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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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