[CASE NUMBER] [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: August 17, 2012 (1) [CASE NUMBER] (O&M) [ENTITY] Petitioner v. The [ENTITY] and another Respondents (2) [CASE NUMBER] (O&M) [ENTITY] Petitioner v. The [ENTITY] and another Respondents CORAM: HON'BLE MR. JUSTICE RAJESH BINDAL Present: Mr. [ENTITY], Mr. [ENTITY] and Ms. [ENTITY], Advocates for the petitioner. Mr. [ENTITY], Senior Advocate with Mr. [ENTITY], Advocate for respondent No. 2 in both the petitions.
[ENTITY] J.
1. This order will dispose of above mentioned two petitions bearing [CASE NUMBER], as common questions of law and facts are involved.
2. Respondent No. 2-workman in [CASE NUMBER] was allegedly enegaged as electrician, whereas in [CASE NUMBER], respondent No. 2-workman was engaged as Mechanic.
3. The facts, in detail, have been extracted from [CASE NUMBER].
4. Challenge has been made to the award dated 30.11.2010, passed by [ENTITY], Industrial Tribunal-cum-Labour Court, Panipat (for short, `the Tribunal'), whereby it directed for reinstatement of respondent No. 2-workman in service with 50% back wages.
5. Learned counsel for the petitioner submitted that the petitioner is a public limited company having its registered office in Mumbai. It is, inter-alia, engaged in the business of manufacture of tractors. It has regional sales office in Karnal, where as per the demand in the year, the vehicles used to be despatched. Before sale, pre-delivery inspection is always carried out to check any defect, which may have been caused during transportation of vehicles from the plant to the sales office. M/s Hari Tractors in Karnal is the authorised dealer for the tractors and other equipments manufactured by the petitioner-firm. As the supply of vehicles in the area was dependent upon its demand. The receipt of tractors was not regular as such. The consignment used to come after a week or 15 days or even later. There was no requirement to keep regular staff for the purpose. The job was entrusted to M/s Hari Tractors, as and when the same was needed. For the purpose of checking of battery and headlights, M/s Hari Tractors had deputed respondent No. 2 with the petitioner for which the amount was being paid to M/s Hari Tractors in terms of the settlement arrived at. Respondent No. 2 was never employed by the petitioner directly. He was never paid any wages by the petitioner. He did not produce on record any material to show that he was ever appointed by the petitioner. The Tribunal had framed the issue regarding relationship of master and servant between the parties, the onus of which was on respondent No. 2, which he failed to discharge. The Tribunal has taken adverse inference on the presumption as if the onus was to be discharged by the petitioner. It was not the case for drawing adverse inference against the petitioner for the reason that no record was sought to be summoned from the petitioner which was not produced.
6. He further submitted that in his cross-examination, respondent No. 2 had specifically admitted before the Labour Inspector that in fact he was employed by M/s Hari Tractors. He could not refer to any record of his attendance. Further, respondent No. 2 in the present case had not been able to prove that in fact, he had worked for a period of 240 days prior to his alleged date of termination. His pleaded case was that he was working from 1.5.1999 and was allegedly terminated on 22.1.2002. The fact remains that respondent No. 2 had earlier filed an application before the Labour Officer and then a petition under [SECTION] of the [ACT] (for short, 'the 1947 Act') seeking wages from May, 2000 to June, 2001, which were declined to him, as the relationship of master and servant was in dispute. It cannot be believed that a low paid employee, like respondent No. 2, would work without wages for a period of more than one year, i.e., from May, 2000 to January, 2002, as is mentioned in the demand notice. Meaning thereby, apparently respondent No. 2 was being paid wages by M/s Hari Tractors, that is why, he continued working.
7. He further submitted that the provisions of [ACT] (for short, 'the [ACT]') will not be applicable in the facts and circumstances of the case for the reason that only two persons had been engaged on contract basis. By placing reliance upon a judgment of Hon'ble the Supreme Court in [PRECEDENT], it was submitted that an employee allegedly employed through a contractor can be considered to be in employment of the principal employer in case the principal employer pays the salary instead of the contractor and further the principal employer controls and supervises the work of the employee. The onus to prove that the salary was paid directly by the principal employer is on the employee and not the contractee. Reliance was also placed upon a judgment of Kerala High Court in [PRECEDENT].
8. On the other hand, learned counsel for respondent No. 2 submitted that though the case set up by the petitioner was that there was some contract entered into between the petitioner and M/s Hari Tractors for providing service of pre-delivery inspection of the vehicles, however, the same was not produced on record. In the absence thereof, no reliance can be placed thereon. It is the admitted case of the petitioner itself that respondent No. 2 had been working and his work was being supervised by the officer of the company. The [ACT] was enacted only with a view to check exploitation of the workers as is there in the present case. The judgment of Hon'ble the Supreme Court in General Manager, (OSD), [PRECEDENT], [PRECEDENT]'s case (supra) is not applicable in the facts of the case for the reason that there the parties were duly registered under the [ACT] and had produced the agreement on record, which was interpreted. Respondent No. 2 had discharged the onus cast upon him by producing relevant evidence, which clearly established that he had been working for the petitioner. His exploitation is even evident from the fact that he was not paid any salary from May, 2000 onwards, however, he could not refer to any material on record to show that any application was filed for summoning the record of the petitioner, which could show that respondent No. 2 was appointed by it and was paid any amount directly.
9. He further submitted that the judgment of Hon'ble the Supreme Court in [PRECEDENT] has rightly been relied upon by the Tribunal as in the present case, the facts are similar. The alleged contract between the petitioner and M/s Hari Tractors is merely an eye-wash and sham transaction. It is just to by-pass compliance of the provisions of various labour laws and exploit the low paid employee.
10. Heard learned counsel for the parties and perused the paper book.
11. The facts, as emerge from the record, are that respondent No. 2 claimed in his demand notice that he was employed as electrician by the petitioner on 1.5.1999 at a monthly wages of ` 3,500/- with over-time of ` 50/- per hour. It is further stated in the demand notice that upto April, 2000, salary was paid to respondent No. 2 and from May, 2000 till January 22, 2002, the date of his alleged termination, no salary was paid to him. The termination was without complying with various provisions of the 1947 Act. The claim of respondent No. 2 was disputed by the petitioner while stating that the job of PDI of tractors was out-sourced to M/s Hari Tractors. M/s Hari Tractors has not been impleaded as one of the respondents in the petition filed by respondent No. 2. Initially, respondent No. 2 filed a complaint before the Labour Inspector on 9.5.2001, where both the parties were summoned. It was pointed out by the petitioner that the work of PDI tractors had been out-sourced to M/s Hari Tractors. Considering that fact, no settlement could take place. Respondent No. 2 thereafter filed application under [SECTION] of the 1947 Act before the Tribunal on 30.7.2001 claiming that he has not been paid wages from May, 2000 to June, 2001, which was disputed by the petitioner stating that accounts of salary of all regular employees are maintained by the head office and respondent No. 2 was not paid any amount directly by the petitioner. The contentions of respondent No. 2 in the aforesaid proceedings before the Tribunal have been noticed in the following terms:
"The applicant has contended that when admittedly he was working with a contractor of M/s Hari Tractor, Karnal, it is the respondent No. 2 who was paying emoluments to him for the job done by him at their premises
xx xx xx The applicant, on the other hand, in support of his case
submitted that he is entitled to arrears of wages even due to fault on the part of the contractor from the respondent, who is principal employer is responsible for making due payment wages to him "
12. Finally, the application was dismissed on 25.8.2003 as not maintainable, as relationship of employer and employee was in dispute.
13. During the pendency of application filed by respondent No. 2 under [SECTION] of the Act, demand notice was issued by respondent No. 2 on 16.2.2002 claiming that his services had been terminated on 22.1.2002 and further that he had not been paid any salary from May, 2000 till the date of his alleged termination. In his examination-in-chief, respondent No. 2 stated that he had worked for a period of more than 240 days in a calendar year. His job was of an electrician. In his cross- examination, he stated that he did not have any diploma of ITI. He did not have acknowledgement of any application submitted by him for his employment with the petitioner or even the call/appointment letter. He referred to attendance register (mark 'A') showing his signatures and claimed that it was prepared by [ENTITY], an employee of the company, but there was no signature of the person, who allegedly prepared it and further the attendance register did not have the name of the company, for which it was allegedly prepared. He was categoric in admitting that he did not have any document for getting salary from the company. He did not know as to whether any PF was deducted out of his salary, however, he admitted that before the Labour Inspector during conciliation proceedings, he admitted that he was an employee of M/s Hari Tractors.
The Tribunal framed primarily three issues, the main being:
"Whether there is a relationship of master and servant between the workman and the management, as alleged ? OPP"
14. A perusal of the award of the Tribunal shows that while recording finding on issue No. 1 and also as to whether services of respondent No. 2 were terminated illegally, adverse inference was drawn against the petitioner pointing out that the petitioner had failed to produce any document on file from M/s Hari Tractors to prove the plea that respondent No. 2 was, in fact, being paid wages by M/s Hari Tractors and not the petitioner and further that it was admitted by MW2- [ENTITY] that he was supervising the work of respondent No. 2. Once payment and supervision was proved, respondent No. 2 was held to be the employee of the petitioner.
15. The judgment of Hon'ble the Supreme Court in General Manager, (OSD), [PRECEDENT], [PRECEDENT]'s case (supra) throws light on the issue as to what is the course to be adopted in the circumstances where a contract between the principal employer and a contractor is held to be sham or merely a camouflage to deny employment benefits to the employee. Two tests have been pointed out, namely, as to whether the principal employer pays salary directly to the employee instead of the contractor and further whether the principal employer controls and supervises the work of the employee. In case, the answer to both the questions is in affirmative, the consequence will be that the employee shall be considered to be in employment of the principal employer. The onus to prove that the salary is paid directly by the principal employer and not the contractor is on the employee concerned. The expression even "control and supervision" was also explained referring to earlier judgments of Hon'ble the Supreme Court while opining that even if there is supply of labour by a contractor, necessarily the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker direct employee of the principal employer, if the salary is being paid by the contractor. The principal employer only controls and directs the work to be done by a contract labour. Relevant paragraphs thereof are extracted below:
"10. It is now well settled that if the industrial adjudicator finds that the contract between the principal employer and the contractor to be a sham, nominal or merely a camouflage to deny employment benefits to the employee and that there was in fact a direct employment, it can grant relief to the employee by holding that the workman is the direct employee of the principal employer. Two of the well-recognised tests to find out whether the contract labourers are the direct employees of the principal employer are: (i) whether the principal employer pays the salary instead of the contractor; and (ii) whether the principal employer controls and supervises the work of the employee. In this case, the Industrial Court answered both questions in the affirmative and as a consequence held that the first respondent is a direct employee of the appellant.
11. On a careful consideration, we are of the view that the Industrial Court committed a serious error in arriving at those findings. In regard to the first test as to who pays the salary, it placed the onus wrongly upon the appellant. It is for the employee to aver and prove that he was paid salary directly by the principal employer and not the contractor. The first respondent did not discharge this onus. Even in regard to the second test, the employee did not establish that he was working under the direct control and supervision of the principal employer. The Industrial Court misconstrued the meaning of the terms "control and supervision" and held that as the officers of the appellant were giving some instructions to the first respondent working as a guard, he was deemed to be working under the control and supervision of the appellant.
12. The expression "control and supervision" in the context of contract labour was explained by this court in [PRECEDENT], thus: (SCC p. 388, paras 38-39) "38 if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the principal employer but that would not make the worker a direct employee of the principal employer, if the salary is paid by a contractor, if the right to regulate the employment is with the contractor, and the ultimate supervision and control lies with the contractor.
39. The principal employer only controls and directs the work to be done by a contract labour, when such labour is assigned/allotted/sent to him. But it is the contractor as employer, who chooses whether the worker is to be assigned/allotted to the principal employer or used otherwise. In short, worker being the employee of the contractor, the ultimate supervision and control lies with the contractor as he decides where the employee will work and how long he will work and subject to what conditions. Only when the contractor assigns/sends the worker to work under the principal employer, the worker works under the supervision and control of the principal employer but that is secondary control. The primary control is with the contractor."
13. Therefore, we are of the view that the Industrial Court ought to have held that the first respondent was not a direct employee of the appellant, and rejected the application of the first respondent." [Emphasis supplied]
16. If the facts of the present case are considered in the light of enunciation of law, as referred to above, undisputedly respondent No. 2- workman has not produced any material on record to discharge the burden on issue No. 1 that he was the employee of the petitioner. He did not produce any appointment letter. No evidence was led to prove that he was ever paid any amount by the petitioner. It is not the case of respondent No. 2 that though he did not have any record of the same but the same be summoned from the petitioner, which may prove payment of salary to him. Under those circumstances, on failure of the petitioner to produce the record, an adverse inference could be drawn. His only case was that he had been working with the petitioner and he even sought to take a stand that he was not paid any salary from May, 2000 till January 22, 2002, whereas from the facts and the circumstances it can be inferred that respondent No. 2 had been employed by contractor-M/s Hari Tractors to carry out the job assigned to him. He was paid salary by the contractor and that is the reason that he was working, otherwise he would have certainly stopped working and looked for some other employment when the case set up is that he was not paid any salary from May, 2000 till January, 2002.
17. Further, as far as the control and supervision of the work of respondent No. 2 by the petitioner is concerned, the Tribunal has not referred to the complete statement made by MW2-[ENTITY] in his cross- examination, where while stating that [ENTITY] and [ENTITY] had been working under his supervision, but whenever any misbehaviour or irregularity came to his notice, the matter was to be reported to M/s Hari Tractors.
18. As laid down in General Manager, (OSD), [PRECEDENT]'s case (supra), once respondent No. 2 had failed to discharge the burden cast on him as he failed to lead any evidence to show that he was paid salary directly by the petitioner and further he was working directly under the control and supervision of the petitioner, he cannot be termed to be an employee of the petitioner to entitle him to raise an industrial dispute with it.
19. For the reasons mentioned, it is held that the impugned awards in both the petitions passed by the Tribunal suffer from patent illegality. The findings recorded being preverse, are set aside. Consequently, the impugned awards are set aside with no order as to costs.
The petitions stand disposed of.
( [ENTITY] ) Judge August 17, 2012 mk (Refer to Reporter)