IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN FRIDAY, THE 13TH JUNE 2008 / 23RD JYAISHTA 1930 OP.No. 4755 of 1999(N) ---------------------- PETITIONER: ------------ 1. M/S.KERALA ELECTRICAL & ALLIED ENGG. COMPANY LTD., PANAMPILLY NAGAR, KOCHI-36, REP. BY ITS CHAIRMAN AND MANAGING DIRECTOR. 2. THE GENERAL MANAGER, KERALA ELECTRICAL AND ALLIED ENGG. CO. LTD., KUNDARA, KOLLAM. BY ADV. SRI.K.ANAND (A.201) RESPONDENTS: ------------- 1 LEEMNS D'CRUZE, CONTRACTOR, KUNNUBUNGLAVIL HOUSE, KANJIRACODE, KUNDARA. 2. P.SALIMKUMAR, YAMUNA MANDIRAM, CANTEEN CONTRACTOR, KOIKKAL MURI EAST KALLADA, KOLLAM. 3. GENERAL SECRETARY, KOLLAM DISTRICT HOTEL AND TEA SHOP WORKERS UNION (AITUC), KADAPPAKAD, KOLLAM-8. 4. THE LABOUR COURT, KOLLAM. BY SRI.T.M.MOHAMMED YOUSUFF(SR.) FOR R3 SMT.AYSHA YOUSEFF FOR R3 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 22.5.2008 ALONG WITH OP NO. 9076 OF 1999 THE COURT ON 13.6.2008 DELIVERED THE FOLLOWING: O.P.NO.4755/99. APPENDIX PETITIONER'S EXHIBITS: P1. COPY OF THE CLAIM STATEMENT. P2. COPY OF THE STATEMENT DTD.14.6.96. P3. COPY OF THE AWARD DTD.31.7.98 BY R4. Sdk+ ///True copy/// P.A. to Judge S.SIRI JAGAN, J. ================== O.P.Nos.4755 and 9076 of 1999 ================== Dated this the 13th day of June, 2008 J U D G M E N T Dissatisfied with the award of the Labour Court, Kollam, in I.D.No.111 of 1995, both the management and the Union in that I.D. are challenging that award in these two original petitions. 2. The issue referred for adjudication was: “Denial of employment to the following 16 workers engaged in the canteen at Kerala Electrical and Allied Engineering Company Limited, Kundara with effect from 1.6.1994. 1. Sri.Chandrasekharan Pillai 2. Sri.P.Mani 3. Sri.Vijayan.R. 4. Sri.Raju.A. 5. Sri.Shaji.P. 6. Sri.Ranjan.P. 7. Sri.Sasidharan Pillai 8. Sri.Biju.A. 9. Sri.Raju.P. 10. Sri.N.Somarajan 11. Sri.Jayakumar 12. Sri.Aji.B. 13. Sri.Satheesan 14. Sri.Suresh 15. Sri.P.Bose, and 16. Sri.V.Kishore.” 3. The facts necessary for disposal of these two writ petitions may be summarised thus: 4. The management is a Government company o.p.4755/99 & cc. 2 employing more than 250 workers in their factory at Kundara. Since, as per Section 46 of the Factories Act, an occupier of a factory is statutorily bound to provide and maintain canteen facilities for the user of the workers, the company has been maintaining a canteen inside the factory for the use of the workers. This canteen was run by a contractor engaged by the management in accordance with an agreement entered into between the management and the contractor. The workers employed in the canteen raised a claim for treating them as regular employees of the management, which was rejected by the company on the ground that there is no employer-employee relationship between them. When the workers raised claim for regularisation they were denied permission to enter the factory premises denying them employment. The workers whose cause was espoused by their Union raised an industrial dispute, which was referred to and adjudicated by the Labour Court, Kollam, which resulted in the impugned award, which is Exts.P3 in the management's original petition and Ext.P4 in the Union's original petition (the original petition filed by the management being the leading original petition, I shall refer to the award as Ext.P3 in o.p.4755/99 & cc. 3 this judgment). In that award the Labour Court found that the workmen involved in the dispute are the regular employees of the company and not those of the contractor. It was also found that they were illegally denied employment. But the workers were not given full relief of reinstatement with backwages, but only those who had completed 240 days as on 31.5.1994 as per their dates of entry in service entered in their E.S.I. cards were directed to be reinstated, that too, without backwages. The management is challenging the award as a whole and the Union is challenging that part of the award denying full relief of reinstatement with backwages. 5. The primary issue raised by the management is as to whether employees of a canteen run by a factory in compliance with its statutory obligation under the Factories Act, through a contractor, are the regular employees of the principal employer. Relying on the terms of the agreement executed by them with the contractor and various Supreme Court decisions on the subject in their favour, the learned counsel for the management company would argue that the workmen engaged by the contractor are the workers of the contractor and there is no o.p.4755/99 & cc. 4 employer-employee relationship between the company and the workers involved. He would particularly refer to the decisions of the Supreme Court which held that workers of statutory canteen are workers of the establishment for the purpose of the Factories Act only and not ipso facto workmen of the establishment for other purposes like service benefits and therefore, simply because the canteen is run to satisfy the requirement of the Factories Act, the workers of the canteen engaged through a contractor cannot be deemed to be workers of the establishment. He would argue on the basis of other Supreme Court decisions that simply because the building, utensils, electricity, water and other infrastructure as well as the provisions and vegetables for cooking foods are supplied by the establishment, the workers engaged by the contractor to carry out the contract entered into as per an agreement executed between the establishment and the contractor do not become workers of the establishment, but would remain as workers of the contractor for all purposes. He would point out that the period of contract is for one year and as per the terms of the agreement, the contractor is to bring his own employees for running the canteen and to take them back as o.p.4755/99 & cc. 5 and when the contract is terminated. According to him, as per clause 18 of the agreement, the exclusive responsibility regarding the employees employed, by the contractor is on the contractor and the contract does not envisage any direct involvement of the establishment in the matter of appointment, payment of salary and other conditions of employment and statutory obligations of an employer in respect of the workers employed by the contractor. Therefore, according to the counsel, there is absolutely no element of employer-employee relationship between the establishment and the workers engaged by the contractor. He, therefore, argues for setting aside the award and holding that the workmen involved in the dispute are solely the workmen of the contractor with no responsibility on the part of the establishment in respect of them. 6. On the other hand, the counsel for the Union, relying on some Supreme Court decisions in their favour, would argue that being a statutory canteen the workers engaged in the canteen, though through a contractor, are direct employees of the establishment, and the contractor is bought in for namesake as a camouflage, only to defeat the legitimate rights of the o.p.4755/99 & cc. 6 employees of the canteen. He would point out that despite the change in the contractor, the very same workers are employed without change and the entire infrastructure including building, utensils, kitchen machines, electricity, water etc. and the entire provisions and vegetables required for preparation of the food articles are also supplied by the company. His further contention is that the items of food to be prepared for the day and their prices are also decided by a committee formed by the company with their employees as members and the contractor has no discretion in the matter. According to him, the only work left with the contractor under the arrangement is to supervise the cooking of the food and serving of the same to the employees of the company and nothing else. The wages of the workers are paid by the company to the contractor who only distributes the same to the workers, contends the counsel. He relies on a Supreme Court decision in which with less inputs than the above the Supreme Court has held that similarly placed workers engaged through a contractor are workers of the principal employer. He would therefore, support the award to the extent of holding that the workers are regular workmen of the company. But he would o.p.4755/99 & cc. 7 submit that after holding in their favour as regards employer- employee relationship and denial of employment, the Labour Court went wrong in denying full relief of reinstatement with backwages by bringing in the concept of retrenchment and requirement of 240 days' continuous service, which were not the issues referred for adjudication. 7. The parties referred to the following Supreme Court decisions:- STATE OF KARNATAKA AND OTHERS v. KGSD CANTEEN EMPLOYEES' WELFARE ASS. AND OTHERS [(2006) 1 SCC 567], HALDIA REFINERY CANTEEN EMPLOYEES UNION AND OTHERS V. INDIAN OIL CORPORATION LTD. AND OTHERS [(2005) 5 SCC 51], INDIAN PETROCHEMICALS CORPN. LTD. v. SHRAMIK SENA [(1999) 6 SCC 439], CANTEEN MAZDOOR SABHA v. METALLURGICAL AND ENGINEERING CONSULTANTS (INDIA) LTD. AND OTHERS [(2007) 7 SCC 710], STATE BANK OF INDIA v. STATE BANK OF INDIA CANTEEN EMPLOYEES' UNION (BENGAL CIRCLE) [(2000) 5 SCC 531], M.M.R.KHAN AND OTHERS v. UNION OF INDIA AND OTHERS [1990 (Supp.) SCC 191], PARIMAL CHANDRA RAHA v. LIC OF INDIA (AIR 1995 SC 1666] and Hari Shankar Sarma v. M/s.Artificial Limbs Manufacturing Copn. [2002 LAB I.C. 131]. o.p.4755/99 & cc. 8 8. It is true that there are decisions of the Supreme Court on the question as to whether employees employed in a canteen maintained by a principal employer through a contractor to fulfill the obligations under a statute are employees of the principal employer and entitled to regularisation, both in favour of the principal employer and the workers, some of which have been cited by both sides before me. But the Supreme Court itself had ultimately held thus in the decisions of State of Karnataka & others v. K.G.S.D. Canteen Employees Welfare Assn. & others reported in (2006) I SCC 567, thus: “32. We have referred to the aforesaid decisions in order to show that in each of the aforementioned cases the industrial adjudicator was required to apply the relevant tests laid down by this Court in the fact situation obtained therein. Most of the cases referred to hereinbefore were considered by this Court in the peculiar facts and circumstances obtaining therein and, thus, it is even not proper for the industrial adjudicator to apply the ratio of one decision to the exclusion of other without considering the facts and circumstances involved therein. The law, however, does not appear to be settled as to whether even in a case where the employer is required to run and maintain a canteen in terms of the provisions of the statute, the employees of the canteen would automatically be held to be the workers of the principal employer for all intent and purport and not for the purpose of the Factories Act alone. We however, are not concerned with the said question in this matter and refrain ourselves from making any observation in respect thereof.” (Emphasis supplied) Relying on that decision, a Division Bench of this Court had after referring to all the Supreme Court decisions now cited before me, o.p.4755/99 & cc. 9 in H.N.I.C.W.U. v. Hindustan Newsprint Ltd. [2006 (2) KLT 103] observed that the law on the point is still unsettled. Thereafter, in that decision the Division Bench held thus: “....... But we are of opinion that for deciding the case essentially we have to come to certain findings on facts, such as whether the contract entered into between the principal employer and the contractor is a bona fide or a sham transaction, whether the terms of the contract would amount to in fact absolute control on the part of the principal employer in the running of the canteen, whether the principal employer had any role in the recruitment of the employees, whether the principal employer had control over the employer of the canteen, etc. etc....” That being so, it is more a question of fact than a question of law and has to be decided as such. In fact in Petrochemicals Corporation's case (supra) and Haldia Refinery's case (supra), after holding that workmen of statutory canteen under the Factories Act are workmen of the establishment for the purposes of that Act alone and for other purposes, the Supreme Court went on to undertake the exercise of finding out whether on the evidence before the Court, the Court could come to the conclusion that the employees concerned therein were in fact employees of the establishment. In the former case, the Supreme Court on the evidence available in the case came to the finding that the workmen are the employees of the establishment and in the o.p.4755/99 & cc. 10 latter that they were not. Therefore, I have to undertake that exercise in this case also. 9. As in those cases, in this case also, admittedly the canteen is one provided and maintained by the company in compliance with its obligation under Section 46 of the Factories Act in so far the factory is employing more than 250 employees. 10. One of the tests adopted by the Supreme Court itself in some of the decisions on the subject as to whether the contract between the principal employer and the contractor is a bona fide or sham contract is to ascertain as to whether the principal employer and the contractor had taken registration under the Contract Labour (Regulation & Abolition) Act, 1970. Unfortunately, in this case evidence does not appear to have been led by either side in that direction. There is not even any evidence as to how many workmen were actually employed in the canteen. Since the union had espoused the cause of only 16 workmen it cannot now be decided as to whether there were other workmen also actually working in the canteen. It is also not known as to whether the company was engaging other contract workmen in the factory apart from those in the canteen. o.p.4755/99 & cc. 11 Therefore there is no clear evidence as to whether the company was employing twenty or more contract workmen in the factory so as to attract the requirement of registration under the Contract Labour (Regulation & Abolition) Act. But in paragraph 12 of the written statement of the management before the labour court it is stated that the company has other contract workers apart from those doing the canteen work, without mentioning the number. So also the agreement between the company and the contractor in this case stipulates that the contractor shall employ 18 workmen each everyday in the canteen and the number should not exceed or should not be below that at any cost. Therefore, if the company is engaging two more contract workers in the factory in addition to the 18 workmen in the canteen, they are liable to take out registration under the said Act. 11. Now let me look at the contract itself, a sample of which for the year 2007 -08 was made available to me for perusal by the counsel for the company. As per Clauses 1 and 4 of the agreement the agreement is for a period of one year. Clauses 2,3, 6, 7, 8, 10, 11, 12, 13, 15, 16, 17, 26, 27, 28, 29, 30, 31, 32, 33, 35 and 36 relate to the work to be done by the o.p.4755/99 & cc. 12 contractor under the agreement which read thus: “2. The licence is for cooking and serving vegetarian food items specified in the Annexure attached hereto as per schedule of timings specified therein. 3. The monthly expense of Rs.33,450/- (Rupees Thirtythree thousand Four hundred & Fifty only) by the licensee for employing workers to cook and serve the food items in the Canteen will be paid on the 3rd working day of each month. No enhancement in the above rate will be allowed during the period of this licence. xxx xxx xxx 6. The licensee will cook and serve only vegetarian dishes. 7. The food supply will have to be made to all the employees of the Company including permanent and temporary staff and workers, Trainees and Apprentices as per the schedule of time. 8. Normally, food will be served only to those employees mentioned in Clause 7 above. “Outsiders connected with the business of the company other than company guests will be served meals in the canteen on production of a cash receipt of Rs.15/- obtained from the Finance Department of the company”. xxx xxx xxx 10. The licensee shall not serve food items more than the quantity prescribed by the Management from time to time. The licensee shall not allow food items served in the Canteen to be taken outside. Food items brought from outside shall not be permitted inside the canteen. 11. The Company will give Canteen building with furniture, electric fittings for lighting, fan, water connection, cooking vessels and utensils for serving food, free of cost. Any damage caused to the above items willfully or by negligence, shall be compensated by the licensee. 12. The licensee will prepare the items and supply the same in the Canteen, Office and Factory at the appointed timings as per the time schedule as Annexure-1. 13. The licensee must keep the canteen building, floor, walls, kitchen, work area, roofs, furniture, serving utensils and cooking o.p.4755/99 & cc. 13 vessels etc., always clean and in good hygienic condition every day. The ground 20’ wide, surrounding the canteen building will also be kept neat and tidy by the licensee at this own cost. xxx xxx xxx 15. Rice, Oil, Vegetables and other Provisions supplied by the Company for the preparation of food items shall be made use of to the maximum by the licensee and any waste of the same shall not be caused. The Company reserves the right to inspect the Canteen including the Kitchen as and when required. The recommendations of the Canteen Committee are binding on the Licensee. 16. The Company reserves the right to impose fine on the licensee, if the food stuffs served are not keeping the standards in quality and quantity fixed as per this agreement. 17. When the licensee’s licence is terminated as per Clause 4 above, he shall surrender the canteen and utensils etc. to the Company and the Company shall have right to enter the Canteen in the presence of witnesses, prepare an inventory of the materials in the premises and take over canteen and any loss sustained by the Company owing to fault of licensee shall be recovered from his Security Deposit. The Company shall have full discretion to decide whether the licensee proved untrustworthy of his conduct of his behaviour unsatisfactory. xxx xxx xxx 26. The licensee shall ensure that no adulteration is caused to food stuffs, snacks, meals, drinks etc. In the event of any such adulteration being detached, the licensee shall be solely responsible for all the consequences, including penal action. 27. The Canteen will have to work on all the working days of the Company and also on all the holidays and Sundays when employees are engaged by the company for work. 28. If due to the laps of the licensee, the food is spoiled during the course of cooking, he shall immediately make alternate arrangements to serve food in time at his cost. If any lose is caused to the company due to the above lapse, the licensee shall compensate the company. 29. Proper registers regarding the number of meals, tea/black o.p.4755/99 & cc. 14 coffee, snacks etc. prepared and served shall be maintained separately by the licensee for verification. 30. The company will have the right to alter the timings or to fix additional timings for the supply of food items. 31. If it is noted that the canteen is being run badly and the direction given to improve are neglected, the company reserves the right to fine and recover the fine from the licensee’s quoted monthly expense payable by the company. 32. The Licensee (Contractor) should employ 18 workers each and every day for the proper functioning of the canteen. It should not exceed and should not be below at any cost. 33. The Licensee (Contractor) should be present during the working time of the Canteen. xxx xxx xxx 35. The licensee should comply all the instructions, which will be issued from the company from time to time. 36. The licensee should submit the copy of wage sheets of the canteen workers at the end of every month without fail.” Clauses 18, 19, 20, 22 and 24 directly relate to employees to be employed by the contractor which read thus: “18. The licensee shall bring in his own employees for running the Canteen and he shall take them back as and when the licensee is terminated. The licensee is solely responsible for their employment and their service conditions. The Canteen employees will be engaged and paid by the licensee and they shall not be considered as employees of the company. The company reserves the right to withdraw or refuse admission to any employee of the licensee at any time without notice or without assigning any reason whatsoever. The licensee will be responsible to the company for the good behaviour of his employees. The company will not be responsible for any dispute arising between the licensee and his employees. 19. All the statutory obligations such as minimum wages ESI & PF contribution, Income Tax etc. regarding the employees of the o.p.4755/99 & cc. 15 licensee shall be that of the licensee. 20. The licensee shall employ only healthy persons as his employees in the canteen. The company has the right to demand medical fitness certificate regarding the employees of the licensee, if required to. The suppliers should be neatly dressed. xxx xxx xxx 22. The licensee shall hold the company harmless and indemnified against all claims for damage (inclusive of legal costs in connection therewith) whether arising as a result of personal injury or death (irrespective of whether such a claim arises in accordance with the provisions of the Workmen’s Compensation Act 1923 or any other statutes in force during the currency of this agreement or otherwise) or of any damage to any property by accident, negligence or otherwise arising out of and in the course of continuance of this agreement. xxx xxx xxx 24. The licensee and his employees will be bound by the rules and regulations of the company in the matter of discipline and cleanliness.” 12. From the terms of the contract themselves the following facts emerge: (a) The contract is for cooking and serving vegetarian food to employees of the factory. (b) The entire infrastructure like building, furniture, utensils, electric fittings, fans, electricity and water and articles for preparation of the food, namely, rice oil, vegetables and other provisions are supplied by the company. (c) A monthly expense of Rs.33,450/- is given for o.p.4755/99 & cc. 16 employing workers to cook and serve food items in the canteen, meaning thereby the same consists of the wages of the employees and perhaps his supervision charges, which are not separately mentioned. (d) The company can inspect the canteen including the kitchen as and when required. (e) The company has appointed a canteen committee whose recommendations are binding on the licensee. (f) The company can demand medical fitness of the employees of the canteen. (g) The licencee and the canteen employees are also bound by the rules and regulations of the company in the matter of discipline and cleanliness. (h) The licencee has to maintain registers regarding number of meals, tea/black coffee, snacks etc. prepared and served, separately for verification. (i) The contractor cannot employ more than or less than 18 workers in the canteen every day. (j) The licencee should be present during the working time of the canteen. o.p.4755/99 & cc. 17 (k) The licencee is bound to submit copy of the wage sheets of the canteen workers to the company at the end of every month. 13. In addition to that on the basis of the evidence on record the Labour Court came to the finding that the administration of