N Civil Appeal No 130 of 1959
Appeal by special leave from the Award dated September 5 1958 of the Industrial Tribunal Bombay in Reference IT No 187 of 1958
C K Daphtary Solicitor General of India G B Pai and Sardar Bahadur for the appellants
H R Gokhale section B Naik and K R Chaudhury for respondent No 1 1960
April 6
The Judgment of the Court was delivered by WANCHOO J
This is an appeal by special leave in an industrial matter
The appellant is The Standard Vacuum Refining Company of India Limited hereinafter called the company
A dispute was raised by the workmen of the company hereinafter called the respondents with respect to contract labour employed by the company for cleaning maintenance of the refinery plant and premises belonging to the company
The system in force in the company is that this work is given to contractors for a period of one year from October 1 to September 30
At the time when the reference was made the contract
was with Ramji Gordhan and Company for the period from October 1 1957 to September 30 1958
On April 27 1957 the respondents made a demand for abolition of the contract system that prevailed in the company and for absorbing the workmen employed through the contractors into the regular service of the company with retrospective effect from the date of their employment in the company through the contractors
The case of the respondents was that the contractor used to change sometimes from year to year with the 468 result that the workmen employed by the previous contractor were thrown out of employment
As an instance it was said that previous to October 1 1957 the contract was with Gowri Construction Company
That company employed 67 workmen to do the work
But when the contract was given to Ramji Gordhan and Company all these 67 workmen were thrown out of employment though 40 of them were subsequently re employed as fresh employees by Ramji Gordhan and Company
The result of the system therefore was that there was no security of service to the workmen who were in effect doing the work of the company
Besides the contractors were paying much less to the workmen than the amount paid by the company to its unskilled regular workmen
Further the workmen of the contractors were not entitled to other benefits and amenities such as provident fund gratuity bonus privilege leave medical facilities and subsidised food and housing to which the regular workmen of the company were entitled
The work was of a permanent nature but the contract system was introduced to deny the workmen the rights and benefits which the company gave to its own workmen
The dispute was taken to the conciliation officer
When conciliation failed the Government of Bombay made the following reference on May 13 1958
 The contract system for cleaning the premises and plant should be abolished and workers working in the refinery through the Ramji Gordhan and Company should be treated as workers of the Standard Vacuum Refining Company of India Limited Bombay and wage scales conditions of service etc that are applicable to the workers of the refinery be made applicable to them
Past service of these workers should be counted and they should be treated as continuously in the service of the Stanvac refinery from the date of their entertainment
 The company resisted the claim and raised two main contentions
In the first place it was contended that the reference under section 10 of the  No 14 of 1947 hereinafter called the Act was incompetent
In the second place it was contended 469 that the work done by the contractor s workmen was not germane to the manufacturing process and was therefore entrusted to the contractor
If the workmen of the contractor were not satisfied with the conditions of service they could take up the matter with the contractor and the company had nothing to do with it
As to the difference between the wages and benefits and amenities of the regular workmen of the company and the contractor s workmen it was said that the work of the two sets of workmen was very different and that in any case this was a matter between the contractor and its workmen
The contractor was an independent employer and it was incorrect to say that the real employer was the company
It was for the company to decide what was the best method of carrying on its business and the industrial tribunal should not interfere with that function of the management
The tribunal held that the reference was competent
On the merits it was of opinion that the work which was being done through the contractor was necessary for the company and had to be done daily though it was not a part of the manufacturing process
It further held that doing of this work through annual contracts resulted in the deprivation of security of service and other benefits privileges leave etc for the workmen of the contractor
Therefore considering the nature of the case it was of opinion that this was a proper case where a direction should be given to the company to abolish the contract system with respect to this work
In the result the company was directed with effect from November 1 1958 to discontinue the practice of getting this work done through contractors and to have it done through workmen engaged by itself
The other part of the demand namely that all the workmen of the contractor should be taken over by the company and their past services should be counted and that they should be given the same wage scale and conditions of service etc which were applicable to the regular workmen of the company was rejected
The company was further directed to engage regular workmen for this work and in so doing it was to give preference to the workmen employed by Ramji 60 470 Gordhan and Company
Wage scale and other benefits to be given to these workmen were left to the company to be determined by it
Learned
Solicitor General appearing for the company raised two contentions before us namely i is this dispute an industrial dispute and therefore the reference was competent  and ii is the tribunal justified in interfering with the management function as to how it should get its work done  Re
i  The contention under this head is that there is no dispute between the company and the respondents and that it was not open to the respondents to raise a dispute with respect to the workmen of some other employer in this case Ramji Gordhan and Company
Reliance in this connection was placed on the definition of  industrial dispute  in section 2 k of the Act and the judgment of this Court in Workmen of Dimakuchi Tea Estate vs The Management of Dimakuchi Tea Estate 1
The definition of  industrial dispute  in section 2 k requires three things i There should be a dispute or difference ii The dispute or difference should be between employers and employers or between employers and workmen or between workmen and workmen iii The dispute or difference must be connected with the employment or non employment or the terms of employment or with the conditions of labour of any person
The first part thus refers to the factum of a real and substantial dispute the second part to the parties to the dispute and the third to the subject matter of the dispute
The contention of the learned Solicitor General is two fold in this connection namely i that there is no real or substantial dispute between the company and the respondents and ii that the subject matter of the dispute is such that it cannot come within the terms of the definition in section 2 k
The first submission can be disposed of shortly
There is undoubtedly a real and substantial dispute between the company and the respondents on the question of the employment of contract labour for the 1  471 work of the company
The fact that the respondents who have raised this dispute are not employed on contract basis will not make the dispute any the less a real or substantial dispute between them and the company as to the manner in which the work of the company should be carried on
The dispute in this case is that the company should employ workmen directly and not through contractors in carrying on its work and this dispute is undoubtedly real and substan tial even though the regular workmen ie the respondents who have raised it are not employed on contract labour
In Dimakuchi case 1 to which reference has been made the dispute was relating to an employee of the tea estate who was not a workman
It was nevertheless held that this was a real and substantial dispute between the workmen and the company
How the work should be carried on is certainly a matter of some importance to the workmen and in the circumstances it cannot be said that this is not a real and substantial dispute between the company and its workmen
Thus out of the three ingredients of section 2k the first is satisfied the second also is satisfied because the dispute is between the company and the respondents  it is the third ingredient which really calls for determination in the light of the decision in Dimakuchi case 1
Section 2k as it is worded would allow workmen of a particular employer to raise a dispute connected with the employment or non employment or the terms of employment or with the conditions of labour of any person
It was this aspect of the matter which was considered in Dimakuchi case 1 and it was held that the words  any person  used in section 2k would not justify the workmen of a particular employer to raise a dispute about any one in the world though the words  any person  in that provision may not be equated with the words  any workman 
The test therefore to be applied in determining the scope of the words  any person  in section 2k was stated in the following words at pp
1174 75  If therefore the dispute is a collective dispute the party raising the dispute must have either a direct interest in the subject matter of dispute or a 1  472 substantial interest therein in the sense that the class to which the aggrieved party belongs is substantially affected thereby
It is the community of interest of the class as a whole class of employers or class of workmen which furnishes the real nexus between the dispute and the parties to the dispute
We see no insuperable difficulty in the practical application of this test
In a case where the party to a dispute is composed of aggrieved workmen themselves and the subject matter of the dispute relates to them or any of them they clearly have a direct interest in the dispute
Where however the party to the dispute also composed of workmen espouse the cause of another person whose employment or non employment etc may prejudicially affect their interest the workmen have a substantial interest in the subject matter of dispute
In both such cases the dispute is an industrial dispute
 We have therefore to see whether the respondents who have raised this dispute have a direct interest in the subject matter of the dispute or a substantial interest therein in the sense that the class to which the respondents belong is substantially affected thereby and whether there is community of interest between the respondents and those whose cause they have espoused
There can be no doubt that there is community of interest in this case between the respondents and the workmen of Ramji Gordhan and Company
They belong to the same class and they do the work of the same employer and it is possible for the company to give the relief which the respondents are claiming
The respondents have in our opinion also a substantial interest in the subject matter of the dispute namely the abolition of the contract system in doing work of this kind
The learned Solicitor General particularly emphasised that there was no question of the interest of the respondents being prejudicially affected by the employment or nonemployment or the terms of service or conditions of labour of the workmen of Ramji Gordhan and Company and placed reliance on the words  may prejudicially affect their interest  appearing in the observations quoted above
We may however mention that 473 the test laid down is that the workmen espousing the cause should have a substantial interest in the subjectmatter of the dispute and it was only when illustrating the practical application of the test that this Court used the words may prejudicially affect their interest 
Besides it is contended by Mr Gokhale for the respondents that even if prejudicial effect on the interest of the workmen espousing the cause is necessary this is a case where the respondents  interest may be prejudicially affected in future in case the contract system of work is allowed to prevail in this branch of the work of the company
He submits that if the company can carry on this part of the work by contract system it may introduce the same system in other branches of its work which are now being done by its regular workmen
We do not think it necessary to go into this aspect of the matter as we have already indicated that prejudicial effect is only one of the illustrations of the practical application of the test laid down in Dimakuchi case 1 viz substantial interest in the sense that the class to which the aggrieved party belongs is substantially affected thereby
It seems to us therefore that the respondents have a community of interest with the workmen of Ramji Gordhan and Company who are in effect working for the same employer
They have also a substantial interest in the subject matter of the dispute in the sense that the class to which they belong namely workmen is substantially affected thereby
Finally the company can give relief in the matter
We are therefore of opinion that all the ingredients of section 2k as interpreted in Dimakuchi case1 are present in this case and the dispute between the parties is an industrial dispute and the reference was competent
ii  We now come to the question whether the tribunal was justified in giving the direction for the abolition of the contract system in the manner in which it has done so
In dealing with this question it may be relevant to bear in mind that industrial adjudication generally does not encourage the employment of contract labour in modern times
As has been observed by the Royal Commission on Labour  whatever the merits of the system 1  474 in primitive times it is now desirable if the management is to discharge completely the complex responsibility laid upon it by law and by equity that the manager should have full control over the selection hours of work and payment of the workers 
The same opinion has been expressed by several Labour Enquiry Committees appointed in different States
We agree that whenever a dispute is raised by workmen in regard to the employment of contract labour by any employer it would be necessary for the tribunal to examine the merits of the dispute apart from the general consideration that contract labour should not be encouraged and that in a given case the decision should rest not merely on theoretical or abstract objections to contract labour but also on the terms and conditions on which contract labour is employed and the grievance made by the employees in respect thereof
As in other matters of industrial adjudication so in the case of contract labour theoretical or academic considerations may be relevant but their importance should not be overestimated
Let us then consider the contract labour system in the present case
The contract in this case related to four matters
But the reference is confined to one only viz cleaning maintenance work at the refinery including premises and plant and we shall deal with that only
So far as  this work is concerned it is incidental to the manufacturing process and is necessary for it and of a perennial nature which must be done every day
Such work is generally done by workmen in the regular employ of the employer and there should be no difficulty in having regular workmen for this kind of work
The matter would be different if the work was of intermittent or temporary nature or was so little that it would not be possible to employ full time workmen for the purpose
Under the circumstances the order of the tribunal appears to be just and there are no good reasons for interfering with it
Our attention in this connection was drawn to D Macropollo And Co P Ltd vs D Macropollo And Co P Ltd Employees  Union 1 and it was urged that the tribunal should not have interfered with the 1 AIR 1958 SC 1012
475 management s manner of having its work done in the most economical and convenient way that it thought proper
It was pointed out that this was not a case where the contract system was a camouflage and the workmen of the contractor were really the workmen of the company
It may be accepted that the contractor in the present case is an independent person and the system is genuine and there is no question of the company carrying on this work itself and camouflaging it as if it was done through contractors in order to pay less to the workmen
But the fact that the contract in this case is a bona fide contract would not necessarily mean that it should not be touched by the industrial tribunals
If the contract had been mala fide and a cloak for suppressing the fact that the workmen were really the workmen of the company the tribunal would have been justified in ordering the company to take over the entire body of workmen and treat it as its own workmen
But because the contract in this case was bona fide the tribunal has not ordered the company to take over the entire body of workmen
It has left to it to decide for itself how many workmen it should employ and on what terms and has merely directed that when selection is being made preference should be given to the workmen employed by the present contractor
In Macropollo case 1 this Court held that the reorganisation had been adopted by the employer for reasons of economy and conveni ence and was bona fide
In that case the main business of the concern was the selling agency of various cigarette manufacturing concerns
Before 1946 the concern used to employ distributors for the purpose and these distributors used to employ salesmen
In 1946 there were communal riots in Calcutta and therefore the concern took over the salesmen in its direct employment in order to reorganise them on communal basis in the then prevailing circumstances
In 1954 the concern decided to close down its own outdoor sales department and revert to the distributor system
It was in that context that certain workmen had to be retrenched and this Court held that the reorganisation scheme adopted in 1954 for reasons of economy and convenience was bona fide 1 AIR 1958 SC 1012
476 and if it resulted in retrenchment that was inevitable
These facts would show that in that case there was reorganisation of the business resulting in retrenchment
In the present case no such thing arises and the only question for decision is whether the work which is perennial and must go on from day to day and which is incidental and necessary for the work of the refinery and which is sufficient to employ a considerable number of wholetime workmen and which is being done in most concerns through regular workmen should be allowed to be done by contractors
Considering the nature of the work and the conditions of service in the present case we are of opinion that the tribunal s decision is right and no interference is called for except that the date should now be changed for such a direction cannot be put into force with retrospective effect from November 1 1958
It appears that a few months remain before the present contract will come to an end
We think that for these few months the present system may continue
We therefore dismiss the appeal with this modification that the order of the tribunal will be carried into effect from such date on which the present contract in force in the company comes to an end
The respondents will get their costs from the company
Appeal dismissed subject to modification


Summary:
The system of working in the cash department of the appellant Bank was that there was a Chief Cashier and there were about thirty Assistant Cashiers under him
The Chief Cashier had to give security for the work of the cash department the Assistant Cashiers were employed upon being introduced by the Chief Cashier who guaranteed each such employee
There was long standing practice in the Bank that at the end of the day when the cash was locked up under the supervision of the Chief Cashier all the assistant cashiers had to be present so that the cash could be checked before being locked up
In spite of reminders C an Assistant Cashier had been leaving the Bank without the permission of the Chief Cashier for some time before the cash was checked and locked up
The Chief Cashier reported the matter to the management withdrew his guarantee in respect of C and stated that unless the services of C were dispensed with his conduct would affect the security of the cash department
The Bank terminated the services of C in accordance with the provisions of para
5221 of the All India Industrial Tribunal Bank Disputes Award 1953 without holding any enquiry against C
The Industrial Tribunal to which the dispute was referred held that this was in fact and in reality a case of termination of services for misconduct and the Bank ought to have followed the procedure laid down in para
521 of the Bank Award for taking disciplinary action that the termination of service was illegal and improper and that C was entitled to reinstatement with full back wages and other benefits  Held that the services of the Assistant Cashier were properly terminated by the Bank
There was no doubt that an employer could not dispense with the services of a permanent employee by mere notice and claim that the industrial tribunal had no jurisdiction to inquire into the circumstances of such termination
Even in a case of this kind the requirement of bona fides was essential and if the termination of service was a colourable exercise of the power or as a result of victimisation or unfair labour practice the tribunal had jurisdiction to interfere
Where the termination of service was capricious arbitrary or unnecessarily harsh that may be cogent evidence of victimisation or unfair labour practice
In the present case the security of the 442 Bank was involved and if the Bank decided that it would not go into the squabble between the Chief Cashier and C and would use para
5221 of the Bank Award to terminate the services of C it could not be said the Bank was exercising its power under para
5221 in a colourable manner
It was not necessary that in every case where there was an allegation of misconduct the procedure under para
521 for taking disciplinary action should be followed
Buckingham and Carnatic Company Ltd vs Workers  of the COmpany  approved