PETITIONER: STEEL AUTHORITY OF INDIA LTD. & ORS. ETC.ETC.
Vs.
RESPONDENT: NATIONAL UNION WATER FRONT WORKERS & ORS.

DATE OF JUDGMENT: 30/08/2001

BENCH: B.N. Kirpal, Syed Shah Mohammed Quadri, M.B. Shah, Ruma Pal, K. G. Balakrishnan,

[Arising out of S.L.P. (C) NOS.12657-58/98]
With
(C.A.No.6011/2001@S.L.P.(C) No.20926/1998, C.A. No.6012/2001 @ S.L.P.(C) No.9568/2000, T.C. No.1/2000, T.C. Nos.5 to 7/2000, T.C.(C)No.14/2000, T.C.Nos.17&18/2000, C.A.Nos.719- 720/2001,C.A.Nos.5798-99/98, C.A.Nos.6013-22/2001 @ SLP(C) Nos.16122- 31/98, C.A. No.6023/2001 @ SLP(C) No.19391/99, C.A.Nos.4188-94/98, C.A.No.4195/98, C.A. Nos.6024-25/2001 @SLP (C) Nos.8282-83/2000, TP(C) No.169/2000, TP(C) Nos.284- 302/2000, C.A.No.6029/2001@ SLP (C) No.16346/2000, C.A.Nos.6030-34/2001@SLP(C)Nos.13146-150/2000,T.P.(C) No.308 -337/2000, C.A.No.141/2001)

JUDGMENT:

SYED SHAH MOHAMMED QUADRI, J.

Leave is granted in the Special Leave petitions.

In Food Corporation of India, Bombay & Ors. vs. Transport & Dock Workers Union & Ors. , a two-Judge Bench of this Court, having noticed the conflict of opinion between different Benches including two three-Judge Benches of this Court on the interpretation of the expression appropriate Government in Section 2(1)(a) of the Contract Labour (Regulation and Abolition) Act, 1970 (for short, the CLRA Act) and in Section 2(a) of the Industrial Disputes Act, 1947 (for short, the I.D.Act) and having regard to the importance of the question of automatic absorption of the contract labour in the establishment of the principal employer as a consequence of an abolition notification issued under Section 10(1) of the CLRA Act, referred these cases to a larger Bench. The other cases were tagged with the said case as the same questions arise in them also. That is how these cases have come up before us.

To comprehend the controversy in these cases, it will suffice to refer to the facts in Civil Appeal Nos.6009-10 of 2001@ S.L.P.Nos.12657-12658 of 1998 which are preferred from the judgment and order of the Calcutta High Court in W.P.No.1773 of 1994 and FMAT No.1460 of 1994 dated July 3, 1998. The appellants, a Central Government Company and its branch manager, are engaged in the manufacture and sale of various types of iron and steel materials in its plants located in various States of India. The business of the appellants includes import and export of several products and bye-products through Central Marketing Organisation, a marketing unit of the appellant, having network of branches in different parts of India. The work of handling the goods in the stockyards of the appellants, was being entrusted to contractors after calling for tenders in that behalf. The Government of West Bengal issued notification dated July 15, 1989 under Section 10(1) of the CLRA Act (referred to in this judgment as the prohibition notification) prohibiting the employment of contract labour in four specified stockyards of the appellants at Calcutta. On the representation of the appellants, the Government of West Bengal kept in abeyance the said notification initially for a period of six months by notification dated August 28, 1989 and thereafter extended that period from time to time. It appears that the State Government did not, however, extend the period beyond August 31, 1994.

The first respondent-Union representing the cause of 353 contract labourers filed Writ Petition No.10108/89 in the Calcutta High Court seeking a direction to the appellants to absorb the contract labour in their regular establishment in view of the prohibition notification of the State Government dated July 15, 1989 and further praying that the notification dated August 28, 1989, keeping the prohibition notification in abeyance, be quashed.

A learned Single Judge of the High Court allowed the writ petition, set aside the notification dated August 28, 1989 and all subsequent notifications extending the period and directed that the contract labour be absorbed and regularised from the date of prohibition notification – July 15, 1989 – within six months from the date of the judgment i.e., April 25, 1994.

The appellants adopted a two-pronged attack strategy.

Assailing the said judgment of the learned Single Judge, they filed writ appeal (FMAT No.1460 of 1994) and challenging the prohibition notification of July 15, 1989 they filed Writ Petition No.1733 of 1994 in the Calcutta High Court. While these cases were pending before the High Court, this Court delivered judgment in Air India Statutory Corporation & Ors. vs. United Labour Union & Ors. holding, inter alia, that in case of Central Government Companies the appropriate Government is the Central Government and thus upheld the validity of the notification dated December 9, 1976 issued by the Central Government under Section 10(1) of the CLRA Act prohibiting employment of contract labour in all establishments of the Central Government Companies. On July 3, 1998, a Division Bench of the High Court nonetheless dismissed the writ appeal as well as the writ petition filed by the appellants taking the view that on the relevant date the appropriate Government was the State Government. The legality of that judgment and order is under challenge in these appeals.

Three points arise for determination in these appeals :

(i) what is the true and correct import of the expression appropriate government as defined in clause (a) of sub-section (1) of Section 2 of the CLRA Act;

(ii) whether the notification dated December 9, 1976 issued by the Central Government under Section 10(1) of the CLRA Act is valid and applies to all Central Government companies; and (iii) whether automatic absorption of contract labour, working in the establishment of the principal employer as regular employees, follows on issuance of a valid notification under Section 10(1) of the CLRA Act, prohibiting the contract labour in the concerned establishment.

Inasmuch as in some appeals the principal employers are the appellants and in some others the contract labour or the union of employees is in appeal, we shall refer to the parties in this judgment as the principal employer and the contract labour.

Before taking up these points, it needs to be noticed that the history of exploitation of labour is as old as the history of civilisation itself. There has been an ongoing struggle by labourers and their organisations against such exploitation but it continues in one form or the other. The Industrial Disputes Act, 1947 is an important legislation in the direction of attaining fair treatment to labour and industrial peace which are sine qua non for sustained economic growth of any country. The best description of that Act is given by Krishna Iyer, J, speaking for a three-Judge Bench of this Court in Life Insurance Corporation of The Industrial Disputes Act is a benign measure which seeks to pre-empt industrial tensions, provide the mechanics of dispute- resolutions and set up the necessary infrastructure so that the energies of partners in production may not be dissipated in counter-productive battles and assurance of industrial justice may create a climate of goodwill.

After the advent of the Constitution of India, the State is under an obligation to improve the lot of the work force. Article 23 prohibits, inter alia, begar and other similar forms of forced labour. The Directive Principle of State Policy incorporated in Article 38 mandates the State to secure a social order for promotion of welfare of the people and to establish an egalitarian society. Article 39 enumerates the principles of policy of the State which include welfare measures for the workers. The State policy embodied in Article 43 mandates the State to endeavour to secure, by a suitable legislation or economic organisation or in any other way for all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities. Article 43A enjoins on the State to take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings, establishment, or other organisations engaged in any industry.

The fundamental rights enshrined in Articles 14 and 16 guarantee equality before law and equality of opportunity in public employment. Of course, the preamble to the Constitution is the lodestar and guides those who find themselves in a grey area while dealing with its provisions. It is now well settled that in interpreting a beneficial legislation enacted to give effect to directive principles of the state policy which is otherwise constitutionally valid, the consideration of the Court cannot be divorced from those objectives. In a case of ambiguity in the language of a beneficial labour legislation, the Courts have to resolve the quandary in favour of conferment of, rather than denial of, a benefit on the labour by the legislature but without rewriting and/or doing violence to the provisions of the enactment.

The CLRA Act was enacted by the Parliament to deal with the abuses of contract labour system.` It appears that the Parliament adopted twin measures to curb the abuses of employment of contract labour — the first is to regulate employment of contract labour suitably and the second is to abolish it in certain circumstances. This approach is clearly discernible from the provisions of the CLRA Act which came into force on February 10, 1971. A perusal of the Statement of Objects and Reasons shows that in respect of such categories as may be notified by the appropriate Government, in the light of the prescribed criteria, the contract labour will be abolished and in respect of the other categories the service conditions of the contract labour will be regulated. Before concentrating on the relevant provisions of the CLRA Act, it may be useful to have a birds eye view of that Act. It contains seven chapters. Chapter I has two sections; the first relates to the commencement and application of the Act and the second defines the terms used therein. Chapter II which has three sections provides for the constitution of a Central Advisory Board by the Central Government and a State Advisory Board by the State Government and empowers the Boards to constitute various committees.

Chapter III contains regulatory provisions for registration of establishments which employ contract labour. Section 10 which prohibits the employment of contract labour falls in this chapter;

we shall revert to it presently. Chapter IV contains provisions for purposes of licensing of Contractors to make sure that those who undertake or execute any work through contract labour, adhere to the terms and conditions of licences issued in that behalf. Power is reserved for revocation, suspension and amendment of licenses by the Licensing Officer and a provision is also made for appeal against the order of the Licensing Officer. Chapter V takes care of the welfare and health of contract labour obliging the appropriate Government to make rules to ensure that the requirements of canteen, rest-rooms and other facilities like sufficient supply of wholesome drinking water at convenient places, sufficient number of latrines and urinals accessible to the contract labour in the establishment, washing facilities and the first aid facilities, are complied with by the contractor. Where the contractor fails to provide these facilities the principal employer is enjoined to provide canteen, rest-rooms etc., mentioned above, for the benefit of the contract labour. Though the contractor is made responsible for payment of wages to each worker employed by him as contract labour before the prescribed period yet for effective implementation of this requirement, care is taken to ensure presence of a nominee of the principal employer at the time of the disbursement of wages. Here again, it is prescribed that if the contractor fails to pay the wages to the contract labour, the principal employer shall pay the full wages or unpaid wages, as the case may be, to the contract labour and a right is conferred on him to recover the same from the amount payable to the contractor; if however, no amount is payable to him then such amount is treated as a debt due by the contractor to the principal employer. Chapter VI deals with the contravention of the provisions of the Act, prescribes offences and lays down the procedure for prosecution of the offenders. Chapter VII is titled miscellaneous and it contains eight sections which need not be elaborated here.

Now we shall advert to point No.1.

The learned Solicitor General for the appellant – principal employer – has conceded that the State Government is the appropriate Government in respect of the establishments of the Central Government companies in question. Mr. Shanti Bhushan, the learned senior counsel appearing for the respondents – contract labour in these appeals, submitted that in view of the concession made by the learned Solicitor General, he would not address the Court on that aspect and prayed that the judgment and order of the High Court, under appeal, be confirmed.

Mr. G.L. Sanghi, the learned senior counsel appearing for the appellants in the appeals filed by the Food Corporation of India (FCI)- principal employer-and Mr. K.K. Venugopal, the learned senior counsel for the appellant – the principal employer – in the appeals filed by the Oil and Natural Gas Commission (ONGC) among others sail with the learned Solicitor General, submitted that the appropriate Government on the relevant date was the State Government and for that reason the notification issued by the Central Government on December 9, 1976 was never sought to be applied to the establishments of FCI and ONGC but in view of the amendment of the definition of the expression, appropriate Government with effect from January 28, 1986, the Central Government would thereafter be the appropriate Government. The learned Additional Solicitor General who appeared for Indian Farmers and Fertiliser Co- operative Ltd. ( IFFCO) and Mr. B. Sen, the learned senior counsel appearing for the appellant, adopted the arguments of the learned Solicitor General on this point.

Ms. Indira Jaisingh, the learned senior counsel appearing for the contract labour (respondents in the appeals filed by FCI), argued that in the case of FCI the appropriate Government before and after the notification issued by the Central Government on January 28, 1986, was the Central Government.

Mr. K.K. Singhvi, the learned senior counsel for the contract labour (respondents in the appeal of ONGC), has argued that all Central Government Undertakings which fall within the meaning of other authorities in Article 12 are agents or instrumentalities of the State functioning under the authority of the Central Government, as such the Central Government will be the appropriate Government; the Heavy Engineerings case was wrongly decided by the two Judge Bench of this Court which was followed by a three-Judge Bench in the cases of Hindustan Aeronautics Ltd. and Rashtriya Mill Mazdoor Sangh; in those cases the judgments of this Court in Sukhdev Singhs case, Ajay Hasias case, Central Inland Water Transport Corporations case, C. V. Ramans case and R.D. Shetty International Airports case were not considered; the approach of the Court in the Heavy Engineerings case was based on private law interpretation and that the approach of the Court ought to be based on public law interpretation. It is submitted that in a catena of decisions of this Court, it has been held that where there is deep and pervasive control, a company registered under the Companies Act or a society registered under the Societies Act would be State and, therefore, it would satisfy the requirement of the definition of appropriate Government. He contended that in Air Indias case (supra) a three-Judge Bench of this Court had correctly decided that for all the establishments of the Air India the Central Government was the appropriate Government, which deserved to be confirmed by us.

Notwithstanding the concession made by the learned Solicitor General which has the support of Mr. Shanti Bhushan, we cannot give a quietus to this issue as the other learned counsel strenuously canvassed to the contra. We, therefore, propose to decide this point in the light of the contentions put forth by the other learned counsel.

To begin with the relevant provisions of Section 1 of the CLRA Act which deals, inter alia, with its extent and application, may be noticed here:

Section 1 – (1) to (3) *** *** *** (4) – It applies — (a) to every establishment in which twenty or more workmen are employed or were employed on any day of the preceding twelve months as contract labour;

(b) to every contractor who employs or who employed on any day of the preceding twelve months twenty or more workmen :

Provided that the appropriate Government may, after giving not less than two months notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment or contractor employing such number of workmen less than twenty as may be specified in the notification.

(5)(a) It shall not apply to establishments in which work only of an intermittent or casual nature is performed.

(b) If a question arises whether work performed in an establishment is of an intermittent or casual nature, the appropriate Government shall decide the question after consultation with the Central Board or, as the case may be, a State Board, and its decision shall be final.

Explanation : For the purpose of this sub-section, work performed in an establishment shall not be deemed to be of an intermittent nature — (i) if it was performed for more than one hundred and twenty days in the preceding twelve months, or (ii) if it is of a seasonal character and is performed for more than sixty days in a year.

A perusal of this section brings out that CLRA Act applies to every establishment and every contractor of the specified description. However, the establishments in which work only of an intermittent or casual nature is performed are excluded from the purview of the Act.

We shall also refer to definitions of relevant terms in sub- section (1) of Section 2 which contains interpretation clauses.

Clause (a) defines the expression appropriate Government thus :

2(1) In this Act, unless the context otherwise requires — (a) appropriate Government means — (i) in relation to an establishment in respect of which the appropriate Government under the Industrial Disputes Act, 1947 (14 of 1947) is the Central Government, the Central Government;

(ii) in relation to any other establishment, the Government of the State in which that other establishment is situated.

Addressing to the definition of appropriate Government, it may be pointed out that clause (a) of Section 2(1) was substituted by the Contract Labour (Regulation and Abolition) Amendment Act, 1986 with effect from January 28, 1986. Before the said amendment, the definition read as under :

2(1). (a) appropriate Government means — (i) in relation to any establishment pertaining to any industry carried on by or under the authority of the Central Government, or pertaining to any such controlled industry as may be specified in this behalf by the Central Government; or (ii) any establishment of any railway, Cantonment Board, major port, mine or oil-field, or (iii) any establishment of a banking or insurance company, the Central Government, (2) in relation to any other establishment the Government of the State in which that other establishment is situated.

A plain reading of the unamended definition shows that the Central Government will be the appropriate Government if the establishment in question answers the description given in sub- clauses (i) to (iii). And in relation to any other establishment, the Government of the State, in which the establishment in question is situated, will be the appropriate Government. So far as sub- clauses (ii) and (iii) are concerned, they present no difficulty.

The discussion has centred round sub-clause (i). It may be seen that sub-clause (i) has two limbs. The first limb takes in an establishment pertaining to any industry carried on by or under the authority of the Central Government and the second limb embraces such controlled industries as may be specified in that behalf by the Central Government.

Before embarking upon the discussion on the first limb, it will be apt to advert to the amended definition of appropriate Government which bears the same meaning as given in clause (a) of Section 2 of the Industrial Disputes Act, quoted hereunder:

2. (a) appropriate Government means — (i) in relation to any industrial disputes concerning any industry carried on by or under the authority of the Central Government or by a railway company [or concerning any such controlled industry as may be specified in this behalf by the Central Government] or in relation to an industrial dispute concerning [a Dock Labour Board established under section 5-A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948), or [the Industrial Finance Corporation of India Limited formed and registered under the Companies Act, 1956 (1 of 1956)], or the Employees State Insurance Corporation established under section 3 of the Employees State Insurance Act, 1948 (34 of 1948), or the Board of trustees constituted under section 3-A of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or the Central Board of Trustees and the State Boards of Trustees constituted under section 5-A and section 5-B, respectively, of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952), or the Life Insurance Corporation Act, 1956 (31 of 1956), or [the Oil and Natural Gas Corporation Limited registered under the Companies Act, 1956 (1 of 1956)], or the Deposit Insurance and Credit Insurance and Credit Guarantee Corporation established under section 3 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of 1961), or the Central Warehousing Corporation established under section 3 of the Warehousing Corporations Act, 1962 (58 of 1962), or the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963), or the Food Corporation of India established under section 3, or a Board of Management established for two or more contiguous States under section 16 of the Food Corporations Act, 1964 (37 of 1964), or [the Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 (55 of 1994)], or a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976), or the Export Credit and Guarantee Corporation Limited or the Industrial Reconstruction Corporation of India Limited], or [the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987) or [the Banking Service Commission established under section 3 of the Banking Service Commission Act, 1975,] or [an air transport service, or a banking or an insurance company], a mine, an oil field], (a Cantonment Board] or a major port, the Central Government; and (ii) in relation to any other industrial dispute, the State Government;

An analysis of this provision shows that the Central Government will be the appropriate Government in relation to an industrial dispute concerning :

(1) any industry carried on by or under the authority of the Central Government, or by a railway company;

or (2) any such controlled industry as may be specified in this behalf by the Central Government; or (3) the enumerated industries (which form part of the definition quoted above and need not be reproduced here).

What is evident is that the phrase any industry carried on by or under the authority of the Central Government is a common factor in both the unamended as well as the amended definition.

It is a well-settled proposition of law that the function of the Court is to interpret the Statute to ascertain the intent of the legislature-Parliament. Where the language of the Statute is clear and explicit the Court must give effect to it because in that case words of the Statute unequivocally speak the intention of the legislature. This rule of literal interpretation has to be adhered to and a provision in the Statute has to be understood in its ordinary natural sense unless the Court finds that the provision sought to be interpreted is vague or obscurely worded in which event the other principles of interpretation may be called in aid. A plain reading of the said phrase, under interpretation, shows that it is lucid and clear. There is no obscurity, no ambiguity and no abstruseness. Therefore the words used therein must be construed in their natural ordinary meaning as commonly understood.

We are afraid we cannot accept the contention that in construing that expression or for that matter any of the provisions of the CLRA Act, the principle of literal interpretation has to be discarded as it represents common law approach applicable only to private law field and has no relevance when tested on the anvil of Article 14, and instead the principle of public law interpretation should be adopted. To accept that contention, in our view, would amount to abandoning a straight route and oft treaded road in an attempt to create a pathway in a wilderness which can only lead astray. We have not come across any principles of public law interpretation as opposed to private law interpretation for interpreting a statute either in any authoritative treatise on interpretation of statutes or in pronouncement of any Court nor is any authority of this Court or any other Court brought to our notice. We may, however, mention that there does exist a distinction between public law and private law. This has been succinctly brought out by the Rt. Hon. Sir Harry Woolf (as he then was, now Lord Woolf) in The Second Harry Street Lecture delivered in the University of Manchester on February 19, 1986.

The learned Law Lord stated :

I regard public law as being the system which enforces the proper performance by public bodies of the duties which they owe to the public. I regard private law as being the system which protects the private rights of private individuals or the private rights of public bodies. The critical distinction arises out of the fact that it is the public as a whole, or in the case of local government the public in the locality, who are the beneficiaries of what is protected by public law and it is the individuals or bodies entitled to the rights who are the beneficiaries of the protection provided by private law.

The divide between the public law and the private law is material in regard to the remedies which could be availed when enforcing the rights, public or private, but not in regard to interpretation of the Statutes. We are not beset with the procedural mandate as in the R.S.C. Order 53 of 1977 of England which was the subject matter of consideration by the House of sought declaration by ordinary action that the order passed by the Prisons Board of visitors awarding penalty against him was void and of no effect. The House of Lords, dismissing the appeal filed against the judgment of the Court of Appeal, held that where a public law issue arises, the proceedings should be brought by judicial review under R.S.C. Order 53 and not by private law action which would be abuse of the process of court.

Now, going back to the definition of the said expression, it combines three alternatives, viz., (a) any industry carried on by the Central Government; (b) any industry carried on under the authority of the Central Government; and (c) any industry carried on by a railway company. Alternatives (a) and (c) indicate cases of any industry carried on directly by the Central Government or a railway company. They are too clear to admit of any polemic. In regard to alternative (b), surely, an industry being carried on under the authority of the Central Government cannot be equated with any industry carried on by the Central Government itself. This leaves us to construe the words under the authority of the Central Government. The key word in them is authority.

The relevant meaning of the word authority in the Concise Oxford Dictionary is delegated power. In Blacks Law Dictionary the meanings of the word authority are: permission;

right to exercise powers — often synonymous with power. The power delegated by a principal to his agent. The lawful delegation of power by one person to another. Power of agent to affect legal relations of principal by acts done in accordance with principals manifestations of consent to agent. In Corpus Juris Secundum (at p.1290) the following are the meanings of the term authority: in its broad general sense, the word has been defined as meaning control over; power; jurisdiction; power to act, whether original or delegated. The word is frequently used to express derivative power; and in this sense, the word may be used as meaning instructions, permission, power delegated by one person to another, the result of the manifestations by the former to the latter of the formers consent that the latter shall act for him, authority in this sense — in the laws of at least one state, it has been similarly used as designating or meaning an agency for the purpose of carrying out a state duty or function; some one to whom by law a power has been given. In Words and Phrases we find various shades of meaning of the word authority at pp.603, 606, 612 and 613: Authority, as the word is used throughout the Restatement, is the power of one person to affect the legal relations of another by acts done in accordance with the others manifestations of consent to him; an agency of one or more participating governmental units created by statute for specific purpose of having delegated to it certain functions governmental in character; the lawful delegation of power by one person to another; power of agent to affect legal relations of principal by acts done in accordance with principals manifestations of consent to him.

From the above discussion, it follows that the phrase any industry carried on under the authority of the Central Government implies an industry which is carried on by virtue of, pursuant to, conferment of, grant of, or delegation of power or permission by the Central Government to a Central Government Company or other Govt. company/undertaking. To put it differently, if there is lack of conferment of power or permission by the Central Government to a government company or undertaking, it would disable such a company/undertaking to carry on the industry in question.

In interpreting the said phrase, support is sought to be drawn by the learned counsel for the contract labour from the cases laying down the principles as to under what circumstances a Government company or undertaking will fall within the meaning of State or other authorities in Article 12 of the Constitution.

We shall preface our discussion of those cases by indicating that for purposes of enforcement of fundamental rights guaranteed in Part III of the Constitution the question whether a Government Company or undertaking is State within the meaning of Article 12 is germane. It is important to notice that in these cases the pertinent question is appropriateness of the Government – which is the appropriate Government within the meaning of CLRA Act;

whether, the Central or the State Government, is the appropriate Government in regard to the industry carried on by the Central/State Government Company or any undertaking and not whether such Central/State Government company or undertaking come within the meaning of Article 12. The word State is defined in Article 12 which is quoted in the footnote.

In Sukhdev Singh & Ors. vs. Bhagatram Sardar Singh Raghuvanshi & Anr. , this Court, in the context whether service Regulations framed by statutory corporations have the force of law, by majority, held that the statutory corporations, like ONGC, IFFCO, LIC established under different statutes fell under other authorities and were, therefore, State within the meaning of that term in Article 12 of the Constitution. The Court took into consideration the following factors, (a) they were owned, managed and could also be dissolved by the Central Government;

(b) they were completely under the control of the Central Government and (c) they were performing public or statutory duties for the benefit of the public and not for private profit; and concluded that they were in effect acting as the agencies of the Central Government and the service Regulations made by them had the force of law, which would be enforced by the Court by declaring that the dismissal of an employee of the corporation in violation of the Regulations, was void.

In Ramanna Dayaram Shetty vs. The International Airport of India & Ors. , a three-Judge Bench of this Court laid down that Corporations created by the Government for setting up and management of public enterprises and carrying out public functions, act as instrumentalities of the Government; they would be subject to the same limitations in the field of constitutional and administrative laws as Government itself, though in the eye of law they would be distinct and independent legal entities. There, this Court was enforcing the mandate of Article 14 of the Constitution against the respondent – a Central Govt. Corporation.

Managing Director, U.P.Warehousing Corporation & Anr.

respondent-employee of the appellant-Corporation in violation of the principles of natural justice. There also the Court held the Corporation to be an instrumentality of the State and extended protection of Articles 14 and 16 of the Constitution to the employee taking the view that when the Government is bound to observe the equality clause in the matter of employment the corporations set up and owned by the Government are equally bound by the same discipline.

etc. , the question decided by a Constitution Bench of this Court was: whether Jammu & Kashmir Regional Engineering College, Srinagar, registered as a society under the Jammu & Kashmir Registration of Societies Act, 1898, was State within the meaning of Article 12 of the Constitution so as to be amenable to writ jurisdiction of the High Court. Having examined the Memorandum of Association and the Rules of the Society, the Court decided that the control of the State and the Central Government was deep and pervasive and the society was a mere projection of the State and the Central Government and it was, therefore, an instrumentality or agency of the State and Central Government and as such an authority-state within the meaning of Article 12.

The principle laid down in the aforementioned cases that if the government acting through its officers was subject to certain constitutional limitations, a fortiorari the government acting through the instrumentality or agency of a corporation should equally be subject to the same limitations, was approved by the Constitution Bench and it was pointed out that otherwise it would lead to considerable erosion of the efficiency of the Fundamental Rights, for in that event the government would be enabled to override the Fundamental Rights by adopting the stratagem of carrying out its function through the instrumentality or agency of a corporation while retaining control over it. That principle has been consistently followed and reiterated in all subsequent cases – Equipment Corpn. Of India Ltd. , Central Inland Water Transport Education & Research Centre & Ors. and G.B. Mahajan & Ors.

burden this judgment by adding to the list and referring to each case separately.

We wish to clear the air that the principle, while discharging public functions and duties the Govt.

Companies/Corporations/Societies which are instrumentalities or agencies of the Government must be subjected to the same limitations in the field of public law — constitutional or administrative law — as the Government itself, does not lead to the inference that they become agents of the Centre/State Government for all purposes so as to bind such Government for all their acts, liabilities and obligations under various Central and/or State Acts or under private law.

From the above discussion, it follows that the fact of being instrumentality of a Central/State Govt. or being State within the meaning of Article 12 of the Constitution cannot be determinative of the question as to whether an industry carried on by a Company/Corporation or an instrumentality of the Govt. is by or under the authority of the Central Government for the purpose of or within the meaning of the definition of appropriate Government in the CLRA Act. Take the case of a State Government corporation/company/undertaking set up and owned by the State Government which is an instrumentality or agency of the State Government and is engaged in carrying on an industry, can it be assumed that the industry is carried on under the authority of the Central Government, and in relation to any industrial dispute concerning the industry can it be said that the appropriate Government is the Central Government? We think the answer must be in the negative. In the above example if, as a fact, any industry is carried on by the State Government undertaking under the authority of the Central Government, then in relation to any industrial dispute concerning that industry, the appropriate Government will be the Central Government. This is so not because it is agency or instrumentality of the Central Government but because the industry is carried on by the State Govt. Company/Corporation/Undertaking under the authority of the Central Government. In our view, the same reasoning applies to a Central Government undertaking as well. Further, the definition of establishment in CLRA Act takes in its fold purely private undertakings which cannot be brought within the meaning of Article 12 of the Constitution. In such a case how is appropriate Government determined for the purposes of CLRA Act or Industrial Disputes Act? In our view, the test which is determinative is: whether the industry carried on by the establishment in question is under the authority of the Central Govt? Obviously, there cannot be one test for one part of definition of establishment and another test for another part.

Thus, it is clear that the criterion is whether an undertaking/instrumentality of Government is carrying on an industry under the authority of the Central Government and not whether the undertaking is instrumentality or agency of the Government for purposes of Article 12 of the Constitution, be it of Central Government or State Government.

There cannot be any dispute that all the Central Government companies with which we are dealing here are not and cannot be equated to Central Government though they may be State within the meaning of Article 12 of the Constitution. We have held above that being the instrumentality or agency of the Central Government would not by itself amount to having the authority of the Central Government to carry on that particular industry. Therefore, it will be incorrect to say that in relation to any establishment of a Central Government Company/undertaking, the appropriate Government will be the Central Government. To hold that the Central Government is the appropriate Government in relation to an establishment, the court must be satisfied that the particular industry in question is carried on by or under the authority of the Central Government. If this aspect is kept in mind it would be clear that the Central Government will be the appropriate Government under the CLRA Act and the I.D.Act provided the industry in question is carried on by a Central Government company/an undertaking under the authority of the Central Government. Such an authority may be conferred, either by a Statute or by virtue of relationship of principal and agent or delegation of power. Where the authority, to carry on any industry for or on behalf of the Central Government, is conferred on the Government company/any undertaking by the Statute under which it is created, no further question arises. But, if it is not so, the question that arises is whether there is any conferment of authority on the Government company/ any undertaking by the Central Government to carry on the industry in question. This is a question of fact and has to be ascertained on the facts and in the circumstances of each case.

We shall refer to the cases of this Court on this point.

In Heavy Engineering Mazdoor Union vs. State of Bihar & Ors. the said expression (appropriate Government) came up for consideration. The Heavy Engineering Corporation is a Central Government company. 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 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. It was, however, clarified that an inference that the corporation was the agent of the Government might be drawn where it was performing in substance Governmental and not commercial functions. It must be mentioned here that in the light of the judgments of this Court, referred to above, it is difficult to agree with the distinction between a governmental activity and commercial function of government companies set up and owned by government, insofar as their function in the realm of public law are concerned.

However, the contention that the decision in that case is based on concession of the counsel for the appellant is misconceived.

This Court summed up the submission in para 4 thus :

The undertaking, therefore, is not one carried on directly by the Central Government or by any one of its departments as in the case of posts and telegraphs or the railways. It was, therefore, rightly conceded both in the High Court as also before us that it is not an industry carried on by the Central Government. That being the position, the question then is, is the undertaking carried on under the authority of the Central Government? It is evident that the concession was with regard to the fact that it was not an industry carried on by the Central Government and not in regard to was the undertaking carried on under the authority of the Central Government? Indeed that was the question decided by the Court on contest and it was held that the undertaking was not carried on by the Central Government company under the authority of the Central Government and that the appropriate Government in that case was the State Government and not the Central Government. From the above discussion, it is evident that the Court correctly posed the question- whether the State Govt. or the Central Govt. was the appropriate Government and rightly answered it.

Ors. , this Court was called upon to decide the question as to whether the expression appropriate Government, as defined in Section 2(a)(i) of the Industrial Disputes Act, was the State Government or the Central Government. In that case dispute arose between the management of the Barrackpore branch (West Bengal) of the appellant and its employees. The Governor of West Bengal referred the dispute to Industrial Tribunal under Section 10 of the I.D. Act. The competence of the State Government to make the reference was called in question. A three-Judge Bench of this Court, relying on the decision in Heavy Engineerings case (supra), held that the reference was valid. The Court took note of the factors, viz; if there is any disturbance of industrial peace at Barrackpore where a considerable number of workmen were working, the appropriate Government concerned in the maintenance of the industrial peace was the West Bengal Government; that Barrackpore industry was a separate unit; the cause of action in relation to the industrial dispute arose at Barrackpore. Having regard to the definitions of the terms appropriate Government and establishment, in Section 2 of CLRA Act, it cannot be said that the factors which weighed with the Court were irrelevant. It was also pointed out therein that from time to time certain statutory corporations were included in the definition but no public company of which the shares were exclusively owned by the Government, was roped in the definition. What we have expressed above about Heavy Engineerings case (supra) will, equally apply here.

The aforementioned phrase an industry carried on by or under the authority of the Central Government again fell for consideration of a three-Judge Bench of this Court in Rashtriya Mill Mazdoor Sangh, Nagpur vs. Model Mills, Nagpur & Anr. .

The case arose in the context of Section 32(iv) of the Payment of Bonus Act, 1965, which provides that nothing in that Act shall apply to employees employed by an establishment engaged in any industry carried on by or under the authority of any department of the Central Government or a State Government or a local authority. Under Section 18-A of the Industries (Development and Regulation) Act, 1951, the Central Government appointed an authorised Controller to replace the management of the respondent – Model Mills. That was done to give effect to the directives issued by the Central Government under Section 16 of the said Act. On behalf of the respondent it was contended that substitution of the management by the Controller appointed under Section 18-A of the Industries (Development & Regulation) Act would tantamount to the industry being run under the authority of the department of the Central Government. Negativing the contention it was held :

While exercising power of giving directions under Section 16 the existing management is subjected to regulatory control, failing which the management has to be replaced to carry out the directions. In either case the industrial undertaking retains its identity, personality and status unchanged. On a pure grammatical construction of sub-section (4) of Section 32, it cannot be said that on the appointment of an authorised controller the industrial undertaking acquires the status of being engaged in any industry carried on under the authority of the department of the Central Government.

Food Corporation of India, Bombays case (supra) is the only case which arose directly under the CLRA Act. The Food Corporation of India (FCI) engaged, inter alia, the contract labour for handling of foodgrains. Complaining that their case for departmentalisation was not being considered either by the Central Government or by the State Government, nor were they extended the benefits conferred by the CLRA Act, a representative action was initiated in this Court by filing a writ petition under Article 32 of the Constitution seeking a writ of mandamus against the Central/State Government to abolish contract labour and to extend them the benefits under that Act.

The FCI resisted the claim for abolition of contract labour on the ground that the operations of loading/unloading foodgrains were seasonal, sporadic and varied from region to region. However, it pleaded that the State Government and not the Central Government was the appropriate Government under the CLRA Act. In view of the unamended definition of the expression appropriate Government under CLRA Act, which was in force on the relevant date, it was pointed out that the FCI was not included in the definition by name as it was done under the Industrial Disputes Act. Following the judgment of this Court in Heavy Engineerings case (supra) and referring to the decision of this Court in Rashtriya Mill Mazdoor Sanghs case (supra), the Court took the view that the same principle would govern the interpretation of the expression appropriate Government in the CLRA Act and held that the State Government was the appropriate Government pertaining to the regional offices and warehouses which were situate in various States. We find no illegality either in the approach or in the conclusion arrived at by the Court in these cases.

It was in that background of the case law that the Air Indias case (supra) came to be decided by a three-Judge Bench of this Court. The Air India Corporation engaged contract labour for sweeping, cleaning, dusting and watching of the buildings owned and occupied by it. The Central Government having consulted the Central Advisory Board constituted under Section 3(1) of the CLRA Act issued notification under Section 10(1) of the Act prohibiting employment of contract labour on and from 9.12.1976 for sweeping, cleaning, dusting and watching of the buildings owned or occupied by the establishment in respect of which the appropriate Government under the said Act is the Central Government. However, the Regional Labour Commissioner, Bombay opined that the State Government was the appropriate Government under the CLRA Act. The respondent-Union filed writ petition in the High Court at Bombay seeking a writ of mandamus to the appellant to enforce the said notification prohibiting employment of contract labour and for a direction to absorb all the contract labour doing sweeping, cleaning, dusting and watching of the buildings owned or occupied by the Air India with effect from the respective dates of their joining as contract labour with all consequential rights/benefits. A learned Single Judge of the High Court allowed the writ petition on November 16, 1989 and directed that all the contract labour should be regularised as employees of the appellant from the date of filing of the writ petition. On appeal, the Division Bench, by order dated April 3, 1992, confirmed the judgment of the learned Single Judge and dismissed the appeal.

On further appeal to this Court, it was held that the word control was required to be interpreted in the changing commercial scenario broadly in keeping with the constitutional goals and perspectives; the interpretation must be based on some rational and relevant principles and that the public law interpretation is the basic tool of interpretation in that behalf relegating common law principles to purely private law field. In that view of the matter, it concluded that the two-Judge Bench decision in Heavy Engineerings case narrowly interpreted the expression appropriate Government on the common law principles which would no longer bear any relevance when it was tested on the anvil of Article 14. It noted that in Hindustan Aeronautics Ltd., Rashtriya Mill Mazdoor Sangh and Food Corporation of India, the ratio of Heavy Engineering formed the foundation but in Hindustan Aeronautics Ltd. there was no independent consideration except repetition and approval of the ratio of Heavy Engineering case which was based on concession; in Food Corporation of India, the Court proceeded on the premise that warehouses of the corporation were situate within the jurisdiction of the different State Governments and that led to conclude that the appropriate Government would be the State Government.

Thus, distinguishing the aforementioned decisions, it was held therein (Air Indias case) that from the inception of the CLRA Act the appropriate Government was the Central Government.

We have held above that in the case of a Central Government company/undertaking, an instrumentality of the Government, carrying on an industry, the criteria to determine whether the Central Government is the appropriate Government within the meaning of the CLRA Act, is that the industry must be carried on by or under the authority of the Central Government and not that the company/undertaking is an instrumentality or an agency of the Central Government for purposes of Article 12 of the Constitution; such an authority may be conferred either by a statute or by virtue of relationship of principal and agent or delegation of power and this fact has to be ascertained on the facts and in the circumstances of each case. In view of this conclusion, with due respect, we are unable to agree with the view expressed by the learned Judges on interpretation of the expression appropriate Government in Air Indias case (supra). Point No.1 is answered accordingly.

Point No.2 relates to the validity of the notification issued by the Central Government under Section 10(1) of the Contract Labour (Regulation & Abolition) Act, 1970, dated December 9, 1976. The main contention against the validity of the notification is that an omnibus notification like the impugned notification would be contrary to the requirements of Section 10 of the CLRA Act and is illustrative of non-application of mind.

It would be profitable to refer to Section 10 of the Act :

10. Prohibition of employment of contract labour – (1) Notwithstanding anything contained in this Act, the appropriate Government may, after consultation with the Central Board or, as the case may be, a State Board, prohibit, by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any establishment.

(2) Before issuing any notification under sub-section (1) in relation to an establishment, the appropriate Government shall have regard to the conditions of work and benefits provided for the contract labour in that establishment and other relevant factors, such as — (a) whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment;

(b) whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment;

(c) whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto;

(d) whether it is sufficient to employ considerable number of whole-time workmen.

Explanation : If a question arises whether any process or operation or other work is of perennial nature, the decision of the appropriate Government thereon shall be final.

A careful reading of Section 10 makes it evident that sub- section (1) commences with a non obstante clause and overrides the other provisions of the CLRA Act in empowering the appropriate Government to prohibit by notification in the Official Gazette, after consultation with Central Advisory Board/State Advisory Board, as the case may be, employment of contract labour in any process, operation or other work in any establishment. Before issuing notification under sub-section (1) in respect of an establishment the appropriate Government is enjoined to have regard to: (i) the conditions of work; (ii) the benefits provided for the contract labour; and (iii) other relevant factors like those specified in clauses (a) to (d) of sub-section (2).

Under clause (a) the appropriate Government has to ascertain whether the process, operation or other work proposed to be prohibited is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is carried on in the establishment; clause (b) requires the appropriate Government to determine whether it is of perennial nature, that is to say, it is of sufficient duration having regard to the nature of industry, trade, business, manufacture or occupation carried on in that establishment; clause (c) contemplates a verification by the appropriate Government as to whether that type of work is done ordinarily through regular workmen in that establishment or an establishment similar thereto; and clause (d) requires verification as to whether the work in that establishment is sufficient to employ considerable number of whole-time workmen. The list is not exhaustive. The appropriate Government may also take into consideration other relevant factors of the nature enumerated in sub-section (2) of Section 10 before issuing notification under Section 10(1) of the CLRA Act.

The definition of establishment given in Section 2(e) of the CLRA Act is as follows:

In clause (e) – establishment is defined to mean – (i) any office or department of the Government or a local authority, or (ii) any place where any industry, trade, business, manufacture or occupation is carried on.

The definition is in two parts : the first part takes in its fold any office or department of the Government or local authority – the Government establishment; and the second part encompasses any place where any industry, trade, business, manufacture or occupation is carried on – the non-Govt.

establishment. It is thus evident that there can be plurality of establishments in regard to the Government or local authority and also in regard to any place where any industry, trade, business, manufacture or occupation is carried on.

Now, reading the definition of establishment in Section 10, the position that emerges is that before issuing notification under sub-section (1) an appropriate Government is required to:

(i) consult the Central Board/State Board; (ii) consider the conditions of work and benefits provided for the contract labour and (iii) take note of the factors such as mentioned in clauses (a) to (d) of sub-section (2) of Section 10, referred to above, with reference to any office or department of the Government or local authority or any place where any industry, trade, business, manufacture or occupation is carried on. These being the requirement of Section 10 of the Act, we shall examine whether the impugned notification fulfils these essentials.

The impugned notification issued by the Central Government on December 9, 1976, reads as under :

S.O.No.779(E) 8/9.12.76 in exercise of the power conferred by Sub-section (1) of Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970 (37 of 1970) the Central Government after consultation with the Central Advisory Contract Labour Board hereby prohibits employment of contract labour on an from the 1st March, 1977, for sweeping, cleaning, dusting and watching of buildings owned or occupied by the establishments in respect of which the appropriate Government under the said Act is the Central Government.

Provided that this notification shall not only apply to the outside cleaning and other maintenance operations of multi-storeyed buildings where such cleaning or maintenance operations cannot be carried out except with specialised experience.

A glance through the said notification, makes it manifest that with effect from March 1, 1977, it prohibits employment of contract labour for sweeping, cleaning, dusting and watching of buildings owned or occupied by establishment in respect of which the appropriate Government under the said Act is the Central Government. This clearly indicates that the Central Government had not adverted to any of the essentials, referred to above, except the requirement of consultation with the Central Advisory Board.

Consideration of the factors mentioned above has to be in respect of each establishment, whether individually or collectively, in respect of which notification under sub-section 1 of Section 10 is proposed to be issued. The impugned notification apart from being an omnibus notification does not reveal compliance of sub- section (2) of Section 10. This is ex facie contrary to the postulates of Section 10 of the Act. Besides it also exhibits non- application of mind by the Central Government. We are, therefore, unable to sustain the said impugned notification dated December 9, 1976 issued by the Central Government.

Point No.3 remains to be considered. This is the moot point which generated marathon debate and is indeed an important one.

The learned Solicitor General contended that contract labour had been in vogue for quite some time past; having regard to the abuses of the contract labour system, the CLRA Act was enacted by the Parliament to regulate the employment of contract labour and to cause its abolition in an establishment when the given circumstances exist; prior to the Act no mandamus could have been issued by courts creating relationship of employer and the employee between the principal employer and the contract labour and the Act did not alter that position. When the principal employer entrusts the work to a contractor there will be principal to principal relationship between them as such the work force of the contractor cannot be said to be the employees of the establishment. It was argued that under the Specific Relief Act a contract of employment could not be enforced specifically much less can a new contract of employment between the principal employer and the contract labour be created by the court. He has also pointed out that in every government company/establishment which is an instrumentality of the State there are service rules governing the appointment of staff providing among other things for equality of opportunity to all aspirants for posts in such establishments, calling for candidates from the employment exchange and the reservation in favour of Scheduled Castes/Scheduled Tribes/other Backward Classes, so a direction by the court to absorb the contract labour en bloc could be complied with only in breach of the statutory service rules. He has further contended that conceding that the CLRA Act is a beneficial legislation, the benefits which the Parliament thought it fit to confer on the contract labour are specified in the Act and the court by way of interpretation cannot add to those benefits.

The contentions of Mr. G.L. Sanghi for the principal employer are : that there was never the relationship of master and servant between the F.C.I. and the contract labour; the various provisions of the Act which require the contractor to maintain canteen, rest-rooms and other facilities like a sufficient supply of wholesome drinking water at convenient places, sufficient number of latrines and urinals accessible to the contract labour in the establishment, washing facilities and the first aid facilities negative the existence of any direct relationship as sought to be made out. The responsibilities of the principal employer under the CLRA Act arise only in the event of failure of the contractor to fulfil his statutory obligations and in such an event he is bound to reimburse the principal employer. Whenever a contractor undertakes to produce a given result or to provide services to an establishment/undertaking by engaging contract labour, the relationship of the master and servant exists between the contractor and the contract labour and not between the principal employer and the contract labour. When the Central Government/State Government/local authority entrusts any work to a contractor who recruits contract labour, in connection with that work, obviously the recruitment will not be in conformity with the statutory service rules and the same position would obtain with regard to non-governmental organisations, factories, mines etc. Further, having regard to the distinction between the principal employer and the establishment, in the absence of conferment of any authority on the manager by his principal employer to enter into a contract of employment on his behalf, the manager by entrusting work to a contractor cannot make a contract of service between the principal employer and the contract labour; if this analogy is applied to the case of the Central Government/the State Government/local authority, the contractor who undertakes to produce a given result would be creating a status of government servant by selecting and appointing persons for a particular establishment/undertaking. Such a consequence will obliterate the constitutional scheme in relation to government employment resulting in uncontemplated and unimaginative liabilities in financial terms. He pointed out that under the Mines Act the manager has no authority to employ persons so as to create master and servant relationship; the same position will equally apply in the case of occupier of a factory under the Factories Act. The provisions of the CLRA Act do not make the contractor an agent for creating relationship of master and servant between the principal employer and the contract labour in the situations pointed out above. In all such cases absorbing the contract labour would amount to opening a new channel of recruitment and it could not have been the intention of the Parliament in enacting CLRA Act to provide for appointment to the posts in various government/non-government establishments by circumventing the service rules. He canvassed that no direction could be issued to the principal employer by the Court to absorb the contract labour in the establishment.

Mr. T.R. Andhyarujina, the learned senior counsel appearing for the principal employer (respondents in Transfer Union of India & Anr.), urged that prior to coming into force of the CLRA Act, the Industrial Courts were ordering abolition of contract labour system and giving appropriate directions to the employer to employ contract labour on such terms and conditions as the employer might deem fit but no direction was given to make automatic absorption on abolition of contract labour. In 1946 in the Rege Committee Report or in 1969 in the Report of Mr. Justice P.B. Gajendragadkar who was himself a party to the judgment in The Standard-Vacuum Refining Co. of India Ltd.

automatic absorption of the contract labour by the principal employer; the Statement of Objects and Reasons of the CLRA Act also does not speak of automatic absorption of contract labour which would show that the Parliament deliberately did not make any provision for automatic absorption; when the contract is terminated either by the principal employer or by the contractor or when the contractor himself terminates services of his workers or when he abandons the contract, the workmen go along with the contractor or may have a cause against the contractor but they can have no claim against the principal employer as such on prohibition of employment of contract labour also the same consequence should follow; by prohibiting the contract labour the Parliament intended that labour in general should be benefitted by making it impossible for the principal employer to engage contract labour through a contractor and the benefit of automatic absorption is not conferred by the CLRA Act on the contract labour working in an establishment at the time of issuing the notification prohibiting engagement of contract labour.

Mr. K.K. Venugopal, the learned senior counsel appearing for the principal employer (appellant in O.N.G.C.) contended that Section 10 of the CLRA Act did not speak of automatic absorption so giving a direction to make absorption of the contract labour as a consequence of issuance of notification thereunder, prohibiting the engagement of contract labour in various processes, would be contrary to the Act. Had it been the intention of the Parliament to establish relationship of master and servant between the principal employer and the contract labour, submitted the learned counsel, Section 10 of the CLRA Act would have been differently worded and new sub section to that effect would have been enacted. If the court were to accept the contention of the contract labour that automatic absorption should follow a notification prohibiting employment of contract labour, the court would be adding a sub-section to Section 10 prescribing for automatic absorption on issuance of notification under sub-section (1) of Section 10 which would be impermissible.

Mr. Shanti Bhushan argued that a contractor employing contract labour for any work of an establishment would, in law, create relationship of master and servant between the establishment and the labour; he sought to derive support from judgments of this court in the following cases: The Maharashtra Ors. . His further contention is that a joint reading of definitions of contract labour in clause (b) and of establishment in clause (e) of Section 2 of the CLRA Act would show that a legal relationship between a person employed to work in an industry and the owner of the industry comes into existence and it would not make any difference whether that relationship was brought about by the act of the principal/master or by the act of his authorised agent; the very fact of being employed in connection with an industry, creates rights in favour of the person employed and against the owner of the industry by bringing into existence, in law, a relationship of employer and the employee (master and servant) between them. He pointed out that the definition of the expression workman in clause (i) excludes an out-worker, a person to whom any articles and materials are given out by or on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or business of the principal employer when the process is to be carried out either in the home of the out-worker or in some other premises not being premises under the control and management of the principal employer and argued that it would show that those who work at the place either of or under the Control and management of the principal employer, must be treated as the workmen of the principal employer. It is further argued that where the work is of a perennial nature, sub-section (2) of Section 10 of the CLRA Act requires that the contract labour should be abolished so it would be an abuse on the part of the employer to resort to employing contract labour in such a case. Reliance is also placed on Rules 21(2), 25(2)(V)(a), 72, 73, 74-Form XII, Rules 75, 76, 77, 81(3), 82(2) and Forms I, II, III and IV relating to certificate of registration, Form VI relating to licence, Form XIV relating to issue of employment card and Form XXV relating to annual returns of the principal employer, to contend that the principal employer has to keep track with the number of workmen employed, terms and conditions on which they are employed and, therefore, the employer cannot be permitted to plead that no relationship of master and servant exists between the principal employer and the contract labour. It is elaborated that under the CLRA Act, the action of the contractor who is the agent of the principal employer to engage contract labour, binds him and creates relationship of master and servant between them, therefore, the only consequence of notification under Section 10(1) could be to remove the contractor (middle-man) and mature the relationship which had already existed between the workman and the principal employer into a completely direct relationship and that the effect of the notification could never be to extinguish the rights of the persons for whose benefit the notification was required to be issued; reliance is placed on the three Judge Bench of this Court in Air Indias case (supra) and it is pointed out that Justice S.B. Majmudar who was a party to Gujarat Electricity Board, Thermal Power Station, Ukai, Gujarat reasons for automatic absorption in his concurring judgment.

Insofar as the reservation quota in favour of Scheduled Castes, Scheduled Tribes and Backward Classes is concerned, he submitted that there would be many situations in which the rule of reservation could not be complied with, e.g. when a private company had made appointments without following the rule of reservation and if such a company were to be taken over by the State the claim of the workers for absorption could not be denied on the ground that it would upset the rule of reservation. It is further contended that if on issuing notification under Section 10(1) prohibiting employment of contract labour, there is no automatic absorption, the employer cannot employ work force which will result in closing down the industry producing a crippling affect on the establishment; but if automatic absorption is held to be the rule, no disturbance will be caused in the functioning of the industry and the contract labourers would become employees of the principal employer and that the employer will, however, have a right to retrench any excess staff by following the principles of retrenchment and paying retrenchment compensation as provided in the Industrial Disputes Act.

Mr. Bhaskar P. Gupta, the learned senior counsel appearing for the contract labour (respondents in Civil Appeal Nos.719-720 of 2001), submitted that identification forms for working in different departments of the company were issued by the appellant company to the contract labour and, therefore, there was a direct relationship of master and servant between the management and the labourers; and if it were to be held that there was no automatic absorption on prohibition of engagement of contract labour the workers would be placed in a position worse than that held by them before abolition. He urged for construction of the provisions of the Act on the principles laid down in Heydons case to support the plea that the Act provided for absorption of the contract labour on issuing abolition notification by necessary implication and provided penal consequences to prevent exploitation and abuse of the contract labour. In that case, it is submitted, the company itself understood that the provisions of the Act required automatic absorption and absorbed 1550 workers leaving only 400 workers to be absorbed.

Ms. Indira Jaisingh has contended that the primary object of the labour laws is to effectuate the Directive Principles of State policy and, therefore, the provisions of CLRA Act have to be interpreted accordingly; the principles of contract law are inapplicable in sricto sensu to labour-management relations; she relied on the following judgments of this Court : Western India Bharat Bank Ltd., Delhi & Anr. , Rai Bahadur Diwan Badri Das Shammi Bhan & Anr. . Prior to the enactment of CLRA Act, it is pointed out, the courts have ordered abolition of contract labour and their departmentalisation in The Standard-Vacuums case (supra) and Hussainbhais (supra). She has argued that the Statement of Objects and Reasons does not say that the CLRA Act is intended to alter the then existing law; it codifies the existing law and confers quasi legislative power upon the government to prohibit contract labour; it does not affect the powers of the court to direct absorption of contract labour [see abolition notification is issued after consideration of all the facts and circumstances so the consequence can only be that the contractor is displaced and a direct relationship is established between the principal employer and the contract labour; in Air Indias case (supra), it was held that the consequence of the abolition of contract labour, by necessary implication, would result in the principal employer absorbing the contract labour;

the linkage between the contractor and the employee would be snapped and a direct relationship between the principal employer and the contract labour would emerge to make them its employees; she invited our attention to Vegoils Private Limited Ltd. & Ors. and Gujarat Electricitys case (supra) and submitted that the award proceedings stipulated in Gujarat Electricitys Case (supra) was cumbersome procedure making the remedy a teasing illusion, therefore, automatic absorption alone was the proper solution. Our attention was also invited to various Forms prescribed under the Rules to bring home the point that the principal employer had complete control over the number of contract labourers being employed and there could be no over- employment without the knowledge of the employer and it was urged that the fact that the labourers had been working for quite a number of years would show that their continuance was necessary.

Mr. R. Venkatramani, the learned senior counsel appearing for the respondents in the appeal filed by the O.N.G.C. submitted that though the CLRA Act itself did not abolish the contract labour, it empowered the appropriate government to abolish the system in any establishment in the given circumstances. His contention is that Section 10 is intended to remove the contractor from the picture and that it can not be read as leading to removal of workers. He has also relied on the reasoning of Justice Majmudar in Air Indias case (supra) and added that if the contract labour is not absorbed the remedy of the abolition of the contract labour would be worse than the mischief sought to be remedied. He submitted that this Court directed absorption in Anr. , G. B. Pant University of Agriculture & Technology, Pant Mr. K.K. Singhvi, the learned senior counsel for the contract labour, referred to the reports of the Royal Commission appointed by the then British Government, the Rege Committee, the Second Planning Commission and the Second National Commission of Labour headed by Justice Gajendragadkar to emphasise that the practice of contract labour is an unfair practice of exploiting the labour and that each of these reports recommended abolition of the contract labour and where it was not possible so to do, to regulate the same. He pleaded for absorption of the contract labourer by the principal employer on the abolition of the contract labour system in the process, operation or other work in the establishment in which it was employed in three situations : (1) where there has been notification for abolition of contact labour; (2) where in violation of the notification, contract labour is employed; and (3) where principal employer resorts to employing of contract labour without getting itself registered or through a contractor who is not licensed. He laid emphasis upon the Directive Principles contained in Articles 39, 41, 42 & 43 and urged for interpreting the beneficial legislation like CLRA Act to promote the intention of the legislature; he argued that the purpose of abolition of the contract labour was to discontinue the exploitation of the contract labour and to bring it on par with the regular workmen, therefore, it was implicit that on abolition of the contact labour system, the concerned workmen should be absorbed as regular employees of the principal employer; relying upon the reasoning of Justice Majmudar in his concurring judgment in Air Indias case (supra), it was submitted that in labour laws the development had been on the basis of the judgments of the Courts and, therefore, we should interpret Section 10 to hold that as a result of issuance of prohibition notification, the contract labour working in an establishment at that time should stand absorbed automatically.

Ms. Asha Jain Madan, the learned counsel appearing for the contract labour (respondents in C.A. Nos. of 2001 @ S.L.P. (C) Nos.12657-12658 of 1998), adopted the argument of the other learned senior counsel; she also relied on the concurring judgment of Justice Majmudar in Air Indias case (supra) in support of her contention that automatic absorption should follow prohibition of contract labour by the appropriate Government in any given establishment.

The contentions of the learned counsel for the parties, exhaustively set out above, can conveniently be dealt with under the following two issues :

A. Whether the concept of automatic absorption of contract labour in the establishment of the principal employer on issuance of the abolition notification, is implied in Section 10 of the CLRA Act; and B. Whether on a contractor engaging contract labour in connection with the work entrusted to him by a principal employer, the relationship of master and servant between him (the principal employer) and the contract labour, emerges.

For a proper examination of these issues, a reference to Section 10 which provides for prohibition of employment of contract labour and Clauses (b), (c), (e), (g) and (i) of Section 2 of CLRA Act which define the terms contract labour, contractor, establishment, principal employer and workman respectively will be apposite. To interpret these and other relevant provisions of the CLRA Act, to which reference will be made presently, we may, with advantage, refer to CRAIES on Statute Law quoting the following observation of Lindley M.R. in Re Mayfair Property Co. in regard to Rule in Heydons case, in order properly to interpret any statute it is as necessary now as it was when Lord Coke reported Heydons Case, to consider how the law stood when the statute to be construed was passed, what the mischief was for which the old law did not provide, and the remedy provided by the statute to cure that mischief.

What the learned Master of the Rolls observed in 1898 holds good even in 2001, so we proceed in the light of Rule in Heydons case.

We have extracted above Section 10 of the CLRA Act which empowers the appropriate Government to prohibit employment of contract labour in any process, operation or other work in any establishment, lays down the procedure and specifies the relevant factors which shall be taken into consideration for issuing notification under sub-section (1) of Section 10. It is a common ground that the consequence of prohibition notification under Section 10(1) of the CLRA Act, prohibiting employment of contract labour, is neither spelt out in Section 10 nor indicated anywhere in the Act. In our view, the following consequences follow on issuing a notification under Section 10 (1) of the CLRA Act:

(1) contract labour working in the concerned establishment at the time of issue of notification will cease to function; (2) the contract of principal employer with the contractor in regard to the contract labour comes to an end; (3) no contract labour can be employed by the principal employer in any process, operation or other work in the establishment to which the notification relates at any time thereafter; (4) the contract labour is not rendered unemployed as is generally assumed but continues in the employment of the contractor as the notification does not sever the relationship of master and servant between the contractor and the contract labour; (5) the contractor can utilise the services of the contract labour in any other establishment in respect of which no notification under Section 10 (1) has been issued; where all the benefits under the CLRA Act which were being enjoyed by it, will be available;

(6) if a contractor intends to retrench his contract labour he can do so only in conformity with the provisions of the I.D.

Act. //The point, now under consideration, is : whether automatic absorption of contract labour working in an establishment, is implied in Section 10 of the CLRA Act and follows as a consequence on issuance of the prohibition notification thereunder. We shall revert to this aspect shortly.

Now we shall notice the definitions of the terms referred to above.

The term contract labour as defined in clause (b) of Section 2 reads:

(2)(1)(b) a workman shall be deemed to be employed as contract labour in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer.

By definition the term contract labour is a species of workman. A workman shall be so deemed when he is hired in or in connection with the work of an establishment by or through a contractor, with or without the knowledge of the principal employer. A workman may be hired: (1) in an establishment by the principal employer or by his agent with or without the knowledge of the principal employer; or (2) in connection with the work of an establishment by the principal employer through a contractor or by a contractor with or without the knowledge of the principal employer. Where a workman is hired in or in connection with the work of an establishment by the principal employer through a contractor, he merely acts as an agent so there will be master and servant relationship between the principal employer and the workman. But where a workman is hired in or in connection with the work of an establishment by a contractor, either because he has undertaken to produce a given result for the establishment or because he supplies workman for any work of the establishment, a question might arise whether the contractor is a mere camouflage as in Hussainbhai Calicuts case (supra) and in Indian Petrochemicals Corporations case (supra) etc.; if the answer is in the affirmative, the workman will be in fact an employee of the principal employer; but if the answer is in the negative, the workman will be a contract labour.

Clause (c) of Section 2 defines contractor as under:

(2)(1)(c) Contractor, in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor.

It may be noticed that the term contractor is defined in relation to an establishment to mean a person who undertakes to produce a given result for the establishment through contract labour or supplies contract labour for any work of the establishment and includes sub-contractor but excludes a supplier of goods or articles of manufacture to such establishment.

The definition of principal employer in clause (g) of Section 2 runs thus:

(2)(1)(g)(i) in relation to any office or department of the Government or a local authority, the head of that office or department or such other officer as the Government or the local authority, as the case may be, may specify in this behalf.

(ii) in a factory, the owner or occupier of the factory and where a person has been named as the manager of the factory under the Factories Act, 1948 ( 63 of 1948), the person so named, (iii) in a mine, the owner or agent of the mine and where a person has been named as the manager of the mine the person so named, (iv) in any other establishment, any person responsible for the supervision and control of the establishment.

Explanation: For the purpose of sub-clause (iii) of this clause, the expressions mine, owner and agent shall have the meanings respectively assigned to them in clause (j), clause (l) and clause (c) of sub-section (1) of section 2 of the Mines Act, 1952 ( 35 of 1952).

It contains four parts. Under the first part, the head of any office or department or such other officer as the Government or the local authority, as the case may be, may specify in that behalf, is called the principal employer. The second part takes in the owner or occupier of the factory and where a person has been named as the manager of the factory under the Factories Act, 1948, the person so named is treated as the principal employer.

The third part includes, within the meaning of the principal employer, the owner or agent of a mine or where a person has been named as the manager of the mine, the person so named .

And the fourth part embraces every person responsible for the supervision and control of any establishment within the fold of principal employer.

The term workman as defined in clause (i) of Section 2 of the CLRA Act is as follows:

workman means any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled or un-skilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied but does not include any such person- (A) who is employed mainly in a managerial or administrative capacity;

(B) who, being employed in a supervisory capacity draws wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature; or (C) who is an out-worker, that is to say, a person to whom any articles and materials are given out by or on behalf of the principal employer to be made up, cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for the purposes of the trade or business of the principal employer and the process is to be carried out either in the home of the out-worker or in some other premises, not being premises under the control and management of the principal employer.

The definition is quite lucid. It has two limbs. The first limb indicates the meaning of the term as any person employed in or in connection with the work of any establishment to do any skilled, semi-skilled or un-skilled, supervisory, technical or clerical work for hire or reward. It is immaterial that the terms of employment are express or implied. The second limb contains three exclusionary classes – (A) managerial or administrative staff;

(B) supervisory staff drawing salary exceeding Rs.500/-(p.m.) and (C) an out worker which implies a person to whom articles and materials are given out by or on behalf of the principal employer to be made up cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise processed for sale for purposes of the trade or business of the principal employer and the process is to be carried out either in the home of the out-worker or in some other place not being the premises under the control and management of the principal employer.

Now we shall consider issue A:

Whether the concept of automatic absorption of contract labour in the establishment of the principal employer on issuance of abolition notification, is implied in Section 10 of the CLRA Act.

It would be useful to notice the historical perspective of the contract labour system leading to the enactment of the CLRA Act for a proper appreciation of the issue under examination. The problems and the abuses resulting from engagement of contract labour had attracted the attention of the Government from time to time. In the pre-independence era, in 1929 a Royal Commission was appointed by the then British Government to study and report all the aspects of labour. Suffice it to mention that in 1931 the Royal Commission ( also known as Whitley Commission) submitted its report mentioning about existence of intermediary named jobber and recommended certain measures to reduce the influence of the jobber. Nothing substantial turned on that. In 1946 Rege Committee noted that in India contractors would either supply labour or take on such portions of work as they could handle. The Committee pointed out, whatever may be the grounds advanced by employers, it is to be feared that the disadvantages of the system are far more numerous and weightier than the advantages; though the Rege Committee recognised need for contract labour yet urged for its abolition where it was possible and recommended for regulating conditions of service where its continuance was unavoidable. In 1956 the Second Planning Commission (of which the then Prime Minister Pandit Jawahar Lal Nehru was the Chairman) observed that in the case of contract labour the major problems relate to the regulations of working conditions and ensuring them continuous employment and for that purposes suggested that it was necessary to:

(a) undertake studies to ascertain the extent and the nature of the problems involved in different industries:

(b) examine where contract labour could be progressively eliminated. This should be undertaken straightway;

(c) determine cases where responsibility for payment of wages, ensuring proper conditions of work, etc. could be placed on the principal employer in addition to the contractor;

(d) secure gradual abolition of the contract system where the studies show this to be feasible, care being taken to ensure that the displaced labour is provided with alternative employment;

(e) secure for contract labour the conditions and protection enjoyed by other workers engaged by the principal employer; and (f) set up a scheme of decasualisation, wherever feasible.

It is no doubt true that one of the suggestions referred to above, does speak of care being taken to ensure that the displaced labour is provided with alternative employment, but a careful reading of the recommendation shows that the Committee was not unmindful of the fact that abolition of the contract labour system would result in displacement of labour, nonetheless what it thought fit to recommend was alternative employment and not absorption in the establishment where the contract labour was working.

In 1969, the National Commission of Labour submitted its report recording the finding that the contract labour system was functioning with advantage to the employer and disadvantage to the contract labour and recommended that it should be abolished.

The Commission also observed that under the various enactments the definition of worker was enlarged to include contract labour and thus benefits of working conditions and hours of work admissible to labour directly employed were made available to the contract labour as well.

Indeed, the National Commission which was chaired by Justice P.B. Gajendragadkar who was a party to the judgment of this Court in The Standard Vacuums case (supra) possibly inspired by that judgment enumerated factors, indicated therein which would justify dispensing with the contract labour system, in para 29.11 of its report, which is reproduced hereunder.

29.11 – Judicial awards have discouraged the practice of employment of contract labour, particularly when the work is (i) perennial and must go on from day to day; (ii) incidental and necessary for the work of the factory; (iii) sufficient to employ a considerable number of wholetime workmen; and (iv) being done in most concerns through regular workmen.

These awards also came out against the system of middlemen.

While recommending abolition of contract labour altogether, it was emphasised that such facilities which other regular workers enjoyed, should be made available to contract labour if for some unavoidable reasons the contract labour had to stay. In para 29.15 of its report the National Commission of Labour noticed the fact of introduction of The Contract Labour (Regulation and Abolition) Bill, 1967 (for short the Bill) in the Parliament, which incorporated to a great extent the said recommendations. The Bill later became the CLRA Act. It is worth noticing that in spite of absence of a provision for absorption of contract labour in the Bill (on issuance of notification under Section 10(1) of the CLRA Act prohibiting engagement of contract labour), the National Commission endorsed that measure.

We have given punctilious reading to the report of the Joint Committee of the Parliament on the said Bill. Neither in the main report nor in the dissent note, do we find a reference to the automatic absorption of the contract labour. This may perhaps be for the reason that on abolition of contract labour system in an establishment, the contract labour nonetheless remains as the workforce of the contractors who get contracts in various establishments where the contract labour could be engaged and where they would be extended the same statutory benefits as they were enjoying before. We noticed that it was clear to the Joint Committee that by abolition of contract labour, the principal employer would be compelled to employ permanent workers for all types of work which would result incurring high cost by him, which implied creation of employment opportunities on regular basis for the contract labour. This could as well be yet another reason for not providing automatic absorption.

This is so far as the recommendations of various commissions and committees leading to enactment of CLRA Act.

We have already referred to the Statement of Objects and Reasons of the Act elsewhere in this judgment which also does not allude to the concept of automatic absorption of the contract labour on issuance of notification for prohibition of employment of the contract labour.

Now turning to the provisions of the Act, the scheme of the Act is to regulate conditions of workers in contract labour system and to provide for its abolition by the appropriate Government as provided in Section 10 of the CLRA Act. In regard to the regulatory measures, Section 7 requires the principal employer of an establishment to get itself registered under the Act. Section 12 of the Act obliges every contractor to obtain licence under the provisions of the Act. Section 9 of the Act places an embargo on the principal employer of an establishment, which is either not registered or registration of which has been revoked under Section 8, from employing contract labour in the establishment.

Similarly, Section 12(1) bars a contractor from undertaking or executing any work through contract labour except under and in accordance with a licence. Sections 23, 24 and 25 of the Act make contravention of the provisions of the Act and other offences punishable thereunder. With regard to the welfare measures intended for the contract labour, Section 16 imposes an obligation on the appropriate Government to make rules to require the contractor to provide canteen for the use of the contract labour. The contractor is also under an obligation to provide rest room as postulated under Section 17 of the Act. Section 18 imposes a duty on every contractor employing contract labour in connection with the work of an establishemnt to make arrangement for a sufficient supply of wholesome drinking water for the contract labour at convenient places, a sufficient number of latrines and urinals of the prescribed type at convenient and accessible places for the contract labour in the establishment, washing facilities etc. Section 19 requires the contractor to provide and maintain a first aid box equipped with prescribed contents at every place where contract labour is employed by him.

Section 21 specifically says that a contractor shall be responsible for payment of wages to workers employed by him as contract labour and such wages have to be paid before the expiry of such period as may be prescribed. The principal employer is enjoined to have his representative present at the time of payment of wages.

In the event of the contractor failing to provide amenities mentioned above, Section 20 imposes an obligation on the principal employer to provide such amenities and to recover the cost and expenses incurred therefor from the contractor either by deducting from any amount payable to the contractor or as a debt by the contractor. So also, Sub-Section (4) of Section 21 says that in the case of the contractor failing to make payment of wages as prescribed under Section 21, the principal employer shall be liable to make payment of wages to the contract labour employed by the contractor and will be entitled to recover the amount so paid from the contractor by deducting from any amount payable to the contractor or as a debt by the contractor. These provisions clearly bespeak treatment of contract labour as employees of the contractor and not of the principal employer.

If we may say so, the eloquence of the CLRA Act in not spelling out the consequence of abolition of contract labour system, discerned in the light of various reports of the Commissions and the Committees and the Statement of Objects and Reasons of the Act, appears to be that the Parliament intended to create a bar on engaging contract labour in the establishment covered by the prohibition notification, by a principal employer so as to leave no option with him except to employ the workers as regular employees directly. Section 10 is intended to work as a permanent solution to the problem rather than to provide a one time measure by departmentalizing the existing contract labour who may, by a fortuitous circumstance be in a given establishment for a very short time as on the date of the prohibition notification. It could as well be that a contractor and his contract labour who were with an establishment for a number of years were changed just before the issuance of prohibition notification. In such a case there could be no justification to prefer the contract labour engaged on the relevant date over the contract labour employed for longer period earlier. These may be some of the reasons as to why no specific provision is made for automatic absorption of contract labour in the CLRA Act.

In the light of the above discussion we are unable to perceive in Section 10 any implicit requirement of automatic absorption of contract labour by the principal employer in the concerned establishment on issuance of notification by the appropriate Government under Section 10(1) prohibiting employment of contract labour in a given establishment.

Here we may also take note of the judicial approach in regard to absorption of contract labour on issuing direction for its abolition, from the cases decided before the enactment of CLRA Act. In The Standard Vacuums case (supra), the appellant- company engaged contractor for cleaning and maintenance work at the refinery and plant belonging to it. The contract labour made a demand for abolition of contract labour system and for absorption of the contract labour in the regular service of the company. The dispute was referred to the Tribunal under the Industrial Disputes Act. The appellant raised an objection to the competence of the reference, inter alia, on the ground that there can be no dispute between it and the respondents as they were the workmen of a different employer namely, the contractor. The Tribunal found against the appellant on the question of competence of the reference and passed award directing that the contract labour system should be abolished. On appeal, this Court held that as the ingredients of Section 2(k) of the Industrial Disputes Act were present, the dispute between the parties was an industrial dispute and, therefore, reference was competent. It was further held that the work entrusted to the contractor was incidental to and necessary for the work of the refinery and was of perennial nature; it was sufficient to employ a considerable number of whole-time workmen and that type of work was being done in most concerns through regular workmen. Therefore, the Tribunals suggestion directing abolition of contract labour was right and no interference with the award of the Tribunal was called for. However, it was observed that the date from which the direction for abolition of contract labour was to be effective, should not be put into force with retrospective effect and having noted that a few months remained for the existing contract to come to an end, permitted the existing contract system to be continued for the rest of the period of the contract. A chary reading of the above judgment shows that though direction for abolition of contract labour was approved, no automatic absorption of the contract labour working as on the date of abolition in the establishment was ordered by this Court. It is interesting to notice that the conditions pointed out by this Court, namely, (i) the work was incidental and necessary for the work of establishment; (ii) was of perennial nature; (iii) was sufficient to employ a considerable number of whole time workmen and (iv) that type of work was being done in most concerns through regular workmen, have been incorporated in sub-section 2 of Section 10 of CLRA Act.

Much emphasis is laid on the judgment of this Court in The Standard Vacuums case (supra) in support of the contention that the Courts directed absorption of contract labour as a consequence of prohibition of employment of contract labour. We have pointed out above that a thoughtful reading of the said judgment would disclose that no such principle has been laid down therein.

On the contrary, the Court having affirmed the direction prohibiting employment of contract labour extended the date from which the prohibition was to take effect so as to permit the existing contractor to continue for the rest of the period of the contract. Thus it is clear that before the enactment of the CLRA Act the industrial adjudicators/courts did direct abolition of contract labour system but did not order absorption of contract labour by the principal employer on such abolition of the contract labour system.

Now, it would be apt to notice the judicial approach after the enactment of the CLRA Act.

In Vegoilss case (supra), the question before this Court was: had the Industrial Tribunal jurisdiction to issue direction to the establishment to abolish contract labour with effect from the date after coming into force of the CLRA Act? The appellant- company had engaged contract labour in seeds godown and solvent extraction plants in its factory. The appellant took the plea that the type of work was intermittent and sporadic for which the contract labour was both efficient and economic. On the other hand, the union of the workmen submitted that the work was continuous and perennial in nature and that in similar companies the practice was to have permanent workmen; it claimed that the contract labour system be abolished and the contract labour be absorbed as regular employees in the concerned establishment of the appellant. The Tribunal having found that the work for which the contract labour was engaged was closely connected with the main industry carried on by the appellant and that the work was also of perennial character, directed abolition of contract labour system from a date after coming into force of the CLRA Act but rejected the claim for absorption of contract labour in the establishment of the appellant. On appeal to this Court, after pointing out the scheme of Section 10 of the Act, it was held that under the CLRA Act, the jurisdiction to decide about the abolition of contract labour had to be in accordance with Section 10, therefore, it would be proper that the question, whether the contract labour in the appellant industry was to be abolished or not, be left to be dealt with by the appropriate Government under the Act, if it became necessary. From this judgment, no support can be drawn for the proposition that absorption of the contract labour is a concomitant of the abolition notification under Section 10(1) of the Act.

A Constitution Bench of this Court in M/s Gammon India constitutional validity of the CLRA Act and the Rules made thereunder in a petition under Article 32 of the Constitution of India. In that case, the work of construction of a building for the banking company was entrusted to the petitioners – building contractors – who engaged contract labour for construction work.

While upholding the constitutional validity of the CLRA Act and the Rules made thereunder, this Court summed up the object of the Act and the purpose for enacting Section 10 of the Act as follows :

The Act was passed to prevent the exploitation of contract labour and also to introduce better conditions of work. The Act provides for regulation and abolition of contract labour. The underlying policy of the Act is to abolish contract labour, wherever possible and practicable, and where it cannot be abolished altogether, the policy of the Act is that the working conditions of the contract labour should be so regulated as to ensure payment of wages and provision of essential amenities. That is why the Act provides for regulated conditions of work and contemplates progressive abolition to the extent contemplated by Section 10 of the Act.

Section 10 of the Act deals with abolition while the rest of the Act deals mainly with regulation. The dominant idea of Section 10 of the Act is to find out whether contract labour is necessary for the industry, trade, business, manufacture or occupation which is carried on in the establishment.

There is nothing in that judgment to conclude that on abolition of contract labour system under Section 10(1), automatic absorption of contract labour in the establishment of the principal employer in which they were working at that time, would follow.

In Dena Naths case (supra), a two-Judge Bench of this Court considered the question, whether as a consequence of non- compliance of Sections 7 and 12 of the CLRA Act by the principal employer and the licensee respectively, the contract labour employed by the principal employer would become the employees of the principal employer. Having noticed the observation of the three-Judge Bench of this Court in The Standard-Vacuums case (supra) and having pointed out that the guidelines enumerated in sub-section (2) of Section 10 of the Act are practically based on the guidelines given by the Tribunal in the said case, it was held that the only consequence was the penal provisions under Sections 23 and 25 as envisaged under the CLRA Act and that merely because the contractor or the employer had violated any provision of the Act or the Rules, the High Court in proceedings under Article 226 of the Constitution could not issue any mandamus for deeming the contract labour as having become the employees of the principal employer. This Court thus resolved the conflict of opinions on the said question among various High Courts. It was further held that neither the Act nor the Rules framed by the Central Government or by any appropriate Government provided that upon abolition of the contract labour, the labourers would be directly absorbed by the principal employer.

India and Ors. contract labour was employed at Rourkela Plant of the Steel Authority of India through contractors and continued in employment for long periods – between 10 and 20 years – as contract labourers. It was found that though the respondents were changing the contractors, yet under the terms of the agreement the incoming contractors were obliged to retain the contract labour engaged by the outgoing contractors. That apart, for about eight years the contract labour was continued to be employed by virtue of the interim order of this Court. It was noticed that in of India & Ors. etc. , Mathura Refinery Mazdoor Sangh through Project, Mathura and Anr. and the Dena Naths case (supra), on the question – whether the contract labourers had become the employees of the principal employer in course of time or whether the engagement and employment of labourers through a contractor was a mere camouflage and a smokescreen – this Court took the view that it was a question of fact and had to be established by the contract labourers on the basis of the requisite material in the industrial court or industrial tribunal. However, having regard to the various interim orders passed by this Court and the time taken in deciding the case, this Court considered the matter on merits and on the basis of the offer made by the respondents, which was recorded, issued certain directions which need not be quoted here.

However, no order was made directing absorption of contract labour on abolition of contract labour system.

In National Federation of Railway Porters, Vendors & Bearers vs. Union of India & Ors. , a two-Judge Bench of this Court on the basis of findings contained in the report of the Labour Commissioner that there was no evidence that the labourers were the employees of the Society (contractor) and that they were contract labourers provided by the Society under the agreement, treated them as labourers of the Northern Railway as they had completed 240 days of continuous service in a year, some from 1972, some from 1980 and some from 1985.

Following the order of this Court dated April 15, 1991 [Raghavendra Gumashta vs. Union of India (Writ Petition No.277 of 1988)], the Court directed their absorption in the Railway Service.

It is obvious that direction to absorb the labourers was given on the premise that they were not the employees of the contractor (the society) but were of the Northern Railways.

In Mathura Refinery Mazdoor Sanghs case (supra), the disputes between the contract labourers represented by the appellant and the respondents, referred to the industrial tribunal for adjudication, included the question, whether the contract labourers were the employees of the respondent corporation. The tribunal answered the question against the appellant but issued, among others, a direction that the respondent should give preference to the contract labour in the employment by waiving the requirement of age and other qualification wherever possible.

It was, however, clarified by the industrial tribunal that the ameliorative steps should not be taken to mean that the contract labour had become the direct employees of the refinery. Against those directions, this Court dismissed the appeal holding that the suggestions and directions given by the tribunal in the impugned award, could not be improved upon.

In Association of Chemical Workers, Bombay vs. A.L.

Alaspurkar and Ors. a three-Judge Bench of this Court declined to go into the correctness of the pronouncement in Dena Naths case (supra) that automatic absorption does not follow on prohibition of contract labour but directed the principal employer to consider the contract labour, by giving them preference, in appointment.

In Gujarat Electricity Boards case (supra), a two-Judge Bench of this Court has held that if there is a genuine labour contract between the principal employer and the contractor, the authority to abolish the contract labour vests in the appropriate Government and not in any court including industrial adjudicator.

If the appropriate Government abolishes the contract labour system in respect of an establishment the industrial adjudicator would, after giving opportunity to the parties to place material before it, decide whether the workmen be absorbed by the principal employer, if so, how many of them and on what terms, but if the appropriate Government declines to abolish the contract labour the industrial adjudicator has to reject the reference. If, however, the so-called contract is not genuine but is sham and camouflage to hide the reality, Section 10 would not apply and the workmen can raise an industrial dispute for relief that they should be deemed to be the employees of the principal employer. The court or the industrial adjudicator would have jurisdiction to entertain such a dispute and grant necessary relief.

While this was the state of law in regard to the contract labour, the issue of automatic absorption of the contract labour came up before a Bench of three learned Judges of this Court in Air Indias case (supra). The Court held : (1) though there is no express provision in the CLRA Act for absorption of the contract labour when engagement of contract labour stood prohibited on publication of the notification under Section 10(1) of the Act, from that moment the principal employer cannot continue contract labour and direct relationship gets established between the workmen and the principal employer; (2) the Act did not intend to denude the contract labour of their source of livelihood and means of development throwing them out from employment;

and (3) in a proper case the Court as sentinel on the qui vive is required to direct the appropriate authority to submit a report and if the finding is that the workmen were engaged in violation of the provisions of the Act or were continued as contract labour despite prohibition of the contract labour under Section 10(1), the High Court has a constitutional duty to enforce the law and grant them appropriate relief of absorption in the employment of the principal employer. Justice Majmudar, in his concurring judgment, put it on the ground that when on the fulfillment of the requisite conditions, the contract labour is abolished under Section 10 (1), the intermediary contractor vanishes and along with him vanishes the term principal employer and once the intermediary contractor goes the term principal also goes with it; out of the tripartite contractual scenario only two parties remain, the beneficiaries of the abolition of the erstwhile contract labour system, i.e. the workmen on the one hand and the employer on the other, who is no longer their principal employer but necessarily becomes a direct employer for erstwhile contract labourers. The learned Judge also held that in the provision of Section 10 there is implicit legislative intent that on abolition of contract labour system, the erstwhile contract workmen would become direct employees of the employer on whose establishment they were earlier working and were enjoying all the regulatory facilities under Chapter V in that very establishment. In regard to the judgment in Gujarat Electricity Boards case (supra), to which he was a party, the learned Judge observed that he wholly agreed with Justice Ramaswamys view that the scheme envisaged by Gujarat Electricity Board case was not workable and to that extent the said judgment could not be given effect to.

For reasons we have given above, with due respect to the learned Judges, we are unable to agree with their reasoning or conclusions.

The principle that a beneficial legislation needs to be construed liberally in favour of the class for whose benefit it is intended, does not extend to reading in the provisions of the Act what the legislature has not provided whether expressly or by necessary implication, or substituting remedy or benefits for that provided by the legislature. We have already noticed above the intendment of the CLRA Act that it regulates the conditions of service of the contract labour and authorizes in Section 10(1) prohibition of contract labour system by the appropriate Government on consideration of factors enumerated in sub- section (2) of Section 10 of the Act among other relevant factors.

But, the presence of some or all those factors, in our view, provide no ground for absorption of contract labour on issuing notification under sub-section (1) of Section 10. Admittedly when the concept of automatic absorption of contract labour as a consequence of issuing notification under Section 10(1) by the appropriate Government, is not alluded to either in Section 10 or at any other place in the Act and the consequence of violation of Sections 7 and 12 of the CLRA Act is explicitly provided in Sections 23 and 25 of the CLRA Act, it is not for the High Courts or this Court to read in some unspecified remedy in Section 10 or substitute for penal consequences specified in Sections 23 and 25 a different sequel, be it absorption of contract labour in the establishment of principal employer or a lesser or a harsher punishment. Such an interpretation of the provisions of the statute will be far beyond the principle of ironing out the creases and the scope of interpretative legislation and as such clearly impermissible. We have already held above, on consideration of various aspects, that it is difficult to accept that the Parliament intended absorption of contract labour on issue of abolition notification under Section 10(1) of CLRA Act.

We have gone through the decisions of this Court in V.S.T.

Industries case (supra), G. B. Pant Universitys case (supra) and Mohammed Aslams case (supra). All of them relate to statutory liability to maintain the canteen by the principal employer in the factory/establishment. That is why in those cases, as in The Saraspur Mills case (supra), the contract labour working in the canteen were treated as workers of the principal employer. These cases stand on a different footing and it is not possible to deduce from them the broad principle of law that on the contract labour system being abolished under sub-section (1) of Section 10 of the CLRA Act the contract labour working in the establishment of the principal employer has to be absorbed as regular employees of the establishment.

An analysis of the cases, discussed above, shows that they fall in three classes; (i) where contract labour is engaged in or in connection with the work of an establishment and employment of contract labour is prohibited either because the Industrial adjudicator/Court ordered abolition of contract labour or because the appropriate Government issued notification under Section 10(1) of the CLRA Act, no automatic absorption of the contract labour working in the establishment was ordered; (ii) where the contract was found to be sham and nominal rather a camouflage in which case the contract labour working in the establishment of the principal employer was 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 canteen in an establishment the principal employer availed the services of a contractor and the courts have held that the contract labour would indeed be the employees of the principal employer.

The next issue that remains to be dealt with is:

B. Whether on a contractor engaging contract labour in connection with the work entrusted to him by a principal employer, the relationship of master and servant between him (the principal employer) and the contract labour emerges.

Mr. Shanti Bhushan alone has taken this extreme stand that by virtue of engagement of contract labour by the contractor in any work of or in connection with the work of an establishment, the relationship of master and servant is created between the principal employer and the contract labour. We are afraid, we are unable to accept this contention of the learned counsel. A careful survey of the cases relied upon by him shows that they do not support his proposition.

In The Maharashtra Sugar Millss case (supra), the question that fell for consideration of this court was whether the contract labour was covered by the definition of employee under the Bombay Industrial Relations Act, 1946 and, therefore, should be treated as employees of the appellant-sugar mills. There contractors were engaged by the appellant for carrying on certain operations in its establishment. The contractors were to employ contract labour (workers) for carrying out the work undertaken but they should have the approval of the appellant, although it was the obligation of the contractors to pay wages to the workers.

However, the contract labour engaged by the contractors got the same amenities from the appellant as were available to its muster roll workers. An industrial dispute arose in respect of the payment of wages to the contract labour engaged by the contractors which, along with other disputes, was referred to the Industrial Court by the Government. The reference was contested, as being not maintainable, by the appellant on the plea that the contractors workers were not employees within the meaning of the said Act. The term employee is defined in the said Act to mean any person employed to do any skilled or unskilled manual or clerical work for hire or reward in any industry and includes a person employed by a contractor to do any work for him in execution of a contract with an employer within the meaning of sub-clause (3) of clause 14. It was on the basis of the definitions of the terms the employer and the employee, the contract labour engaged by the contractors was held to be employees of the appellant. The decision in that case cannot be read as holding that when a contractor engages contract labour in connection with the work of the principal employer, the relationship of master and servant is created between the principal employer and the contract labour.

In Shivnandan Sharmas case (supra), the respondent-Bank entrusted its cash department under a contract to the treasurers who appointed cashiers, including the appellant – the head cashier.

The question before the three-Judge Bench of this Court was:

was the appellant an employee of the Bank? On the construction of the agreement entered into between the Bank and the treasurers, it was held that the treasurers were under the employment of the Bank on a monthly basis for an indefinite term as they were under the complete control and direction of the Bank through its manager or other functionaries and, therefore, the appointees including the appellant (nominees) of the treasurers, were also the employees of the Bank. This Court laid down, if a master employs a servant and authorises him to employ a number of persons to do a particular job and to guarantee their fidelity and efficiency for a cash consideration, the employees thus appointed by the servant would be equally with the employer, servants of the master.

We do not think that the principle, quoted above, supports the proposition canvassed by the learned counsel.

The decision of the Constitution Bench of this Court in Basti Sugar Mills case (supra) was given in the context of reference of an industrial dispute under the Uttar Pradesh Industrial Disputes Act, 1947. The appellant-Sugar Mills entrusted the work of removal of press mud to a contractor who engaged the respondents therein (contract labour) in connection with that work. The services of the respondents were terminated by the contractor and they claimed that they should be re-instated in the service of the appellant. The Constitution Bench held, The words of the definition of workmen in Section 2(z) to mean any person (including an apprentice) employed in any industry to do any skilled or unskilled, manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied are by themselves sufficiently wide to bring in persons doing work in an industry whether the employment was by the management or by the contractor of the management. Unless however the definition of the word employer included the management of the industry even when the employment was by the contractor the workmen employed by the contractor could not get the benefit of the Act since a dispute between them and the management would not be an industrial dispute between employer and workmen. It was with a view to remove this difficulty in the way of workmen employed by contractors that the definition of employer has been extended by sub-clause (iv) of Section 2(i). The position thus is : (a) that the respondents are workmen within the meaning of Section 2(z), being persons employed in the industry to do manual work for reward, and (b) they were employed by a contractor with whom the appellant company had contracted in the course of conducting the industry for the execution by the said contractor of the work of removal of press- mud which is ordinarily a part of the industry.

It follows therefore from Section 2(z) read with sub-clause (iv) of Section 2(i) of the Act that they are workmen of the appellant company and the appellant company is their employer.

It is evident that the decision in that case also turned on the wide language of statutory definitions of the terms workmen and employer. So it does not advance the case pleaded by the learned counsel.

In The Saraspur Mills case (supra), the question was whether the respondents engaged for working in the canteen run by the co-operative society for the appellant-company were the employees of the appellant-Mills. The respondents initiated proceedings under Section 79 of the Bombay Industrial Relations Act, 1946 for payment of D.A. in terms of the award of the Industrial Court. The appellant contested the claim on the ground that the respondents were employees of the co-operative society and not of the appellant. A two-Judge Bench of this Court approached the question from the point of view of statutory liability of the appellant to run the canteen in the factory and having construed the language employed in the definitions of employee and employer in sub-sections (13) and (14), respectively, of Section 3 of the Act, and the definition of worker contained in Section 2(i) of the Factories Act and having referred to the Basti Sugar Mills case (supra), held that even though in pursuance of a statutory liability the appellant was to run the canteen in the factory, it was run by the co-operative society as such the workers in the canteen (the respondents) would be the employees of the appellant. This case falls in class (iii) mentioned above.

In a three-Judge Bench decision of this Court in Hussainbhais case (supra), the petitioner who was manufacturing ropes entrusted the work to the contractors who engaged their own workers. When, after some time, the workers were not engaged, they raised an industrial dispute that they were denied employment. On reference of that dispute by the State Government, they succeeded in obtaining an award against the petitioner who unsuccessfully challenged the same in the High Court and then in the Supreme Court. On examining various factors and applying the effective control test, this court held that though there was no direct relationship between the petitioner and the respondent yet on lifting the veil and looking at the conspectus of factors governing employment, the naked truth, though draped in different perfect paper arrangement, was that the real employer was the management not the immediate contractor. Speaking for the Court, Justice Krishna Iyer observed thus :- Myriad devices, half-hidden in fold after fold of legal form depending on the degree of concealment needed, the type of industry, the local conditions and the like may be resorted to when labour legislation casts welfare obligations on the real employer, 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………….

Of course, if there is total dissociation in fact between the disowning Management and the aggrieved workmen, the employment is, in substance and in real-life terms, by another.

The Managements adventitious connections cannot ripen into real employment.

This case falls in class (ii) mentioned above.

The above discussion amply justifies rejection of the contentions of Mr. Shanti Bhushan by us.

We find no substance in the next submission of Mr. Shanti Bhushan that a combined reading of the definition of the terms contract labour, establishment and workman would show that a legal relationship between a person employed in an industry and the owner of the industry is created irrespective of the fact as to who has brought about such relationship.

We have quoted the definitions of these terms above and elucidated their import. The word workman is defined in wide terms. It is a generic term of which contract labour is a species. It is true that a combined reading of the terms establishment and workman shows that a workman engaged in an establishment would have direct relationship with the principal employer as a servant of master. But what is true of a workman could not be correct of contract labour. The circumstances under which contract labour could be treated as direct workman of the principal employer have already been pointed out above.

We are not persuaded to accede to the contention that a workman, who is not an out-worker, must be treated as a regular employee of the principal employer. It has been noticed above that an out-worker falls within the exclusionary clause of the definition of workman. The word out worker connotes a person who carries out the type of work, mentioned in sub-clause (C) of clause (i) of Section 2, of the principal employer with the materials supplied to him by such employer either (i) at his home or (ii) in some other premises not under the control and management of the principal employer. A person who is not an out worker but satisfies the requirement of the first limb of the definition of workman would, by the very definition, fall within the meaning of the term workman. Even so, if such a workman is within the ambit of the contract labour, unless he falls within the afore-mentioned classes, he cannot be treated as a regular employee of the principal employer.

We have also perused all the Rule and Forms prescribed thereunder. It is clear that at various stages there is involvement of the principal employer. On exhaustive consideration of the provisions of the CLRA Act we have held above that neither they contemplate creation of direct relationship of master and servant between the principal employer and the contract labour nor can such relationship be implied from the provisions of the Act on issuing notification under Section 10(1) of the CLRA Act, a fortiorari much less can such a relationship be found to exist from the Rules and the Forms made thereunder.

The leftover contention of Ms. Indira Jaisingh may be dealt with here. The contention of Ms. Indira Jaisingh that the principles of contract law sticto sensu do not apply to the labour and management is too broad to merit acceptance.

In Rai Bahadurs case (supra), the industrial dispute referred to the Industrial Tribunal was: whether all the employees of the appellant should be allowed 30 days earned leave with full wages for every 11 months service without discrimination. The appellant framed the rules on July 1, 1956 providing that every workman employed on or before that date would be entitled to 30 days earned leave with full wages for every 11 months service.

The contention of the employer was that those who were employed after that date were not entitled to the same period of leave. It was contended that the appellant was entitled to fix the terms of employment on which it would employ the workmen and it was open for the workman to accept or not to accept those terms so the Tribunal was not justified in interfering with such matter.

A three-Judge Bench of this Court, by majority, held that the Tribunal was justified in directing the appellant to provide the same uniform rules as to earned leave for all its employees that the doctrine of absolute freedom of contract had to yield to the higher claims for social justice and had to be so regulated. After referring to Western Indias case (supra) and The Bharat Banks case (supra), Justice P.B. Gajendragadkar speaking for the majority observed:

in order that industrial adjudication should be free from the tyranny of dogmas or the sub- conscious pressure of pre-conceived notions, it is important that the temptation to lay down broad principles should be avoided.

Accordingly, it is not necessary to decide the broad contention whether industrial adjudication can interfere with the contract between the employers and the employees.

It is apparent that the case was decided on the ground that there could be no discrimination of the employees in regard to their entitlement for earned leave on the basis of a fixed date and that no general principle was laid down that the contract laws are inapplicable to labour-management relation.

In the case of Uptron India (supra), the controversy related to the termination of the services of the workmen for unauthorised absence. The Industrial Employment (Standing Orders) Act, 1946 provided that a workman is liable to automatic termination on the ground of unauthorised absence. It is in that context that this Court has observed that the general principles of the Contract Act, 1872 applicable to an agreement between two persons having capacity to contract, are also applicable to a contract of industrial employment but relationship so created is partly contractual and partly non-contractual as the States have already, by legislation, prescribed positive obligations for the employer towards his workmen, as for example, terms, conditions and obligations prescribed by the Payment of Wages Act, 1936;

Industrial Employment (Standing Orders) Act, 1946; Minimum Wages Act, 1948; Payment of Bonus Act, 1965; Payment of Gratuity Act, 1972 etc. In our view, the law has been correctly laid down therein. The judgment in that case cannot be read as laying down a principle of law that the provisions of the Contract Act are not applicable to relation between the labour and the management.

The upshot of the above discussion is outlined thus:

(1) (a) Before January 28, 1986, the determination of the question whether Central Government or the State Government, is the appropriate Government in relation to an establishment, will depend, in view of the definition of the expression appropriate Government as stood in the CLRA Act, on the answer to a further question, is the industry under consideration carried on by or under the authority of the Central Government or does it pertain to any specified controlled industry; or the establishment of any railway, cantonment board, major port, mine or oilfield or the establishment of banking or insurance company? If the answer is in the affirmative, the Central Government will be the appropriate Government; otherwise in relation to any other establishment the Government of the State in which the establishment was situated, would be the appropriate Government, (b) After the said date in view of the new definition of that expression, the answer to the question referred to above, has to be found in clause (a) of Section 2 of the Industrial Disputes Act; if (i) the concerned Central Government company/undertaking or any undertaking is included therein eo nomine, or (ii) any industry is carried on (a) by or under the authority of the Central Government, or (b) by railway company; or (c) by specified controlled industry, then the Central Government will be the appropriate Government otherwise in relation to any other establishment, the Government of the State in which that other establishment is situated, will be the appropriate Government.

(2) (a) A notification under Section 10(1) of the CLRA Act prohibiting employment of contract labour in any process, operation or other work in any establishment has to be issued by the appropriate Government :

(1) after consulting with the Central Advisory Board or the State Advisory Board, as the case may be, and;

(2) having regard to (i) conditions of work and benefits provided for the contract labour in the establishment in question; and (ii) other relevant factors including those mentioned in sub-section (2) of Section 10;

(b) inasmuch as the impugned notification issued by the Central Government on December 9, 1976 does not satisfy the afore-said requirements of Section 10, it is quashed but we do so prospectively i.e. from the date of this judgment and subject to the clarification that on the basis of this judgment no order passed or no action taken giving effect to the said notification on or before the date of this judgment, shall be called in question in any tribunal or court including a High Court if it has otherwise attained finality and/or it has been implemented.

(3) Neither Section 10 of the CLRA Act nor any other provision in the Act, whether expressly or by necessary implication, provides for automatic absorption of contract labour on issuing a notification by appropriate Government under sub-section (1) of Section 10, prohibiting employment of contract labour, in any process, operation or other work in any establishment. Consequently the principal employer cannot be required to order absorption of the contract labour working in the concerned establishment;

(4) We over-rule the judgment of this court in Air Indias case (supra) prospectively and declare that any direction issued by any industrial adjudicator/any court including High Court, for absorption of contract labour following the judgment in Air Indias case (supra), shall hold good and that the same shall not be set aside, altered or modified on the basis of this judgment in cases where such a direction has been given effect to and it has become final.

(5) On issuance of prohibition notification under Section 10(1) of the CLRA Act prohibiting employment of contract labour or otherwise, in an industrial dispute brought before it by any contract labour in regard to conditions of service, the industrial adjudicator will have to consider the question whether the contractor has been interposed either on the ground of having undertaken to produce any given result for the establishment or for supply of contract labour for work of the establishment under a genuine contract or is a mere ruse/camouflage to evade compliance of various beneficial legislations so as to deprive the workers of the benefit thereunder. If the contract is found to be not genuine but a mere camouflage, the so-called contract labour will have to be treated as employees of the principal employer who shall be directed to regularise the services of the contract labour in the concerned establishment subject to the conditions as may be specified by it for that purpose in the light of para 6 hereunder.

(6) If the contract is found to be genuine and prohibition notification under Section 10(1) of the CLRA Act in respect of the concerned establishment has been issued by the appropriate Government, prohibiting employment of contract labour in any process, operation or other work of any establishment and where in such process, operation or other work of the establishment the principal employer intends to employ regular workmen he shall give preference to the erstwhile contract labour, if otherwise found suitable and, if necessary, by relaxing the condition as to maximum age appropriately taking into consideration the age of the workers at the time of their initial employment by the contractor and also relaxing the condition as to academic qualifications other than technical qualifications.

We have used the expression industrial adjudicator by design as determination of the questions afore-mentioned requires inquiry into disputed questions of facts which cannot conveniently be made by High Courts in exercise of jurisdiction under Article 226 of the Constitution. Therefore, in such cases the appropriate authority to go into those issues will be industrial tribunal/court whose determination will be amenable to judicial review.

In the result :

C.A.Nos.6009-6010 /2001 @S.L.P. (C) Nos. 12657-58/98 The order of the High Court at Calcutta, under challenge, insofar as it relates to holding that the West Bengal Government is the appropriate Government within the meaning of the CLRA Act, is confirmed but the direction that the contract labour shall be absorbed and treated on par with the regular employees of the appellants, is set aside. The appeals are accordingly allowed in part.

C.A.No.6011/2001@ SLP(C)No.20926/98 In the impugned order of the High Court of Judicature, Madhya Pradesh, Bench at Jabalpur in C.P. 143 of 1998 dated October 14,1998, it was held that no contempt of the High Court was committed. In view of this finding, no interference of this Court is warranted. The appeal is accordingly dismissed.

T.C.No.1/2000 W.A.No. 80/1998 on the file of the High Court of Judicature at Andhra Pradesh was transferred to this Court and numbered as TC.1/2000. The writ appeal is directed against the order of the learned Single Judge dismissing W.P.No.29865/1998 on 13.11.1997. The petitioner questioned the competence of the State Government to make reference of the industrial dispute to the Labour Court at Visakhapatnam. It will be open to the Labour Court to decide the question whether the reference was made by the appropriate Government on the basis of the main judgment. Transferred Case No.1/2000 ( W.A.80/1998 ) is dismissed accordingly.

T.C. Nos.5-7/2000 Civil Writ Petition Nos.1329/97, 655/97 and 1453/97 on the file of the High Court of Delhi were transferred to this Court and numbered as TC. 5/2000, TC. 6/2000 and TC. 7/2000 respectively. The petitioners therein prayed for a writ of mandamus directing the respondents to absorb them as regular employees in the establishment in which they were working at the relevant time. Their claim is based on the impugned notification dated December 9, 1976 issued by the Central Government. In view of the finding recorded by us that the notification is illegal and it is not issued by the appropriate Government under the CLRA Act in relation to the establishment in question, the petitioners in writ petitions cannot get any relief. However, we leave it open to the appropriate Government to issue the notification under Section 10(1) of the CLRA Act in respect of the concerned establishment of the petitioners. Subject to the above observation the transferred cases are dismissed.

T.C.Nos. 17/2000 and 18/2000 L.P.A. Nos. 326/97 and 18/98 on the file of the High Court of Judicature, Madhya Pradesh, Bench at Jabalpur were transferred and numbered as TC.Nos. 17/2000 and 18/2000. The Letter patent appeals were directed against the order of a learned Single Judge allowing the writ petitions and directing absorption of the members of the respondent-union. The claim of the petitioners was based on a notification issued by the Central Government on 17.3.1993 prohibiting with effect from the date of publication of the notification the employment of contract labour in the limestone and dolomite mines in the country, in the works specified in the Schedule to the notification. The points that arise in these cases are: (i) the validity of the notification and (ii) the consequential orders that may be passed on issue of the abolition notification. Having regard to the facts of these cases, we consider it appropriate to direct that the cases be transferred back to the High Court to be decided by the High Court in the light of the main judgment. Transferred cases are disposed of accordingly.

C.A.No.6012/2001@SLP(C)No.9568/2000 This appeal arises from the order of the High Court of Judicature at Jabalpur in LPA No.418/1999 dated 1.5.2000. The High Court declined to pass any order and dismissed the LPA as this Court had stayed proceedings in the connected LPA Nos.

326/97 and 18/98 on August 17, 1998. Inasmuch we have now transferred back those LPAs, we consider it appropriate to transfer this case also back to the High Court to be heard and decided along with the said cases. The appeal is accordingly disposed of.

C.A.Nos. 719-720/2001 These appeals arise from the judgment and order of a Division Bench of the High Court of Judicature at Calcutta in MAT Nos. 1704 and 1705 of 1999 dated August 12, 1999. A learned Single Judge of the High Court directed, inter alia, absorption of contract labour on the ground that the type of work in which the contract labour was engaged was prohibited in view of the notification issued by the Central Government on February 9, 1980 under Section 10(1) of the CLRA Act. The appellants filed the application against the notification on the ground that the respondents are not covered by the notification. Be that as it may, the Central Government issued a further notification on 14.10.1999 which appears to cover the respondents herein. The Division Bench maintained the directions under appeals with modification in regard to interim order. In view of the fact that we have over-ruled the judgment of this Court in Air Indias case (supra) which covered the field when the order of the High Court was passed, we set aside the order of the High Court under challenge. Appeals are accordingly allowed.

T.C.No. 14/2000 M.A.T. No.1592/1997 pending before the Division Bench of the High Court of Calcutta which was filed against the order of a learned Single Judge dated 9.5.1997 in C.O. No.6545(w) of 1996, holding that having regard to the impugned notification of the Central Government dated December 9, 1976 issued under Section 10(1) of the CLRA Act prohibiting employment of contract labour, the appellants are bound to absorb the contract labour as regular employees of the appellants. In view of the main judgment, the order of the learned Single Judge cannot be sustained. It is accordingly set aside and the transferred case is allowed.

C.A.Nos. 5798-99/1998 In these appeals, the Food Corporation of India is the appellant. Having regard to the un-amended definition of the appropriate Government which was in force till 28.1.1986, the appropriate Government within the meaning of CLRA Act was the government of the State in which the concerned establishment of FCI was situated. With effect from 28.1.1986, the amended definition of that expression under the CLRA Act came into force.

Consequently, the definition of that expression as given in the Industrial Disputes Act would apply for purposes of the CLRA Act also. FCI is included within the definition of appropriate Government in sub-clause (1) of clause (a) of Section 2 of the Industrial Disputes Act. It follows that for any establishment of FCI for the purposes of the CLRA Act, the appropriate Government will be the Central Government.

In these appeals, prohibition notification was issued on March 26, 1991 under Section 10(1) of the CLRA Act prohibiting employment of contract labour in the concerned establishment in the process, operation or work of handling of foodgrains including loading and unloading from any means of transport, storing and stocking. The respondents claimed absorption of contract labour in the concerned establishment of the appellant. A Division Bench of the High Court of Bombay following the judgment of this Court in Air Indias case (supra) directed the appellant to absorb the contract labour engaged in the depots of the appellant in Jalgaon, Srirampur and Ahmednagar (Khedgaon). Inasmuch we have over-ruled the judgment in Air Indias case (supra), the appeals deserve to be allowed. We, accordingly, set aside the judgment of the High Court under challenge and allow these appeals leaving it open to the contract labour to seek appropriate relief in terms of the main judgment.

C.A.Nos.6013-22/2001@SLP(C) Nos. 16122-16131/98 These appeals by FCI from the judgment of a Division Bench of the Karnataka High Court in W.A. Nos. 345-354/97 dated April 17, 1998 confirming the judgment of a learned Single Judge passed in W.P. NO.22485/94 and batch dated 22.11.1996.

The learned Single Judge directed absorption of the contract labour with effect from 29.1.1996. Inasmuch as the impugned judgment, under challenge, was passed following the judgment in Air Indias case (supra) which has since been over-ruled, we set aside the judgment of the High Court and allow these appeals accordingly, leaving it open to the contract labour to seek appropriate relief in terms of the main judgment.

C.A.Nos. 4188-94/98 and 4195/98 These appeals arise from a common judgment of the High Court of Karnataka in W.A.Nos. 228-229, 231, 233-236/97 and 1742/97 dated 17.4.98 are filed by union of workmen and workmen of FCI. The Division Bench confirmed the judgment of the learned Single Judge directing absorption of contract labour in the concerned establishment of the appellants w.e.f. 29.1.96. The grievance of the appellants is that they should have been absorbed with effect from the date of the prohibition notification dated November 1, 1990. Inasmuch as in the connected civil appeals we have set aside the judgment of Division Bench passed following the judgment of this Court in Air Indias case (supra) which has since been over-ruled, the appellants are not entitled to any relief in these appeals. Accordingly, these appeals are dismissed.

T.P(C) Nos. 284-302/2000 and 308-337/2000 In these transfer petitions, the petitioners prayed for transfer of various writ petitions/writ appeals pending in the High Court of Andhra Pradesh mentioned in para (a) of prayer on the ground that the question involved in those cases is pending consideration of this Constitution Bench in SLP (C) Nos. 12657- 58/98. Notice has been ordered in these cases but the cases are not transferred. Inasmuch as we have already pronounced the judgment in the above-mentioned cases, we are not inclined to allow these transfer petitions. The High Court will now proceed to decide those cases in accordance with the main judgment.

Transfer petitions are dismissed accordingly.

C.A.No.6029/2001@SLP(C)No. 16346/2000 The order under challenge in this appeal is the judgment of a Division Bench of the High Court of Bombay in W.P.No.

4050/99 dated 2.8.2000. On the ground that the members of respondent union (employees of ONGC) are covered by the notification issued by the Central Government on December 9, 1976, the High Court ordered absorption of the workers employed as contract labour. Inasmuch as the Central Government became the appropriate Government, for an establishment of ONGC after the amended definition of the appropriate Government came into force under the CLRA Act w.e.f. 28.1.1986 whereunder the definition of the said expression under the Industrial Disputes Act is adopted in the CLRA Act, therefore, the Central Government will be the appropriate Government for ONGC w.e.f. 28.1.1986.

It follows that the notification issued on December 9, 1976 would not cover the establishments of the appellant. However, as the High Court directed absorption of the contract labour in the establishments of the appellant following the judgment of this Court in Air Indias case (supra) and that judgment has since been over-ruled, both on the question of appropriate Government as well as on the point of automatic absorption, we set aside the order under challenge and accordingly allow this appeal.

C.A.Nos.6030-34/2001@SLP(C)Nos.13146-150/2000 These appeals are directed against the order of the High Court of Andhra Pradesh in W.A. Nos. 1652-1655/99 and 1959/99 dated 22.11.99. The Division Bench of the High Court took note of the fact that the order of the learned Single Judge had been given effect to and on the facts declined to condone the delay of 353 days in filing the writ appeals. In our view, having regard to the facts and circumstances of the case, no interference with the impugned order, is warranted. The appeals are, therefore, dismissed.

C.A.Nos.6024-25/2001@SLP(C)Nos.8282-83/2000 These appeals are from the order of the Division Bench of the High Court of Gujarat in L.P.A.No.118/2000 dated 19.4.2000 which was directed against the interim order passed by a learned Single Judge. Inasmuch as the writ petitions are pending before the High Court, we are not inclined to interfere with the orders impugned in the appeals. We leave it open to the High Court to dispose of the writ petitions in terms of the main judgment. The appeals are accordingly dismissed.

T.P.(C)No. 169/2000 In this transfer petition, the petitioner seeks transfer of S.C.A.No.5192/99 pending in the High Court of Gujarat. Notice has been issued but the case is not transferred. In view of the fact that we have pronounced the judgment in the connected cases, we are not inclined to order transfer of the case from the High Court.

We leave it open to the High Court to dispose of the said appeal in accordance with the main judgment of this Court. Transfer petition is dismissed accordingly.

C.A.No.6023/2001@SLP(C)No.19391/99 This appeal arises from the judgment and order dated 19.8.1999 of the High Court of Patna, Ranchi Bench, Ranchi, in L.P.A.No. 214/99 (R). The Division Bench declined to interfere with the order of the learned Single Judge dismissing the writ petition filed by the appellant.

The case arose out of the award dated October 3, 1996 passed by the Central Government Industrial Tribunal No.1 directing the appellant to absorb the contract labour. The Tribunal, on appreciation of the evidence, found that the contract labourers were not regularised to deprive them from the due wages and other benefits on par with the regular employees under sham paper work by virtue of the sham transaction. It was also pointed out that the workmen in other coal washery were regularised. The claim of the appellant that the washery was given to the purchaser was not accepted as being a sham transaction to camouflage the real facts. The learned Single Judge on consideration of the entire material confirmed the award and the Division Bench declined to interfere in the LPA. We find no reason to interfere with the order under challenge. The appeal is, therefore, dismissed with costs.

C.A.No. 141/2001 This appeal arises from the judgment of the High Court of Judicature at Bombay passed in W.P.No. 2616/99 dated 23.12.99.

The employment of contract labour in the concerned establishment of the appellant was prohibited by the notification issued by the Central Government under Section 10(1) of the CLRA Act on 16.11.99. Following the judgment of this Court in Air Indias case (supra), the High Court directed the appellant to absorb the contract labour. Inasmuch as we have over-ruled the judgment of this Court in Air Indias case (supra), the direction given by the High Court cannot be sustained. We, however, leave it open to the respondent-union to seek appropriate relief in terms of the main judgment. The order, under challenge, is set aside.

The appeal is accordingly allowed.

In all these cases except in C.A.6023/2001@SLP(C)No.

19391/99, the parties are directed to bear their own costs.

……………………………………………J.

(B.N. Kirpal) ……………………………………………J.

(Syed Shah Mohammed Quadri) ……………………………………………J.

(M.B. Shah) ……………………………………………J.

(Ruma Pal) ……………………………………………J.

(K. G. Balakrishnan) New Delhi, August 30, 2001 [1980] INSC 210; 1999 (7) SCC 59 1997 (9) SCC 377 1981 (1) SCC 315 1983 (2) Appeal Cases 237 In this part, unless the context otherwise requires, the State includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India.

[1975] INSC 43; 1975 (3) SCR 619 1979 (3) SCR 1014 1980 (2) SCR 773 1981 (2) SCR 79 1991 Suppl. (1) SCC 600 [1980] INSC 218; 1981 (1) SCC 449 1984 Suppl. SCC 540 1984 (2) SCC 141 1984 (3) SCC 316 1986 (3) SCC 156 1988 (3) SCC 105 1994 (1) SCC 243 1990 (3) SCC 280 1995 (5) SCC 482 20 [1990] INSC 278; 1991 (3) SCC 91 [1969] INSC 74; 1969 (1) SCC 765 1969 (1) SCC 765 1975 (4) SCC 679 1984 Suppl. SCC 443 1960 (3) SCR 466 AIR 1951 SC 313 1955 (1) SCR 1427 1964 (2) SCR 838 1974 (3) SCC 66 [1978] INSC 117; 1978 (4) SCC 257 1995 (5) SCC 27 AIR (36) 1949 Federal Court 111 [1950] INSC 20; 1950 SCR 459 1963 (3) SCR 930 1998 (6) SCC 538

36. J.T. 2001 (2) SC 376 1971 (2) SCC 724

38. 1992 (1) SCC 695 2001 (1) SCC 298 2000 (7) SCC 109 2001 (1) SCC 720 1999 (6) SCC 439 (6th Edition by S.G.G.Edgar Page 96) (1898 (2) Ch.28, 35,) [1584] EngR 9; (1584 (3) Co. Rep. 7a) The explanation appended to this clause clarifies that the expressions mine, owner and agent shall have the meanings respectively assigned to them in clause (j), clause (l) and clause (c) of sub-section (1) of section 2 of the Mines Act, 1952.

1974 (1) SCC 596 1994 (5) SCC 304

49. [1985] INSC 7; 1985 (1) SCC 630

50. 1991 (2) SCC 176

The post Steel Authority of India Ltd. & Ors etc. Vs. National Union Water Front Workers & Ors appeared first on B&B Associates LLP.

Deepali Gundu Surwase …Appellant
versus
Kranti Junior Adhyapak Mahavidyalaya (D.Ed.) and others …Respondents

J U D G M E N T

G.S. SINGHVI, J.

1. Leave granted.

2. The question which arises for consideration in this appeal filed against order dated 28.9.2011 passed by the learned Single Judge of the Bombay High Court, Aurangabad Bench is whether the appellant is entitled to wages for the period during which she was forcibly kept out of service by the management of the school.

3. The appellant was appointed as a teacher in Nandanvan Vidya Mandir (Primary School) run by a trust established and controlled by Bagade family. The grant in aid given by the State Government, which included rent for the building was received by Bagade family because the premises belonged to one of its members, namely, Shri Dulichand. In 2005, the Municipal Corporation of Aurangabad raised a tax bill of Rs.79,974/- by treating the property as commercial. Thereupon, the Headmistress of the school, who was also President of the Trust, addressed a letter to all the employees including the appellant requiring them to contribute a sum of Rs.1500/- per month towards the tax liability. The appellant refused to comply with the dictate of the Headmistress. Annoyed by this, the management issued as many as 25 memos to the appellant and then placed her under suspension vide letter dated 14.11.2006. She submitted reply to each and every memorandum and denied the allegations. Education Officer (Primary) Zilla Parishad, Aurangabad did not approve the appellant’s suspension. However, the letter of suspension was not revoked. She was not even paid subsistence allowance in terms of the Maharashtra Employees of Private Schools (Conditions of Service) Rules, 1981 (for short, ‘the Rules’) framed under Section 16 of the Maharashtra Employees of Private Schools (Conditions of Service) Regulation Act, 1977 (for short, ‘the Act’).

4. Writ Petition No.8404 of 2006 filed by the appellant questioning her suspension was disposed of by the Division Bench of the Bombay High Court vide order dated 21.3.2007 and it was declared that the appellant will be deemed to have rejoined her duties from 14.3.2007 and entitled to consequential benefits in terms of Rule 37(2)(f) of the Rules and that the payment of arrears shall be the liability of the management. Paragraphs 4 and 5 of that order read as under:

“4. Considering the order we intend passing it is not necessary for us to deal with the rival contentions of the parties. That will be for the Inquiry Committee to decide. In view of the apprehensions expressed regarding the inquiry being dragged on unnecessarily, it is necessary to safeguard the interests of the petitioner as well.

5. In the circumstances, Rule is made absolute in the following terms.

i) The Inquiry Committee shall conclude the proceedings and pass a final order on or before 31.5.2007.

ii) The petitioner shall be at liberty to have her case represented by Smt.Sulbha Panditrao Munde.

iii) The petitioner/her representative shall appear, in the first instance, before the Inquiry Committee at 11 a.m. on 26.3.2007 and, thereafter, as directed by the Inquiry Committee.

iv) The petitioner is entitled to the benefit of Rule 37 (2) (f) of Maharashtra Employees of Private Schools (Conditions of Service) Rules, 1981, as specified in paragraph 11 of the order and judgment of the Division Bench in the case of Hamid Khan Nayyar s/o Habib Khan v. Education Officer, Amravati and others (supra). The petitioner shall be deemed to have rejoined the duties from 14.3.2007 and entitled to consequential benefits that would flow out of Rule 37 (2) (f). The payment of arrears shall be the liability of the management.”

5. In the meanwhile, the management issued notice dated 28.12.2006 for holding an inquiry against the appellant under Rules 36 and 37 of the Rules. The appellant nominated Smt. Sulbha Panditrao Munde to appear before the Inquiry Committee, but Smt. Munde was not allowed to participate in the inquiry proceedings. The Inquiry Committee conducted ex parte proceedings and the management terminated the appellant’s service vide order dated 15.6.2007.

6. The appellant challenged the aforesaid order under Section 9 of the Act. In the appeal filed by her on 25.6.2007, the appellant pleaded that the action taken by the management was arbitrary and violative of the principles of natural justice. She further pleaded that the sole object of the inquiry was to teach her a lesson for refusing to comply with the illegal demand of the management.

7. The management contested the appeal and pleaded that the action taken by it was legal and justified because the appellant had been found guilty of misconduct. It was further pleaded that the inquiry was held in consonance with the relevant rules and the principles of natural justice.

8. By an order dated 20.6.2009, the Presiding Officer of the School Tribunal, Aurangabad Division (for short, ‘the Tribunal’) allowed the appeal and quashed the termination of the appellant’s service. He also directed the management to pay full back wages to the appellant. The Tribunal considered the appellant’s plea that she had not been given reasonable opportunity of hearing and observed:

“Now let us test for what purpose and for what subject inquiry was initiated in what manner inquiry was conducted, which witnesses have been examined and how injury was conclude. I have already demonstrate above that starting point against this appellant is calling upon staff members collection of fund for payment for tax dues page 54 of appeal memo. All the staff members have objected this joining hands together page 58 of appeal. Fact finding committee have submitted its report Exhibit

62. Report of Education Officer (Primary) in regard to the proposal of appointment of Administrator page 71. If we see issuance of memo by Head Mistress, I observe that language which is used to revengeful against this appellant. It seems that attitude towards this appellant was of indecent and I also observed that behaviour of the appellant have also instigated Head Mistress for the same. Language is of law standard use in the letter by imputing defamed language and humiliation to the appellant.

If we see memos, we can find that some memos are of silly count i.e. late for 3 minutes page 95, query about the examination page 93 to which appellant have replied that when no examinations were held where is the question of getting inquiry by the parents page 96. In regard to the memo, in regard to the black dress on 15.08.2005 and 06.12.2005 and about issuance of show cause notice for issuing false affidavit page 143.

We can find attitude of this Head Master towards appellant.

Three minute late is very silly ground query about examination which was not at all held, wearing of black dress during course of argument there was argument on photograph, however, no such photograph is submitted on record. In this regard during course of argument, it was brought to my notice that on 15.08.2005 this appellant have wore black colour blouse, however, she had wore white sari on her person. First thing is that there is no such rule about so called colour that it is bogus colour or this colour is being used for protesting or otherwise. How and why Head Mistress and Management have made issue of this black colour blouse I cannot understand. I have gone through the whole record but I do not find any circular issued by Head Mistress by which all the staff members have been called upon to come in dress for this function. So in the absence of such circular, how it can be an issue of inquiry.

Another aspect is that one of the staff Vijay Gedam have lodged appeal before this Tribunal in favour of him, this appellant and one another staff teacher have swear affidavit. I do not find how this issue can be a subject of inquiry that appellant have swear false affidavit. Is Head Mistress having authority to say that this appellant have swear false affidavit. Here I find 5 to 6 staff members have supported this appellant, at the same time some teachers have also come forward this Head Mistress. They were in dilemma to whom they may favour. So over all attitude of this Head Mistress against this appellant is revengeful with ulterior motive to drag this appellant in inquiry proceeding.

I gone through the statement recorded of the witnesses. I find that all the statements are general in nature and it is repetition of statement of first witness Surajkumar Khobragade.

Nobody has made statement specifically with date and incident.

The deposition is a general statement which is already in memos which have been issue by the Head Mistress to the appellant.

More important in this regard that no cross examination of witnesses by the appellant. In the statement of witnesses, I do not find any endorsement that appellant was absent or appellant is present, she declined to cross examine or otherwise. These statements have been concluded that witnesses have stated before inquiry committee, that is all. If we read first statement of first witnesses we can find carry forward of the statement for other witnesses by some minor change in the statement.

One crucial aspect in regard to the proceeding is that this Head Mistress who had issued more than 25 bulky memos against this appellant and on whose complaint or grievances this inquiry was initiate, have not been examined by the inquiry committee. I am surprised that why such a key witness is not examined. In reply this appellant have put her grievances against Head Mistress. By taking advantage of this Chief Executive Officer of the inquiry i.e. Sonia Bagale called upon written explanation from Head Mistress to cover up complaint and grievances of the appellant.

It is on 21.05.2007, page 777, 778 and 781 by this explanation again one issues have been brought which were not subject matter of the chargesheet. So it is serious lacuna in this inquiry proceeding that witnesses Head Mistress have not been examined.” The Tribunal then adverted to the charges levelled against the appellant and held:

“It is also demonstrated in the course of argument that permission was not granted as per letter dated 22.11.2006 of Education Officer. So naturally suspension of this appellant was in question. It is another aspect that on persuasion appellant have been paid subsistence allowance. However, remaining subsistence allowance till today is not paid to the appellant.

So it can be another ground for vitiating inquiry.

204(1)Mh. L.J. page 676 in case of Awdhesh Narayan K. Singh vs.

Adarsh Vidya Mandir Trust and another, (a) Maharashtra Employees of Private Schools (Conditions of Service) Rules 1981, R.R. 35 and 33- Failure to obtain prior permission of Authority under Rule 33(1) before suspending an employee does not affect the action of suspension pending inquiry- If prior permission is obtained, Rule 35(3) is attracted and the suspended employee is entitled for subsistence allowance under the scheme of payment through Cooperative Banks for a period of four months after which period the payment is to be made by the Management. If an employee is suspended without obtaining prior approval of the Education Authority, payment of subsistence allowance for entire period has to be made by the Management. So if considered all these aspects, we can find that appeal deserves to be allowed by quashing inquiry held against appellant.” The Tribunal finally took cognizance of the fact that the appellant was kept under suspension from 14.11.2006 and she was not gainfully employed after the termination of her service and declared that she is entitled to full back wages. The operative portion of the order passed by the Tribunal reads as under:

“1) Appeal is allowed.

2) The termination order dated 15.06.2007 issued by Respondent on the basis of inquiry report is hereby quashed and set aside.

3) The appellant is hereby reinstated on her original post and Respondents are directed to reinstate the appellant in her original post as Asst. Teacher Nandanvan Vidyamandir (Primary School), Aurangabad with full back wages from the date of termination till date of reinstatement.

4) The Respondent Nos.1 to 3 are hereby directed to deposit full back wages i.e. pay and allowances of the appellant from the date of her termination till the date of her reinstatement in the service, within 45 days in this Tribunal from the date of this order.

5) The appellant will be entitled to withdraw the above amounts from this Tribunal immediately after it is deposited.”

9. The management challenged the order of the Tribunal in Writ Petition No. 10032 of 2010. The learned Single Judge examined the issues raised by the management in detail and expressed his agreement with the Tribunal that the decision of the management to suspend the appellant and to terminate her service were vitiated due to violation of the statutory provisions and the principles of natural justice. While commenting upon the appellant’s suspension, the learned Single Judge observed:

“It has also come on record that the appellant was suspended by suspension letter dated 14.11.2006. The appellant made representation to the Education Officer. The Education Officer refused to approve suspension of the appellant as per his letter dated 22.11.2006. From careful perusal of the material brought on record, I do not find that, there arose extraordinary situation to suspend services of the appellant without taking prior approval of the Education Officer, as contemplated under Rules. No doubt, the Management can suspend services of an employee without prior approval of the Education Officer, but for that there should be extraordinary situation. However, in the facts of this case, nothing is brought on record to suggest that there was extraordinary situation existing so as to take emergent steps to suspend services of the appellant without taking prior approval of the Education Officer (Primary), Zilla Parishad, Aurangabad. It is also not in dispute that the Education Officer declined to approve suspension of the appellant as per his letter dated 22.11.2006.

Therefore, taking into consideration facts involved in the present case, conclusion is reached by the School Tribunal that the Management of the petitioner-school/Institution is dominated by the members of Bagade family.” The learned Single Judge then considered the finding recorded by the Tribunal that the Inquiry Committee was not validly constituted and observed:

“In the present case, admittedly petitioners herein did not file any application or made prayer for reconstituting the inquiry committee and to proceed further for inquiry by newly reconstituted committee. On the contrary, from reading the reply filed by the petitioners herein before the School Tribunal, it is abundantly clear that the petitioners went on justifying constitution of the Committee and stating in the reply that no fault can be attributed with the constitution of the Committee.

Therefore, in absence of such prayer, the School Tribunal proceeded further and dealt with all the charges which were levelled against the appellant i.e. Respondent No.3 herein.

Therefore, in my opinion, further adjudication by the Tribunal on merits of the matter cannot be said to be beyond jurisdiction or powers of the School Tribunal. In the facts of this case, as it is apparent from the findings recorded by the School Tribunal, that as the case in hand is a case of victimization and petitioner Management as well as the Inquiry Committee having joined hands against the delinquent right from the beginning, no premium can be put over the action of the petitioner-Management and Inquiry Committee who threw the principles of natural justice in the air. It would be a travesty of justice, in these circumstances, to allow the petitioner- Management to once again hold inquiry in such a extreme case.” However, the learned Single Judge set aside the direction given by the School Tribunal for payment of back wages by relying upon the judgments in J.K. Synthetics Ltd. v. K. P. Agrawal and another (2007) 2 SCC 433 and Zilla Parishad, Gadchiroli and another v. Prakash s/o Nagorao Thete and another 2009 (4) Mh. L. J. 628. The observations made by the learned Single Judge on this issue are extracted below:

“Bare perusal of above reproduced para 40 of the judgment of the School Tribunal would make it abundantly clear that, the advocate for the appellant, in the course of arguments, argued that the appellant was kept under suspension from 14.11.2006 till the appeal is finally heard. It was argued that the appellant was not gainfully employed anywhere during the period of suspension and termination and therefore, she is entitled to back wages from the date of her suspension. The Tribunal has observed that no rebuttal argument by other side. Therefore, it appears that, the School Tribunal has considered only oral submissions of the Counsel appearing for the appellant, in the absence of any specific pleadings, prayers and evidence for payment of back wages. There was no application or pleadings before the School Tribunal on oath by the appellant stating that she was not gainfully employed from the date of suspension till reinstatement. Therefore, in my considered opinion, finding recorded by the Tribunal in clauses 3 to 5 of the operative order, in respect of payment of back wages, cannot be sustained, in the light of law laid down by this Court and Honourable Supreme Court in respect of payment of back wages.”

10. Learned counsel for the appellant relied upon the judgments of this Court in Hindustan Tin Works Private Limited v. Employees of Hindustan Tin Works Private Limited [1978] INSC 157; (1979) 2 SCC 80, Surendra Kumar Verma v. Central Government Industrial Tribunal-cum-Labour Court, New Delhi (1980) 4 SCC 443, Mohan Lal v. Management of Bharat Electronics Limited (1981) 3 SCC 225, Workmen of Calcutta Dock Labour Board and another v. Employers in relation to Calcutta Dock Labour Board and others (1974) 3 SCC 216 and argued that the impugned order is liable to be set aside because while the appellant had pleaded that she was not gainfully employed, no evidence was produced by the management to prove the contrary. Learned counsel submitted that the order passed by the Tribunal was in consonance with the provisions of the Act and the Rules and the High Court committed serious error by setting aside the direction given by the Tribunal to the management to pay back wages to the appellant on the specious ground that she had not led evidence to prove her non-employment during the period she was kept away from the job. He emphasized that in view of the embargo contained in Rule 33(3), the appellant had not taken up any other employment and argued that she could not have been deprived of full pay and allowances for the entire period during which she was forcibly kept out of job.

11. Learned counsel for the respondent supported the impugned order and argued that the High Court did not commit any error by setting aside the direction given by the Tribunal for payment of back wages to the appellant because she had neither pleaded nor any evidence was produced that during the period of suspension and thereafter she was not employed elsewhere.

Learned counsel relied upon the judgments in M.P. State Electricity Board v. Jarina Bee (2003) 6 SCC 141, Kendriya Vidyalaya Sangathan v. S.C. Sharma (2005) 2 SCC 363, U.P. State Brassware Corporation Ltd. v. Uday Narain Pandey (2006) 1 SCC 479, J. K. Synthetics Ltd. v. K.P. Agrawal and another (supra), The Depot Manager, A.P.S.R.T.C. v. P. Jayaram Reddy (2009) 2 SCC 681, Novartis India Ltd. v. State of West Bengal and others (2009) 3 SCC 124, Metropolitan Transport Corporation v. V. Venkatesan (2009) 9 SCC 601 and Jagbir Singh v. Haryana State Agriculture Marketing Board and another (2009) 15 SCC 327 and argued that the rule of reinstatement with back wages propounded in 1960’s and 70’s has been considerably diluted and the Courts/Tribunal cannot ordain payment of back wages as a matter of course in each and every case of wrongful termination of service. Learned counsel submitted that even if the Court/Tribunal finds that the termination, dismissal or discharge of an employee is contrary to law or is vitiated due to violation of the principles of natural justice, an order for payment of back wages cannot be issued unless the employee concerned not only pleads, but also proves that he/she was not employed gainfully during the intervening period.

12. We have considered the respective arguments. The Act was enacted by the legislature to regulate the recruitment and conditions of service of employees in certain private schools in the State and to instill a sense of security among such employees so that they may fearlessly discharge their duties towards the pupil, the institution and the society. Another object of the Act is to ensure that the employees become accountable to the management and contribute their might for improving the standard of education. Section 2 of the Act contains definitions of various words and terms appearing in other sections. Section 8 provides for constitution of one or more Tribunals to be called “School Tribunal” and also defines the jurisdiction of each Tribunal. Section 9(1) contains a non obstante clause and provides for an appeal by any employee of a private school against his/her dismissal or removal from service or whose services are otherwise terminated or who is reduced in rank. The employee, who is superseded in the matter of promotion is also entitled to file an appeal. Section 10 enumerates general powers and procedure of the Tribunal and Section 11 empowers the Tribunal to give appropriate relief and direction. Section 12 also contains a non obstante clause and makes the decision of the Tribunal final and binding on the employee and the management. Of course, this is subject to the power of judicial review vested in the High Court and this Court. Section 16(1) empowers the State Government to make rules for carrying out the purposes of the Act. Section 16(2) specifies the particular matters on which the State Government can make rules. These include Code of Conduct and disciplinary matters and the manner of conducting inquiries.

13. Rule 35 of the Rules empower the management to suspend an employee with the prior approval of the competent authority. The exercise of this power is hedged with the condition that the period of suspension shall not exceed four months without prior permission of the concerned authority. The suspended employee is entitled to subsistence allowance under the scheme of payment (Rule 34) through Co-operative Bank for a period of four months.

If the period of suspension exceeds four months, then subsistence allowance has to be paid by the management. In case, the management suspends an employee without obtaining prior approval of the competent authority, then it has to pay the subsistence allowance till the completion of inquiry. A suspended employee can be denied subsistence allowance only in the contingencies enumerated in clauses (3) and (4) of Rule 33, i.e., when he takes up private employment or leaves headquarter without prior approval of the Chief Executive Officer.

14. For the sake of reference, Sections 2(7), 9, 10, 11 and 16 of the Act are reproduced below:

“2(7) “Employee,” means any member of the teaching and non teaching staff of a recognized school and includes Shikshan Sevak;

9. Right of appeal to Tribunal to employees of a private school.

(1) Notwithstanding anything contained in any law or contract for the time being in force, any employee in a private school,- (a) who is dismissed or removed or whose services are otherwise terminated or who is reduced in rank, by the order passed by the Management; or (b) who is superseded by the Management while making an appointment to any post by promotion;

and who is aggrieved, shall have a right to appeal and may appeal against any such order or supersession to the Tribunal constituted under section 8.

Provided that, no such appeal shall lie to the Tribunal in any case where the matter has already been decided by a Court of competent jurisdiction or is pending before such Court, on the appointed date or where the order of dismissal, removal, otherwise termination of service or reduction in rank was passed by the Management at any time before the 1st July, 1976.

(2) to (4) xxxx xxxx xxxx 10. General Powers and procedure of Tribunal.

(1) For the purpose of admission, hearing and disposal of appeals, the Tribunal shall have the same powers as are vested in an Appellate Court under the Code of Civil Procedure, 1908, and shall have the power to stay the operation of any order against which an appeal is made on such conditions as it may think fit to impose and such other powers as are conferred on it by or under this Act.

(2)The Presiding Officer of the Tribunal shall decide the procedure to be followed by the Tribunal for the disposal of its business including the place or places at which and the hours during which it shall hold its sitting.

(3) xxxx xxxx xxxx

11. Powers of Tribunal to give appropriate relief and direction.

(1) On receipt of an appeal, where the Tribunal, after giving reasonable opportunity to both parties of being heard, is satisfied that the appeal does not pertain to any of the matters specified in section 9 or is not maintainable by it, or there is no sufficient ground for interfering with the order of the Management it may dismiss the appeal.

(2) Where the Tribunal, after giving reasonable opportunity to both parties of being heard, decides in any appeal that the order of dismissal, removal, otherwise termination of service or reduction in rank was in contravention of any law (including any rules made under this Act), contract or conditions of service for the time being in force or was otherwise illegal or improper, the Tribunal may set aside the order of the Management, partially or wholly, and direct the Management,- (a) to reinstate the employee on the same post or on a lower post as it may specify;

(b) to restore the employee to the rank which he held before reduction or to any lower rank as it may specify;’ (c) to give arrears of emoluments to the employee for such period as it may specify;

(d) to award such lesser punishment as it may specify in lieu of dismissal, removal, otherwise termination of service or reduction in rank, as the case may be;

(e) where it is decided not to reinstate the employee or in any other appropriate case, to give to the employee twelve months’ salary (pay and allowances, if any) if he has been in the services of the school for ten years or more and six months salary (pay and allowances, if any) if he has been in service of the school for less then ten year, by way or compensation, regard being had to loss of employment and possibility of getting or not getting suitable employment thereunder, as it may specify; or (f) to give such other relief to the employee and to observe such other conditions as it may specify, having regard to the circumstances of the case.

(3) It shall be lawful for the Tribunal to recommend to State Government that any dues directed by it to be paid to the employee, or in case of an order to reinstate the employee an emoluments to be paid to the employee till he is reinstated, may be deducted from the grant due and payable, or that may become due and payable in future, to the Management and be paid to the employee directly.

(4) Any direction issued by the Tribunal under sub-section (2) shall be communicated to both parties in writing and shall be complied by the Management within the period specified in the direction, which shall not be less than thirty days from the date of its receipt by the Management.

16. Rules.

(1) The State Government may, by notification in the Official Gazette, make rules for carrying out the purposes of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely :- (a) to (c) xx xx xx xx (d) the other conditions of service of such employees including leave, superannuation, re-employment and promotions;

(e) the duties of such employees and Code of Conduct and disciplinary matters;

(f) the manner of conducting enquiries;

(g) xx xx xx xx (2A) to (4) xx xx xx ”

15. Rules 33 (1) to (4), 34(1), (2) and 35, which have bearing on the decision of this appeal read as under:

“33. Procedure for inflicting major penalties.

(1) If an employee is alleged to be guilty of any of the grounds specified in sub-rule (5) of rule 28 and if there is reason to believe that in the event of the guilt being proved against him, he is likely to be reduced in rank or removed from service, the Management shall first decide whether to hold an inquiry and also to place the employees under suspension and if it decides to suspend the employee, it shall authorise the Chief Executive Officer to do so after obtaining the permission of the Education Officer or, in the case of the Junior College of Educational and Technical High Schools, of the Deputy Director.

Suspension shall not be ordered unless there is a prima facie case for his removal or there is reason to believe that his continuance in active service is likely to cause embarrassment or to hamper the investigation of the case. If the Management decides to suspend the employee, such employee shall, subject to the provisions of sub-rule (5) stand suspended with effect from the date of such orders.

(2) If the employee tenders resignation while under suspension and during the pendency of the inquiry such resignation shall not be accepted.

(3) An employee under suspension shall not accept any private employment.

(4) The employee under suspension shall not leave the headquarters during the period of suspension without the prior approval of the Chief Executive Officer. If such employee is the Head and also the Chief Executive Officer, he shall obtain the necessary prior approval of the President.

34. Payment of subsistence allowance.

(1) (a) A subsistence allowance at an amount equal to the leave salary which the employee would have drawn if he had been on leave on half pay and in addition, Dearness allowance based on such leave salary shall be payable to the employee under suspension.

(b) Where the period of suspension exceeds 4 months, the authority which made or is deemed to have made the order of suspension shall be competent to vary the amount of subsistence allowance for any period subsequent to the period of the first 4 months as follows, namely :- (i) The amount of subsistence allowance may be increased by a suitable amount not exceeding 50 per cent of the subsistence allowance admissible during the period of first 4 months, if in the opinion of the said authority, the period of suspension has been prolonged for reasons, to be recorded in writing, not directly attributable to the employee.

(ii) The amount of subsistence allowance may be reduced by a suitable amount, not exceeding 50 per cent of the subsistence allowance admissible during the period of the first 4 months, if in the opinion of the said authority the period of suspension has been prolonged due to reasons, to be recorded in writing directly attributable to the employee.

(iii) The rate of Dearness allowance shall be based on the increased or on the Decreased amount of subsistence allowance, as the case may be, admissible under sub-clauses (i) and (ii).

(2) Other compensatory allowances, if any, of which the employee was in receipt on the date of suspension shall also be payable to the employee under suspension to such extent and subject to such conditions as the authority suspending the employee may direct:

Provided that the employee shall not be entitled to the compensatory allowances unless the said authority is satisfied that the employee continues to meet the expenditure for which such allowances are granted:

Provided further that, when an employee is convicted by a competent court and sentenced to imprisonment, the subsistence allowance shall be reduced to a nominal amount of rupee one per month with effect from the date of such conviction and he shall continue to draw the same till the date of his removal or reinstatement by the competent authority :

Provided also that, if an employee is acquitted by the appellate court and no further appeal or a revision application to a higher court is preferred and pending, he shall draw the subsistence allowance at the normal rate from the date of acquittal by the appellate court till the termination of the inquiry if any, initiated under these rules :

Provided also that, in cases falling under sub-rules (1) and (2) above, where the management refuses to pay or fails to start and continue payment of subsistence allowance and other compensatory allowances, if any, to an employee under suspension, payment of the same shall be made by the Education Officer or Deputy Director, as the case may be, who shall deduct an equal amount from the non-salary grant that may be due and payable or may become due and payable to the school.

35. Conditions of suspension.

(1) In cases where the Management desires to suspend an employee, he shall be suspended only with the prior approval of the appropriate authority mentioned in rule 33.

(2) The period of suspension shall not exceed four months except with the prior permission of such appropriate authority.

(3) In case where the employee is suspended with prior approval he shall be paid subsistence allowance under the scheme of payment through Co-operative Banks for a period of four months only and thereafter, the payment shall be made by the Management concerned.

(4) In case where the employee is suspended by the Management without obtaining prior approval of the appropriate authority as aforesaid, the payment of subsistence allowance even during the first four months of suspension and for further period thereafter till the completion of inquiry shall be made by the Management itself.

(5) The subsistence allowance shall not be withheld except in cases of breach of provisions of sub-rules (3) or (4) of rule 33.”

16. The word “reinstatement” has not been defined in the Act and the Rules. As per Shorter Oxford English Dictionary, Vol.II, 3rd Edition, the word “reinstate” means to reinstall or re-establish (a person or thing in a place, station, condition, etc.); to restore to its proper or original state; to reinstate afresh and the word “reinstatement” means the action of reinstating; re-establishment. As per Law Lexicon, 2nd Edition, the word “reinstate” means to reinstall; to re-establish; to place again in a former state, condition or office; to restore to a state or position from which the object or person had been removed and the word “reinstatement” means establishing in former condition, position or authority (as) reinstatement of a deposed prince. As per Merriam Webster Dictionary, the word “reinstate” means to place again (as in possession or in a former position), to restore to a previous effective state. As per Black’s Law Dictionary, 6th Edition, “reinstatement” means ‘to reinstall, to re- establish, to place again in a former state, condition, or office? To restore to a state or position from which the object or person had been removed.’

17. The very idea of restoring an employee to the position which he held before dismissal or removal or termination of service implies that the employee will be put in the same position in which he would have been but for the illegal action taken by the employer. The injury suffered by a person, who is dismissed or removed or is otherwise terminated from service cannot easily be measured in terms of money. With the passing of an order which has the effect of severing the employer employee relationship, the latter’s source of income gets dried up. Not only the concerned employee, but his entire family suffers grave adversities. They are deprived of the source of sustenance. The children are deprived of nutritious food and all opportunities of education and advancement in life. At times, the family has to borrow from the relatives and other acquaintance to avoid starvation. These sufferings continue till the competent adjudicatory forum decides on the legality of the action taken by the employer. The reinstatement of such an employee, which is preceded by a finding of the competent judicial/quasi judicial body or Court that the action taken by the employer is ultra vires the relevant statutory provisions or the principles of natural justice, entitles the employee to claim full back wages. If the employer wants to deny back wages to the employee or contest his entitlement to get consequential benefits, then it is for him/her to specifically plead and prove that during the intervening period the employee was gainfully employed and was getting the same emoluments.

Denial of back wages to an employee, who has suffered due to an illegal act of the employer would amount to indirectly punishing the concerned employee and rewarding the employer by relieving him of the obligation to pay back wages including the emoluments.

18. A somewhat similar issue was considered by a three Judge Bench in Hindustan Tin Works Pvt. Ltd. v. Employees of Hindustan Tin Works Pvt. Ltd.

(supra) in the context of termination of services of 56 employees by way of retrenchment due to alleged non-availability of the raw material necessary for utilization of full installed capacity by the petitioner. The dispute raised by the employees resulted in award of reinstatement with full back wages. This Court examined the issue at length and held:

“It is no more open to debate that in the field of industrial jurisprudence a declaration can be given that the termination of service is bad and the workman continues to be in service. The spectre of common law doctrine that contract of personal service cannot be specifically enforced or the doctrine of mitigation of damages does not haunt in this branch of law. The relief of reinstatement with continuity of service can be granted where termination of service is found to be invalid. It would mean that the employer has taken away illegally the right to work of the workman contrary to the relevant law or in breach of contract and simultaneously deprived the workman of his earnings. If thus the employer is found to be in the wrong as a result of which the workman is directed to be reinstated, the employer could not shirk his responsibility of paying the wages which the workman has been deprived of by the illegal or invalid action of the employer. Speaking realistically, where termination of service is questioned as invalid or illegal and the workman has to go through the gamut of litigation, his capacity to sustain himself throughout the protracted litigation is itself such an awesome factor that he may not survive to see the day when relief is granted. More so in our system where the law’s proverbial delay has become stupefying. If after such a protracted time and energy consuming litigation during which period the workman just sustains himself, ultimately he is to be told that though he will be reinstated, he will be denied the back wages which would be due to him, the workman would be subjected to a sort of penalty for no fault of his and it is wholly undeserved. Ordinarily, therefore, a workman whose service has been illegally terminated would be entitled to full back wages except to the extent he was gainfully employed during the enforced idleness. That is the normal rule. Any other view would be a premium on the unwarranted litigative activity of the employer. If the employer terminates the service illegally and the termination is motivated as in this case viz. to resist the workmen’s demand for revision of wages, the termination may well amount to unfair labour practice. In such circumstances reinstatement being the normal rule, it should be followed with full back wages. Articles 41 and 43 of the Constitution would assist us in reaching a just conclusion in this respect. By a suitable legislation, to wit, the U.P. Industrial Disputes Act, 1947, the State has endeavoured to secure work to the workmen.

In breach of the statutory obligation the services were terminated and the termination is found to be invalid; the workmen though willing to do the assigned work and earn their livelihood, were kept away therefrom. On top of it they were forced to litigation up to the Apex Court now they are being told that something less than full back wages should be awarded to them. If the services were not terminated the workmen ordinarily would have continued to work and would have earned their wages. When it was held that the termination of services was neither proper nor justified, it would not only show that the workmen were always willing to serve but if they rendered service they would legitimately be entitled to the wages for the same. If the workmen were always ready to work but they were kept away therefrom on account of an invalid act of the employer, there is no justification for not awarding them full back wages which were very legitimately due to them.

In the very nature of things there cannot be a strait-jacket formula for awarding relief of back wages. All relevant considerations will enter the verdict. More or less, it would be a motion addressed to the discretion of the Tribunal. Full back wages would be the normal rule and the party objecting to it must establish the circumstances necessitating departure. At that stage the Tribunal will exercise its discretion keeping in view all the relevant circumstances. But the discretion must be exercised in a judicial and judicious manner. The reason for exercising discretion must be cogent and convincing and must appear on the face of the record. When it is said that something is to be done within the discretion of the authority, that something is to be done according to the Rules of reason and justice, according to law and not humour. It is not to be arbitrary, vague and fanciful but legal and regular.” (emphasis supplied) After enunciating the above-noted principles, this Court took cognizance of the appellant’s plea that the company is suffering loss and, therefore, the workmen should make some sacrifice and modified the award of full back wages by directing that the workmen shall be entitled to 75 % of the back wages.

19. Another three Judge Bench considered the same issue in Surendra Kumar Verma v. Central Government Industrial Tribunal-cum-Labour Court, New Delhi (supra) and observed:

“Plain common sense dictates that the removal of an order terminating the services of workmen must ordinarily lead to the reinstatement of the services of the workmen. It is as if the order has never been, and so it must ordinarily lead to back wages too. But there may be exceptional circumstances which make it impossible or wholly inequitable vis-à-vis the employer and workmen to direct reinstatement with full back wages. For instance, the industry might have closed down or might be in severe financial doldrums; the workmen concerned might have secured better or other employment elsewhere and so on. In such situations, there is a vestige of discretion left in the court to make appropriate consequential orders. The court may deny the relief of reinstatement where reinstatement is impossible because the industry has closed down. The court may deny the relief of award of full back wages where that would place an impossible burden on the employer. In such and other exceptional cases the court may mould the relief, but, ordinarily the relief to be awarded must be reinstatement with full back wages. That relief must be awarded where no special impediment in the way of awarding the relief is clearly shown. True, occasional hardship may be caused to an employer but we must remember that, more often than not, comparatively far greater hardship is certain to be caused to the workmen if the relief is denied than to the employer if the relief is granted.” (emphasis supplied) 20. The principle laid down in Hindustan Tin Works Private Limited v.

Employees of Hindustan Tin Works Private Limited (supra) was reiterated in P.G.I. of Medical Education & Research, Chandigarh v. Raj Kumar (2001) 2 SCC 54. That case makes an interesting reading. The respondent had worked as helper for 11 months and 18 days. The termination of his service was declared by Labour Court, Chandigarh as retrenchment and was invalidated on the ground of non-compliance of Section 25-F of the Industrial Disputes Act, 1947. As a corollary, the Labour Court held that the respondent was entitled to reinstatement with continuity of service. However, only 60% back wages were awarded. The learned Single Judge of the Punjab and Haryana High Court did not find any error apparent in the award of the Labour Court but ordered payment of full back wages. The two Judge Bench of this Court noted the guiding principle laid down in the case of Hindustan Tin Works Private Limited and observed:

“While it is true that in the event of failure in compliance with Section 25-F read with Section 25(b) of the Industrial Disputes Act, 1947 in the normal course of events the Tribunal is supposed to award the back wages in its entirety but the discretion is left with the Tribunal in the matter of grant of back wages and it is this discretion, which in Hindustan Tin Works (P) Ltd. case this Court has stated must be exercised in a judicial and judicious manner depending upon the facts and circumstances of each case. While, however, recording the guiding principle for the grant of relief of back wages this Court in Hindustan case, itself reduced the back wages to 75%, the reason being the contextual facts and circumstances of the case under consideration.

The Labour Court being the final court of facts came to a conclusion that payment of 60% wages would comply with the requirement of law. The finding of perversity or being erroneous or not in accordance with law shall have to be recorded with reasons in order to assail the finding of the Tribunal or the Labour Court. It is not for the High Court to go into the factual aspects of the matter and there is an existing limitation on the High Court to that effect. In the event, however the finding of fact is based on any misappreciation of evidence, that would be deemed to be an error of law which can be corrected by a writ of certiorari. The law is well settled to the effect that finding of the Labour Court cannot be challenged in a proceeding in a writ of certiorari on the ground that the relevant and material evidence adduced before the Labour Court was insufficient or inadequate though, however, perversity of the order would warrant intervention of the High Court. The observation, as above, stands well settled since the decision of this Court in Syed Yakoob v. K.S. Radhakrishnan [1963] INSC 201; AIR 1964 SC 477.

Payment of back wages having a discretionary element involved in it has to be dealt with, in the facts and circumstances of each case and no straight-jacket formula can be evolved, though, however, there is statutory sanction to direct payment of back wages in its entirety. As regards the decision of this Court in Hindustan Tin Works (P) Ltd. be it noted that though broad guidelines, as regards payment of back wages, have been laid down by this Court but having regard to the peculiar facts of the matter, this Court directed payment of 75% back wages only.

The issue as raised in the matter of back wages has been dealt with by the Labour Court in the manner as above having regard to the facts and circumstances of the matter in the issue, upon exercise of its discretion and obviously in a manner which cannot but be judicious in nature. In the event, however, the High Court’s interference is sought for, there exists an obligation on the part of the High Court to record in the judgment, the reasoning before however denouncing a judgment of an inferior Tribunal, in the absence of which, the judgment in our view cannot stand the scrutiny of otherwise being reasonable. There ought to be available in the judgment itself a finding about the perversity or the erroneous approach of the Labour Court and it is only upon recording therewith the High Court has the authority to interfere. Unfortunately, the High Court did not feel it expedient to record any reason far less any appreciable reason before denouncing the judgment.”

21. The aforesaid judgment became a benchmark for almost all the subsequent judgments. In Hindustan Motors Ltd. v. Tapan Kumar Bhattacharya (2002) 6 SCC 41, the Fifth Industrial Tribunal, West Bengal had found that the finding of guilty recorded in the departmental inquiry was not based on any cogent and reliable evidence and passed an award for reinstatement of the workman with other benefits. The learned Single Judge allowed the writ petition filed by the employer and quashed the award of the Industrial Tribunal. The Division Bench of the High Court reversed the order of the learned Single Judge. This Court issued notice to the respondent limited to the question of back wages. After taking cognizance of the judgments in Hindustan Tin Works Private Limited v. Employees of Hindustan Tin Works Private Limited (supra) and P.G.I. of Medical Education & Research, Chandigarh v. Raj Kumar (supra), the Court observed:

“As already noted, there was no application of mind to the question of back wages by the Labour Court. There was no pleading or evidence whatsoever on the aspect whether the respondent was employed elsewhere during this long interregnum.

Instead of remitting the matter to the Labour Court or the High Court for fresh consideration at this distance of time, we feel that the issue relating to payment of back wages should be settled finally. On consideration of the entire matter in the light of the observations referred to supra in the matter of awarding back wages, we are of the view that in the context of the facts of this particular case including the vicissitudes of long-drawn litigation, it will serve the ends of justice if the respondent is paid 50% of the back wages till the date of reinstatement. The amount already paid as wages or subsistence allowance during the pendency of the various proceedings shall be deducted from the back wages now directed to be paid. The appellant will calculate the amount of back wages as directed herein and pay the same to the respondent within three months, failing which the amount will carry interest at the rate of 9% per annum. The award of the Labour Court which has been confirmed by the Division Bench of the High Court stands modified to this extent. The appeal is disposed of on the above terms. There will be no order as to costs.” (emphasis supplied)

22. In Indian Railway Construction Co. Ltd. v. Ajay Kumar (2003) 4 SCC 579, this Court was called upon to consider whether the services of the respondent could be terminated by dispensing with the requirement of inquiry enshrined in Indian Railway Construction Co. Ltd. (Conduct, Discipline and Appeal) Rules, 1981 read with Article 311(2) of the Constitution. The learned Single Judge of the Delhi High Court held that there was no legal justification to dispense with the inquiry and ordered reinstatement of the workman with back wages. The Division Bench upheld the order of the learned Single Judge. The two Judge Bench of this Court referred to the judgments in Hindustan Tin Works Private Limited v.

Employees of Hindustan Tin Works Private Limited (supra) and P.G.I. of Medical Education & Research, Chandigarh v. Raj Kumar (supra) and held that payment of Rs.15 lakhs in full and final settlement of all claims of the employee will serve the ends of justice.

23. In M.P. State Electricity Board v. Jarina Bee (Smt.) (supra), the two Judge Bench referred to P.G.I. of Medical Education & Research, Chandigarh v. Raj Kumar (supra) and held that it is always incumbent upon the Labour Court to decide the question relating to quantum of back wages by considering the evidence produced by the parties.

24. In Kendriya Vidyalaya Sangathan v. S. C. Sharma (supra), the Court found that the services of the respondent had been terminated under Rule 19(ii) of the Central Civil Services (Classification, Control and Appeal) Rules, 1965 on the charge that he was absconding from duty. The Central Administrative Tribunal held that no material was available with the disciplinary authority which could justify invoking of Rule 19(ii) and the order of dismissal could not have been passed without holding regular inquiry in accordance with the procedure prescribed under the Rules. The Division Bench of the Punjab and Haryana High Court did not accept the appellants’ contention that invoking of Rule 19(ii) was justified merely because the respondent did not respond to the notices issued to him and did not offer any explanation for his willful absence from duty for more than two years. The High Court agreed with the Tribunal and dismissed the writ petition. The High Court further held that even though the respondent- employee had not pleaded or produced any evidence that after dismissal from service, he was not gainfully employed, back wages cannot be denied to him.

This Court relied upon some of the earlier judgments and held that in view of the respondent’s failure to discharge the initial burden to show that he was not gainfully employed, there was ample justification to deny him back wages, more so because he had absconded from duty for a long period of two years.

25. In General Manager, Haryana Roadways v. Rudhan Singh (2005) 5 SCC 591, the three Judge Bench considered the question whether back wages should be awarded to the workman in each and every case of illegal retrenchment. The factual matrix of that case was that after finding the termination of the respondent’s service as illegal, the Industrial Tribunal- cum-Labour Court awarded 50% back wages. The writ petition filed by the appellant was dismissed by the Punjab and Haryana High Court. This Court set aside award of 50% back wages on the ground that the workman had raised the dispute after a gap of 2 years and 6 months and the Government had made reference after 8 months. The Court then proceeded to observe:

“There is no rule of thumb that in every case where the Industrial Tribunal gives a finding that the termination of service was in violation of Section 25-F of the Act, entire back wages should be awarded. A host of factors like the manner and method of selection and appointment i.e. whether after proper advertisement of the vacancy or inviting applications from the employment exchange, nature of appointment, namely, whether ad hoc, short term, daily wage, temporary or permanent in character, any special qualification required for the job and the like should be weighed and balanced in taking a decision regarding award of back wages. One of the important factors, which has to be taken into consideration, is the length of service, which the workman had rendered with the employer. If the workman has rendered a considerable period of service and his services are wrongfully terminated, he may be awarded full or partial back wages keeping in view the fact that at his age and the qualification possessed by him he may not be in a position to get another employment. However, where the total length of service rendered by a workman is very small, the award of back wages for the complete period i.e. from the date of termination till the date of the award, which our experience shows is often quite large, would be wholly inappropriate.

Another important factor, which requires to be taken into consideration is the nature of employment. A regular service of permanent character cannot be compared to short or intermittent daily-wage employment though it may be for 240 days in a calendar year.”

26. In U.P. State Brassware Corporation Ltd. v. Uday Narain Pandey (supra), the two Judge Bench observed:

“No precise formula can be laid down as to under what circumstances payment of entire back wages should be allowed.

Indisputably, it depends upon the facts and circumstances of each case. It would, however, not be correct to contend that it is automatic. It should not be granted mechanically only because on technical grounds or otherwise an order of termination is found to be in contravention of the provisions of Section 6-N of the U.P. Industrial Disputes Act.”

27. The Court also reiterated the rule that the workman is required to plead and prima facie prove that he was not gainfully employed during the intervening period.

28. In Depot Manager, Andhra Pradesh State Road Transport Corporation v.

P. Jayaram Reddy (supra), this Court noted that the services of the respondent were terminated because while seeking fresh appointment, he had suppressed the facts relating to earlier termination on the charges of grave misconduct. The Labour Court did not find any fault with the procedure adopted by the employer but opined that dismissal was very harsh, disproportionate and unjustified and accordingly exercised power under Section11-A of the Industrial Disputes Act, 1947 for ordering reinstatement with back wages. This Court referred to the judgments in P.G.I. of Medical Education & Research, Chandigarh v. Raj Kumar (supra) and J.K. Synthetics Ltd. v. K. P. Agrawal (supra) and held that the Labour Court was not justified in awarding back wages.

29. In Novartis India Limited v. State of West Bengal (supra), the services of the workman were terminated on the charge of not joining the place of transfer. The Labour Court quashed the termination of services on the ground of violation of the rules of natural justice and passed an award of reinstatement of the workman with back wages. The learned Single Judge of the High Court dismissed the writ petition filed by the appellant but the letters patent appeal was allowed by the Division Bench on the ground that the State of West Bengal was not the appropriate Government for making the reference. The special leave petition filed by the workman was allowed by this Court and the Division Bench of the High Court was asked to decide the letters patent appeal on merits. In the second round, the Division Bench dismissed the appeal. This Court referred to shift in the approach regarding payment of back wages and observed:

“There can, however, be no doubt whatsoever that there has been a shift in the approach of this Court in regard to payment of back wages. Back wages cannot be granted almost automatically upon setting aside an order of termination inter alia on the premise that the burden to show that the workman was gainfully employed during interregnum period was on the employer. This Court, in a number of decisions opined that grant of back wages is not automatic. The burden of proof that he remained unemployed would be on the workmen keeping in view the provisions contained in Section 106 of the Evidence Act, 1872.

This Court in the matter of grant of back wages has laid down certain guidelines stating that therefor several factors are required to be considered including the nature of appointment;

the mode of recruitment; the length of service; and whether the appointment was in consonance with Articles 14 and 16 of the Constitution of India in cases of public employment, etc.

It is also trite that for the purpose of grant of back wages, conduct of the workman concerned also plays a vital role. Each decision, as regards grant of back wages or the quantum thereof, would, therefore, depend on the fact of each case. Back wages are ordinarily to be granted, keeping in view the principles of grant of damages in mind. It cannot be claimed as a matter of right.”

30. In Metropolitan Transport Corporation v. V. Venkatesan (supra), the Court noted that after termination of service from the post of conductor, the respondent had acquired Law degree and started practice as an advocate. The Industrial Tribunal declared the termination of the respondent’s service by way of removal as void and inoperative on the ground that the Corporation had not applied for approval under Section 33(2)(b) of the Industrial Disputes Act. At one stage, the High Court stayed the order of the Industrial Tribunal but finally dismissed the writ petition. The workman filed application under Section 33-C(2) of the Industrial Disputes Act claiming full back wages. The Labour Court allowed the claim of the respondent to the extent of Rs.6,54,766/-. The writ petition filed against the order of the Labour Court was dismissed by the learned Single Judge and the appeal was dismissed by the Division Bench.

This Court referred to the earlier precedents and observed:

“First, it may be noticed that in the seventies and eighties, the directions for reinstatement and the payment of full back wages on dismissal order having been found invalid would ordinarily follow as a matter of course. But there is change in the legal approach now.

We recently observed in Jagbir Singh v. Haryana State Agriculture Mktg. Board that in the recent past there has been a shift in the legal position and in a long line of cases, this Court has consistently taken the view that the relief of reinstatement with back wages is not automatic and may be wholly inappropriate in a given fact situation even though the termination of an employee is held to be in contravention of the prescribed procedure.

Secondly, and more importantly, in view of the fact that the respondent was enrolled as an advocate on 12-12-2000 and continued to be so until the date of his reinstatement (15-6- 2004), in our thoughtful consideration, he cannot be held to be entitled to full back wages. That the income received by the respondent while pursuing legal profession has to be treated as income from gainful employment does not admit of any doubt. In North-East Karnataka RTC v. M. Nagangouda this Court held that “gainful employment” would also include self-employment. We respectfully agree.

It is difficult to accept the submission of the learned Senior Counsel for the respondent that he had no professional earnings as an advocate and except conducting his own case, the respondent did not appear in any other case. The fact that he resigned from service after 2-3 years of reinstatement and re- engaged himself in legal profession leads us to assume that he had some practice in law after he took sanad on 12-12-2000 until 15-6-2004, otherwise he would not have resigned from the settled job and resumed profession of glorious uncertainties.”

31. In Jagbir Singh v. Haryana State Agriculture Marketing Board (supra), this Court noted that as on the date of retrenchment, respondent No.1 had worked for less than 11 months and held:

“It would be, thus, seen that by a catena of decisions in recent time, this Court has clearly laid down that an order of retrenchment passed in violation of Section 25-F although may be set aside but an award of reinstatement should not, however, be automatically passed. The award of reinstatement with full back wages in a case where the workman has completed 240 days of work in a year preceding the date of termination, particularly, daily wagers has not been found to be proper by this Court and instead compensation has been awarded. This Court has distinguished between a daily wager who does not hold a post and a permanent employee.

Therefore, the view of the High Court that the Labour Court erred in granting reinstatement and back wages in the facts and circumstances of the present case cannot be said to suffer from any legal flaw. However, in our view, the High Court erred in not awarding compensation to the appellant while upsetting the award of reinstatement and back wages.” 32. We may now deal with the judgment in J.K. Synthetics Ltd. v. K.P.

Agrawal and another (supra) in detail. The facts of that case were that the respondent was dismissed from service on the basis of inquiry conducted by the competent authority. The Labour Court held that the inquiry was not fair and proper and permitted the parties to adduce evidence on the charges levelled against the respondent. After considering the evidence, the Labour Court gave benefit of doubt to the respondent and substituted the punishment of dismissal from service with that of stoppage of increments for two years. On an application filed by the respondent, the Labour Court held that the respondent was entitled to reinstatement with full back wages for the period of unemployment. The learned Single Judge dismissed the writ petition and the Division Bench declined to interfere by observing that the employer had willfully violated the order of the Labour Court.

On an application made by the respondent under Section 6(6) of the U.P.

Industrial Disputes Act, 1947, the Labour Court amended the award. This Court upheld the power of the Labour Court to amend the award but did not approve the award of full back wages. After noticing several precedents to which reference has been made hereinabove, the two Judge Bench observed:

“There is also a misconception that whenever reinstatement is directed, “continuity of service” and “consequential benefits” should follow, as a matter of course. The disastrous effect of granting several promotions as a “consequential benefit” to a person who has not worked for 10 to 15 years and who does not have the benefit of necessary experience for discharging the higher duties and functions of promotional posts, is seldom visualised while granting consequential benefits automatically.

Whenever courts or tribunals direct reinstatement, they should apply their judicial mind to the facts and circumstances to decide whether “continuity of service” and/or “consequential benefits” should also be directed.

Coming back to back wages, even if the court finds it necessary to award back wages, the question will be whether back wages should be awarded fully or only partially (and if so the percentage). That depends upon the facts and circumstances of each case. Any income received by the employee during the relevant period on account of alternative employment or business is a relevant factor to be taken note of while awarding back wages, in addition to the several factors mentioned in Rudhan Singh and Uday Narain Pandey. Therefore, it is necessary for the employee to plead that he was not gainfully employed from the date of his termination. While an employee cannot be asked to prove the negative, he has to at least assert on oath that he was neither employed nor engaged in any gainful business or venture and that he did not have any income. Then the burden will shift to the employer. But there is, however, no obligation on the terminated employee to search for or secure alternative employment. Be that as it may.

But the cases referred to above, where back wages were awarded, related to termination/retrenchment which were held to be illegal and invalid for non-compliance with statutory requirements or related to cases where the Court found that the termination was motivated or amounted to victimisation. The decisions relating to back wages payable on illegal retrenchment or termination may have no application to the case like the present one, where the termination (dismissal or removal or compulsory retirement) is by way of punishment for misconduct in a departmental inquiry, and the court confirms the finding regarding misconduct, but only interferes with the punishment being of the view that it is excessive, and awards a lesser punishment, resulting in the reinstatement of employee. Where the power under Article 226 or Section 11-A of the Industrial Disputes Act (or any other similar provision) is exercised by any court to interfere with the punishment on the ground that it is excessive and the employee deserves a lesser punishment, and a consequential direction is issued for reinstatement, the court is not holding that the employer was in the wrong or that the dismissal was illegal and invalid. The court is merely exercising its discretion to award a lesser punishment. Till such power is exercised, the dismissal is valid and in force.

When the punishment is reduced by a court as being excessive, there can be either a direction for reinstatement or a direction for a nominal lump sum compensation. And if reinstatement is directed, it can be effective either prospectively from the date of such substitution of punishment (in which event, there is no continuity of service) or retrospectively, from the date on which the penalty of termination was imposed (in which event, there can be a consequential direction relating to continuity of service). What requires to be noted in cases where finding of misconduct is affirmed and only the punishment is interfered with (as contrasted from cases where termination is held to be illegal or void) is that there is no automatic reinstatement;

and if reinstatement is directed, it is not automatically with retrospective effect from the date of termination. Therefore, where reinstatement is a consequence of imposition of a lesser punishment, neither back wages nor continuity of service nor consequential benefits, follow as a natural or necessary consequence of such reinstatement. In cases where the misconduct is held to be proved, and reinstatement is itself a consequential benefit arising from imposition of a lesser punishment, award of back wages for the period when the employee has not worked, may amount to rewarding the delinquent employee and punishing the employer for taking action for the misconduct committed by the employee. That should be avoided. Similarly, in such cases, even where continuity of service is directed, it should only be for purposes of pensionary/retirement benefits, and not for other benefits like increments, promotions, etc.

But there are two exceptions. The first is where the court sets aside the termination as a consequence of employee being exonerated or being found not guilty of the misconduct. Second is where the court reaches a conclusion that the inquiry was held in respect of a frivolous issue or petty misconduct, as a camouflage to get rid of the employee or victimise him, and the disproportionately excessive punishment is a result of such scheme or intention. In such cases, the principles relating to back wages, etc. will be the same as those applied in the cases of an illegal termination.

In this case, the Labour Court found that a charge against the employee in respect of a serious misconduct was proved. It, however, felt that the punishment of dismissal was not warranted and therefore, imposed a lesser punishment of withholding the two annual increments. In such circumstances, award of back wages was neither automatic nor consequential. In fact, back wages was not warranted at all.”

33. The propositions which can be culled out from the aforementioned judgments are:

i) In cases of wrongful termination of service, reinstatement with continuity of service and back wages is the normal rule.

ii) The aforesaid rule is subject to the rider that while deciding the issue of back wages, the adjudicating authority or the Court may take into consideration the length of service of the employee/workman, the nature of misconduct, if any, found proved against the employee/workman, the financial condition of the employer and similar other factors.

iii) Ordinarily, an employee or workman whose services are terminated and who is desirous of getting back wages is required to either plead or at least make a statement before the adjudicating authority or the Court of first instance that he/she was not gainfully employed or was employed on lesser wages. If the employer wants to avoid payment of full back wages, then it has to plead and also lead cogent evidence to prove that the employee/workman was gainfully employed and was getting wages equal to the wages he/she was drawing prior to the termination of service. This is so because it is settled law that the burden of proof of the existence of a particular fact lies on the person who makes a positive averments about its existence. It is always easier to prove a positive fact than to prove a negative fact. Therefore, once the employee shows that he was not employed, the onus lies on the employer to specifically plead and prove that the employee was gainfully employed and was getting the same or substantially similar emoluments.

iv) The cases in which the Labour Court/Industrial Tribunal exercises power under Section 11-A of the Industrial Disputes Act, 1947 and finds that even though the enquiry held against the employee/workman is consistent with the rules of natural justice and / or certified standing orders, if any, but holds that the punishment was disproportionate to the misconduct found proved, then it will have the discretion not to award full back wages. However, if the Labour Court/Industrial Tribunal finds that the employee or workman is not at all guilty of any misconduct or that the employer had foisted a false charge, then there will be ample justification for award of full back wages.

v) The cases in which the competent Court or Tribunal finds that the employer has acted in gross violation of the statutory provisions and/or the principles of natural justice or is guilty of victimizing the employee or workman, then the concerned Court or Tribunal will be fully justified in directing payment of full back wages. In such cases, the superior Courts should not exercise power under Article 226 or 136 of the Constitution and interfere with the award passed by the Labour Court, etc., merely because there is a possibility of forming a different opinion on the entitlement of the employee/workman to get full back wages or the employer’s obligation to pay the same. The Courts must always be kept in view that in the cases of wrongful / illegal termination of service, the wrongdoer is the employer and sufferer is the employee/workman and there is no justification to give premium to the employer of his wrongdoings by relieving him of the burden to pay to the employee/workman his dues in the form of full back wages.

vi) In a number of cases, the superior Courts have interfered with the award of the primary adjudicatory authority on the premise that finalization of litigation has taken long time ignoring that in majority of cases the parties are not responsible for such delays. Lack of infrastructure and manpower is the principal cause for delay in the disposal of cases. For this the litigants cannot be blamed or penalised. It would amount to grave injustice to an employee or workman if he is denied back wages simply because there is long lapse of time between the termination of his service and finality given to the order of reinstatement. The Courts should bear in mind that in most of these cases, the employer is in an advantageous position vis-à-vis the employee or workman. He can avail the services of best legal brain for prolonging the agony of the sufferer, i.e., the employee or workman, who can ill afford the luxury of spending money on a lawyer with certain amount of fame.

Therefore, in such cases it would be prudent to adopt the course suggested in Hindustan Tin Works Private Limited v. Employees of Hindustan Tin Works Private Limited (supra).

vii) The observation made in J.K. Synthetics Ltd. v. K.P. Agrawal (supra) that on reinstatement the employee/workman cannot claim continuity of service as of right is contrary to the ratio of the judgments of three Judge Benches referred to hereinabove and cannot be treated as good law.

This part of the judgment is also against the very concept of reinstatement of an employee/workman.

34. Reverting to the case in hand, we find that the management’s decision to terminate the appellant’s service was preceded by her suspension albeit without any rhyme or reason and even though the Division Bench of the High Court declared that she will be deemed to have rejoined her duty on 14.3.2007 and entitled to consequential benefits, the management neither allowed her to join the duty nor paid wages. Rather, after making a show of holding inquiry, the management terminated her service vide order dated 15.6.2007. The Tribunal found that action of the management to be wholly arbitrary and vitiated due to violation of the rules of natural justice.

The Tribunal further found that the allegations levelled against the appellant were frivolous. The Tribunal also took cognizance of the statement made on behalf of the appellant that she was not gainfully employed anywhere and the fact that the management had not controverted the same and ordered her reinstatement with full back wages.

35. The learned Single Judge agreed with the Tribunal that the action taken by the management to terminate the appellant’s service was per se illegal but set aside the award of back wages by making a cryptic observation that she had not proved the factum of non-employment during the intervening period. While doing so, the learned Single Judge not only overlooked the order passed by the Division Bench in Writ Petition No.8404/2006, but also Rule 33 which prohibits an employee from taking employment elsewhere. Indeed, it was not even the pleaded case of the management that during the period of suspension, the appellant had left the Headquarter without prior approval of the Chief Executive Officer and thereby disentitling her from getting subsistence allowance or that during the intervening period she was gainfully employed elsewhere.

36. In view of the above discussion, we hold that the learned Single Judge of the High Court committed grave error by interfering with the order passed by the Tribunal for payment of back wages, ignoring that the charges levelled against the appellant were frivolous and the inquiry was held in gross violation of the rules of natural justice.

37. In the result, the appeal is allowed, the impugned order is set aside and the order passed by the Tribunal is restored. The management shall pay full back wages to the appellant within four months from the date of receipt of copy of this order failing which it shall have to pay interest at the rate of 9% per annum from the date of the appellant’s suspension till the date of actual reinstatement.

38. It is also made clear that in the event of non-compliance of this order, the management shall make itself liable to be punished under the Contempt of Courts Act, 1971.

…………………………..J.
(G.S. SINGHVI)
…………………………..J.
(V. GOPALA GOWDA)

New Delhi;
August 12, 2013.

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PETITIONER: General Manager, Haryana Roadways

RESPONDENT: Rudhan Singh

DATE OF JUDGMENT: 14/07/2005

BENCH: CJI R.C. Lahoti,G.P. Mathur & P.K. Balasubramanyan

JUDGMENT:

1. This appeal, by special leave, has been filed against the judgment and order dted 145.2001 of the High Court of Punjab and Haryana by which the writ petition preferred by the appellant challenging the award of Industrial Tribunal-cum-Labour Court, Rohtak directing reinstatement of the respondent Rudhan Singh with continuity of service and 50% back wages was dismissed.

2. The respondent Rudhan Singh was appointed in various capacities on a class IV post with the appellant Haryana Roadways and he worked from 16.3.1988 to 28.2.1989 with some breaks. Thereafter, he was not given any appointment. He raised a demand for being reinstated before the Conciliation Officer, Rohtak on 24.8.1991. The conciliation efforts having failed the State Government exercising powers under Section 10(1)(c) of the Industrial Disputes Act, 1947 (for short the ‘Act’) made a reference to the Industrial Tribunal-cum-Labour Court, Rohtak as to whether the termination of service of the respondent is justified and valid, and, if not, to what relief he was entitled under law.

3. In his claim statement the respondent pleaded that he was appointed as Helper on 16.3.1988 on daily wage basis. His work and conduct was always satisfactory but his services were terminated on 28.2.1989 without assigning any reason. He further pleaded that neither any notice nor wages in lieu of notice were paid to him and as he had completed 240 days of service in a calendar year, the termination of his service was in violation of Section 25-F of the Act and, therefore, the same was liable to be set aside and he was entitled to be reinstated with continuity of service and full back wages. The appellant (management) filed a written statement on the plea that the respondent Rudhan Singh was initially appointed on daily wage basis for a fixed period from 16.3.1988 up to 31.3.1988. Thereafter, he was appointed as Washing Boy, Helper and Water Carrier as per the needs of the Department.

According to the appellant the appointment of the respondent was for a fixed period which came to an automatic end and, therefore, it was not a case of retrenchment in view of Section 2(oo)(bb) of the Act and consequently Section 25-F of the Act had no application to the facts of the case. The respondent filed a replication controverting the please taken in the written statement and reasserting the contents of the claim statement. The parties adduced oral and documentary evidence in support of their case. The Industrial Tribunal-cum-Labour Court held that the respondent had worked for 264 days in one calendar year and, therefore, the termination of his service without complying with the requirements of Section 25-F of the Act was illegal as neither any notice nor salary in lieu thereof nor any retrenchment compensation was paid to him. Regarding back wages it was held that the same can be awarded to the workman keeping in view the actual loss suffered by him by remaining out of employment. Since the respondent was working on a class IV post and the said type of work was available in Haryana as large number of labourers come from Eastern UP and Bihar for doing that kind of work, the Industrial Tribunal-cum-Labour Court concluded that it cannot be held that the respondent did not earn any amount during the period he was out of employment. It was thus held that the respondent was entitled to 50% back wages. Accordingly an award was passed on 26.5.2000 directing reinstatement of the respondent on his previous post with continuity of service and 50% back wages. The appellant filed a writ petition challenging the award of the Industrial Tribunal-cum- Labour Court before the Punjab and Haryana High Court, which was dismissed on 14.5.2001.

4. Learned counsel for the appellant has submitted that the respondent had been appointed for a fixed period and his appointment came to an automatic end after the expiry of the period and, therefore, it was not a case of retrenchment in view of Section 2(oo)(bb) of the Act.

It is true that in view of the aforesaid provision the termination of service of a workman as a result of non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein would not amount to retrenchment in view of Section 2(oo)(bb) of the Act. However, such a plea that had been taken in the written statement does not appear to have been pressed before the Industrial Tribunal-cum-Labour Court nor the award shows that any evidence was led to substantiate such a plea that the respondent had been engaged on contract for a fixed period or his contractual employment had come to an end in accordance with any stipulation contained therein in that behalf. This plea has also not been raised before the High Court and, therefore, it is not open to the appellant to raise a new plea at this stage.

5. Learned counsel for the appellant has next submitted that according to the own case of the respondent he was appointed on 16.3.1988 and his services were terminated on 28.2.1989 and thus he had not worked for one year and consequently Section 25-F of the Act would not apply to his case. In support of this submission reliance has been placed on Sur Enamel and Stamping Works Ltd. vs. The Workmen [1963] INSC 133; [AIR 1963 SC 1914], wherein it was held that under Section 25-F of the Act only a workman, who has been in continuous service for not less than one year under an employer, is entitled to its benefit. Before a workman can be considered to have completed one year of continuous service in an industry it must be shown first that he was employed for a period of not less than 12 calendar months and next that during those 12 calendar months he had worked for not less than 240 days. It was further held that a workman, who has not at all been employed for a period of 12 months, would not satisfy the requirements of Section 25-B of the Act and would not be entitled to the benefit under Section 25-F of the Act. It is important to note that Section 25-B of the Act, which contains the definition of ‘continuous service’ was amended by Act No. 36 of 1964 and the relevant part thereof reads as under: – “25-B. Definition of continuous service For the purpose of this Chapter, – (1) a workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorized leave or an accident or a strike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman;

(2) where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer (a) for a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than (i) one hundred and ninety days in the case of a workman employed below ground in a mine; and (ii) two hundred and forty days, in any other case;

(b) for a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than (i) ninety-five days, in the case of a workman employed below ground in a mine; and (ii) one hundred and twenty days, in any other case.

Explanation. – ………………………………………………………….

………………. (omitted as not relevant for the present case)” This amended provision has been considered in Surendra Kumar Verma vs. The Central Government Industrial Tribunal-cum- Labour Court, New Delhi [1980] INSC 186; [AIR 1981 SC 422], where after noticing the ratio of Sur Enamel and Stamping Works Ltd. vs. The Workmen (supra), it was held as under: – “Act 36 of 1964 has drastically changed the position.

S. 2(eee) has been repealed and S. 25-B(2) now begins with the clause “where a workman is not in continuous service …… for a period of one year”. These changes brought about by Act 36 of 1964 appear to be clearly designed to provide that a workman who has actually worked under the employer for not less than 240 days during a period of twelve months shall be deemed to have been in continuous service for a period of one year whether or not he has in fact been in such continuous service for a period of one year. It is enough that he has worked for 240 days in a period of 12 months; it is not necessary that he should have been in the service of the employer for one whole year. ………” In view of this authoritative pronouncement the requirements of Section 25-F of the Act would be satisfied if a workman has worked for 240 days in a period of 12 months and it is not necessary that he should have been in the service of employer for complete one year. The Industrial Tribunal-cum-Labour Court has recorded a finding that the respondent has worked for 264 days and this finding has not been challenged before the High Court. In this view of the matter the provisions of Section 25-F of the Act are clearly applicable and as neither any notice or wages in lieu of the period of notice nor any retrenchment compensation was paid to the respondent, his termination of service has to be held to be invalid.

6. The next question, which requires consideration is whether the respondent is entitled to any back wages. The Industrial Tribunal-cum- Labour Court awarded 50% back wages on the ground that in Rohtak District of State of Haryana work of the nature, which was being done by the respondent, is available in plenty as a large work force comes from Eastern UP and Bihar for doing such kind of work. However, a general observation has been made that keeping in view the facts and circumstances of the case it will be proper to award 50% back wages.

The High Court has also not given any reason for upholding this part of the award.

7. In our opinion certain factors, which are relevant for forming an opinion regarding award of back wages, have been completely ignored and, therefore, the award on this point is vitiated. The list of dates given in the Special Leave Petition, which have not been controverted, show that though according to the own case of the respondent his services had been terminated on 18.2.1989, yet he served a demand notice praying for reinstatement in service after two and half years on 24.8.1991. The State Government made reference to the Industrial Tribunal-cum-Labour Court in the year 1997, which means eight years after the termination of service. Normally, a reference should not be made after lapse of a long period. A labour dispute should be resolved expeditiously and there is no justification for the State Government to sleep over the matter and make a reference after a long period of time at its sweet will. It causes prejudice both to the workman and also to the employer. It is not possible for an employer to retain all the documents for a long period and then to produce evidence, whether oral or documentary, after years as the officers, who may have dealt with the matter, might have left the establishment on account of superannuation or any other reason. The employer is not at fault if the reference is not made expeditiously by the State Government, but it is saddled with an award directing payment of back wages without having taken any work from the concerned workman. The plight of the workman who is thrown out of employment is equally bad as it is a question of survival for his family and he should not be left in a state of uncertainty for a long period.

8. There is no rule of thumb that in every case where the Industrial Tribunal gives a finding that the termination of service was in violation of Section 25-F of the Act, entire back wages should be awarded. A host of factors like the manner and method of selection and appointment, i.e., whether after proper advertisement of the vacancy or inviting applications from the employment exchange, nature of appointment, namely, whether ad hoc, short term, daily wage, temporary or permanent in character, any special qualification required for the job and the like should be weighed and balanced in taking a decision regarding award of back wages. One of the important factors, which has to be taken into consideration, is the length of service, which the workman had rendered with the employer. If the workman has rendered a considerable period of service and his services are wrongfully terminated, he may be awarded full or partial back wages keeping in view the fact that at his age and the qualification possessed by him he may not be in a position to get another employment. However, where the total length of service rendered by a workman is very small, the award of back wages for the complete period, i.e., from the date of termination till the date of the award, which our experience shows is often quite large, would be wholly inappropriate.

Another important factor, which requires to be taken into consideration is the nature of employment. A regular service of permanent character cannot be compared to short or intermittent daily wage employment though it may be for 240 days in a calendar year.

9. The written statement filed by the respondent shows that between 16.3.1988 to 31.10.1988 he had been given short term appointments as Helper, Wash Boy and Water Carrier with breaks of two days and seven days respectively on two occasions. After 31.10.1988 he was employed as Helper on 8.1.1989 after a gap of more than two months. This appointment was only up to 31.1.1989 and thereafter he was given fresh appointment on 7.2.1989, which came to an end on 28.2.1989. These facts show that the respondent had not worked continuously from 16.3.1988 to 28.2.1989 in the establishment of the appellant. A person appointed on daily wage basis gets wages only for days on which he has performed work.

10. In Smt. Saran Kumar Gaur and others vs. State of Uttar Pradesh and others [JT 1991 (3) SC 478], this Court observed that when work is not done remuneration is not to be paid and accordingly did not make any direction for award of past salary. In State of U.P. and Anr. vs. Atal Behari Shastri and anr. [JT 1992 (5) 523], a termination order passed on 15.7.1970 terminating the services of a Licence Inspector was finally quashed by the High Court in a writ petition on 27.11.1991 and a direction was issued to pay the entire back salary from the date of termination till the date of his attaining superannuation. This Court, in absence of a clear finding that the employee was not gainfully employed during the relevant period, set aside the order of the High Court directing payment of entire back salary and substituted it by payment of a lumpsum amount of Rs.25,000/-. In Virender Kumar, General Manager, Northern Railways, New Delhi vs. Avinash Chandra Chadha and others [(1990) 3 SCC 472], there was a dispute regarding seniority and promotion to a higher post. This Court did not make any direction for payment of higher salary for the past period on the principle ‘no work no pay’ as the respondents had actually not worked on the higher post to which they were entitled to be promoted. In Surjit Ghosh vs. Chairman and Managing Director, United Commercial Bank and others [(1995) 2 SCC 474], the appellant (Assistant Manager in the Bank) was dismissed from service on 28.5.1985, but his appeal was allowed by this Court on 6.2.1995 as his dismissal order was found to be suffering from an inherent defect. His claim for arrears of salary for the past period came to about Rs.20 lakhs but this Court observed that a huge amount cannot be paid to anyone for doing no work and accordingly directed that a compensation amount of Rs.50,000/- be paid to him in lieu of his claim for arrears of salary. In Anil Kumar Gupta vs. State of Bihar [(1996) 7 SCC 83], the appellants were employed as daily wage employees in Water and Land Management Institute of the Irrigation Department of Government of Bihar and they were working on the posts of steno-typists, typists, machine operators and peons, etc. This Court allowed the appeal of the workmen and directed reinstatement but specifically held that they would not be entitled to any past salary. These authorities show that an order for payment of back wages should not be passed in a mechanical manner but host of factors are to be taken into consideration before passing any order for award of back wages.

11. In the case in hand the respondent had worked for a very short period with the appellant, which was less than one year. Even during this period there were breaks in service and he had been given short term appointments on daily wage basis in different capacities. The respondent is not a technically trained person, but was working on a class IV post.

According to the finding of the Industrial Tribunal-cum-Labour Court plenty of work of the same nature, which the respondent was doing, was available in the District of Rohtak. In such circumstances we are of the opinion that the respondent is not entitled to payment of any back wages.

12. The appeal is accordingly partly allowed and the award of the Industrial Tribunal-cum-Labour Court insofar as it directs reinstatement with continuity of service is upheld but the award regarding payment of 50% back wages is set aside.

13. No costs.

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DATE OF JUDGMENT07/09/1978

BENCH: DESAI, D.A. KRISHNAIYER, V.R. REDDY, O. CHINNAPPA (J)

CITATION: 1979 AIR 75 1979 SCR (1) 563 1979 SCC (2) 80

CITATOR INFO : R 1980 SC1896 (142,143,147) R 1985 SC 617 (3) D 1985 SC1128 (9)

ACT:
Constitution of India 1950–Article 136-Scope of in labour matters Article 43A-Eixplained-Participation of workman in Managenuent.
Uttar Perdesh Industrial Disputes Act 1947-Workelrs retrellcled on grounds of losses.-rrihullal found retreluchllent unjustified-ordere reinstatement with back wages Speeial leave refused regalding reinstatement-Employer if could reopen at the time of hearing.

HELD: 1. Since the emoloyer’s prayer in the special ieave petition that the retrenched workmen should not be reinstated was rejected by this Court it meant that the Labour Court’s view that retrenchment was unjusified was correct. For the reasons found by the Labour Court retrenchment was motivated and so invalid. The workmen were entitled to the relief of reinstatement from the date they were sought to be retrenched. The order of the Labour Court on the question of reinstatement became final. [567 C-E]

2. Article 136 of the Constitution does not envisage this Court to be a regular Court of Appeal but it confers a discretionary power on it to grant special leave to appeal, inter Ala, against the Award of any Tribunal. The scope and ambit of this vide constitutional discretionary power cannot be 564 exhaustively defined. It cannot be so construed as to confer a right to a party when he has none under the law. The Court will entertain a petition for special leave in which a question of general public importance is involved or when the decisions would shock the conscience of this Court. The Industrial Disputes Act is intended to be a self-contained code and it seeks to achieve social justice on the basis of collective bargaining, conciliation and arbitration. Awards are given on circumstances peculiar to each dispute and the Tribunals are to a large extent free from restrictions of technical consider- rations imposed on Courts. A free and liberal exercise of the power under Article 136 may materially affect the fundamental basis of such decisions, viz., quick solution of such disputes to achieve industrial peace. [567 F-568 A] Bengal Chemical & Pharmaceutical Works Ltd, Calcutta v.

Their Workmen [1959] Suppl. 2 SCR 136 at 140 referred to.

2. In the field of industrial jurisprudence a declaration can be given that the termination of service is bad and the workman continues to be in service.. The common law doctrine that contract of personal service cannot be specifically enforced or the doctrine of mitigation of damages does not haunt in this branch of law. The relief of reinstatement with continuity of service can be granted where termination of service is found to be invalid. [568 G- H]

3. Where termination of service is questioned as being invalid or illegal and the workman has to go through the litigation, his capacity to sustain himself throughout the protracted litigation is itself so precarious that he may not survive to see the day when relief is granted. If after such prolonged litigation the workman is not paid his back wages it would amount to a penalty for no fault of his. The workman whose service has been illegally terminated would be entitled to full back wages except to the extent he was gainfully employed during the enforced idleness. If the termination is illegal or motivated it may amount to unfair labour practice. Tn such circumstances reinstatement being the normal rule it should be done with full back wages. [569 B-D] Workmen of Calcutta Dock Labour Board & Anr. v.

Employers in relation to Calcutta Dock Labour Board & ors.

[1974] 3 S.C.C. 216, referred to.

Management of Panitole Tea Estate v. The Workmen [1971] 3 SCR 771 referred to.

Dhari Gram Panchayat v. Safai Kamdar Mandal [1971] 1 LLJ 508 approved.

Postal Seals Industrial Co-operative Society Ltd. v.

Labour Court ll Luck now & Ors. [1971] 1 LlJ 327 approved.

For awarding relief of back wages all relevant considerations will enter The verdict of the Tribunal. Full back wages would be the normal rule and the party objecting to it must establish the circumstances necessitating departure. The Tribunal will then exercise its discretion But the discretion must be exercised in a judicial and judicious manner. The reason for exercising discre tion must be cogent and convincing and must appear on the face of the record. It should not be arbitrary, vague and fanciful but legal and regular. [570 GE] Susannah Sharn v. Wakefield [1891] AC 173 at 179 referred to.

565 on the question of the employer’s financial viability to pay back wages view of mounting losses the Supreme Court held.

Industry is a common venture, the participants being capital and labour Article 43A. requires the State to take steps to secure participation of workman in the management. From being a factor of production labour has become a partner in industry. It is a common venture in pursuit of a desired goal. If sacrifice is necessary in the overall interest of the industry it would be unfair to expect only labour to make the sacrifice. It should be common sacrifice. If sacrifice is necessary those who can afford and have the capacity must bear the brunt. [571 A-F] (b) In the present case there is nothing to show that the Managing Director has made any sacrifice. In the absence such information the weaker section of society cannot be expected to make a greater sacrifice than the directors In an appropriate case it would be appropriate to direct that till the loss is wiped out the managing directors shall not charge any fees for the services rendered and no dividend shall be paid. [571 G. 572 E-F] (c) As the appellant has turned the corner, and the industrial unit is looking up and started making profits, the retrenched workmen having already been reinstated and started earing their wages it would be appropriate to award 75% of the backs wages to the workmen to be paid in two equal instalments. [572 D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 656 of 1978.

Appeal by Special Leave from the Award dated 21-9-1977 of the Labour Court, Meerut in Adjudication Case No. 160/74.

G. B. Pia, L. R. Singh, R. P. Singh, R. K. lain, Suman Kapoor and Sukumar Sahu for the Appellant.

R. K. Garg, V. J. Francis and Madan Mohan for Respondent No. l.

G. N. Dikshit and o. P. Rana for Respondents 2-3.

The Judgment of the Court was delivered by F DESAI J. This appeal by special leave, limited to the question of grant of back wages, raises a very humane problem in the field of industrial jurisprudence, namely, where termination of service either by dismissal, discharge or even retrenchment is held invalid and the relief of reinstatement with continuity of service Is awarded what ought to be the criterion for grant of compensation to the extent of full wages or a Part of it ? A few relevant facts will highlight the problem posed.

Appellant is a private limited Company having set up an industrial unit in engineering industry. The raw material for its manufacturing process is tin plates. The appellant served notice of retrenchment on 56 workmen in February 1974 alleging non-availability or raw material to utilise the full installed capacity, power shedding limiting the 566 working of the Unit to 5 days a week, and the mounting loss.

Subsequently, negotiations took place between the Union and the appellant leading to an agreement dated 1st April 1974 whereby the workmen who were sought to be retrenched were taken back in service with continuity of service by the appellant and the workmen on their part agreed to co-operate with the management in implementing certain economy measures and in increasing the productivity so as to make the undertaking economically viable. Simultaneously, the workmen demanded a revision of the wage scales and the appellant pleaded its inability in view of the mounting losses. Some negotiations took place and a draft memorandum of settlement was drawn up which provided for revision of wages on the one hand and higher norms of production on the other, but ultimately the settlement fell through. Appellant thereafter on 1st July, 1974 served a notice of retrenchment on 43 workmen. The Tin Workers’ Union, Ghaziabad, espoused the cause of such retrenched workmen and ultimately the Government of Uttar Pradesh by its notification dated 9th october 1974, issued in exercise of the power conferred by Section 4-K of the U.P. lndustrial Disputes Act, 1947.

referred the industrial dispute arising out of retrenchment of 43 workmen, between the parties, for adjudication to the Labour Court. Names of the retrenched workmen were set out in an Annexure to the order of reference.

The Labour Court, after examining the evidence led on both sides and considering various relevant circumstances, held that the reasons stated in the notice dated 1st July, 1974, Ext. E-2, viz., heavy loss caused by non-availability of tin plates, persistent power curbs and mounting cost of production were not the real reasons for affecting retrenchment but the real reason was the annoyance felt by the management consequent upon the refusal of the workmen to agree to the terms of settlement contained in the draft dated 5th April, 1974 and, therefore, the retrenchment was illegal. The Labour Court by its award directed that all the workmen shall be reinstated in service from 1 st August, 1974 with full back wages, permitting the appellant to deduct any amount paid as retrenchment compensation from the amount payable to the workmen as back wages. the Appellant challenged the Award in this appeal. When the special` leave petition came up for admission Court rejected the special leave petition with regard to the relief of reinstatement but limited the leave to the grant of full back wages.

The question whether the workmen who were retrenched were entitled to the relief of reinstatement is no more open to challenge. Another words. it would mean that the retrenchment of workmen was invalid for the reasons found by the Labour Court and the workman were 567 entitled to the relief of reinstatement effective from the day on which A they were sought to be retrenched. The workmen were sought to be retrenched from 1st August, 1974 and the Labour Court has directed their reinstatement effective from that date. The Labour Court has also awarded full back wages to the workmen on its finding that the retrenchment was not bona fide and that the non-availability of the raw material or recurrent power shedding and lack of profitability was a mere pretence or a ruse to torment the workmen by depriving them of their livehood, the real reason being the annoyance of the appellant consequent upon the refusal of the workmen to be a party to a proposed settlement by which work-load was sought to be raised(l.

Mr. Pai, learned counsel for the appellant in his attempt to persuade us to give something less than full back wages, attempted to re-open the controversy concluded by the order of this Court while granting limited leave that the retrenchment was inevitable in view of the mounting losses and falling production for want OF raw material and persistent power shedding. It was said that for the limited purpose of arriving at a just decision on the question whether the workmen should be awarded full back wages, we should look into the compelling necessity for m-retrenchment of the workmen. Once leave against relief of reinstatement was rejected, the order of the Labour Court holding that retrenchment was invalid and it was motivated and the relief of reinstatement must follow, has become final. Under no pretext or guise it could now be re-opened.

Before dealing with the contentions in this appeal we must bear in mind the scope of jurisdiction of this Court under Article 136 of the Constitution vis-a-vis the Awards of the Industrial Tribunals. Article 136 of the Constitution does not envisage this Court to be a regular Court of appeal but it confers a discretionary power on the Supreme Court to grant special leave to appeal, inter alia, against the Award of any Tribunal in the territory of India. The scope and ambit of this wide constitutional discretionary power cannot be exhaustively defined. lt cannot obviously be so construed as to confer a right to a party which he has none under the law. The Court will entertain a petition for special leave in which a question of general public importance is involved or when the decision would shock the conscience of this Court. the lndustrial Disputes Act is intended to be a self- contained one and it seeks to achieve social justice on the basis of collective bargaining, collaboration and arbitration. Awards are given on circumstances peculiar to each dispute and the Tribunals are to a large extent free from resrtrictions of technical considerations imposed on courts. A free and 568 liberal exercise of the power under Article 136 may materially affect the fundamental basis of such decisions, viz., quick solution of such disputes to achieve industrial peace. Though Article 136 is couched in widest terms, it is necessary for this Court to exercise its discretionary jurisdiction only in cases where Awards are made in violation of the principles of natural justice causing substantial and grave injustice to parties or raises an important principle of industrial law requiring elucidation and final decision by this Court or discloses such other exceptional or special circumstances which merit consideration of this Court (See Bengal Chemical & Pharmaceutical Works Ltd., Calcutta v. Their Workman) (1) The question in controversy which fairly often is raised in this Court is whether even where reinstatement is found to be an appro priate relief, what should be the guiding considerations for awarding full or partial back wages. This question is neither new nor raised for the first time. It crops up every time when the workman questions the validity and legality of termination of his service howsoever brought about, to wit, by dismissal, removal, discharge or retrenchment, and the relief of reinstatement is granted. As a necessary corollary the question immediately is raised as to whether the workman should be awarded full back wages or some sacrifice is expected of him.

Let us steer clear of one controversy whether where termination of service is found to be invalid, reinstatement as a matter of course should be awarded or compensation would be an adequate relief. That question does not arise in this. appeal. Here the relief of reinstatement has been granted and the award has been implemented and the retrenched workmen have been reinstated in service. The only limited question is whether the Labour Court in the facts and circumstances of this case was justified in awarding full back wages.

It is no more open to debate that in the field of industrial jurisprudence a declaration can be given that the termination of service is bad and the workman continues to be in service. The spectre of common law doctrine that contract of personal service cannot be specifically enforced or the doctrine of mitigation of damages does not haunt in this branch of law. The relief of reinstatement with continuity of service can be granted where termination of service is found to be invalid. It would mean that the employer has taken away illegally the right to the work of the workman contrary to the relevant law or in breach of contract and simultaneously deprived deprived workman of his earnings. if (1) [1959]] Suppl. 2 SCR 136 at 140.

569 thus the employer is found to be in the wrong as a result of which the workman is directed to be reinstated, the employer could not shirk his responsibility of paying the wages which the workman has been deprived of by the illegal or invalid action of the employer. Speaking realistically, where termination of service is questioned as invalid or illegal and the workman has to go through the gamut of litigation, his capacity to sustain himself throughout the protracted litigation is itself such an awesome factor that he may not survive to see the day when relief is granted.

More so in our system where the law’s proverbial delay has become stupefying. If after such a protracted time and energy consuming litigation during which period the workman just sustains himself, ultimately he is to be told that though he will be reinstated, he will be denied the back wages which would be due to him, the workman would be subjected to a sort of penalty for no fault of his and it is wholly undeserved. Ordinarily, therefore. a workman whose service has been illegally terminated would be entitled to full back wages except to the extent he was gainfully employed during the enforced idleness. That is the normal rule. Any other view would be a premium on the unwarranted litigating activity of the employer. If the D employer terminates the service illegally and the termination is motivated as in this case, viz ., to resist the workman’s demand for revision of wages. the termination may well amount to unfair labour practice. In such circumstances reinstatement being the normal rule, it should be followed(l with full back wages. Articles 41 and 43 of the Constitution would assist us in reaching a just conclusion in this respect. By a suitable legislation, to wit, the U.P.

Industrial Disputes Act, 1947, the State has endeavored to secure work to the workmen. In breach of the statutory obligation the services were terminated and the termination is found to be invalid; the workmen though willing to do the assigned work and earn their livelihood, were kept away therefrom. On top of it the were forced to litigation upto the apex Court and now they are being told that something less than full back wages should be awarded to them. If the services were not terminated the workmen ordinarily would have continued to work and would have earned their wages.

When it was held that the termination of services was neither proper nor justified, it would not only show that the workman were always willing to serve but if they rendered service they would legitimately be entitled to the wages for the same. If the workman were always ready to work but they were kept away therefrom on account of invalid act of the employer, there is no justification for not awarding them full back wages which were very legitimately due to them. A Division Bench of the Gujarat High Court in Dhari Gram Panchayat v. Safai Kamldar Mandal(1), and a Division Bench of the Allahabad (1) 11-971] I Labour Law Journal 508 570 High Court in Postal Seals Industrial Co-operative Society Ltd. v. Labour Court 11, Lucknow & ors.(l), have taken this view and we are of the opinion that the view taken therein is correct.

The view taken by us gets support from the decision of this Court in workman of Calcutta Dock Labour Board & Anr.

v.Employers in relation to Calcutta Dock Labour Board & ors.(2). In this case seven workmen had been detained under the Defence of India Rules and one of the disputes was that when they were released and reported for duty, they were not taken in service and the demand was For their reinstatement.

The Tribunal directed reinstatement of five out of seven workmen and this part of the Award was challenged before this Court. This Court held that the workmen concerned did not have any opportunity of explaining why their services should not be terminated and, therefore, reinstatement was held to be the appropriate relief and Act aside the order of the Tribunal. It was observed that there was to justification for not awarding full back wages from the day they offered to resume work till their reinstatement. Almost an identical view was taken in Management of Paniltole Tea Estate v. The Workmen(3).

In the very nature of things there cannot to a straight jacket formula for awarding relief of back wages. All relevant considerations will enter the verdict. More or less, it would be a motion addressed to the discretion of the Tribunal. Full back wages would be the normal rule and the party objecting to it must establish the circumstances necessitating departure. At that stage the Tribunal will exercise its discretion keeping in view all the relevant circumstances. But the discretion must be exercised in a judicial and judicious manner. The reason for exercising discretion must be cogent and convincing and must appear on of the face of. the record. When it is said that something is to be done within the discretion of the authority, that something is to be done according to the rules of reason and justice? according to law and not humor. It is not to be arbitrary, vague and fanciful but legal and regular (See Susannah Sharm v.Workfild(4).

It was, however, very strenuously contended that as the appellant company is suffering loss and its carry-forward loss as on 31st March 1978 is Rs. 8,12,416.90, in order to see that the industry survives and the workmen continue to get employment, there must be come sacrifice on the part of workmen. If the normal rule in a case like this is to award full back wages, the burden will be on the appellant employer (l) [1971] I Law Journal, 327.

(2) [1974] 3 SCC 216.

(3) [1971] INSC 55; [1971] 3 SCR 774.

(1) [1891] AC 173 31 179.

571 to establish circumstances which would permit a departure from the A normal rule. To substantiate the contention that this is an exceptional case for departing from the normal rule it was stated that loss is mounting up and if the appellant is called upon to pay full back wages in the aggregate amount of Rs. 2,80,0OO/-, it would shake the financial viability of the company and the burden would be unbearable. More. Often when some monetary claim by the workmen is being examined, this financial inability of the company consequent upon the demand being granted is voiced.

Now, undoubtedly an industry is a common venture, the participants being the capital and the labour. Gone arc the days when labour was considered a factor of production.

Article 43A of the Constitution requires the State to take steps to secure the participation of workmen in the management of the undertaking, establishments or other organisations engaged in any industry. Thus, from being a factor of production the labour has become a partner in industry. lt is a common venture in the pursuit of desired goal.

Now? if a Sacrifice is necessary in the overall interest of the industry D or a particular undertaking, it would be both unfair and iniquitous to expect only one partner of the industry to make the sacrifice. Pragmatism compels common sacrifice on the part of both. The sacrifice must come from both the partners and we need not state the obvious that the labour is a weaker partner who is more often called upon to make the sacrifice. Sacrifice for the survival of an industrial undertaking cannot be an unilateral action. It must be a two way traffic. The management need not have merry time to itself making the workmen the sacrificial goat. If sacrifice is necessary, those who can afford and have the cushion and the capacity must bear the greater brunt making the shock of sacrifice as less poignant as possible for those who keep body and soul together with utmost difficulty. F The appellant wants us to give something less than full back wages in this case which the Labour Court has awarded.

There is nothing to show whether the Managing Director has made any sacrifice; whether his salary and perks have been adversely affected; whether the managerial coterie has reduced some expenses on itself. If there is no such material on record, how do we expect the workmen, the less affording of the weaker segment of the society, to make the sacrifice, because sacrifice on their part is denial of the very means of livelihood.

We have also found that since 1976-77 the appellant is making profit. A Statement of Account certified by the Chartered Accountants of the company dated 25th July, 1978 shows that the appellant has been making profit since 1976- 77. The unit is, therefore, looking up.

572 One relevant aspect which would assist us in reaching a just con clusion is that after retrenching 43 workmen effective from 1st August 1974, 36 of them were recalled for service on large number of days in 1975-1976 and 1977, the maximum being the case of Jai Hind who was given work for 724 1/4 days, and the minimum being Harsaran s/o Baldev who was given work for 15 days. An amount of Rs. 74,587.26 was paid to these 36 workmen for the work rendered by them since the date of retrenchment. Certainly, the appellant would get credit for the amount so paid plus the retrenchment compensation it must have paid. Even then we were told that the employer will have to pay Rs. 2,80,OOO/- by way of back wages. We were also told that the appellant had offered to pay by way of settlement 50% of the back wages. Therefore, the only question is whether we should confirm the Award for full back wages.

Now, undoubtedly the appellant appears to have turned the corner. The industrial unit is looking up. It has started making profits. The workmen have already been reinstated and therefore, they have started earning their wages. It may, however, be recalled that the appellant has still not cleared its accumulated loss. Keeping in view all the facts and circumstances of this case it would be appropriate to award 75% of the back wages to the workmen to be paid in two equal instalments. It may well be that in appropriate cases the Court may, in the spirit of labour and management being partners in the industry, direct scaling down of back wages with some sacrifice on management’s part too. We were, even here, inclined to saddle the condition that till the loss is totally wiped out the Managing Director and the Directors shall not charge any fee for the services rendered as Director, no dividend shall be paid to equity shareholders, and the Managing Director shall not be paid any overriding commission, if there be any, on the turnover of the company since this will account for the pragmatic approach of common sacrifice in the interest of the industry. We indicate the implications of Article 43A in this area of law but do not impose it here for want of fuller facts.

The Award shall stand accordingly modified to the effect that the retrenched workmen who are now reinstated shall be paid 75% of the back wages after deducting the amount paid to them as wages when recalled for work since the date of retrenchment and adjustment of the retrenchment compensation towards the amount found due and pay able. The appellant shall pay the costs of the respondents as directed while granting special leave.

N.V.K. Appeal dismissed.

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IN THE SUPREME COURT OF INDIA
THE STATE OF MYSORE …PETITIONER
Vs.
THE WORKERS OF GOLD MINES …RESPONDENT
DATE OF JUDGMENT: 22/05/1958
BENCH: GAJENDRAGADKAR, P.B. SARKAR, A.K. SUBBARAO, K. BOSE, VIVIAN
CITATION: 1958 AIR 923 1959 SCR 895

J U D G M E N T

ACT: Industrial Dispute-Gold mining industry -Claim of bonus by employees-Available surplus, Calculation of-Applicability of Full Bench Formula-Duty of Industrial Tribunal.

JUDGMENT:
CIVIL APPELLATE JURISDICTION Civil Appeal No. 648 of 1957.

Appeal by special leave from the judgment and order dated November 24, 1956, of the Central Govt. Industrial Tribunal, Madras, in Industrial Dispute No. 1 of 1956.

H. N. Sanyal, Additional Solicitor-General of India, 897 R. Ganapathy Iyer, T. Rangaswami lyengar and T. M. Sen, for the appellant.

Janardan Sharma, for respondents Nos. 1, 2 and 6.

L.K. Jha, B. R. L. Iyengar and C. V. Ramachar-, for respondents Nos. 3 and 5.

1958. May 22. The Judgment of the Court was delivered by GAJENDRAGADKAR J.-This is an appeal with special leave by the State of Mysore against the award passed by the Central Government Industrial Tribunal, Madras, on November 24, 1956, in Industrial Dispute No. 1 of 1956 between the employers in relation to the Gold Mines of the Kolar Gold Fields, Mysore, and their workmen. The employers were the Champion Reef Gold Mines of India (KGF) Ltd., Mysore State, the Mysore Gold Mining Company (KGF) Ltd., Mysore State and the Nundydroog Mines (KGF) Ltd., and their allied establishments the Central Administration, the Kolar Gold Fields Electricity Department, the Kolar Gold Field Hospital and the Kolar Gold Field Watch and Ward establishment. The dispute between these employers and their workmen arose from the claim made by the workmen for bonus for the calendar years 1953 and 1954. The Unions representing the workmen alleged that the employers had sufficient available surplus in their hands from which they could and should be awarded bonus for the two years in question. The Union representing the working in Mysore Gold Mining Co. Ltd., demanded four months wages and five months wages as bonus for the years 1953 and 1954 respectively. The Union on behalf of the Nundydroog Mines demanded four months total wages as bonus for 1953 and 1954 whereas the workmen in Champion Reef Gold Mines demanded four months wages as bonus for the said two years. The management opposed these demands on the ground that there was no available surplus for both the years in all the mines and so no bonus can be awarded. In substance the tribunal has rejected the case made out by the 898 management and has passed an award in favour of the workmen.

Taking into consideration all relevant factors the tribunal has awarded as bonus wages at the rate of 1-1/2 months in 1953 and three months in 1954 to the workers of Champion Ref Mines Ltd; 2-1/2 months in 1953 and 3-1/2 months in 1954 to the workers of the Nundydroog Mines Ltd; and one month’s in 1953 and three months in 1954 to the workers of the Mysore Gold Mines Co. Ltd. In regard to the workmen employed in the allied establishments, the tribunal has awarded as bonus one month’s wages in the year 1953 and two months basic wages in the year 1954.

It was urged before the tribunal by the management that it would be inappropriate to apply the Full Bench formula evolved by the Labour Appellate Tribunal in the Mill Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay (1) without suitable modifications to the case of the mines. The argument was that, unlike the textile industry, gold mining is a wasting industry, and the adjustment of the rival claims of the employer and the employee, even on the basis of social justice, cannot be properly made by the rigid application of the said formula. In the case of gold mines it is of considerable importance that the industry should invest a large amount in search of new ore and higher expenditure has to be incurred even for renewal and replacement of machinery. The tribunal accepted the argument that the special requirements of the gold mining industry would have to be considered in dealing with the workmen’s claim for bonus, but nevertheless it was inclined to take the view that the principles laid down by the Labour Appellate Tribunal in arriving at the Full Bench formula -should be adhered to.

The next argument which was raised before the tribunal was based on sub-para. (5) in the lease deed executed in favour of the management on February 20, 1949. The case for the management was that the management was entitled to deduct 15% of the revenue expenditure as a prior charge in calculating (i)(1950) L. L. J. 1247.

899 the available surplus. It Nil-as urged that the relevant clause in the lease deed required the management to create a reserve fund to meet depreciation and development expenditure of a capital nature and to provide for the search of new ore and it was urged that the amount debited by the management in pursuance of this clause should be treated as a prior charge. The tribunal was not impressed by this argument. It held that a separate fund for finding out new ore and keeping the longevity of the industry was absolutely necessary but it was not satisfied that the covenant in the lease on which reliance was placed by the management could bind the workmen and that the amount in question could be treated as a prior charge. The tribunal also found that no evidence had been adduced before it that any part of the amount thus debited had been in fact used for any of’ the purposes mentioned in the covenant.

According to the tribunal there was also no evidence that, in addition to the statutory depreciation any further allowance should be made for rehabilitation reserve and it held that it was not shown that any amount had in fact been spent for rehabilitation in the two relevant years. Oil these findings the amount of Rs. 20.26 lakhs oil which the management relied was not allowed by the tribunal because, in its opinion, the said amount was a mixture of very many items depending upon the options exercised by the management under the terms of the joint operation schemes.

Another point of dispute between the parties was in respect of the contribution made by the management to the Pension Fund scheme. The management claimed credit both for the initial and the annual contribution made by it in the relevant years. The tribunal held that, having regard to the circumstances under which the pension fund was introduced by the companies and having regard to the fact that it was intended only for the benefit of the covenanted staff of the companies, it would be inequitable to allow either the initial or the annual contributions to take precedence over the workmen’s claim for bonus. Therefore, the claim by the management for deduction 900 of both the initial and annual contributions was rejected.

It was also urged by the management that the amount representing the bonus paid to the workmen for the year 1950 should be deducted in 1958 since it was actually debited to the workmen in that year. The tribunal held that this claim was inadmissible. Lastly, the tribunal disallowed the claim made by the management for interest at a higher rate than 2 % on reserve employed as working capital during the relevant years. Having thus rejected most of the contentions raised by the management, the tribunal applied the Full Bench formula and came to the conclusion that there was enough available surplus in the hands of the management for the years 1953 and 1954 and so it made an award in favour of the workmen for payment of bonus as already indicated. It is this award which has given rise to the present appeal.

Before dealing with the merits of the appeal, it would be relevant to state the material facts in regard to the working of the Gold Mines which has ultimately brought the State of Mysore as the appellant in the present appeal before us. Four Public Joint, Stock Companies incorporated in the United Kingdom were operating the Gold Mines of the Kolar Gold Fields by virtue of leases of mining rights obtained by them from the Government of Mysore. These companies were the Mysore Gold Mining (-Io. Ltd., the Champion Reef Gold Mines of India Ltd., the Oorgaum Gold Mining Co. Ltd.,and the Nundydroog Mines Ltd. The termsand conditions of the leases obtained by these companies were the same. After the second world war broke out, the value of gold increased and so the Mysore legislature passed an act called the Mysore Duty on Gold Act, 1940 (Mys. XIX of 1940) imposing duty on gold produced in the mines. This duty was in addition to the royalty, rent, cesses and taxes payable under the lease deeds executed on March 25, 1935.

It appears that the gold mining companies represented that the imposition of gold duties meant hardship for them and that it did not leave sufficient funds from which provision could be made for depreciation and 901 development so necessary for the longevity of the mines. As a result of the negotiations, the Act of 1940 was repealed in 1946 and a fresh agreement made under which contribution was levied by the State of Mysore against the companies.

Under this agreement rupee companies had to be formed in India to take over the undertakings and assets in Mysore of the Sterling or U. K. companies and the seat of management had to be transferred from the United Kingdom to India. In pursuance of this agreement four rupee companies corresponding to the four Sterling or U. K. companies were formed in India. Their names were the Mysore Gold Mining Co. (KGF) Ltd., the Champion Reef Gold Mines of India (KGF) Ltd., the Oorgaum Gold Mines (KGF) Ltd., and the Nundydroog Mines (KGF) Ltd. All the shares in the rupee companies were held by the corresponding Sterling or U. K. companies. The assets in Mysore of the Sterling companies were transferred to the corresponding K. G. F. companies and the mining operations were carried on by these companies from April 1, 1951, by conforming to the terms and conditions embodied in the agreements (copies of which are Exs. 1 and 2).

The four gold mining companies had for the purposes of convenience and economy common establishments called Central Administration, Medical Establishment and the Electricity -Department. There was also a private limited company named Kolar Mines Power Station (K. G. F.) Private Ltd., all the shares of which were held by the said gold mining companies.

This was only an ancillary company and its object was to maintain a stand-by emergency plant for generating electricity in case of emergency and to distribute electric power to the gold mining companies. The gold mining companies were managed by the same managing agents by name John Taylor & Sons (Private) Ltd.

The Oorgaum mine soon became an uneconomic unit because it had reached such depths that owing to technical difficulties ore could no longer be taken out of them. This company, therefore, ceased mining 902 operations in 1953 and transferred its leases with the concurrence of the Mysore Government to the Champion Reef Gold Mines of India (K. G. F.) Ltd. Since then Oorgaum company has gone into liquidation. That is how in the year 1954 there were only three operating, mining companies and their allied establishments.

In 1956 the Mysore State nationalised the gold mining industry by an act called the Kolar Gold Mine Undertakings (Acquisition) Act, 1956 (Mys. XXII of 1956). According to the provisions of this Act and the notification issued thereunder, the undertakings of the gold mining companies vested in the State from November 29, 1956. In consequence, the Government became liable to pay the bonus awarded by the Central Government Industrial Tribunal, Madras. That is how the State of Mysore felt aggrieved by the said award and has preferred the present appeal by special leave to this Court.

The first point which calls for our decision is whether the tribunal was justified in applying the principles underlying the Full Bench formula in determining the existence or otherwise of the available surplus in the hands of the appellant during the relevant years. In The Mill Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay(1), the Labour Appellate Tribunal was called upon to consider the workmen’s claim for bonus. The appellate tribunal held that bonus was not an exgratia payment even where wages had been standardised nor was it a matter of deferred wages. The recognition of the workmen’s claim for bonus rests on the view, which is now well established, that both labour and capital contribute to the earnings of the industrial concern and that social justice requires that, workmen should be allowed a reasonable share in the profits made by the industry. In determining the quantum of the profit to which workmen as a whole (,an be held to be entitled, the Labour Appellate Tribunal evolved a formula under which the amount of the available surplus in the hands of the employer (1)(1950) L.L.J. 1247.

903 can be determined. This formula takes the figure of the gross profits made by the industry for the relevant year and makes provisions for depreciation, for reserves, for rehabilitation, for return at 6% on the paid-up capital, for a return on the working capital at a lesser rate than the return on the paid-up capital and for the payment of income- tax. These items are treated as prior charges and the amount determined after deducting the aggregrate total of these items from the gross profits is deemed to be the available surplus for the relevant year. It is in this available surplus thus deduced that labour is entitled to claim a reasonable share by way of bonus. It would thus be clear that under this formula the existence of an available surplus is a condition precedent for the award of bonus to workmen. The formula also postulates that the claim for bonus is made by workmen who are not paid what may properly be regard as living wages. The payment of bonus is thus intended to attempt to fill up the (Tap, to the extent that is reasonably possible, between the wages actually paid to the workmen and the living wages which they legitimately hope in due course to secure. This formula has received the general approval of this Court in Muir Mills Co. Ltd., Kanpur v. Suti Mills Mazdoor Union, Kanpur (1). It is conceded before us that since 1950 the basis supplied by this, formula has been adopted by industrial adjudication all over the country in dealing with the workmen’s claim for bonus in different kinds of industries.

It is, however, urged by Mr. Sanyal, for the appellant, that the appellant’s industry is a wasting industry and it needs special consideration. Search for new ore which is essential for the prosperity and longevity of this industry is its special feature and the interests of the industry itself require that proper and adequate provision for prospecting new ore must be made before the workmen’s, claim for bonus can be awarded. Similarly a larger provision may have to be made for depreciation or (1) [1954] INSC 110; [1955] 1 S. C. R. 991.

I15 904 rehabilitation because of the special needs of this in- dustry. It may be conceded that this inustry has some special needs of its own; but it cannot be -denied that the principles of social justice oil which a claim for bonus is founded apply as much to this industry as to others. Social and economic justice have been given a place of pride in our Constitution and one of the directive principles of State policy enshrined in Art. 38 requires that the State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice social, economic and political shall inform all the institutions of national life. Besides, Art. 43 enuiiciates another directive principle by providing that the State shall endeavour to secure, by suitable legislation or economic organization or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities. The concept of social and economic justice is a living concept of revolutionary import ; it gives sustenance to the rule of law and meaning and significance to the ideal of a welfare state. It is on this concept of social justice that the formula in question has been founded and experience in the matter of industrial adjudication shows that, on the whole, the formula has attained a fair amount of success. It is true that in industrial ad- judication purely techinical and legalistic considerations which are apt to lead to rigidity or inflexibility would not always be appropriate; nor is it desirable to allow purely theoretical or academic considerations unrelated to facts to influence industrial adjudication. In its attempt to do social justice, industrial adjudication has to adjust rival claims of the employer and his workmen in a fair and just manner and this object can best be achieved by dealing with each problem as it arises on its own facts and circumstances. Experience has shown that the formula in question is, in its application, elastic enough to meet the requirements of individual cases, and so we do not think that the appellant has made out a case for any addition to the 905 existing categories of prior charges. It is clear that the amounts which can be admitted under the said existing categories would have to be determined in the light of the evidence adduced by the employer and having regard to the special requirements of the employer’s industry. In the present case the special features of the appellant’s industry on which Mr. Sanyal relies would have to be taken into account’ in determining the amounts which could be included either under depreciation or under rehabilitation.

That is the approach adopted by the tribunal in the present case and we do not think that any complaint can be validly made against it.

The next point which has been urged by Mr. Sanval relates to the claim made by the appellant for the deduction of 15% of the revenue expenditure under a special covenant of the lease. Let us first refer to the relevant terms of the lease on which this argument is founded. The original lease which was executed in 1935 had, under para. 3, imposed upon the lessees an obligation that they shall, during the term of the lease, in the best and the most effectual manner and without intermission, except when prevented by unavoidable accident, search for all gold metals, metallic ores, pre- cious stones, coal and other substances of a saleable or mercantilable nature within or upon the mining block. The second schedule to the lease purported to define the expression adjusted annual profits of the lessee’ on which the lessor’s claim for royalty was based. The adjusted annual profits of the lessee had to be ascertained under this schedule by reference to the published annual accounts of the lessees and meant the difference in any year between the gross income of the lessees from all sources and the gross amount of the sums mentioned in paras. 1 to 6 of the schedule. Para. 5 to the schedule referred to a sum equal to 15% of the aggregate amount of the expenses mentioned in para. 4 of this part of the schedule. Thus it appears that amongst the items which the lessee was entitled to deduct from the gross revenue for the purpose of determining his adjusted annual profits was included the amount mentioned in para. 5. Subsequently by an 906 A agreement and deed of variation executed in 1949 the deductions which the lessee was entitled to make from the gross profits for the purpose of determining his adjusted surplus were stated in a modified form. The adjusted profit was now called the net surplus and the procedure to be adopted to determine this net surplus has been mentioned in para. 5 of this document. Clause (v) of para. 5 is the material clause with which we are concerned. Under this clause a sum up to 15% of the aggregate amount of the expenses of the lessees shown as debit items in their published revenue account or Income and Expenditure account shall be reserved for depreciation and development expenditure of a capital nature such as search for new ore, purchase of machinery, etc., and for renewals and replacements and shall be credited to a separate fund, provided, however, that the accumulated balance in the said fund less commitments does not exceed 25% of the expenses of the lessee shown as debit items in their published revenue account or Income and Expenditure account as the case may be for the first year on which the 15% was calculated or of the last preceding year whichever shall be greater. It is on this clause that the appellant claims to treat the amount of 15% as a prior charge in the present proceedings. The argument is that this is a valid contract between the lessor and the lessee and the lessee is entitled to claim the benefit of the contract and to treat the amount as a prior charge.

In dealing with this point we do not think it is necessary to decide the larger academic question as to whether such a contract would bind the workmen. The tribunal has hold that since the relevant covenant has the effect of withdrawing from the gross profits a substantial amount, workmen are entitled to contend that the contract does not bind them and the amount should not be treated as a prior charge. In our opinion it would be possible to deal with this question in a different way. The appellant’s argument assumes that the lessee is under an obligation to create a reserve fund and to contribute to it an amount equal to 15% as mentioned in the clause. This 907 assumption is not justified by the clause itself It is significant that the clause does not impose on the appellant an obligation to create a reserve fund at all. The only obligation which the lease has imposed on the appellant is that the appellant shall make a search for all gold and metallic ores during the continuance of the lease. If, for carrying out this search the appellant actually spends any amount he may be entitled to claim credit for that amount ;

but neither the lease nor its annexures impose any obligation on the appellant to spend a particular amount in that behalf or to create a special fund earmarked for that purpose. The lessor has merely allowed the appellant to create a specific fund as indicated in the relevant, clause and the lessor has agreed to allow the appellant to deduct the amount thus put in the said reserve fund from year to year from the gross receipts for the purpose of determining the appellant’s net surplus. In other words, for deciding the amount of net surplus on which the lessor’s claims such as that for royalties or contributions may be based, the appellant is allowed to make certain specified deductions;

amongst these is the 15% mentioned in para. 5, cl. (v).

:Besides, the 15% of the aggregate amount mentioned in the clause is the maximum limit which the contribution to the special fund in any year is allowed to reach under this clause. Prima facie it appears to be doubtful if the appellant’s failure to create a reserve fund or to make a contribution to the said fund from year to year would neces- sarily incur forfeiture of his lease. However, apart from this consideration there is no obligation imposed on the appellant under this clause and any argument based on the alleged obligation cannot, therefore, be accepted.

There is also another consideration which must be borne in mind. The fund contemplated by the relevant clause is intended to meet depreciation and development expenditure and it is clear that the depreciation and rehabilitation are included in the Full Bench formula amongst the items of prior charge in dealing with workmen’s claim for bonus. If the appellant wants to make a claim for depreciation and rehabilitation 908 it would be open to him to make such a claim even under the Full Bench formula. Indeed its claim for depreciation has been upheld by the present award. The fact that items of depreciation and rehabilitation are included in this clause shows that even if the amounts claimed by the appellant solely on the strength of this clause are not allowed, it would nevertheless be open to the appellant to make a claim in respect of admissible items independently of the clause and if he succeeds in proving this claim there could be no injustice to the appellant. In our opinion it would not be reasonable or fair to allow the appellant’s specific claim for 15% by way of rehabilitation solely on the ground that the clause allows it to debit up to 15% in a special fund without examining the question as to whether a claim for depreciation and rehabilitation is justified, and if yes, what should be the amount which should be treated as a prior charge in the present proceeding. Inclusion of these items in a separate fund allowed under the relevant clause cannot preclude an investigation by the industrial tribunal into the merits of the said items and that is what the appellant seeks to do by placing his claim in that behalf solely on the relevant clause. We are, therefore, satisfied that the tribunal was not in error in disallowing the claim made by the appellant solely on the strength of this particular clause.

As we have already pointed out the tribunal has in fact conceded that the appellant would be justified in making a claim for prospecting new ore and thereby helping the longevity of its industry ; but since no material was placed before the tribunal on which the tribunal could determine the amount which the appellant can legitimately claim in that behalf, the tribunal was unable to give the appellant any relief in this matter. In this connection Mr. Sanyal referred us to the entries in the extracts from the balance- sheets which referred to the captial expenditure during the relevant years on buildings, machinery and plant and sundries as well as on shaft sinking, etc. In regard to the Mysore Gold Mining Co., for instance, the capital 909 expenditure in question during the year ending December 31, 1953, was shown as Rs. 3,30,729 (Ex. VIII-A). But the difficulty in accepting this figure as a prior charge either under depreciation or under rehabilitation arises from the fact that Mr. Rajagopal Srinivasan who was examined on behalf of the appellant was unable to explain how this total amount was made up. The witness expressly admitted that the companies had no record to show separately the amounts under different heads. Mr. Sanyal fairly conceded that the, companies might have led better evidence in support of their case. As the evidence stands, however, it is difficult to challenge the correctness of the view taken by the tribunal that the amounts shown in the different extracts from the balance-sheets are a mixture of very many items depending upon the options exercised by the management and that it would be impossible to say which part of the said amounts can be legitimately treated as prior charge under the heading of rehabilitation. That is why we do not think that Mr. Sanyal can succeed in his argument that, on the evidence as it stands, the appellant is entitled to any particular amount under the heading of rehabilitation.

That takes us to the appellant’s case in regard to the annual contribution towards the pension fund which has been disallowed by the tribunal. It appears that the scheme of pension fund which was intended for the benefit of the covenanted servants of the sterling companies came into operation as from January 1, 1951, soon after the rupee companies came into existence. Certain rules appear to have been framed in respect of this pension fund and a trust has apparently been created for the administration of the fund.

Under these rules the companies made the contribution which is called the initial contribution to the fund as specified in para. 1(c) of the rules. In addition to this initial contribution, the companies had to pay to the fund by half- yearly instalments on June 30 and December 31 of each year an ordinary annual contribution at the rate specified in para. 6. The appellant makes a claim for the deduction of this annual contribution as a prior charge and his grievance is that this 910 claim has been unreasonably disallowed by the tribunal. In regard to this fund the tribunal has made certain findings of fact which cannot be challenged before us. The tribunal has relied on the circumstances under which this fund came into existence. Mr. Jha, for the respondents, has characterised this fund as a parting gift of the Sterling companies to their covenanted servants and it would appear as if the tribunal was inclined to take a similar view about the genesis of this fund. The class of persons for whose benefit this fund has been created consists of a very small number of officers. It does not appear from the record that these persons claimed this benefit or that granting this benefit was otherwise necessary for the successful operation of the affairs of the companies. The officers who got the benefit of this fund were entitled to gratuity and during all the years of their existence the Sterling companies had never thought before of creating such a fund. A claim for the initial contribution to this fund has not been made before us; but even in regard to the annual contribution the tribunal was not satisfied that the amount was reasonable and that the payment of this amount was otherwise justified on the merits. As against these facts the tribunal referred to the cases of a larger number of non-covenanted servants of the companies and other employees for whom no such fund exists. Having regard to all these circumstances the tribunal held that it would not be fair or just to allow the appellant to claim that the annual contribution to the pension fund in question should be treated as a prior charge, and thereby reduce the gross profits which would adversely affect the respondents’ claim for bonus. In our opinion, whether or not this particular amount should be allowed as claimed by the appellant does not raise any general question of law and the reasonableness of the claim has, therefore, to be judged in the light of all relevant facts and circumstances. As the tribunal has found against the appellant on this point we do not think we would be justified in interfering with the decision of the tribunal.

The next contention raised by Mr. Sanyal is in 911 respect of the finding made by the tribunal in regard to the amount of bonus paid by the companies to their workmen for the year 1950. The employer’s case was that though this bonus had accrued for the year 1950 it was actually paid in 1953 and so the amount of the bonus should be deducted from the gross profits for 1953. This contention has been rejected by the tribunal. The tribunal has observed that though the disbursement of bonus for the year was actually made in the early part of 1953 the amount was provided and debited in 1952. This can be seen from the income-tax as- sessment order to which the tribunal has referred. The employer had claimed as an expenditure the amount in respect of bonus relating to 1950 in the said income tax proceeding and so it was held that the said amount cannot now be taken into consideration for the year 1953. We do not see any error of law committed by the tribunal in recording this finding. It is clear that the respondents were found entitled to bonus for the year 1950, because the companies held in their hands sufficient available surplus from the trading profits of that year. In the absence of satisfactory evidence, normally the bonus paid to the respondents for the year 1950 cannot be brought into accounting for a subsequent year. We are, therefore, satisfied that the appellant cannot successfully challenge the tribunal’s finding on this question.

It will now be material to refer to the two previous awards between the companies and their workmen because Mr. Sanyal has based an argument on these awards and that argument yet remains to be examined. On January 5,1953, Mr. V. N.

Dikshitulu, the sole member of the industrial tribunal made his award in an industrial dispute between the Champion Reef Gold Mines of India Ltd., and its workmen. By this award the tribunal held that the claim made by the employer on the strength of the clause permitting the creation of a reserve fund and an annual contribution to it up to 15% “cannot but be allowed because mining operations can be performed only subject to the condition of making the said item of 116 912 reserve as per the agreement and hence it stands to reason that the reserve should be deducted from the gross profits to ascertain the available surplus”. It is clear from the award that the tribunal did not consider the effect of the terms contained in the clause after construing the relevant clauses and we see no discussion about the merits of the rival contentions in respect of this claim. Apparently, the tribunal accepted the employer’s case at its face value and granted the relief to the employer without considering all the relevant clauses of the lease and its annexures and without examining the merits of the workmen’s case on the point. The next award was passed by Mr. Dave on December 31, 1954, in Reference Nos. 6 and 7 of 1954. These two references arose from disputes between the Orgaum Gold Mines and the Champion Reef Gold Mines and their workmen. By this award Mr. Dave rejected the employer’s claim for deducting 15% from the gross profits under the relevant clause because he was not satisfied that the maximum limit of 25% mentioned in the clause had not been exceeded during the year 1952.

The employer did not produce relevant books of account and Mr. Dave took the view that the non-production of the books showed that the employer was afraid that the books would indicate that the maximum limit had already been exceeded.

On that view Mr. Dave reached the conclusion that the employer was not entitled to make any contribution to the fund during the relevant year. In regard to the pension fund Mr. Dave disallowed the claim for initial contribution but allowed the claim for annual contribution. He was inclined to hold that the annual contribution was made for services rendered during that year and should certainly form part of the expenses of that year. This award was taken before the Labour Appellate Tribunal. The Labour Appellate Tribunal confirmed Mr. Dave’s decision both in regard to the initial and the annual contribution towards the pension fund. The Appellate Tribunal, however, different from Mr.

Dave in regard to the employer’s claim for the deduction of 15% under the relevant clause. It accepted 913 the finding of the tribunal that the employer had failed to prove that in a particular year the maximum of 15% was in fact required to be contributed to the reserve fund.

However, it held that the amount of Rs. 4.77 lakhs represented the actual expenditure incurred by the employer during the year and so this amount was allowed to be treated as a prior charge., It would no doubt appear as if the Appellate Tribunal’ took the relevant figure from the balance-sheet as showing the actual expenditure. It is unnecessary for us to consider whether this finding was justified or not. What is, however, relevant for the present purpose is the finding of the tribunal that the company was not entitled to claim the full provision of the rate of 15% of the total revenue expenditure allowed under the clause in question.

Mr. Sainyal has referred to these two awards in support of his contention that the companies did not think it necessary to make a specific claim for rehabilitation because – it was thought that following the previous awards the claim made for 15% would be allowed. His argument is that if the claim based on the covenant is disallowed it would be unfair to his client not to allow any claim for rehabilitation at all.

It is clear that the claim for rehabilitation which could have been separately made by the company was not so made because it was included in the claim for the deduction of 15%. There is also some force in Mr. Sanyal’s argument that, having regard to the previous awards the companies may have thought that the said claim would be allowed. Since we have held against the appellant in respect of the major claim made on the said relevant clause of 15% it is necessary to consider whether the appellant should be allowed an opportunity to make out a specific claim for rehabilitation and lead evidence in support of the said claim.

Mr. Jha, for the respondents, has resisted the appellant’s request for a remand to enable it to put forward this claim for rehabilitation. He argues that the companies deliberately did not make a specific claim for rehabilitation and chose to rest their case on the relevant terms of the contract because they knew that 914 a claim for rehabilitation would not be sustained. ln this connection Mr. Jha referred us to the principles adopted by industrial courts in determining the employer’s claims for rehabilitation. We are not impressed by this argument. It seems to us that, if the employer was partly misled by the previous awards and did not in consequence put forward a specific claim rehabilitation it would not be fair or just that he should be precluded from making such a claim even after his general claim for the deduction of 15% is disallowed. After all, the Full Bench formula has recognised the existence of four items as constituting a prior charge on principles of social justice and if, in the present case, the employer failed to make out a claim for deduction of one of the items substantially as a result of the previous awards passed in its favour, he cannot be penalised as suggested by Mr. Jha. We would accordingly allow the appellant to put forward before the tribunal a specific claim under the heading of rehabilitation and lead evidence in support of the said claim.

While we are sending this case back for the purpose of determining the appellant’s claim for rehabilitation and for deciding two other points which we would presently indicate, it would be useful, if we briefly refer to the principles which are usually adopted by industrial courts in adjudicating upon the employer’s claim for rehabilitation.

It is not disputed before us that these principles would have to be borne in mind by the tribunal in determining the validity of the appellant’s claim for rehabilitation which we are now permitting it to make. It has been observed by the Labour Appellate Tribunal in Ganesh Flour Mills Co.

Ltd., Kanpur v. Ganesh Flour Mills Staff Union (1) that though the employer is entitled to claim deductions from the gross profits in respect of rehabilitation as a matter of right it is difficult to lay down any general rule applicable to each and every industry. The Full Bench formula evolved in the case of The Mill Owners Association, Bombay (2), was not intended to lay down any hard and fast rule in that behalf For (1) (1952) L.A.C. 172.

(2) (1950) L. L. J. 1247.

915 the purpose of sustaining the claim for rehabilitation there must be evidence to show the age of the machinery, the period during which it requires the replacement, the cost of replacement, the amount standing in the depreciation and reserve fund and to what extent the funds at the disposal of the company would meet the cost of replacement. In Trichinopoly Mills Ltd., Ramjeenagar v. National Cotton Mills Workers’ Union, Ramjeenagar (1) the appellate tribunal has observed that for determining the total amount required for rehabilitation it is the original cost that has to be multiplied by an appropriate multiple, for instance 2.7, for the purpose of ascertaining the replacement value of the machinery, buildings and plant. From the amount thus obtained 5% of the original value is to be deducted as breakdown value. The balance is treated as sufficient to complete replacement of machinery and buildings. Then the amounts in hand under the head of depreciation, general reserve and rehabilitation have to be totalled and this total has to be deducted from the aforesaid balance which is required to complete replacement of machinery and buildings.

It is the balance thus drawn that has to be spread over a number of years, as for instance 15, for the purpose of rehabilitation; in other words, the balance has to be divided by 15 and the amount thus determined has to be treated as prior charge under the heading of rehabilitation for the relevant year. (Vide The Meenakshi Mills Ltd., Madurai and Manapparai v. Their Workmen(1) ; The Rohtas Sugar Ltd. v. Their Workmen (3) ; and The Mettur Industries Ltd., Mettur Dam v. The Workers (4)). Thus the appellant’s claim for rehabilitation would have to be tried by the tribunal in the light of these decisions. In the application of the principles discussed in these decisions, industrial adjudication cannot adopt an inflexible or rigid approach; these principles will have to be applied with such modifications and adjustments as may be found necessary, just and expedient having regard to the evidence led by the parties before the tribunal and (1)(1953) L.A.C. 672.

(3)(1954) L.A.C. 168, 184.

(2)(1954) L.A.C. 131.

(4)(1957) L.A.C. 288.

916 having reward to the special-needs and requirements of the industry. This position appears to be fully recognised by the Labour Appellate Tribunal in these decisions themselves.

There is another point on which Mr. Sanyal has requested us to call for a finding from the tribunal. His case is that the award of the tribunal in one material particular suffers from an error apparent on the face of the record. In the award, the initial contribution to the pension fund and the annual contribution to the pension fund have been added back for both the years in respect of all the companies. Mr.

Sanyal contends that the amount added back under the heading ” annual contribution to the pension fund ” really includes the initial contribution to the said fund also, and so it was erroneous to have added back a separate amount under the heading ” the initial contribution to the pension fund”. -In other words, the grievance is that the amount of the initial contribution has been added back twice. Mr. Jha, for the respondents, does not accept Mr. Sanyal’s contention that this is an error apparent on the face of the record. He disputes the assumption made by Mr. Sanyal that the annual contribution to the pension fund in each case includes the initial contribution as well. We do not propose to express any opinion on the merits of this dispute. We think it is desirable that the tribunal should be requested to make its finding on the question as to whether the amount of initial contribution has been added back twice over as suggested by the appellant. This is the second point which we want to remit for the consideration of the tribunal.

The third point which we -propose to remit for the consideration of the tribunal has – been raised by Mr. Jha for the respondents. He argues that the tribunal has committed an obvious error in allowing a deduction of statutory depreciation to each one of the companies for both the years in question and in support of his argument he relies on the statements contained in the report of the directors in each case. As an illustration we should refer to the report and accounts of the Nundydroog Mines (KGF) Ltd., for the 917 year ended December 31, 1953. In this report, under the item ” capital expenditures, it is stated that the sum of Rs. 13,50,000 being depreciation for the period April 1, 1951 to December 31, 1953 has now been written off. Mr. Jha contends that, since this amount has been written off as depreciation, in calculating the available surplus for the year no amount should be, allowed by way of statutory depreciation. This argument has been considered by the tribunal in para. 20 of its award but Mr. Jha wants to challenge the correctness of the conclusion reached by the tribunal. We would normally not have allowed Mr. Jha’s request for a reconsideration of this matter; but since on two points raised by the appellant we are remanding the case to the tribunal and calling for its findings on the said points we think it right to allow the respondents an opportunity to re-agitate this point. In fairness to Mr.

Sanyal we may add that he did not object to this matter being remitted to the tribunal for reconsideration. We would, however, like to make it clear that in dealing with this point it would not be open to the respondents to contend that the appellant was not entitled to claim additional depreciation under the head of statutory depreciation. This Court has held in Sree Meenakshi Mills Ltd. v. Their Workmen (1) that additional depreciation which is admissible under s. 10(2) (vi) of the Income-tax Act need not necessarily be allowed by industrial courts in determining the available surplus under the Full Bench formula. We wish to make it clear that it would not be open to the respondents to raise any contention on the strength of this decision under the issue which is being remitted to the tribunal at their request.

It is somewhat unfortunate that, though we have held against the appellant on the main points urged by Mr. Sanyal before us, we cannot finally dispose of the appeal today. It is true that it is of the utmost importance that industrial adjudication should be dealt with speedily and without unnecessary delay; but in the present case we have come to the conclusion that it would be fair and just to allow the appellant to raise (1)[1958] S.C.R. 878.

918 the two points mentioned in the judgment. That is why we think it necessary that this case should be sent back to the tribunal with the direction that the tribunal should make its findings on the issues remitted to it by this judgment.

The three issues on which we want a finding from the tribunal are:

(1)In addition to the statutory depreciation allowed, is the appellant entitled to claim any deduction under the head of rehabilitation, and if yes, to what amount ? (2)Does the award in substance add back the initial contribution to the pension fund twice over in making calculations for ascertaining the available surplus ? (3)In allowing statutory depreciation to the appellant for the relevant years, has the award virtually allowed the said depreciation twice over having regard to the fact that a large amount has been written off by the appellant towards depreciation for the said period ? Parties will be at liberty to lead additional relevant evidence. The tribunal should consider the evidence led by the parties, hear their learned advocates and make its findings on these issues. We would also direct the tribunal to consider whether, as a result of its findings on any of the said issues, any adjustment will have to be made in its final award. If, as a result of its findings, the amount of available surplus is likely to be materially affected then the tribunal should indicate what the available surplus in that case would be in respect of each of the companies in regard to each of the two years in question. The tribunal should also make a finding as to the amount of bonus to which the respondents would, in its opinion, be entitled on this altered finding as to available surplus.

We desire that this appeal should be finally disposed of as soon as possible; so we direct that the tribunal should submit its findings along with the evidence to be recorded hereafter to this Court within three months from today.

Both parties have stated to us that this matter has to be and would be dealt with by the Central Government Industrial Tribunal functioning 919 at Bangalore. The proceedings will accordingly be remitted to the said tribunal. The appellant will pay the cost of remand in any event. Costs of the present hearing of the appeal will be costs in the appeal.

We would like to add that Mr. Sanyal has agreed without prejudice that the appellant will pay to the respondents fifteen days basic wage towards their claim’ for bonus during the relevant years.

Case, remanded.

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