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REPORTABLE  IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL Nos. 5874-5875  OF 2015 (ARISING OUT OF S.L.P. (C) NOS. 1624-25 OF 2014)

MOHAN SINGH & ORS.      … APPELLANTS

VERSUS

THE CHAIRMAN RAILWAY BOARD & ORS.       … RESPONDENTS

J U D G M E N T

VIKRAMAJIT SEN,J.

1 Leave granted.

2 The legal nodus that arise in the present Appeals before us are whether the

existing canteen at Moradabad Division of the Northern Railway i.e., the subject

Canteen, is located in a ‘Factory’ within the meaning of Section 46 of the Factories

Act, 1948; and consequently, whether the services of the staff employed in the

subject  Canteen  ought  to  be  regularized.   These  Appeals  have  been  preferred

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against the Judgment passed by the Division Bench of the High Court of New

Delhi in LPA No. 19 of 2012, whereby the Orders passed in Writ Petition No. 6582

of 2003 and Review Petition No. 670 of 2011 have been set aside and it has been

held that the subject Canteen is a ‘Non Recognized and Non Statutory’ canteen.  

3 We shall briefly narrate the facts leading up to the present lis. The Appellants

are employed in the subject Canteen, which has been running within the precincts

of  the  Divisional  Railway  Manager  (hereinafter  referred  to  as  “the  DRM”),

Moradabad since 1940 and has been catering to more than 100 employees, (in fact,

well over 500) since its establishment. In 1963, the Respondent No. 1, namely the

Chairman,  Railway  Board,  issued  a  Circular  No.  E(W)  63/GN  1-2  dated

09.07.1963  for  setting  up  of  canteens  as  a  welfare  measure,  whenever  and

wherever the staff strength exceeds 100. The existing Staff Canteen, i.e. the subject

Canteen continued to operate smoothly, even thereafter. It is the uncontroverted

case of the Appellants that when the subject Canteen underwent severe financial

losses in 1971, it was the Respondent No. 3, i.e. the DRM of Northern Railways,

Moradabad  Division,  who  decided  to  constitute  a  committee  of  three  senior

Railway Divisional Officers to examine whether the affairs of the subject Canteen

could be taken over by the Railways. It was decided by the said committee that the

affairs of the subject Canteen be revived; and an ad hoc committee comprising five

Railway Officers,  which was to be replaced later  on by a  regular  management

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committee, be appointed to manage the affairs of the said Canteen. It was in these

circumstances that the subject Canteen was formally taken over by the Respondent

Railways with  effect  from 18.01.1972.   Subsequently, Respondent  No.1  issued

Circular No. E (W) 83 CN1-8 dated 13.04.1987 laying down that prior approval of

the Railway Board would be mandatory for setting up of a new canteen as well as

for increasing the staff strength of existing canteens. The Appellants assert that the

mandate  laid  down  in  the  Circular  of  1987  was  not  applicable  to  the  subject

Canteen as it was validly operational since 1940, and was also in consonance with

the Circular of 1963.  Ergo, no prior approval was required to be taken from the

Railway Board since the subject Canteen was not a new canteen.  It appears that

thereafter  on 19.09.1996,  Respondent  No.  2,  the General  Manager  of  Northern

Railways wrote a letter to the Railway Board requesting it to accord recognition to

the subject Canteen in the interest of the welfare of the employees.  However, vide

Order  dated  9.09.2002,  the  Ministry  of  Railways  rejected  this  request  on  the

premise that if recognition were to be granted to the subject Canteen, the existing

staff would nevertheless not be absorbed automatically, and they would have to

compete with other eligible candidates.  The Ministry then ordered status quo to be

maintained in respect of the subject Canteen.  The said proposal was thereafter

discussed  in  the  Permanent  Negotiating  Machinery  (PNM)  meeting  held  on

22.12.2003,  wherein  it  was  decided  that  since  the  Railway  Board  had  already

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rejected the proposal for recognition due to the changed priorities of Railways and

cutting  down  of  non-planned  expenditure,  the  proposal  for  recognition  of  any

canteen under the provisions of the Factories Act, 1948, or the Railway Manual

could not be considered.

4 Aggrieved thereby, the Appellants filed a writ petition before the Delhi High

Court,  seeking directions to the Railways to recognize the subject  Canteen and

regularize the services of the PS, who were the then Canteen staff, as employees of

Railways.   The learned Single Judge, relying heavily upon the view of this Court

in  M.M.R.  Khan v.  Union  of  India  (1990)  Supp  SCC 191,  allowed  the  Writ

Petition on 13.01.2011 and held that since the subject Canteen at Moradabad has

been  operational  for  over  seventy  years,  by  then  catering  to  more  than  900

employees, and in the absence of any other canteen in the Moradabad Division, the

Railways could not be permitted to take advantage of their failure to comply with

the  requirements  of  Section  46  of  the  Factories  Act  and  treat  this  Canteen  at

Moradabad as a ‘Non-Statutory Canteen’.  Against the Order of the learned Single

Judge, a Review Petition was preferred by the Respondents which was dismissed

on 2.12.2011.  The Respondents then filed an appeal contending, inter alia, that the

subject Canteen was a ‘Non-Statutory and Non-Recognized’ Canteen and that it

could not be treated as a ‘Statutory Canteen’ under the Factories Act, 1948 as no

manufacturing process was being carried on in the DRM Office at Moradabad.  In

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the appeal, the Division Bench, vide the impugned Judgment dated 16.03.2012,

reversed the decision of the learned Single Judge.  It held that the provisions of

Section 46 of the Act would not get attracted in the instant case only because the

number  of  the  persons  employed  in  the  DRM  Office,  Moradabad,  exceeds

two-hundred  fifty,  unless  the  concerned  establishment  squarely  fell  within  the

definition of ‘Factory’ as defined under Section 2 (m) of the Act. The Division

Bench acknowledged that the dictum laid down by this Court in M.M.R. Khan has

become  locus classicus on the subject of regularisation of employees of several

canteens being run in the different Railway establishments.  All the same, it added

that in order to avail  the benefit emanating from  M.M.R. Khan the Appellants

would have to prove the sine qua non of a ‘Statutory Canteen’, i.e. that the subject

Canteen is being run in a premises which is a factory within the four corners of

Section 46 of the Act.  The Division Bench then took note of Section 46 of the Act,

which enjoins that ‘manufacturing process’ must, inter alia, be carried on in the

premises of a ‘factory’.    

5      We  shall,  first,  consider  the  concomitants  of  a  ‘Non-Statutory  and

Non-Recognised  Canteen’,  which  aspect  has  been  duly  cogitated  upon  by  this

Court in M.M.R. Khan where this Court has adumbrated the basic characteristics

of a ‘Non-Recognized and Non-Statutory Canteen’ thus –  

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“38. (iii)  Non-statutory  Non-recognised  Canteens:  The  difference between  the  non-statutory  recognised  and  non-statutory non-recognised canteen is that these canteens are not started with the approval of the Railway Board as required under paragraph 2831 of the Railway Establishment Manual.  Though, they are started in the premises  belonging  to  the  railways  they  are  so  started  with  the permission of the local officers. They are not required to be managed either as per the provisions of the Railway Establishment Manual or the Administrative Instructions (supra). There is no obligation on the railway administration to provide them with any facilities including the furniture, utensils, electricity and water. These canteens are further not entitled to nor are they given any subsidies or loans. They are run by  private  contractors  and  there  is  no  continuity  either  of  the contractors or the workers engaged by them. More often than not the workers go out with the contractors. There is further no obligation cast even on the local offices to supervise the working of these canteens. No rules whatsoever are applicable to the recruitment of the workers and their  service conditions.  The canteens are run more or  less on ad-hoc basis,  the railway administration having no control  on their working  neither  is  there  a  record  of  these  canteens  nor  of  the contractors who run them who keep on changing, much less of the workers engaged in these canteens. In the circumstances we are of the view that the workers engaged in these canteens are not entitled to claim the status of the railway servants”.

6 It cannot be controverted that the subject Canteen has been running since

1940 within the precincts of the office of the DRM, Moradabad and has been under

the  direct  control  and  supervision  of  the  DRM.   The  Management  Committee

appointed for administration of the subject Canteen comprises office bearers of the

Canteen Management Committee, duly elected in union elections held from time to

time.  Further, no private contractor or co-operative society has ever been engaged

for running or  operating the subject  Canteen.   The Appellants  contend that  the

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joining and leaving the canteen staff has always been sanctioned and regulated by

the Controller, i.e. the Assistant Personnel Officer of the Northern Railways.  The

prices of the food items supplied in the subject Canteen as well as the salaries of

the staff are also fixed by the said Assistant Controller Personnel Officer.   Even

the renovation of the Canteen, in 2005, was carried out at the directions of the

Northern Railways, which bore all the expenses incurred in this exercise.  It further

appears that the Appellants have been provided with uniforms, medical aid, free

travelling passes, residential accommodations, privileged ticket orders etc. by the

Railways.   Thus,  it  seems  amply  clear  from  this  factual  matrix  that  the

Respondents have remained in control of the management and operation of the

subject Canteen.   

7 For a canteen to qualify as a ‘Recognized Canteen’ it is imperative to obtain

the approval of the Railway Board.  Since the proposal for approval, admittedly,

had been rejected by the Railway Board vide Order dated 9.9.2002, it follows that

the subject Canteen does not qualify as a ‘Recognized Canteen’.  It thus, becomes

crucial for us to examine whether the subject Canteen is a ‘Statutory Canteen’ as

postulated in the Factories Act, 1948.   

8 Section 46 of the Factories Act,  1948 which provides for setting up of a

‘Statutory Canteen’ reads as follows:

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46. Canteens.— (1) The  State  Government  may  make  rules  requiring  that  in  any

specified factory wherein more than two hundred and fifty workers are ordinarily  employed,  a  canteen  or  canteens  shall  be  provided  and maintained by the occupier for the use of the workers.

(2) Without prejudice to the generality 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  construction,  accommodation,

furniture and other equipment of the canteen; (c) the foodstuffs to be served therein and the charges which may be

made thereof; (d) the constitution of  a managing committee for  the canteen and

representation of the workers in the management 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 Inspector, subject to such conditions as may be prescribed, of the power to make rules under clause (c)

9 The statute does not exempt factories belonging to the Central Government

from  its  reach;  Parliament  obviously  expected  them  to  conform  to  what  it

perceived as essential to welfare of the workforce. It  is evident from a perusal of

the definition of canteens and factories that Government factories have not been

conceived of as beyond the concept of a ‘factory’, nor do we find any justification

for it to be otherwise. Thus, what emerges from the above provision is that when

an establishment is a ‘factory’ within the meaning of Section 2(m) of the Act, and

there are more than two-hundred fifty workers employed therein, the Occupier is

obliged to set up a canteen and conform to the statutory rules made in that behalf.

Section 2(n) of the Factories Act, 1948 defines ‘Occupier’ of a factory ‘as a person

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who has ultimate control over the affairs of the factory’.   Sub Section (iii)  of

Section 2(n) states that ‘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 local authority, as the case may be, shall be deemed to be the

occupier’.  It cannot be controverted that each of the five units of the Northern

Railways,  including  the  Moradabad  Division,  is  managed  by  a  respective

Divisional Railway Manager. Thus, for the purposes of Section 2(n) of the Act, it

can be fairly inferred that the DRM, by virtue of being in control of the affairs of

Moradabad Division, should be deemed to be the ‘Occupier’ of that unit of the

Northern Railways.  

10. Learned Counsel  for  the  Respondents  has  duly  admitted  that  Moradabad

Division  is  a  part  of  the  Northern  Railways,  but  contends  that  the  whole  of

Northern Railways cannot be declared as ‘Factory’.   We are presently concerned

only  with  the  Moradabad  DRM,  which  may  well  be  dissimilar  to  the  other

Divisional  Offices  of  the  Northern  Railways,  where  manufacturing  activity  is

absent.  Therefore, we do not find merit in the said argument. Section 4 of the

Factories Act, 1948 gives power to the State Government to, either  suo motu or

upon  receiving  an  application  in  this  behalf  by  an  occupier,  declare  different

departments to be treated as separate factories. However, no such application can

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be said to have been made by the Respondents or by the Northern Railways. In the

absence  of  any  clear  declaration  in  this  respect,  we  cannot  but  assume  that

Moradabad Division is a unit of Northern Railway and DRM is its occupier within

Section 2(n) of the Factories Act, 1948.  

11 Further, it also appears that providing for a staff canteen was felt necessary

by  the  Respondents  themselves  and  several  representations  were  made  to  the

Railway Board from time to time for recognition of the subject Canteen.  Such

conduct  or  approach  is  to  be  expected  of  every  model  employer,  as  the

Government  must  be.   It  is  for  this  very  reason  that  the  Divisional  Personnel

Officer made the first request to the Divisional Superintendent for recognition of

the subject Canteen on 12.06.1972.  Thereafter, the Respondent No. 2 addressed

another letter to the Respondent No. 1 on 19.09.1996, whereby it again stressed

that running of a recognized canteen in Moradabad is an imperative and important

staff amenity.  It is evident that the Respondents were aware of the need for setting

up and continuing a recognised canteen.

12 The Factories Act, 1948 is a social legislation enacted for the welfare of the

workers. It deals with matters connected with the health, safety, welfare, working

hours of the workers, employment of young persons and leave to be granted to

workers.  The idea behind providing Statutory Canteen in a Factory is  to create

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disputed  that  railway  wagons  are  repaired  and  maintained  at  the  Moradabad

Division.   It  is  also not  disputed that  the Moradabad Division carries on other

activities  such  as  repairing  of  faulty  signals,  sanitation  systems,  loading  and

unloading  of  goods,  supply  of  power  continuously  for  railway  tracks,  railway

station etc.  Thus, it has perforce to be inferred that manufacturing process is being

carried out at the Moradabad Division.  

16 The more important question that arises is whether the said manufacturing

activities are carried on within the premises of DRM Office, Moradabad.   Black’s

Law Dictionary, 5th Edition defines ‘Premises’, so far as estates and property are

concerned, as lands and tenements.  With regard to the Worker’s Compensation

Act, ‘premises of employer’ is not restricted to permanent site of the employer’s

business nor to property owned or leased by him but contemplates any place under

the  exclusive  control  of  the  statutory  employer  where  his  normal  business  is

conducted or carried out.”   In Kamla Devi V. LaxmiDevi (2000) 5 SCC 646, in the

context of the Delhi Rent Control Act, this Court has held that even an open plot of

land  so  long  as  it  has  some  structures  on  it,  will  fall  within  the  meaning  of

‘premises’.  Extrapolating from these decisions, we are in no manner of doubt that

the  DRM Office  of  Moradabad  Division  along with  all  the  appurtenant  lands,

yards,  etc.  are  ‘premises’  within  the  contemplation  of  the  Factories  Act.    In

Ardeshir H. Bhiwandiwala v. State of Bombay AIR 1962 SC 29, the Constitution

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canteens in question have been established pursuant to the said provision there is

no difficulty in holding that the canteens 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  Establishment  Manual

recognises the obligation on the Railway Administration created by the Act and as

pointed out earlier paragraph 2834 makes provision for meeting the cost of the

canteens. Paragraph 2832 acknowledges that although the Railway Administration

may employ anyone such as a Staff Committee or a Co-operative Society for the

management of the canteens, the legal responsibility for the proper management

rests not with such agency but solely with the Railway Administration…..We are,

therefore, of the view that the employees in the statutory canteens of the Railways

will have to be treated as Railway servants. Thus the relationship of employer and

employee  stands  created  between  the  Railway  Administration  and  the  canteen

employees from the very inception.”

18 Therefore, in the light of the settled principle enunciated hereinabove, we

hold that the subject Canteen is a ‘Statutory Canteen’ under the Factories Act, 1948

and that the learned Single Judge had arrived at the correct conclusion.  In our

opinion, the Division Bench of the High Court was not correct in taking a contrary

view. We, therefore, allow these Appeals.  We set aside the impugned Judgment

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passed by the High Court, and direct the Respondents to treat the subject Canteen

at Moradabad as a Statutory Canteen either under Section 46 of the Act or the

relevant clauses of the Indian Railway Establishment Management.   However, so

far as the Appellants are concerned, we find it difficult to condone or ignore the

fact that they were not appointed as per the regular recruitment procedure. To pass

an  order  regularizing  the  services  of  all  workers  employed  therein  would

necessarily  imply  ratification  of  appointments  given  outside  the  Constitutional

scheme.  We,  therefore,  direct  the  Respondents  to  consider  regularizing  the

services of the Appellants presently serving as canteen workers in consonance with

the principles laid down in Secretary, State of Karnataka v. Uma Devi AIR 2006

SC  1806  and  take  requisite  action  within  six  months  of  the  receipt  of  this

Judgment.   Further, as and when the subject posts fall vacant the Respondents

shall be bound to fill the posts by a regular process of selection.  The Appellants in

the present case shall be allowed to compete in the regular recruitment and the

Respondents shall grant to them appropriate age relaxation as well as grant proper

weightage for their having worked in the subject Canteen.

19 There cannot be any cavil that the necessity for  canteen amenities to be

available  where  more  than  250  workmen are  engaged,  is  an  essential  facet  of

human or labour rights.  Managements and employers are duty bound to provide

these basic facilities.

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20  Stay granted by this Court on 28.03.2014 stands vacated.  There shall be no

order as to costs.   

…..…………………………………J. (VIKRAMAJIT SEN)

………………………………….…..J. (PRAFULLA C. PANT)

New Delhi, August 3, 2015.

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