IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 8030 of 1997 with SCA No.5807 of 1998 with CA No.4474 of 1998 For Approval and Signature: Hon'ble MR.JUSTICE S.D.PANDIT ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements? Yes 2. To be referred to the Reporter or not? Yes. 3. Whether Their Lordships wish to see the fair copy of the judgement? No. 4. Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? No. 5. Whether it is to be circulated to the Civil Judge? No. -------------------------------------------------------------- AEC CO LTD Versus ELECTRICITY MAJDOOR SABHA -------------------------------------------------------------- Appearance: NANAVATI ASSOCIATES for Petitioner MR AK CLERK for Respondent No. 1 -------------------------------------------------------------- SPECIAL CIVIL APPLICATION No 5807 of 1998 -------------------------------------------------------------- ELECTRICITY MAZDOOR SABHA Versus AHMEDABAD ELECTRICITY CO. LTD. -------------------------------------------------------------- Appearance: MR AK CLERK for Petitioner NANAVATI ASSOCIATES for Respondent No. 1 -------------------------------------------------------------- CIVIL APPLICATION No 4474 of 1998 in SPECIAL CIVIL APPLICATIONNo 8030 of 1997 -------------------------------------------------------------- AEC CO LTD Versus ELECTRICITY MAJDOOR SABHA -------------------------------------------------------------- Appearance: NANAVATI ASSOCIATES for Petitioner MR AK CLERK for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE S.D.PANDIT Date of decision: 02/09/98 CAV JUDGEMENT Rule. These two SCAs are preferred originally by the employer-the Ahmedabad Electricity Company (hereinafter referred to as the company) and Labour union representing the workmen of the company viz. Electricity Mazdoor Sabha(hereinafter referred it as EMS) against the award passed in Reference No. 133 of 1992 on 20.9.1997. With the consent of the parties, the main SCAs and the CA are heard together finally. Learned advocates for the respondents in each petition have waived service of notice of rule in all the above said matters. 2. The EMS raised an industrial dispute in respect of 360 workmen who have shown on record as the workmen working under the contractors contending that the work which these workmen are carrying out is permanent in nature and connected with the general activities of the company and the contracts executed between the company and its contractors to show that those 360 workmen are contract laborers were sham and a camouflage in order to avoid the provisions of the labour laws and to deny those 360 workmen the benefits of the regular employees of the company. Thus it was contended that said 360 workmen were real workmen of the company and the contracts between the contractor to provide laborers and the company are illegal and camouflage to deny these workmen the rights of the regular employees. They therefore, sought to declare that they were regular employees of the company and that they were entitled to get the same pay and allowances which are being paid to the regular employees of the company. 3. The company had resisted the claim of the EMS by contending that the demand which the EMS is making of seeking the abolition of contract labour system and the Industrial Court has no jurisdiction to grant the same relief. It is further contended that out of those 360 workmen about 34 workmen had earlier filed applications to get the same and similar reliefs and their applications were rejected by the Labour Court. Consequently they cannot raise the same contention again by raising an industrial dispute through the EMS. It was also contended by the company that out of those 360 workmen the workmen who are working in the township system could not be said to be the workmen of the company and the job which these workmen are doing have no connection with the work of the company. Therefore, those workmen could not claim to be the workmen of the company and they cannot claim and get the declaration of being workmen of the company and other consequential reliefs. It was further contended that out of those 360 workmen who were working as drivers, are the personal drivers of the employees/officers of the company and they have no connection with the working of the company. Similarly one of the joworkman who is driver of the school bus has also no connection with the company . He is engaged by the parents of the students to send the children by the school bus and they arrange to make payment of him and consequently they cannot claim any relief against the company. It was further contended that even after the introduction of the contract labour (Regulation and Abolition) Act 1970(hereinafter referred to as the said Act of 1970.) there is no bar to engagement of laborers through contractor. It is further contended that the validity of the employment through the contractors could not be decided and considered by the Industrial Court and said Act of 1970 is a complete code and it makes the provisions to declare the invalidity of the contract or to abolish contract labour system. Thus it was contended that the reference be rejected. The Industrial Court gave opportunity to both the sides to lead oral as well as documentary evidence and on considering the material before it , the Industrial Court came to the conclusion that from the date of reference i.e. 3.12.1992 all the workmen mentioned in the reference were to be treated as employees of the company and out of them 339 workmen who have joined upto 1990 should be abnsorbewd in the permkanent strength of the company on 3.12.1992, 16 workmen should be absorbed from 1.1.94 and 5 workmen from 1.1.95. The Industrial Court further issued a direction that if are no vacant posts available to absorb them, then the company should create additional permanent posts to absorb them and they should be paid benefits in two equal quarterly installments within 6 months. The Industrials Court negatived the contention of the company that the relief sought was of abolition of the contract labour system and consequently the Industrial Court had no jurisdiction to entertain the reference . 4. The Industrial Court also rejected the claim of the company that the claim of about 34 workmen was hit by the prrinciples of resjudicata. The Industrial Court also negatived the contention of the company that the workmen who were working as drivers and who were working in the township scheme were not workmen of the company. 5. The company being aggrieved by the said decision has come before this court seeking the total quashing and setting aside of the award passed by the Industrial Court;whereas the EMS has come before this court seeking the modification of the award and they want that benefits of permanency and other services conditions ought to have been given to the workmen from 3 years since they joined the service. 6. Mr. K.S.Nanavati learned Sr. counsel appearing on behalf of the company in SCA No. 8030 of 1997 has contended before me that the award in question amounts to abolition of the contract labour system and the Industrial Court has no jurisdiction to abolish Contract Labour System. He contended before me that in view of the provisions of section 10 of the said Act of 1970, the jurisdiction vests in the appropriate Government to prohibit the contract Labour System. He contended before me that the object of the said Act of 1970 is to regulate and improve conditions of service of contract laborers and not merely to abolish the contract labour system. He contended before me that said Act of 1970 is a complete code for the same object. He drew my attention to the following observations of the Apex Court in the case of Vegoils Pvt. Ltd. vs. The workmen AIR 1972 SC 1942 . In paras 40 and 45 the Apex Court has observed as under: "40. The question naturally arises what is the effect of the Central and the State Acts regarding the jurisdiction of the Industrial Tribunal to entertain and adjudicate upon a dispute regarding abolition of contract labour. The Central Act had received the assent of the President on September 5,1970 before the date of the award, though the said Act has come into force only with effect from, February 10,1971. The State Act was already in force at the time when the award was passed. Though we are not inclined to accent the extreme contention of Mr. Pai that the Industrial Tribunal in view of these two enactments had no jurisdiction to adjudicate upon the dispute regarding the abolition of contract labour, nevertheless we are of the view that those two enactments, which are now in force have to be taken into account in considering whether the award of the Industrial Tribunal regarding abolition of contract Labour in respect of loading and unloading operations has to be sustained. The Industrial Tribunal acquires jurisdiction to entertain the dispute in view of the reference made by the State Government on April 17,1967. Admittedly on that date none of these enactments have been passed. Even during the proceedings before the Industrial tribunal, there is no indication that the appellant raised an objection after the passing of the enactments that the Tribunal has no longer jurisdiction to adjudicate upon the dispute. Under those circumstances the Tribunal had to adjudicate upon the point referred to it having due regard to the principles laid down by the courts, particularly this Court governing the abolition of contract labour. It may be that in future if a reference is proposed to be made or actually made by the authorities concerned regarding abolition of contract labour for adjudication by the Industrial Tribunal, it may be open to the persons concerned to resist the reference on the ground that the jurisdiction to consider such matters and prohibit contract labour is now vested with appropriate Government under the Central Act. 45. The more important aspect to be noted is the provision in the explanation which makes the decision of the appropriate Government final on the question, whether any process or operation or the work is of a perennial nature. We have already extracted the whole of Section 10 and one of the relevant factions is that contained in Cl. (b) of sub-s.(2) in respect of which the Explanation makes the decision of the Appropriate Government final. The appropriate Government when taking action under Section 10 will have an overall picture of the industries carrying on similar activities and decide whether contract labour is to be abolished in respect of any of the activities of that industry. Therefore, it is reasonable to include that the jurisdiction to decide about the abolition of contract labour or to put it differently to prohibit the employment of contract labour is now to be done in accordance with Sec.10. Therefore, it is proper that the question whether the contract labour regarding loading and unloading in the industry of the appellant is to be abolished or not is left to be dealt with by the appropriate Government under the Act, if it becomes necessary."... If the questioned award passed by the Industrial Court is seen then it is very difficult to accept the contention raised by Mr. Nanavati that by the award in question, the Industrial Tribunal has abolished the contract labour system of the petitioner. The Industrial Court has after stating the claims of both the sides in para nos 1 to 8 had raised in para 9, in all 8 issues for its determination while passing the award. And on all those issues, the Industrial Court has recorded its finding. Out of those 8 issues the Issue no.7 and its finding are as under: Issue No.7 Finding Whether the demand raised by the first party in this reference is with regard to abolition of Con- tract Labour system ? No. Now apart from the raising of the issue and recording of finding, if the whole of the award of the Industrial Court is carefully read, then it would be quite clear that the Industrial Court had never guided itself to consider the question of abolition of contract labour system. The award passed by the Industrial Court indicates and shows that the industrial Court had considered and decided the question as to whether the contracts of labour which were entered into by the company with its contractors were genuine or sham and a camouflage to avoid the clutches of labour laws. Mr. Nanavati fairly stated as he is known for the same that the Industrial Court has got jurisdictions to consider the question as to whether the contract to supply laborers between the company and its contractors were sham and bogus and to decide the said question. 7. Therefore, in the circumstances, it is not necessary to go into the question as to whether the said Act of 1970 is a complete code or not because it was neither the claim of the EMS seeking abolition of contract labour system. nor the Industrial Court had considered the question of abolition of contract labour system. The Industrial Court has found on the materials produced before it that the contracts between the company and its contractors were sham and bogus. Once the Industrial Court reaches to that conclusion then, the natural consequences will follow and the contract labour workmen would become labourers of the company. But merely because of the result of the award, the workmen of the contractors have become workmen of the company it could not be said that the Industrial Court has abolished the contract labour system. What the Industrial Court has found is that there is no honest and genuine contract labour system. It is therefore, the task of this court to find out as to whether the Industrial Court was justified in reaching to the same conclusion. 8. At the cost of repetition it must be stated that it is the claim of the EMS that the labour contracts are sham and bogus and is a camouflage to avoid the clutches of labour laws. The learned counsel for the company has cited before the case of Snook vs. London & West Riding Investments Ltd. 1967(1) All England Reports 518 and has drawn my attention to the observations of M.R.Diplok L.J on page no. 528. These observations are as under: "As regards the contention of the plaintiff that the transactions between himself,Auto-Finance, Ltd. and the defendants "sham" it is, I think, necessary to consider what,if any, legal concept is involved in the use of this popular and pejoratively word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the "sham" 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. One thing I think, however, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co. vs. Maclure; Stoneleigh Finance Ltd. vs. Phillips that for acts of documents to be a "sham", with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a "shammer" affect the rights of a party whom he deceived. There is an express finding in this case that the defendants were not parties to the alleged "sham". So the contention fails." When the documents of either of the two parties to a contract or document contends before the court that the contract or the document was a sham one, what he means is that, the contract or the document does not represent the real intention of the parties and that the real intention and understanding of the parties to a contract or the document was quite different, and distinct than what is represented in the document. But if a party who is not a party to the contract or the document, contends before the court that a document or contract entered into by the parties is sham and bogus contract or document, he thereby pleads and contends that , that document or contract executed between the two parties was a fraudulent document or transaction and not representing the real state of affairs. When the third party which is disputing the effect of the document or contract entered into by the parties to the document or contract by contending that said a contract or document should not be read as it is and that it affects its right or obligations or liabilities, then he want to contend that said documents is fraudulent document created in order to defeat his rights and benefits. Now when such a contention is raised by a person or party who is not a signatory to the document or contract then the material on record will have to be considered by the court to find out as to whether the claim of that third party that the contract is fraudulent contract or a fraudulent transaction is acceptable, on the material produced before the Court. When such a situation is there, it must be also borne in mind that when there is allegation of fraud, the court must remember that generally a fraud is played by deceitful means and there would be hardly any direct evidence of fraud. A fraud is in its very naqture is secret in it's origin and inception. Hence it is to be spelt out from the totality of the circumstances produced on record. Each and every circumstances individually will not be in a position to spelt out or disclose the fraud but the court must take into consideration the totality of the circumstances which are produced on record and then to find out as to whether those totality of the circumstances reveal a fraudulent or dishonest gain . Therefore, bearing this aspect in mind, the award of the Industrial Court and the material produced before the Industrial Court will have to be taken into consideration. 9. I have already stated that the Industrial Court had not considered the question of abolition of contract labour system. But if the provisions of the said Act of 1970 are considered, then it would be quite clear that the powers under the said Act of 1970 to abolish the contract labour system vests with the appropriate Government and not with any other authority. This is made quite clear by the Apex Court in its decision of BHEL Workers Association vs. Union of India AIR 1985 SC 409. Therefore, in the circumstances, it is redandent to consider the question as to whether the Industrial Court has got jurisdiction to abolish the contract labour system. 10. The power vests with the appropriate Government under section 10 to prohibit the employment of contract labour. Sub section 2 of section 10 of the said Act of 1970 lays down four factors which are to be required to be considered by the appropriate Government before issuing prohibitory orders of employment of contract labour. As per the said provisions, it is necessary to consider as to whether the work carried out by the contract labourers is incidental or or perennial in nature and whether said work is ordinarily carried out by the regular workmen in the establishment and whether sufficient employees were appointed by the establishment for the said work. Now in the instant case, the workers union had raised an issue that the work which the 360 workmen are carrying out is of perennial nature and that it was not an incidental work. The material produced on the record also shows that the establishment is having sufficient means to make appointment of regular workmen and the work which these alleged contract laborers are doing is also being carried out by the regular workmen of the establishment. The Industrial Court has made the following observations in para 28(3) of its judgment "Shri Gandhi has submitted that according to the Government Notification the company has strictly adhere to the principles of contract labour abolition in the process. In this notification, the first party union is a party. In nine processes stated in the notification the company has abolished the contracts system with effect from 1.4.1984. Even if this contention is accepted, considering the submissions of the union, proofs, depositions, and the duties enumerated in the reference as stated above the work of taking out coal from the samples bag, crushing the same, mixing the same, sorting out according to the formula of mixing, sorting out of the crushed coal by mixing the same from time to time, collecting and removing the additional goods(coal) outside the room after finishing the work of crushing in the crusher and loading the same in hand-lorry and shifting it to the coal stock area, is taken from the concerned workmen of this reference. This is clear from the pleadings, evidence and proofs because this work is not only taken from concerned workmen of this reference but is also taken from the other permanent labourers of the company. The company has not proved this aspect. Though the company is able to furnish true and correct facts in this reference, it has not done so. The Secretary of the Union has admitted the details of the working of the concerned workmen in the company in 15 different categories and in their respective departments in his affidavit filed on oath and thereafter in his evidence given on oath. In reply thereto the officer of the company has only stated that the concerned workmen are doing the work according to the needs of the company. As this reply of the company is not satisfactory, there is no reason to disbelieve that the concerned workmen of this reference are doing the work of collecting the excess coal sampling goods from the coal sampling section and loading the same in the lorry and thereafter lifting the same to the coal stock area which is the work of perennial nature, and a part of the power production of the company which is prohibited vide the notification. In the same way the contention that the cleaning work in D station is not taken from the concerned workmen, according to the notification, which is prohibited vide item 6 of the notification with effect from 1.4.1984 in view of the prohibition of contract labour, is also not acceptable. The issue of D station was raised in 1984. However, 110 Megavolt 'E' station was commenced in 1985 and 110 Megawatt capacity 'F' station was commenced in 1988 and 60 Megawatt capacity 'C' power station was converted into 44 Megawatt in 1993. Moreover 100 Megawatt gas based 'G' power generating station was commenced at Vatva in 1991. The fact that in all these stations cleaning work is done by the concerned workmen of the reference cannot be denied. Therefore, if there was prohibition of cleaning work in 'D' station in 1984 it cannot be believed, that the conditions of the notifications were strictly adhered to if the work of cleaning is taken by the concerned workmen in "F", 'G' and 'C' generating power stations." Then it is also found that these 360 workmen are continuously working from 6 to 24 years. Even though the contractor is changed the workmen continued to work since long and for more than 240 days in a year and as a matter of fact, the company is continuously working 365 days in a year and the workmen in question are working and are getting the work for all the days except on Sundays. Thus though the contractors are changed, then also the workmen continued in service. This shows that the work of perennial nature is carried out in 38 sections by the workmen as per the needs of the company. 11. I am aware that said Act of 1970 is not prohibiting contract labour. Its aim and goal is regarding regularising and abolishing of contract labour as per the provisions of the said Act of 1970 . I am also aware