C.W.P. No.15565 of 1997 -1- IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No.15565 of 1997 Date of Decision: 28.08.2009 Cement Corporation of India Ltd. .....Petitioner Versus Presiding Officer, Labour Court-cum-Industrial Tribunal, Hissar and others ...Respondents Present: Ms. Abha Rathore, Advocate for the petitioner. Mr. Sudhir Mittal, Advocate for respondent No.2. 2. C.W.P. No.7172 of 2001 Mahatam etc. .....Petitioners Versus Cement Corporation of India Ltd. etc. ...Respondents resent: Mr. Sudhir Mittal, Advocate for the petitioners. Ms. Abha Rathore, Advocate for respondent No.1. Mr. D.S. Nalwa, Addl. A.G., Haryana. CORAM:HON'BLE MR. JUSTICE K. KANNAN 1. Whether Reporters of local papers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest? -.- K. KANNAN J. I. The dispute & parties to the dispute 1. Nine persons who claimed to be workmen under the Cement C.W.P. No.15565 of 1997 -2- Corporation of India Limited (hereinafter called the management) sought for an adjudication through a reference that the termination purported to have been made by the third respondent M/s Ram & Co. Cement Loading Contractor was really a termination made by the management and that it was not legally justified. The reference had an inbuilt mandate to also adjudicate whether the workmen were to be regarded as such under the management or as workmen under the contractor, third respondent. Before the alleged contract with the third respondent-Ram & Co., the workmen were purported to have been engaged by Hira Lal, the 2nd respondent and the same workmen had been transferred to the third respondent. The claim statements filed at the instance of all the 9 workmen contended that they were removed from their original jobs between 08.04.1993 to 15.05.1993 by respondent Nos.1 & 2 at the first instance and at the second instance w.e.f. 01.01.1994 onwards by the 3rd respondent. The workmen claimed that they had been in regular employment in Charkhi Dadri Cement Unit right from its inception from 23.06.1981. II. Employees in loading section permitted to be employed under contract system, effect 2. The respondents No.2 and 3, who are the contractors remained ex parte before the Labour Court. The principal contest was entered only by the 1st respondent, which shall be referred as management. It contended on behlf of the management that by virtue of tripartite agreement between the management, Workers Union and the Government, the Cement Wage Board permitted and sanctioned the use of contract labour, that permitted the job of cement loading and allowed works to operate through contract system. Clause 166 of C.W.P. No.15565 of 1997 -3- the Award provided that all workers employed in the permitted occupations of loading (including packing) and unloading shall be given the same wages, be it bonus or other benefits, as had given to regular employees of the company. It was the contention of the management that a certificate of registration in Form II under the Contract Labour (Regulations and Abolition) Act, 1970 had been issued, permitting the management to employ three contractors for the purpose of loading and handling of cement among other activities. The 2nd respondent, Sh. Hira Lal had been issued with the licence for employing contract labourers engaged in loading cement and allied works in cement project. The licences issued subsequently to the M/s Ram & Co., which is the third respondent, for doing similar work of cement loading and for employing 40 contract labourers had also been put on record. The contention of the management, therefore, was that all the workmen had been employed only through a properly sanctioned contract system and the management had no role to play in the matter of termination of service. According to the management, no relief was claimable against the management. III. The labour court's analysis and result (a) Nature of work that the workmen were alleged to be doing: 3. The Labour Court undertook, therefore, the exercise of finding whether the workmen had been only the workers under the contractors or they were to be deemed as direct employees of the management and whether the so-called contract itself was sham, intended to defeat the rights of the workmen. The Court found on evidence that the workmen had not been really employed merely in C.W.P. No.15565 of 1997 -4- the process of loading and unloading but their services had been obtained for other activities connected directly with the management. A change of condition of service was sought to be made through the contractors by directing them to do more rigorous work of actual loading and unloading and therefore, the workmen could not be compelled to do work without prior notice. The workmen had set out the nature of activities which they were previously doing, which were as follows:- “(i) Check weighment of packed cement bags. (ii) Bringing empty gunny bags from Gunny Godown to packing machine for packing cement. (iii) Collecting and removing of loose cement in packing House and putting the same in chute conveyor. (iv) Checking and cleaning of empty wagons placed by Railway, for Cement Loading as instructed by clerical staff in packing house. (v) To attend the work of Peon in packing office and to discharge other misc. duties as directed by Mechanical and clerical staff of respondent No.1 in packing house. (b) Basis for workmen's remonstrations, and Indicia of proof of direct employment by the management 4. The workmen were later assigned for actual physical work of lifting the cement bags and therefore, they did not undertake the work which was allegedly stopped by the contractor. The Labour Court found that there were several materials to ascertain that the system of contract was merely farcical and the workmen had been C.W.P. No.15565 of 1997 -5- actually employed by the management directly. It noted that the management had paid ESI Contributions and Provident Fund for the workmen. Shoes and uniform had also been provided only by the management. The workmen had been obtaining medical facilities provided by the management. The contractors themselves had written several letters that showed that the engagement of several workmen were made only at the instance of the management and they were themselves not directly connected therewith. Conveyance and cycle allowances had also been paid only by the management. The Presiding Officer of the Labour Court, therefore, held that contract itself was a sham and bogus one and the workmen were entitled to treat themselves as directly employed by the management. The Labour Court also found that the rotation of work which were given to the workmen making them do more arduous task amounted to change in conditions of service and the same having been done without prior notice was invalid. The Court, therefore, ultimately answered the reference in favour of all the 9 workmen and against all the three respondents to the effect that the termination of service at the first instance on 08.04.1993 to 15.05.1993 and at the second instance on 01.01.1994 were illegal, invalid and unjustified and they were entitled to be reinstated in their original jobs with backwages and continuity of service and all other service benefits. IV. Contentions on behalf of management (a) Factors taken by Labour Court as constituting direct employment did not give room for such inference 5. Learned counsel appearing for the management contended that the award of the Labour Court was perverse in entering into C.W.P. No.15565 of 1997 -6- elaborate discussion and rendering a finding that the contract labour was sham and bogus and that all the workmen were only directly employed by the management. The materials, which the Labour Court examined to enter such a finding namely the contribution of ESI and Provident Fund were clearly wrong for the respective enactments that made contributions mandatory required the principal employer as liable to ensure the contributions and therefore, even in a contract system, the payment by the principal employer could not be taken to prove the case of direct employment under them. As regards the provision for medical facilities, the learned counsel's contention was that medical facilities were bound to be provided under the Factories Act even for workers under the contractors and therefore, that could not have been decisive. The provision for shoes and uniform, conveyance and cycle allowances were to be met only by the management because the award of the Wage Board itself provided that all the contract workers were entitled to the very same benefits as were given to regular employees of the company. According to learned counsel appearing for the management every one of the factors that was taken as establishing a direct employment were really instances where statutorily and by the award, all the contract labourers were also entitled and therefore, the inference by the Labour Court was clearly wrong. (b) Change of condition of service was not subject of reference 6. Yet another contention on behalf of the management was that the Labour Court had exceeded its jurisdiction in finding that there had been an alteration in terms of service without prior notice C.W.P. No.15565 of 1997 -7- and hence there was a breach of Section 9A of the Industrial Disputes Act, failing to note that even a change in service conditions could not constitute termination and when the reference was only to find whether the termination had been justified or not, the Labour Court had exceeded the reference by adjudicating on the alleged change in terms and conditions of labour and finding that there had been violation of Section 9A of the Industrial Disputes Act. The learned counsel further submitted that the contractors themselves who had been arrayed as respondent Nos.2 and 3 chose to remain ex parte and did not defend themselves. The idea was only to evade the responsibility of their own personal conducts and the management could not be held in any way responsible for the conduct meted out to the workmen, save in so far what the statute provides for indemnity to workmen against the management. V. Contention on behalf of the workmen- Character of contract work, whether true or sham, is a crucial issue 7. Learned counsel for the workmen contended that the jurisdiction of the Labour Court to adjudicate on the character of the contract itself cannot be doubted after the decision of a Consitution Bench of the Hon'ble Supreme Court in Steel Authority of India Limited Vs. National Union Waterfront Workers (2001) 7 SCC 1. This judgment had been subsequently referred to and followed by several decisions including Steel Authority of India Ltd. Vs. Union of India and others 2006 12 SCC 233. Even apart from the contributions to Provident Fund and ESI, the Labour Court considered the fact that the 2nd respondent-contractor had written several letters to the Union and the higher authorities mentioning that these 9 workmen C.W.P. No.15565 of 1997 -8- had been doing jobs of allied and miscellaneous works of bringing empty bags from the godown to the canter machine, collecting and removing loose cement, checking and cleaning empty wagon/truck, checking weighment of 10% cement bags, other works as and when provided by mechanical and clerical staff and when the management started getting all these works done through their own employees, these 9 workers had become surplus. Consequently, the management had directed the contractor to extract the work of loading cement from them. The Labour Court found that there was nothing to challenge the correctness of these documents and there was nothing for the contractors all of a sudden to start requiring from these 9 workmen to change the nature of the jobs unless they were carrying out the directions of the management. Learned counsel appearing for the workmen also stated that these workmen had been paid on time scale unlike other workmen engaged by the contractors, who were all paid wages as per the piecemeal rate. According to him, they had been working even prior to the time when the licences had been granted to the contractors and they had been working at the factory right from the inception in the year 1981. The Labour Court had referred to the fact that all the 35 workers including the 9 workmen had been actually provided to the contractor by the management itself, while fixing the workload. The Labour Court found that all the 9 workers were not really the employees of the contractor but only employees under the management and the contractors were mere commission agents, who directed the workers to work in a particular fashion and obtain commission from the management, while the management itself paid C.W.P. No.15565 of 1997 -9- the wages depending on the workload. The Labour Court also referred to a copy of the order dated 06.09.1984 under the terms of which the Labour Court had directed the management to pay conveyance/cycle allowances for the period from 01.01.1993 to 31.12.1997 and the award had been passed only against the management. Even in that case, the management had taken a plea that there had been no relationship of master and servant but still the Labour Court had passed the order and it had also been complied by the managaement. The said order had become final and the management itself did not challenge the legality or validity in any court of law. The Labour Court also took note of Ex.WW-1/42 another order issued by the Labour Court, Chandigarh on 08.03.1994 requiring the management to make payment of 50% wages from 01.04.1993 to all these 9 workmen. In all these proceedings, the contractors had remained ex parte. The respondent had complied with the order and that order had also become final. According to the learned counsel appearing for the workmen, therefore, apart from the contributions of ESI and PF, the Labour Court had several other documents/instances to rely on to show that the contract was merely sham and all the workmen were to be treated as only the workmen under the management. VI. Labour Court's power to ascertain nature of contract, unassailable 8. The power of the Labour Court to consider the true character of the document that created the intermediate of a contractor between the management and the workmen cannot in any way be doubted. In paragraph of the judgment of Hon'ble Supreme Court in C.W.P. No.15565 of 1997 -10- Steel Authority of India Vs. Union of India and others (supra), the Hon'ble Supreme Court held: "....When, however, a contention is raised that the contract entered into by and between the management and the contractor is a sham one, in view of the decision of this Court in Steel Authority of India Ltd. Vs. National Union Waterfront Workers an industrial adjudicator would be entitled to determine the said issue. The industrial adjudicator would have jurisdiction to determine the said issue as in the event if it be held that the contract purportedly awarded by the management in favour of the contractor was really a camouflage or a sham one, the employees appointed by the contractor would, in effect and substance, be held to be direct employees of the management. The view taken in Steel Authority of India Ltd. has been reintereated by this Court subsequently. (see e.g. Nitinkumar Nathalal Joshi Vs. ONGC Ltd.(2002) 3 SCC 433 and Municipal Corpn. of Greater MumbaiVs. K.V. Shramik Sangh (2002) 4 SCC 609)...." VII. Parameters applied for determining the nature of contract examined. 9. Learned counsel appearing for the management would contend that all these workmen had been in employment right from the year 1981 or that they had been given a time scale in the payment of wages unlike the other workmen through the contractors. It was urged by the counsel for the management that admittedly these C.W.P. No.15565 of 1997 -11- workmen had not been shown to have signed in the attendance register maintained by the management nor had they been shown to have been paid wages by the management and the statutory registers did not contain the payment of wages to these workmen by the management. It was also the contention that the management was a Government of India Undertaking and there was no need for adopting sham and questionable ways by engaging the workmen directly, but by making it appear as though that they were employed through contractors. The matter has to be seen whether the inference that the contract had been sham was possible by reference to the particular incidents which weighed in the mind of the Labour Court to render adjudication in favour of the workmen and finding that they had been direct employees of the management. 10. The aspects relating to contributions to ESI and PF, it was conceded even by the learned counsel appearing for the workmen were statutory liabilities on the principal employer and therefore, they would themselves not prove that workmen had been directly engaged by them. The provision for medical facilities was also the duty of the occupier to provide to all the workmen including workmen through contractors under the provisions of the Factories Act and therefore, even the said feature will not be conclusive evidence of direct engagement by the management. The provision for shoes and uniform, though they were in the nature of other allowances that even the workmen under the contractor were assured of, by parity in treatment under the Wage Board Award, it must be noticed that these provisions ought to have been provided only by the contractors C.W.P. No.15565 of 1997 -12- themselves and what the Wage Board provided was the workmen under the contractors were entitled to the same privileges and allowances as other workmen directly employed by the management. It ought not to be understood that the management itself was liable for making provision for these allowances to the workmen under the contractors. It was at best only a provision enjoining the contractors to provide a parity in treatment to how the management would treat its own workmen in the matter of such allowances. Let us assume for the moment that even if the workmen had directly been provided these provisions like shoes or uniform, it ought not to be taken as a decisive factor to consider the alleged sham character of the contract. The provision for conveyance and cycle allowances was wholly different but the management did not pay on their own. It was done on the directions of the Labour Court in a different case, when in an application under Section 33 C(2) there had been orders. It must be remembered that the orders did not come through any reference after a dispute under section 10 of the ID Act. Orders under section 33 C(2) are invariably summary adjudications and the decision rendered therein shall have no bearing in a subsequent case when a comprehensive decision was required where there had been a relationship of master and servant. If an inference had been made on a dispute whether the workmen were entitled to such allowances and an adjudication was sought whether there existed relationship of master and servant, the order passed by the Labour Court finding the workmen to have been held under a direct contract the managment could be taken as relevant but never conclusive. Further, the C.W.P. No.15565 of 1997 -13- communications of the contractor that all these workmen had been given to them by the management and the management itself had at some point of time given to the factory manager some directions for training these workmen though not irrelevant, are definitely not conclusive. 11. An Industrial Tribunal or a Labour Court that displays sham character of an instrument literally examines whether the management was engaging the workmen directly to create a fictitious intermediate agency, when the contractors were merely front-men for the management itself. Of course, if there had been no valid registration under the Contract Labour (Regulations and Abolition) Act or where no licences had been actually issued to the contractors but the management was merely using same men as contractors to whom wages were paid for distribution to the workmen, the decision would be straight forward and would leave nothing to change. However, in a case where there is a valid registration and the licence had also been issued to the workmen, when wages had been paid by the contractors directly and when it was not shown that even their attendance had been maintained in the attendance registers of the management, it shall be difficult to accept the contention of the workmen that all the workmen were only to be treated as workmen of the management. I shall not go as far as saying that a public sector undertaking shall have no cause for committing fraud. Indeed, the cases where the Hon'ble Supreme Court laid an authoritative pronouncement on the duty to examine the nature of contract itself came through decisions where the employer were public sector undertakings. ONGC v ONGC Workers C.W.P. No.15565 of 1997 -14- Union (2008) 12 SCC 275, was a case where a contractor had been introduced only for the purpose of payment of wages, where the Industrial Tribunal was held justified in lifting the veil; BHEL v State of UP (2003) 6 SCC 528, where gardeners engaged through contractor to sweep, clean, maintain and to look after lawns and parks in the factory premises were held to be directly engaged. In both cases, there had been no licensing of contractors and they provide instances where public sector undertakings have been found to have indulged in fraudulent practices in the matter of engagement of contractual workers. The duty shall be to see the meaning of the word 'sham' itself to ascertain whether in this case, such a characterisation is possible. 12. Black's Dictionary defines the term as follows: "Something that is not what it seems; a counterfeit. A person who pretends to be something that he or she is not; a faker." Ramanatha Iyer's Law Lexicon also defines 'sham' in the following fashion: "Good in appearance but false in fact, as a sham plea or answer. The word "sham" is defined by lexicographers as false, counterfeit, or pretended, and it has received the same interpretation when applied to pleadings." It is also reported in Snook Vs. London and West Riding Investments (1967) 2 QB 786 as follows: "I apprehend that, if it has any meaning in law, it means acts done, or documents executed by the parties to the 'sham' C.W.P. No.15565 of 1997 -15- which are intended by them to give to third parties or to the Court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create." 13. A sham instrument is no instrument in the eye of law and it is merely a ruse to which what the law otherwise prohibits. The Wage Board's Award allowed for engagement of contract labour for the activity of loading and unloading that included packing. So long as all the workmen conceded that they were working only in the Packing Division, they cannot plead that they shall be treated as workmen engaged directly by the management. If they had been assigned lesser duties, which were less onerous than loading and unloading and at some point of time, the management had decided to do those lesser duties through their own workmen employed directly, there were two options open which were more in the nature of an option for a contractor than for a workman. One, the contractor can shift all these workmen to some other units or place where they had a control to engage such workmen, who were capable of doing only less onerous duties. Two, the contractor had a right to expect them to undertake onerous duties and serve appropriate notices for change in service conditions and if the workmen were willing, they could have been employed for other onerous duties on fresh terms without putting an end to their respective engagements. The management that had the power to employ contract labour for certain activities