bIN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 1610 OF 2009 Bharat Forge Limited, ) Mundhwa, Pune- 411 036. ) ... ..Petitioner versus 1. Maharashtra General Kamgar ) Mahasangh, Babu Babul Chawl, ) P.P. Dias Wadi, Near Vikas Tower ) and Hanuman Temple Andheri ) (East), Mumbai-400 069. ) 2. R.R. Hendre, ) Assistant Commissioner of ) Labour, Bungalow No.5, Shivaji ) Nagar, Pune Mumbai Road, ) Pune 411 005. ... ) 3. D.P. Pagar. ) Additional Commissioner of ) Labour, Shivaji Nagar, Pune ) Mumbai Road, Pune 411 005. ) ... ..Respondents 2 Mr. P. J. Rele for the Petitioner. Mr. N. M. Ganguli for the Respondents. CORAM : SMT. RANJANA DESAI, and A. A. SAYED, JJ. RESERVED ON: 7TH OCTOBER, 2009 PRONOUNCED ON : 14TH JUNE, 2010. (AT 2.40 P.M. IN CHAMBER) JUDGMENT (Per A.A.Sayed, J.) : 1. Rule. By consent, rule made returnable forthwith and heard finally. 2. The principal question which falls for consideration in this petition is whether a reference can be made by the appropriate Government at the instance of an unrecognized Union under Section 10(1) of the Industrial Disputes Act, 1947 (“I. D. Act” for short). 3. The Petitioner is a company incorporated under the Companies Act, 1956, having one of its factories at Mundhwa, Pune. It is engaged in the 3 activity of manufacture of forgings and employs about 800 permanent workmen on its rolls in the said factory. The said workmen are stated to be members of Bharat Forge Sangh, which is the union duly recognized in respect of the petitioner company’s aforesaid factory (hereinafter referred to as “the recognized union”), under the provisions of the Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, 1971 (for short “MRTU & PULP Act). Respondent No.1- Maharashtra General Kamgar Mahasangh is a Trade Union which is an unrecognized union (hereinafter referred as Respondent No.1-union) which represents contract labour workmen, who are engaged in petitioner undertaking through various contractors under the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 (for short “the Contract Labour Act”). Respondent No.2 is the Assistant Commissioner of Labour and Conciliation Officer who issued the impugned failure report dated 7th October, 2008 (Ex. “M” to the petition). Respondent No.3 is the Additional Commissioner of Labour, who passed the impugned order of reference dated 25th November, 2008 (Ex. “O” to the petition). 4 4. It is the case of the petitioner company that formerly, the contract labour workmen had organized themselves under the banner of Maharashtra Labour Union and thereafter under the banner of Sarva Shramik Sanghathana. The said Sarva Shramik Sanghathana had raised a demand that the contract labour system established by the petitioner company should be abolished. In light of the aforesaid demand, the matter was referred to the Advisory Committee of the State Government under the Contract Labour Act. The said Advisory Committee studied the contract labour system prevailing in the petitioner company and made recommendation to the State Government that the contract labour system followed by the petitioner undertaking ought not to be abolished. Upon receipt of the aforesaid recommendation, the State Government concurred with the same and issued a Notification dated 24th August, 2004 (Exhibit “C” to the petition) not to abolish the contract labour system prevailing in the petitioner company. The contract labour workmen, thereafter, joined the membership of respondent No.1 union. On 22nd April, 2008, respondent No.1 union informed the petitioner company that some of the workmen engaged through the contractors had joined their membership and the petitioner company was called upon to accord respondent No.1 union 5 recognition on behalf of the said workmen. Respondent No.1 union thereafter, by their letter dated 29th April, 2008 called upon the Dy. Commissioner of Labour to refuse permission to the petitioner company for engaging contract labour in its factory and alleged violation of the provisions of the Contract Labour Act. Respondent No.1 union claimed not only that there was contravention of the Contract Labour Act but also that the contracts were sham and bogus. By their letter dated 16th June, 2008 respondent No.1 union recorded that about 650 contract workmen had become members of their union and called upon the Dy. Commissioner of Labour to intervene in the matter and refer the matter for adjudication in case no settlement is reached in conciliation between the petitioner company and respondent No. 1 union under sections 10 and 12 of the I. D. Act. Simultaneously, respondent No.1 union also addressed another letter dated 16th June, 2008 to the petitioner company demanding that the contract labour workmen which were employed through 144 contractors be treated at par with regular employees of the petitioner company with retrospective effect and they be extended with same benefits, allowances, wages, etc. and to terminate the existing contract system and the contract allotted to about 144 contractors, as the contracts were sham and bogus and 6 were entered into only with a view to deprive the concerned workmen of their legal and legitimate dues. The petitioner company replied to the letter stating that respondent No.1 union was not the recognized union and that the recognized union was Bharat Forge Kamgar Sangh and therefore being a non-recognized union, respondent No.1 union was not entitled to raise a dispute against petitioner company. It was also pointed out that under Section 36 of the I. D. Act the right of representation of the workmen lay exclusively with the recognized union. It was further stated that the petitioner company had obtained registration certificate as the principal employer under the Contract Labour Act and the contractors, who had engaged more than 20 workers, had also obtained licenses under the said Act. It was pointed out that the Government by its notification dated 24th August, 2004 had decided that there was no case made out for abolition of the contract labour system prevailing in the petitioner company. It was further stated that there was no relationship of employer and employee and there was no industrial dispute as defined in Section 2(k) of the I. D. Act and therefore the demand made by respondent No.1 union was unsustainable. In their letter dated 11th August, 2008 (Ex. “J” to the petition) the respondent No. 1 union has interalia stated that the demand of the 7 Union is not that contract system in the Company should be abolished which the State Government has allegedly held in favour of the system; the demand is that the workmen employed in various jobs in the undertaking of the Company should be absorbed and regularized in the services of the Company. 5. There is also a letter on record dated 17th September, 2008 by the recognized union - Bharat Forge Kamgar Sangh, to the Assistant Commissioner of Labour, wherein they have pointed out that their union is the registered and recognized union under the MRTU & PULP Act; hence as per section 36 of the I. D. Act only they have the legal right to represent and sign a settlement with the management of the petitioner company and that they are sole bargaining agent and requested the Assistant Commissioner not to entertain any dispute in conciliation without their knowledge. There are further communications referred to by the petitioner in the petition. 6. By the impugned letter dated 7th October, 2008 (Exhibit “M” to the petition), the Conciliation Officer has recorded that the demand of 8 respondent No.1 union representing the cause of the contract labour workmen were admitted and discussed. However, no amicable settlement could be reached. He, accordingly, submitted the failure report to the Government. By the impugned order dated 25th November, 2008 (Exhibit “O” to the petition), the Additional Commissioner of Labour, Pune, after considering the Failure Report submitted to him, came to a prima facie conclusion that the existing dispute could be referred to the Industrial Tribunal for adjudication and accordingly referred the matter for adjudication to the Industrial Tribunal by setting out the following point for reference in the form of Agenda as set out hereinbelow: “AGENDA The present employees employed through so called 144 contractors be absorbed as regular employees of the Company, extend them all the benefits, allowances, wages, etc. at par with regular employees of the company with retrospective effect, terminate the existing contract system and contract allotted to about 144 contractors with immediate effect.” 7. A reply has been filed by respondent No.1 union opposing the petition. According to the respondent No.1 union, the petitioner company has employed approximately 800 permanent workmen and that besides 800 9 workmen there are over 2000 workmen who are paid much less than their counterpart in the petitioner company, who are employed through alleged contractors and that the contracts were sham and bogus. It is stated that the workers are employed in the main manufacturing stream of the petitioner company. There are questions of facts and also law which are seriously contested between the parties and need to be gone into, which only the Industrial Tribunal can determine and not the Appropriate Government, which is only exercising its administrative function. According to respondent No. 1 union, at least 60 of the 144 contractors are fictitious and non- existent. It is further stated that it will be premature at this stage to decide one way or the other if the reference as made, is bad-in-law or not maintainable in law and that every court or tribunal has inherent jurisdiction to decide whether it has jurisdiction to decide the matter before it. 8. It must, at the outset, be stated that though several contentions have been raised in the petition, the thrust of the argument that has been canvassed before us, as is reflected in the written submissions on behalf of 10 the petitioner company, is with regard to issue of locus of respondent No. 1 union to seek a reference and the maintainability of such reference at their instance. 9. Learned Senior Counsel Mr. Rele, on behalf of the petitioner company, submitted that an industrial dispute under section 2(k) of the I. D. Act is required to be espoused by union of workmen employed in the establishment or by an appreciable number of workmen employed in the establishment. He placed reliance upon the case of Bombay Union of Working Journalist v. The Hindu, Bombay, 1961 Vol. II LLJ 436, and pointed out the observations of the Apex Court that in order to become an industrial dispute, it had to be established that it has been taken up by the union of employees of the respondent Company therein or by an appreciable number of employees. He submitted that because of the law laid down by the Apex Court, section 2A was introduced in the I. D. Act enabling individual workman to raise a dispute arising as a result of discharge, dismissal, retrenchment, termination or suspension. Learned Senior Counsel, Mr. Rele then relied upon decision of the Apex Court in the case of 11 Gujarat Electricity Board, Thermal Power Station, Ukai, Gujarat v. Hind Mazdoor Sabha, 1995 I CLR 967. He referred to para 50(iii) of the said judgment wherein it is observed that if the labour contract is genuine a composite industrial dispute can still be raised for abolition of the contract labour and their absorption, however, the dispute will have to be raised invariably by the direct employees of the principal employer. 10. Learned Senior Counsel Mr. Rele then referred to Section 36(1) of the I. D. Act, the proviso of which lays down that where there is a recognized union for any undertaking, no workman in such undertaking shall be entitled to be represented in any such proceeding not being a proceeding in which the legality or propriety of an order of dismissal, discharge, removal, retrenchment, termination of service, or suspension of an employee is under consideration, except by such recognized union. He contended that since the recognized union in the petitioner company was Bharat Forge Kamgar Sangh, that union alone has exclusive right to represent workmen in an industrial dispute under the Act. Thus, in the submission of the Learned Senior Counsel, the respondent No.1 union which is an unrecognized union, 12 had no locus to raise any demand and respondent Nos. 2 and 3 ought not to have entertained the demand and made a reference. The Learned Senior Counsel, therefore, urged that the impugned order of reference is required to be set aside. Mr. Rele also placed reliance on the following decisions of the Hon'ble Supreme Court - (1) Rashtriya Chemicals & Fertilizers Ltd. & Anr. v/s General Employees' Association and Ors. (2007) 5 SCC 273; (2) Steel Authority of India Limited v/s Union of India and Ors., (2006) 12 SCC 233; (3) Nedungadi Bank Ltd. v/s K. P. Madhavankutty & Ors., 2000 I CLR 671 and (4) National Engineering Industries Ltd. v/s State of Rajasthan & Ors., 2000 I CLR 389. 11. Mr. Ganguli, Learned Counsel on behalf of the respondent No. 1 union, on the other hand also relied upon the very case of Gujarat Electricity Board, Thermal Power Station, Ukai, Gujarat v. Hind Mazdoor Sabha (supra). He alluded to para 50(ii) of the decision wherein it was observed as under: “53. Our conclusions and answers to the questions raised are, therefore, as follows: 13 (i) … (ii) If the contract is a sham or not genuine, the workmen of the so- called contractor can raise an industrial dispute for declaring that they were always the employees of the principal employer and for claiming the appropriate service conditions. When such dispute is raised, it is not a dispute for abolition of the labour contract and hence the provisions of Section 10 of the Act will not bar either the raising or the adjudication of the dispute. When such dispute is raised, the industrial adjudicator has to decide whether the contract is a sham or genuine. It is only if the adjudicator comes to the conclusion that the contract is a sham, that he will have jurisdiction to adjudicate the dispute. If, however, he comes to the conclusion that the contract is genuine, he may refer the workmen to the appropriate Government for abolition of the contract labour under Section 10 of the Act and keep the dispute pending. However, he can do so if the dispute is espoused by the direct workmen of the principal employer. If the workmen of the principal employer have not espoused the dispute, the adjudicator, after coming to the conclusion that the contract is genuine, has to reject the reference, the dispute being not an industrial dispute within the meaning of Section 2(k) of the ID Act. He will not be competent to give any relief to the workmen of the erstwhile contractor even if the labour contract is abolished by the appropriate Government under Section 10 of the Act.” 12. Learned Counsel, Mr. Ganguli also placed reliance on the decision of the Apex Court in the case of International Airport Authority of India v. International Air Cargo Workers Union, 2009 AIR SCW 4926, wherein in paragraphs 19 and 20 it is observed by the Apex Court as under: “19. A course correction, if we may use that expression, was applied by the Constitution Bench, in SAIL. This Court made it 14 clear that neither Section 10 nor any other provision in CLRA Act provides for automatic absorption of contract labour on issuing a notification by the appropriate government under Section 10(1) of the CLRA Act and consequently the principal employer cannot be required to absorb the contract labour working in the establishment. This Court further held that on a prohibition notification being issued under Section 10(1) of the CLRA Act, prohibiting employment of contract labour in any process, operation or other work, if an industrial dispute is raised by any contract labour in regard to conditions of service, the industrial adjudicator will have to consider whether the contractor has been interposed either on the ground of having undertaken to produce any given result for the establishment or for supply of contract labour for work of the establishment under a genuine contract, or as a mere ruse/camouflage to evade compliance with various beneficial legislations so as to deprive the workers of statutory benefits. If the contract is found to be sham or nominal and merely a camouflage, then the so called contract labour will have to be treated as direct employees of the principal employer and the industrial adjudicator should direct the principal employer to regularize their services in the establishment subject to such conditions as it may specify for that purpose. On the other hand if the contract is found to be genuine and at the same time there is a prohibition notification under Section 10(1) of CLRA Act, in respect of the establishment, the principal employer intending to employ regular workmen for the process, operation or other work of the establishment in regard to which the prohibition notification has been issued, it shall give preference to the erstwhile contract labour if otherwise found suitable, if necessary by giving relaxation of age. As noticed above, SAIL did not specifically deal with the legal position as to when a dispute is brought before the Industrial Adjudicator as to whether the contract labour agreement is sham, nominal and merely a camouflage, when there is no prohibition notification under Section 10(1) of CLRA Act. 15 20. But where there is no abolition of contract labour under Section 10 of CLRA Act, but the contract labour contend that the contract between principal employer and contractor is sham and nominal, the remedy is purely under the ID Act the principles in Gujarat Electricity Board continue to govern the issue. The remedy of the workmen is to approach the industrial adjudicator for an adjudication of their dispute that they are the direct employees of the principal employer and the agreement is sham, nominal and merely a camouflage, even when there is no order under Section 10(1) of CLRA Act. The industrial adjudicator can grant the relief sought if it finds that contract between principal employer and the contractor is sham, nominal and merely a camouflage to deny employment benefits to the employer and that there is in fact a direct employment, by applying tests like: who pays the salary; who has the power to remove/dismiss from service or initiate disciplinary action; who can tell the employee the way in which the work should be done, in short who has direction and control over the employee. But where there is no notification under Section 10 of the CLRA Act and where it is not proved in the industrial adjudication that the contract was sham/nominal and camouflage, then the question of directing the principal employer to absorb or regularize the services of the contract labour does not arise. The tests that are applied to find out whether a person is an employee or an independent contractor may not automatically apply in finding out whether the contract labour agreement is a sham, nominal and is a mere camouflage. For example, 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 contractor, if the right to regulate employment is with the contractor, and the ultimate supervision and control lies with the contractor. 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 16 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. Mr. Ganguli, learned Counsel for the respondent No.1 union, contended that for the espousal of the cause of the workmen of the so called contractors, the direct workman of the establishment or the recognized union is not necessary and the workmen can themselves do so through their union. Mr. Ganguli submitted that the contract labour workmen cannot go unrepresented and unheard in absence of support from respondent No.1 union. He called in question the vires of section 36(1) to the I. D. Act which gives exclusive right to recognized union to represent workmen in an Industrial Dispute on the ground that it is violative of the fundamental rights of the workmen under Article 19(1)(c) of the Constitution of India. He pointed out that even in the case of Balmer Lawrie Workers’ Union v. Balmer Lawrie & Co. Ltd, AIR 1985 SC 311, the constitutional validity of 17 Section 20(2)(b) of the MRTU & PULP Act which interalia seeks to amend section 36(1) of the I. D. Act was kept open. The Learned Counsel further submitted that even under the MRTU & PULP Act, the right exclusive of the recognized union to espouse the cause of the workmen is limited to Items 2 and 6 of Schedule IV of the said Act as held by the Division Bench of this Court in the case of Warden & Co. (India) Ltd. v. Akhil Maharashtra Kamgar Union, 2001 II CLR 359 and Ceat Ltd. (Electronics Division), Mumbai v. Anand Aba Saheb Hawaldar 2003 II CLR 741. Mr. Ganguli also cited the following rulings - (1) Oswal_Petrochemicals v/s Govt. of Maharashtra & Ors., (2005) 12 SCC 433; (3) V. Veerarajan and others v/s Government of Tamil Nadu & Ors., AIR 1987 SC 695 and (4)Shambu Nath Goyal v/s Bank of Baroda, AIR 1978 SC 1088. He, therefore, submitted that the order of reference was rightly made and no interference is called for by this Court. 14. We have heard Learned Senior Counsel Mr. Rele and Learned Counsel Mr. Ganguli. 18 15. In the instant case, the charter of demand that has been raised by respondent No.1 union is reflected in their letter dated 16th June, 2008. The demand set out in the said letter reads as follows: “DEMAND The present employees employed through so called 144 contractors be absorbed as regular employees of the company, extend them all the benefits, allowances, wages, etc. at par with regular employees of the company with retrospective effect, terminate the existing contract system and contracts allotted to about 144 contractors with immediate effect since the same are sham and bogus and created only with a view to deprive the concerned workers of their legal and legitimate dues the work is of a permanent nature and directly related to the manufacturing activities of the factory.” 16. Respondent No.1 Union has in their further letter dated 11th August, 2008 stated as follows - “......the demand of the Union is not that the contract system in the company should be abolished, which the State Government has allegedly held in favour of the system. The demand is that the workmen employed in the various job in the undertaking of the company should be absorbed and regularized in the services of the company. The company may continue with the contract system, if they so desire....." 19 17. After holding conciliation proceeding, the Conciliation Officer has submitted a failure report dated 7-10-2010. The conciliation officer has stated in his report that on verification of the papers submitted by the respondent no. 1 union, it is found that they have sufficient membership to raise the dispute. Upon consideration of the failure report, the impugned order of reference came to be passed by the appropriate Government. The petitioner company in this petition have essentially prayed that the