of the concerned workmen
by directing the Air India to regularize them as
canteen workers. At Para 25 of the said judgment the
observations made by this Court which are very
relevant for our purpose read thus:
“25. Since in terms of the Rules made by the State Governments under Section 46 of the Act, it is obligatory on the railway administration to provide a canteen, and the canteens in question have been estab- lished pursuant to the said provision there is no difficulty in holding that the can- teens are incidental to or connected with the manufacturing process or the subject of the manufacturing process. The provision of the canteen is deemed by the statute as a necessary concomitant of the manufacturing activity. Paragraph 2829 of the Railway Es- tablishment Manual recognises the obliga- tion on the railway Administration created by the Act and as pointed out earlier para- graph 2834 makes provision for meeting the cost of the canteens. Paragraph 2832 ac- knowledges that although the railway admin-
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istration may employ anyone such as a staff committee or a co-operative society for the management of the canteens, the legal re- sponsibility for the proper management rests not with such agency but solely with the railway administration. If the manage- ment of the canteen is handed over to a consumer cooperative society the bye-laws of such society have to be amended suitably to provide for an overall control by the railway administration.”
26. Before applying the legal principles laid down
in the above paragraph of the case to the case in
hand, it is pertinent to note that at the very
outset three kinds of canteens exist in the
Railways. They are: (i) Statutory canteens as
required under Section 46 of the Factories Act, 1948
where more than 250 employees are working, (ii) Non-
statutory non-recognized canteens which employ 250
or less than 250 employees and hence there is no
statutory obligation on the part of the employer to
maintain them, where workers exceed hundred and such
canteens are set up with prior approval of the
Railway Board, and (iii) Non-Statutory non-
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recognized canteens where 100 or less than hundred
workers work and are set up without prior approval
of the Railway Board.
27. In the decision of this Court in M.M.R. Khan(supra), the workers engaged in the first and second category of canteens mentioned above were
treated as Railway employees after considering the
relevant facts and statutory provisions of the
Factories Act and the Rules. Thus, this Court held
that the workmen would be entitled to all service
conditions prescribed for them under relevant
rules/orders. The relevant paragraph from the said
decision reads as under:
”30. While discussing above the contention that the employees in the statutory can- teens cannot be treated as railway employ- ees even for the purposes of the said Act, we have referred to the various develop- ments, and documents on record including the court decisions. It is not necessary to repeat them here. In view of the same, the contention advanced by Mr Ramaswamy that the railway administration is engaged in
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varied welfare activities, and the employ- ees engaged in these activities will also have to be treated as railway employees, in case, the canteen employees are 98recog- nized as railway employees does not appeal to us. We express no opinion on the subject as to whether the employees engaged in other welfare activities will or will not be entitled to the status of the railway employees, since neither they nor the facts pertaining to them are before us. Our con- clusion that the employees in the statutory canteens are entitled to succeed in their claim is based purely on facts peculiar to them as discussed above. If by virtue of all these facts they are entitled to the status of railway employees and they cannot be deprived of that status merely because some other employees similarly or dissimi- larly situated may also claim the same sta- tus. The argument to say the least can only be described as one in terrorem , and as any other argument of the kind has to be disre- garded.”
(Emphasis laid by the Court)
28. I have carefully analysed the law enunciated by
this Court in M.M.R. Khan’s case which throws interesting light on the history of the canteen
workers’ litigation which I have carefully
considered and applied the legal principle laid down
in that case to the fact situation of the case in
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hand. The canteen workers of the canteen of Railways
in Kharagpur approached the High Court of Calcutta
praying that they be recognized as Railway workers
and that all service conditions available to railway
workers be made available to them. The learned
single Judge dismissed the petition. The Division
Bench directed the respondents to recognize the
workers as Railway employees but rejected their plea
for similar service conditions. The matter came
before this Court and the Court was inclined to
agree with the Division Bench decision of the
Calcutta High Court and left it open to the Union of
India. The railway board acted on the initiative of
this Court and declared that all Kharagpur canteen
workers, soon followed by all statutory canteen
workers across India would be deemed railway
workers, but governed by their earlier service
conditions. The prime mover therefore was not the
Railway Establishment Manual (REM) but a judicial
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interpretation clubbed with judicial nudging, to
achieve the constitutional goals for canteen
workers. Therefore the contention urged by Mr. C.U.
Singh, learned senior counsel on behalf of Air India
that the decision rendered by this Court in M.M.R. Khan’s case is distinguishable from the facts of the instant case, as this Court placed reliance upon the
REM and the circulars issued by the Railway Board in
the above referred case is wholly untenable in law,
for the reason that REM is also invoked by the
Railways. I have to state that this Court has not
given relief to railway canteen workers because of
the REM. On the contrary, it is the statutory
status of one type of canteen that was the prime
mover, not only for workers to claim their rights,
but also for the railways to find a basis for
classification and then create a suitable
administrative system to govern all kinds of canteen
workers using a reasonable basis for classification.
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Indeed the distinguishing feature adopted by the
Railways in the above referred case is primarily the
one provided by the Factories Act and the Rules.
The relevant fact has been duly recognized by this
Court in the aforesaid case without in any way
watering down the importance of a statutory canteen
to be provided to the employees/ workmen by the
occupier of a factory. The learned single Judge and
Division Bench have unjustly refused the claim of
the canteen workmen by accepting the untenable
arguments advanced by the learned senior counsel on
behalf of the Air India that the canteen run through
HCI from Chefair is not the statutory canteen and
Air India is not the principal employer. This
conclusion is not only erroneous but is also
contrary to the law laid down by this Court in the
cases referred to supra which are binding upon it.
29. The presence of a statutory obligation on the
part of Air India to run a canteen must always be
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seen as one more strong circumstance for me to
determine the wider question of regularization of
the concerned workmen involved in this case. In
Indian Petrochemicals Corpn.’s case, referred to supra we noticed the facts of that case which are
quite similar to the case in hand. This Court was
greatly influenced in determinative way of the
finding of fact and recorded that the workers were
in continuous employment in the canteen for a
considerable length of time. The underlying test is
what is the nature of employment of the concerned
workmen in the case in hand? Is it a temporary or
casual vacancy or is it perennial and permanent in
nature? The answer to the aforesaid queries by me
is that in all statutory canteens, the nature of
employment, of vacancies, is indeed of a permanent
nature and those who deploy the workmen on contract
basis to discharge statutory duties of an employer
amounts to unfair labour practice. In the nature of
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rotational hire and fire, policy adopted by the
employer must not be rewarded for the illegalities
perpetuated by them. This is more so when the
principal employer is a statutory corporation
coupled with the fact that the contractor also is
one such entity and the two should not be allowed to
continue their unfair labour practices to employ the
workmen on contract basis in the canteen to
discharge the statutory duty by the occupier to
provide and maintain a statutory canteen for its
employees/workmen in its factory. Both Air India
and HCI have colluded with each other to perpetuate
unfair labour practices by engaging the concerned
workmen in the statutory canteen of the principal
employer- Air India.
30. Another important angle is examined by me in
relation to the nature of test to be used to
determine employment relations between the parties.
Classically jurists like Salmond and others while
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developing the jurisprudence relating to Torts have
laid down the test to determine the relationships
between ‘master and servant’. In such situations
the predominant test deployed was the test of
control and supervision. It is needless to state
that post constitutional jurisprudence in India must
no longer be allowing practice of the traditional
master and servant relationship but should be
facilitating employer-employee relationships
mediated by constitutional jurisprudence which is
relevant to the area of labour law jurisprudence in
our country in the interest of maintaining
industrial peace and harmony which is in larger
public interest.
31. Further there has been considerable discussion
in the area of determining the relevant test
relating to the jurisprudence of employer-employee
relationship. Sometimes, we have fallen back on the
old principles of master and servant and quite often
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when we find that these were not capable of
delivering justice to the workers keeping with the
principles contained in our Directive Principles of
State Policy as enshrined in Part IV of the
Constitution, this Court has taken note of this
difficult situation and has devised new tests to
meet the challenges of the new times.
32. That is why the legal principle has been
enunciated by this Court right from the Hussainbhai Calicut, M.M.R. Khan, Parimal Chandra Raha to Harjinder Singh v. Punjab State Warehousing Corporation18 establishing the trend of healthy constitutional jurisprudence and its application to
labour law keeping in mind the basic feature of the
constitution namely to render social justice to the
weaker sections of the society as has been held by
this Court in Kesvananda Bharati v. State of Kerala19. The concept of social justice has been 18 (2010)3 SCC 192 19 (1973)4 SCC2 25
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vividly explained in the case of Harjinder Singh, the relevant paragraph of which is extracted
hereunder:
“30. Of late, there has been a visible shift in the courts’ approach in dealing with the cases involving the interpretation of social welfare legislations. The attrac- tive mantras of globalisation and liberali- sation are fast becoming the raison d’être of the judicial process and an impression has been created that the constitutional courts are no longer sympathetic towards the plight of industrial and unorganised workers. In large number of cases like the present one, relief has been denied to the employees falling in the category of work- men, who are illegally retrenched from ser- vice by creating by-lanes and side-lanes in the jurisprudence developed by this Court in three decades. The stock plea raised by the public employer in such cases is that the initial employment/engagement of the workman/employee was contrary to some or the other statute or that reinstatement of the workman will put unbearable burden on the financial health of the establishment. The courts have readily accepted such plea unmindful of the accountability of the wrong doer and indirectly punished the tiny beneficiary of the wrong ignoring the fact that he may have continued in the employ- ment for years together and that micro wages earned by him may be the only source of his livelihood.”
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33. Courts in this country have been faced with the
problem to resolve the dilemma as to who is really
independent contractor and who is not? In the light
of the Constitution Bench decision in Steel Authority of India’s case (supra) on the subject, the crucial test is to determine whether the nature
of the contractual relationship between the parties
that is juristically introduced is a genuine one or
a sham contract. It must be noted that employers and
their organizations and indeed all parties to labour
litigation keep close watch on the evolving
jurisprudence and tailor legal agreement and paper
contracts accordingly to suit the purpose of finding
the cheapest and most exploitable labour with
honourable exceptions as we have seen in the case of
the railway management. This craze for facilitating
‘flexible labour’ which is another phrase for ‘hire
and fire’ deserves no constitutional sympathy.
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34. Two broad judicial approaches have manifested
themselves in the above background - one that
responds to constitutional jurisprudence, as pointed
out in Harjinder Singh’s case (supra) and the other that abides by the new dogmas of globalisation and
liberalisation. It is my considered view that I must
abide by the former jurisprudence keeping in view
the mandate we find in the judgments of this Court
referred to supra.
35. The test which I come across is almost universal
in its application to address the wide range of fact
situations which has been discussed by me in this
judgment. In the case of Hussainbhai (supra), this Court has held that the test of economic control in
contrast to the test of control and supervision is
the test to ascertain the employer-employee
relationship. I am inclined to apply the above test
to the fact situation of the case in hand to
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determine the fact as to whether a genuine contract
or a sham contract exists between Air India and the
Hotel Corporation of India. Indeed if I pierce the
veil of legal appearances that is contained in the
contractual arrangement between the two public
sector corporations named above, I must come to the
conclusion that what I see is a sham contract
between them behind which many unfair labour
practices like the 40 days contract of employment of
the concerned workmen in the canteen has been
perpetuated by them in order to deny permanent
employment to the workmen in the canteen which is of
permanent and statutory in nature and therefore
carries with it permanent vacancies.
36. The learned senior counsel on behalf of Air
India, placing reliance upon the decision of this
Court referred to supra urged that the concerned
workmen in the canteen are ‘workmen’ only for the
purpose of Factories Act. I disagree with the said
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contention and the view point for the reason that the
same workers are also 'workers' as defined under
Section 2(s) of the I.D. Act and permanently keeping
them on a temporary status is against entries at
serial numbers 5 and 10 of the Vth Schedule of the
I.D. Act pertains to “Unfair Labour Practices” under
the I.D. Act which prohibits employers from
committing such illegalities, for which the statutory
penal action is prescribed under Section 25U of the
I.D. Act on such persons. The existing practice that
is followed by either the Hotel Corporation of India
or Air India independent of each other or in
collusion thereof is unbecoming of a model employer.
Interestingly, this position would remain the same
irrespective of whether the canteen worker is an
employee of the 'independent contractor' or the
'principal employer'.
37. Further question is whether the above two legal
entities are independent of each other or not, has
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become central focus to stay within the confines of
the test of 'control and supervision'. I am prompted
to find out whether the wholly owned subsidiary, the
HCI is acting at the behest of Air India and if so to
what extent. If, however, I have to apply the other
tests already laid down by this Court as, I propose
to do in this case in Hussainbhai’s case, then the independence of the separate legal personalities and
the interpretation made in Salomon v. Salomon, on which the learned single judge relies, pales into in-
significance. The relevant paragraph reads as under:
“Then, if the company was a real company, fulfilling all the requirements of the Leg- islature, it must be treated as a company, as an entity, consisting indeed of certain corporators, but a distinct and independent corporation. The Court of Appeal seem to treat the company sometimes as substantial and sometimes as shadowy and unreal: it must be one or the other, it cannot be both. A Court cannot impose conditions not imposed by the Legislature, and say that the shareholders must not be related to each other, or that they must hold more than one share each. There is nothing to prevent one shareholder or all the share- holders holding the shares in trust for
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some one person. What is prohibited is the entry of a trust on the register: s. 30 . If all the shares were held in trust that would not make the company a trustee.”
38. The said principle has been followed by this
Court in catena of cases namely, Kanpur Suraksha Karamchari Union and Basti Sugar Mills Ltd. referred to supra. In the case of State of UP v. Renusagar Power Co. (supra), this Court held as under:
“55. ……On the other hand these English cases have often pierced the veil to serve the real aim of the parties and for public purposes. See in this connection the ob- servations of the Court of appeal in DHN Food Distributors Ltd. v. London Borough of Tower Hamlets. It is not necessary to take into account the facts of that case. We may, however, note that in that case the corporate veil was lifted to confer benefit upon a group of companies under the provisions of the Land Compensation Act, 1961 of England. Lord Denning at p. 467 of the report has made certain inter- esting observations which are worth re- peating in the context of the instant case. The Master of the Rolls said at p. 467 as follows:
‘Third, lifting the corporate veil. A further very interesting point was raised by counsel for the claimants
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on company law. We all know that in many respects a group of companies are treated together for the purpose of general accounts, balance sheet and profit and loss account. They are treated as one concern. Profes- sor Gower in his book on company law says: ‘there is evidence of a gen- eral tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group’. This is especially the case when a parent company owns all the shares of the subsidiaries, so much so that it can control every move- ment of the subsidiaries. These sub- sidiaries are bound hand and foot to the parent company and must do just what the parent company says. A striking instance is the decision of the House of Lords in Harold Holdsworth & Co. (Wakefield) Ltd. v. Caddies. So here. This group is vir- tually the same as a partnership in which all the three companies are partners. They should not be treated separately so as to be defeated on a technical point. They should not be deprived of the compensation which should justly be payable for distur- bance. The three companies should, for present purposes, be treated as one, and the parent company, DHN, should be treated as that one. So that DHN are entitled to claim com- pensation accordingly. It was not
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necessary for them to go through a conveyancing device to get it……’
XXX XXX XXX
XXX XXX XXX
65. Mr. Justice O. Chinnappa Reddy speak- ing for this Court in LIC v. Escorts Ltd. had emphasised that the corporate veil should be lifted where the associated com- panies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumer- ate the classes of cases where lifting the veil is permissible, since that must nec- essarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the in- volvement of the element of the public in- terest, the effect on parties who may be affected. After referring to several Eng- lish and Indian cases, this Court observed that ever since A. Salomon & Co. Ltd. case a company has a legal independent exis- tence distinct from individual members. It has since been held that the corporate veil may be lifted and corporate personal- ity may be looked in. Reference was made to Pennington and Palmer’s Company Laws.
66. It is high time to reiterate that in the expanding horizon of modern jurispru- dence, lifting of corporate veil is per- missible. Its frontiers are unlimited. It must, however, depend primarily on the re- alities of the situation. The aim of the
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legislation is to do justice to all the parties. The horizon of the doctrine of lifting of corporate veil is expanding. Here, indubitably, we are of the opinion that it is correct that Renusagar was brought into existence by Hindalco in or- der to fulfil the condition of industrial licence of Hindalco through production of aluminium. It is also manifest from the facts that the model of the setting up of power station through the agency of Renusagar was adopted by Hindalco to avoid complications in case of take over of the power station by the State or the Elec- tricity Board. As the facts make it abun- dantly clear that all the steps for estab- lishing and expanding the power station were taken by Hindalco, Renusagar is wholly owned subsidiary of Hindalco and is completely controlled by Hindalco. Even the day-to-day affairs of Renusagar are controlled by Hindalco. Renusagar has at no point of time indicated any independent volition. Whenever felt necessary, the State or the Board have themselves lifted the corporate veil and have treated Renusagar and Hindalco as one concern and the generation in Renusagar as the own source of generation of Hindalco. In the impugned order the profits of Renusagar have been treated as the profits of Hin- dalco.
XXX XXX XXX
68. The veil on corporate personality even though not lifted sometimes, is becoming more and more transparent in modern com-
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pany jurisprudence. The ghost of Salomon case still visits frequently the hounds of Company Law but the veil has been pierced in many cases. Some of these have been noted by Justice P.B. Mukharji in the New Jurisprudence.”
(Emphasis laid by the Court)
39. The above said judgment is followed by this Court
in D.D.A. v. Skipper Construction Co.(supra). The relevant paragraphs read as under:
“26. The law as stated by Palmer and Gower has been approved by this Court in TELCO v. State of Bihar. The following passage from the decision is apposite:
‘… Gower has classified seven cate- gories of cases where the veil of a corporate body has been lifted. But, it would not be possible to evolve a ra- tional, consistent and inflexible prin- ciple which can be invoked in determin- ing the question as to whether the veil of the corporation should be lifted or not. Broadly stated, where fraud is in- tended to be prevented, or trading with an enemy is sought to be defeated, the veil of a corporation is lifted by ju- dicial decisions and the shareholders are held to be the persons who actually work for the corporation.’
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27. In DHN Food Distributors Ltd. v. Lon- don Borough of Tower Hamlets the court of appeal dealt with a group of companies. Lord Denning quoted with approval the statement in Gower’s Company Law that “ there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group”. The learned Master of Rolls observed that “this group is virtually the same as a partnership in which all the three compa- nies are partners”. He called it a case of “three in one” — and, alternatively, as “one in three”.
28. The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties con- cerned. The fact that Tejwant Singh and members of his family have created several corporate bodies does not prevent this Court from treating all of them as one en- tity belonging to and controlled by Tejwant Singh and family if it is found that these corporate bodies are merely cloaks behind which lurks Tejwant Singh and/or members of his family and that the device of incorporation was really a ploy
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adopted for committing illegalities and/or to defraud people. The concept of resulting trust and equity”
(Emphasis laid by the Court)
40. In Kapila Hingorani v. State of Bihar (supra), this Court held as under:
“26. The proposition that a company al- though may have only one shareholder will be a distinct juristic person as adum- brated in Salomon v. Salomon and Co., has time and again been visited by the appli- cation of doctrine of lifting the corpo- rate veil in revenue and taxation matters. (See Dal Chand and Sons v. CIT and Juggi- lal Kamlapat v. CIT.)
27. The corporate veil indisputably can be pierced when the corporate personality is found to be opposed to justice, conve- nience and interest of the revenue or workman or against public interest. (See CIT v. Sri Meenakshi Mills Ltd., Workmen v. Associated Rubber Industry Ltd., New Horizons Ltd. v. Union of India, State of U.P. v. Renusagar Power Co., Hussainbhai v. Alath Factory Thezhilali Union and Secy., H.S.E.B. v. Suresh.)”
(Emphasis laid by the Court)
41. This Court in Secretary, HSEB v. Suresh & Ors.20
has held as under: 20 (1999) 3 SCC 601
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“6. In order to keep the said plants and stations clean and hygienic, the appel- lant-Board, upon tenders being floated, awards contracts to contractors who under- take the work of keeping the same clean and hygienic. One such contract was awarded to one Kashmir Singh, for “proper, complete and hygienic cleaning, sweeping and removal of garbage from the Main Plant Building” at Panipat, at the rate of Rs 33,000 per month with a stipulation to en- gage minimum 42 Safai Karamcharis with ef- fect from 15-5-1987 for a period of one year and in terms therewith the contractor took over the work and performed the said work through the above-stated Safai Karam- charis.
XXX XXX XXX
9. The High Court did in fact note with care and caution the doctrine of “lifting of the veil” in industrial jurisprudence and recorded that in the contextual facts and upon lifting of the veil, question of having any contra opinion as regards the exact relationship between the contesting parties would not arise and as such di- rected reinstatement though, however, without any back wages. While it is true that the doctrine enunciated in Saloman v. Saloman & Co. Ltd. came to be recognised in the corporate jurisprudence but its ap- plicability in the present context cannot be doubted, since the law court invariably has to rise up to the occasion to do jus- tice between the parties in a manner as it deems fit. Roscoe Pound stated that the
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greatest virtue of the law court is flexi- bility and as and when the situation so demands, the law court ought to administer justice in accordance therewith and as per the need of the situation.
XXX XXX XXX
13. There is, however, a total unanimity of judicial pronouncements to the effect that in the event the contract labour is employed in an establishment for seasonal workings, question of abolition would not arise but in the event of the same being perennial in nature, that is to say, in the event of the engagement of labour force through an intermediary which is otherwise in the ordinary course of events and involves continuity in the work, the legislature is candid enough to record its abolition since involvement of the con- tractor may have its social evil of labour exploitation and thus the contractor ought to go out of the scene bringing together the principal employer and the contract labourers rendering the employment as di- rect, and resultantly a direct employee. This aspect of the matter has been dealt with great lucidity, by one of us (Majmu- dar, J.) in Air India Statutory Corpn. v. United Labour Union .
XXX XXX XXX
17. Needless to note at this juncture that the Contract Labour (Regulation and Aboli- tion) Act being a beneficial piece of leg-
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islation as engrafted in the statute-book, ought to receive the widest possible in- terpretation in regard to the words used and unless words are taken to their maxi- mum amplitude, it would be a violent in- justice to the framers of the law. As a matter of fact the law is well settled by this Court and we need not dilate much by reason therefor to the effect that the law courts exist for the society and in the event of there being a question posed in the matter of interpretation of a benefi- cial piece of legislation, question of in- terpreting the same with a narrow pedantic approach would not be justified. On the contrary, the widest possible meaning and amplitude ought to be offered to the ex- pressions used as otherwise the entire legislation would lose its efficacy and contract labour would be left at the mercy of the intermediary.
XXX XXX XXX
20. It has to be kept in view that this is not a case in which it is found that there was any genuine contract labour system prevailing with the Board. If it was a genuine contract system, then obviously it had to be abolished as per Section 10 of the Contract Labour Regulation and Aboli- tion Act after following the procedure laid down therein. However, on the facts of the present case, it was found by the Labour Court and as confirmed by the High Court that the so-called contractor Kash- mir Singh was a mere name lender and had procured labour for the Board from the
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open market. He was almost a broker or an agent of the Board for that purpose. The Labour Court also noted that the manage- ment witness Shri A.K. Chaudhary also could not tell whether Shri Kashmir Singh was a licensed contractor or not. That workman had made a statement that Shri Kashmir Singh was not a licensed contrac- tor. Under these circumstances, it has to be held that factually there was no gen- uine contract system prevailing at the relevant time wherein the Board could have acted as only the principal employer and Kashmir Singh as a licensed contractor em- ploying labour on his own account. It is also pertinent to note that nothing was brought on record to indicate that even the Board at the relevant time was regis- tered as the principal employer under the Contract Labour Regulation and Abolition Act. Once the Board was not a principal employer and the so-called contractor Kashmir Singh was not a licensed contrac- tor under the Act, the inevitable conclu- sion that had to be reached was to the ef- fect that the so-called contract system was a mere camouflage, smoke and a screen and disguised in almost a transparent veil which could easily be pierced and the real contractual relationship between the Board, on the one hand, and the employees, on the other, could be clearly visu- alised.”
(Emphasis laid by the Court)
42. The legal principle laid down by this Court by
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following the exposition of law for lifting the veil
to find out real facts is very much necessary to the
facts of the case in hand having the law laid down in
the case of Salomon v. Salomon (supra) to examine the correctness of the findings of the High Court in
reversing the finding of fact recorded in favour of
the concerned workmen by the CGIT in its award with a
view to find out whether the arrangement with or
without the consent of the owner company
facilitated the violation of the basic
principles of labour jurisprudence
established in this country over a period
of more than six decades, especially
principles relating to security of tenure,
retrenchment, natural justice, and many
other standards relating to "decent
conditions at work". If two statutory
corporations owned by the Government of India are
governed by Rule of law, namely Factories Act and
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Industrial Disputes Act, in the manner in which they
contended, it would be opposed to the labour
jurisprudence and constitute a clear case of unfair
labour practice which is against the law enunciated
by this Court in plethora of cases referred to supra
whose relevant paragraphs are extracted as above in
support of my conclusion to hold that the finding in
the impugned judgments of the High Court that is, the
HCI, though it is a subsidiary company of Air India,
yet it is a separate and distinct legal entity and
that the concerned workmen have been employed by the
HCI and not Air India and hence, there is no
relationship of employer and employee and
disciplinary control upon them by Air India, which
has been reached at by the High Court and setting
aside the findings recorded by the CGIT in favour of
the concerned workmen, is not only erroneous but also
suffers from error in law as the same is opposed to
the law laid down by this Court in catena of cases
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referred to supra.
43. Any other test required to be applied to the
question of the legal entity of the so called
'independent contractor', is irrelevant to the
critical issues which arise in this case. The view
taken by the Delhi High Court regarding the separate
legal identity of both these corporations, and
erroneously setting aside the findings of the CGIT is
not the determining factor in this case. There have
been varying practices in vogue in this regard. In
the Parimal Chandra Raha’s case (supra), it is noticed that there were 'Managing Committees’, and
'Cooperative Societies' which could not exist without
a separate legal personality that is, 'Contractors',
many of them also create convenient legal
personalities under garb of different legal entities.
The presence of a contractor clothed with a legal
personality or not as in the case of the defence
establishments referred to above in the Suraksha
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Karamchari Union’s case (supra) also has hardly ever been considered to be a determinative test pertaining
to canteen workers on contract.
44. For the reasons recorded by me on the contentious
points with reference to the facts, legal evidence
and law laid down by this Court in plethora of cases,
I am in agreement with the CGIT on the finding of
facts recorded by it on the question of the
relationship between the concerned workmen and the
Air India on proper appreciation of pleadings and the
legal evidence on record and piercing the veil to the
fact situation to find out true facts which is
rightly answered by CGIT on the points of disputes
and the said finding is in conformity with the law
laid down by this Court in Hussainbhai’ case and M.M.R. Khan and other cases referred to supra for the reason that the contract with the HCI which is a
subsidiary Company of Air India and employing the
contract workers to work in the statutory canteen, is
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a sham contract. They have been engaged in permanent
nature of work continuously for number of years. The
finding of fact recorded by the CGIT on the points of
dispute holding that they are entitled for
regularization and to be absorbed as employees of Air
India, without prejudice to any managerial
arrangement to avail the expertise of the HCI of
India through existing arrangements. Indeed that
would be a win-win situation for all the stake
holders concerned in this case- the corporates, the
Air India employees numbering more than 2000 in this
case and the disempowered canteen workers and that
would also be in harmony with our constitutional
jurisprudence.
45. However it must be clarified that the requirement
of reservation as provided for in Articles 14 and 16
of the Constitution must be complied with while
regularizing the canteen workers as employees of Air
India. This can be achieved by complying with
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relevant provisions of the I.D. Act in contrast to
the action taken by the HCI in violation of the said
statute. It is also further relevant to note that the
only relief the workers have sought is one of
regularization on the rolls of Air India. This does
not itself impose any additional expenditure for it.
Therefore, the concern of the learned single Judge of
the High Court, on this count is not attracted in the
context of the relief sought for by the concerned
workmen.
46. The special facts which are intermingled with
questions of fact relevant to the case at hand may
once again be noticed by me to hold that the
concerned workmen have completed 240 days despite
attempt of the contractor by giving break in service
of the concerned workmen by the statutory corporation
which is an instrumentality of the state which is
not permissible in law.
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47. The wages of the canteen workers and other costs
are paid through the arrangement of per head subsidy
@ of Rs.340/- for over 2000 employees, to the
contractor that is, HCI by the principal employer
-Air India. The supervision and control of the
establishment is adequately provided for through the
'Memorandum and Articles of Association' which binds
both the 'sole owner' and the 'wholly owned
subsidiary'. The service of running the statutory
canteen is provided for the benefit of the employees
of Air India. The statutory obligation on the part of
Air India to run the canteen is squarely placed on
the shoulders of the occupier of the factory as per
Section 2(n) of the Factories Act, because they
employ more than 2000 employees despite resorting to
pleadings stating that it did not employ more than
250 workers, thus seeking to escape from the
consequences that may follow in case of a 'statutory
canteen' without challenging the Notification of the
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Labour Department issued by the Lt. Governor of Delhi
under Rules 65 to 70 of the Rules.
48. For the above reasons, in addition to the test of
economic control, as held by this Court in
Hussainbhai’s case, I am of the view that the relief sought for by the concerned workmen which is accepted
by the CGIT is legal and valid. Therefore, I have to
accept the finding and reasons recorded by the CGIT
though the reasons which I have assigned are not the
reasons assigned by it but the conclusions arrived at
by the CGIT while determining the points of dispute
referred to it are legal and valid. Therefore, the
reasons assigned by me in this judgment must be read
into the reasons of the award of the CGIT. The
aforesaid reasons are assigned by me in this judgment
after careful examination of the rival legal
contentions urged by the learned senior counsel on
behalf of the parties with reference to the
provisions of the Factories Act, Rules, Contract
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Labour Act and Industrial Disputes Act and law laid
down by this Court in catena of cases. These points
are accordingly answered in favour of the workmen.
Answer to point No. 3:
49. In view of the foregoing reasons recorded by me
in answering the point Nos. 1 and 2 after adverting
to the relevant facts and interpretation of certain
provisions of the Factories Act, Rules and the
Industrial Disputes Act, particularly Sections 2(k),
2(s) read with the provisions of Section 25(T) and
Section 25(U) of the Industrial Disputes Act and
Entry No.10 in the Vth Schedule under the definition
of unfair labour practices as defined in Section
2(ra) regarding the employment of the workmen on
contract basis against the permanent nature of
employment in the statutory canteen I have held that
this practice by Air India constitutes unfair labour
practice. The decisions rendered by this Court which
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have been extensively referred to by me and some of
the cases referred to by the CGIT have rightly
answered the points of dispute in favour of the
concerned workmen, on proper appreciation of the
facts pleaded, legal evidence on record and I have
applied the legal principles laid down by this Court
in the cases of Basti Sugar Mills Ltd., Parimal Chandra Raha, Kanpur Suraksha Karamchari Union and M.M.R. Khan (all referred to supra) to the fact situation of the case on hand to restore the award of
the CGIT. The CGIT has rightly come to the conclusion
and recorded the finding of fact assigning valid and
cogent reasons. Therefore, I have to answer that the
findings and reasons recorded by CGIT on the points
of dispute in relation to the concerned employees
declaring that the concerned contract workers of the
canteen are deemed employees of Air India is a right
decision which has been reached after appreciation of
evidence on record and adhering to the legal
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principles laid down by this Court in catena of
cases. Further, setting aside the termination orders
passed against some of the concerned workmen covered
in the industrial dispute case Nos.97 to 99 of 1996
is also justified for the reason that the services of
the concerned workmen in the above cases were
terminated during pendency of the industrial disputes
before CGIT regarding absorption of the concerned
workmen as permanent employees, without obtaining
approval from the CGIT as required under Section
33(2)(b) of the I.D. Act. Apart from the above
reason, the termination of services of the workmen
involved in the above industrial dispute cases is
unsustainable in law for the reason that they have
not complied with the mandatory provisions of Section
25F, clauses (a) and (b) of the I.D. Act and have not
obtained the permission from the Central Government
as required under Section 25N of Chapter VB of the
I.D. Act. Therefore, the orders of termination passed
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against the concerned workmen are void ab initio in
law and the same are liable to be set aside. I have
to hold that the CGIT has rightly passed an award in
favour of all the workmen in all the Industrial
Disputes on the file of CGIT on findings and reasons
recorded on the points of dispute referred to it by
the Central Government upon which adjudication is
made by the CGIT. The same cannot be termed either as
erroneous or error in law. Accordingly, I answer the
point No.3 in favour the concerned workmen.
Answer to point No.4:
50. The findings and reasons recorded on the
contentious points by both the learned single Judge
and the Division Bench of the Delhi High Court in the
impugned judgment that no better service conditions
than the Management of HCI would be provided to the
canteen workers except to get free air tickets which
apparently some employees of Air India are entitled
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to, is untenable in law. Incidentally this is
another aspect which may have a bearing on the
question of viability in terms of prevailing practice
in industry. Perhaps, Air India must explore the
significance of the region cum industry principle so
well developed in our labour jurisprudence. It is
seriously concerned about competition and viability
rather than focus on the handful of canteen workers.
51. The learned single Judge and the Division Bench
have interfered with the finding of fact recorded in
the common award passed by the CGIT by disagreeing
with the findings and reasons recorded by the CGIT
and holding that the HCI is a subsidiary corporation
of Air India and it has got 100% share holding and
power to appoint the Directors of the HCI and after
referring to the decisions of this Court in Kanpur Suraksha Karamchari Union case (supra), it held that it is a separate legal entity which finding of fact
and reason has been concurred with by the Division
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Bench by assigning the similar reasons placing
reliance on the decision of this Court in M.M.R. Khan’s case which decision supports the case of the concerned workmen. The said decision is
distinguished by the Division Bench of the High
Court after adverting to certain paragraphs without
considering the relevant paragraph Nos. 25 and 30
which has laid down the legal principle and also
referred to other judgments namely Indian Petrochemicals Corporation Ltd. and Hari Shanker Sharma referred to supra without piercing the veil to the real facts of the case.
52. Both the learned single Judge and the Division
Bench have exceeded in their jurisdiction in
exercising their extraordinary and supervisory
jurisdiction in the Writ Petitions and the Letter
Patent Appeals, while examining the correctness and
findings recorded by the CGIT in the common award
which the High Court has disagreed with and has set
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aside the common award impugned in the Writ
Petitions filed by Air India. Both the learned
single Judge and the Division Bench have exceeded
their jurisdiction in interfering with findings of
fact recorded by the CGIT on the points of dispute
and the contentious issues on proper appreciation of
pleadings, evidence on record and law laid down by
this Court in the cases referred to in the award I
have referred to the relevant factual aspects and
legal evidence and the statutory provisions of the
Factories Act, Rules and the Industrial Disputes
Act, while answering to Point Nos.1, 2 and 3 in
favour of the concerned workmen by recording my
reasons in this judgment. Therefore, I have to hold
that the learned single Judge and the Division Bench
exceeded in their jurisdiction to interfere with the
finding of fact recorded by the CGIT on the points
of dispute which were referred to by the Central
Government. For the reasons recorded by me on point
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Nos. 1 and 2 in this judgment and further answering
the point No.3 in affirmative in favour of the
concerned workmen holding that findings and reasons
recorded by the CGIT on the point of dispute
referred to it by the Central government are neither
erroneous nor suffers from error in law. Also I have
to hold while answering to point No. 4 that both the
learned single Judge and the High Court have
disagreed with the correct finding of fact recorded
by the CGIT in its award. The findings recorded by
the learned Singh Judge and Division Bench in the
impugned judgment are not only erroneous but suffers
from error in law as the same is contrary to the
statutory provisions and law laid down by this Court
which have been extensively referred to by me in
the reasoning portion of this judgment in answer to
point Nos. 1 and 2. Hence, I have to hold that
findings and reasons recorded in the impugned
judgment is wholly untenable and liable to be set
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aside and accordingly set aside by answering point
no. 4 in affirmative in favour of the concerned
workmen.
Answer to Point No.5:
53. Since I have answered point No. 4 in favour of
the concerned workmen and against Air India, the
appellants are entitled for the reliefs as prayed
for in these appeals. Accordingly, these appeals are
allowed and common award dated 5.5.2004 passed in
I.D. Nos.97 to 99 of 1996 in favour of the workmen
is restored. Further, I direct the Management of
Air India to absorb all the concerned workmen
covered in the I.D. Nos.97 to 99 of 1996 as
permanent workmen on its rolls from the date of
their appointment and grant all the consequential
benefits such as salary for which they are entitled
for after computing properly, taking into
consideration the pay scale and periodical wage
revision that has taken place and are applicable to
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the respective posts of the concerned workmen as per
the notification issued by the Lt. Governor, Union
Territory of Delhi and on the basis of similar
notifications applicable for them.
54. Since I have allowed I.D. Nos. 97 to 99 of 1996,
the Industrial Dispute case Nos. 107 and 108 of 1996
involving the workmen whose services were terminated
during the pendency of petition before CGIT, must
also be treated as permanent workmen at par with the
concerned workmen involved in the instant case. The
award for their reinstatement to their posts shall
be passed with all consequential benefits with full
back wages.
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55. Accordingly, I allow the appeals of the
concerned workmen in the above said terms.
……………………………………………………………J.
[V. GOPALA GOWDA]
New Delhi, November 13, 2013
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