IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 10225 of 1996 WITH SPECIAL CIVIL APPLICATION No. 2643 of 1997 For Approval and Signature: Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE A.M.KAPADIA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- STEEL AUTHORITY OF INDIA LTD. Versus GUJARAT MAZDOOR PANCHAYAT & ANR. -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 10225 of 1996 MR KS NANAVATI, SENIOR ADVOCATE, for NANAVATI ASSOCIATES for Petitioner MR R.VENKATARAMANI, SENIOR ADVOCATE, with BHUSHAN B. OZA for Respondent No. 1 MR GIRISH C.PATEL, SR.ADVOCATE for Respondent No. 2 2. Special Civil Application No. 2643 of 1997 MR R.VENKATARAMANI, SENIOR ADVOCATE, with BHUSHAN B OZA for Petitioner MR KS NANAVATI, SENIOR ADVOCATE, for NANAVATI ASSOCIATES for Respondent No. 1 MR GIRISH C.PATEL, SR. ADVOCATE for Respondent No.2 -------------------------------------------------------------- CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE A.M.KAPADIA Date of decision: 18/09/2003 COMMON ORAL JUDGEMENT (Per : MR.JUSTICE J.M.PANCHAL) By instituting Special Civil Application No.10225 of 1996 under Articles 226 & 227 of the Constitution, Steel Authority of India Limited ["SAIL" for short] has prayed to issue a writ of certiorari to quash award and order dated November 8, 1996 rendered by the Industrial Tribunal, Ahmedabad, in Reference (IT) No.190 of 1993, by which SAIL is directed to treat 160 workmen working in the stockyard located at Kaligam, Sabarmati, Ahmedabad as its permanent employees, and pay them salary, dearness allowance and other benefits as per the Rules and Regulations of the Company from the date of making of the reference i.e. from July 31, 1993. Special Civil Application No.2643 of 1997 is filed by Gujarat Mazdoor Panchayat under Articles 226 & 227 of the Constitution, wherein prayer made is to declare that the workmen employed in the stockyard located at Kaligam, Sabarmati, Ahmedabad are entitled to salary, dearness allowance and other benefits as per Rules and Regulations of SAIL from January 1, 1980 with 18% interest on the arrears to be paid to the workmen and not from July 31, 1993 as directed by the Industrial Tribunal. As both the petitions are directed against common award and order dated November 8, 1996, rendered by the Industrial Tribunal in Reference (IT) No.190 of 1993, this Court proposes to dispose of them by this common judgment. 2. Steel Authority of India Limited is a Government of India Enterprise. It is a Government Company registered under the provisions of the Companies Act, 1956. It is engaged in production and marketing of iron and steel items, such as, angles, bars, coils, wires, rods, looms, billets, iron girders etc. The company has its steel manufacturing plants at Bokaro, Rourkela, Bhilai, Alloy Steel Plant at Durgapur, stainless steel plant at Salem and subsidiaries at Burnpur, Bhadravati and Chandrapura. 3. The Central Marketing Organization, which is the marketing unit of SAIL, markets the products manufactured at various steel plants. In order to cater to the demands of its customers, the Central Marketing Organization has established network of stockyards where it receives materials produced by the plants and after receiving the same, stores it and sells the same to its customers. One such stockyard is located at Kaligam, Sabarmati, Ahmedabad. 4. The workmen employed in the stockyard are doing work of unloading the materials arriving by rail/road, sorting them out, stacking in the yard and loading the same in the trucks brought by the customers when sale is effected. All the handling operations as also stacking are done as per the stipulations of stacking plans, handling and storage guidelines laid down by SAIL and other instructions issued by stockyard incharge. In the stockyard, 160 labourers are employed and they work in three shifts, duration of each shift being of 8 hours. Cranes, tools and tackles, equipments etc. required to efficiently handle the expected cargo in the yard are also supplied by the Company and they are being operated by labourers. The workers employed in the stockyard are members of Gujarat Mazdoor Panchayat, which is the sole bargaining agent on behalf of the workmen employed at SAIL's stockyard located at Kaligam, Sabarmati, Ahmedabad. 5. The case of SAIL is that having regard to the liberalised imports as well as competition from private sectors and unsteady supply of materials from manufacturing plants, it is not in a position to maintain regular, systematic or permanent labour force for its handling operations carried out at stockyards, and enters into a contract with a handling contractor capable of handling iron and steel materials at the stockyard, who engages his own labourers and handles steel materials on the terms and conditions stipulated in the contract. What is maintained by SAIL is that the contract, inter alia, stipulates that the handling contractor has to comply with the provisions of the Contract Labour (Regulations and Abolition) Act, 1970 ("the Act" for short), Minimum Wages Act etc. and there is no privity of contract, direct or indirect, between SAIL and labourers engaged by the contractor. On the other hand, the claim of Gujarat Mazdoor Panchayat is that workmen are working in the stockyard of SAIL since years and as (i) they are doing work of SAIL which is permanent in nature, and (ii) without those workers, whole activity in the stockyard is bound to come to a standstill, the workers are, in reality, employees of SAIL and are entitled to receive basic wages, dearness allowance etc. as per the scales applicable to other employees of SAIL. What is asserted by the Panchayat is that though the concerned workmen are shown on the rolls of dubious intermediaries i.e. contractors, the so-called contractors are not independent nor concerned workmen perform the work of contractors and the contractor being a name lender and a facade brought in by the Company, the workers are entitled to be treated as employees of SAIL. 6. Therefore, Gujarat Mazdoor Panchayat served a demand notice dated March 21, 1992 asking SAIL to treat workers employed in stockyard located at Kaligam, Sabarmati, Ahmedabad as its employees and make payment of wages etc. on that basis. However, there was no response from SAIL. The Panchayat, therefore, raised an industrial dispute and approached the competent authority under the provisions of the Industrial Disputes Act, 1947 ("the I.D.Act" for short) demanding that the workers employed in the stockyard located at Kaligam be treated as employees of SAIL. Thereupon, conciliation proceedings were initiated and reply dated June 26, 1993 was submitted by SAIL refuting the claim advanced by the Panchayat. During the pendency of conciliation proceedings, tender notice dated July 20, 1993 was issued by SAIL for appointment of handling contractor. The tender submitted by Bardhan & Company (Handling) Contractors Private Limited. ("Bardhan & Co." for short) was accepted on September 27, 1993 and work contract was issued on October 16, 1993. However, formal contract was executed by Bardhan & Co. on October 23, 1993, though strangely stamp paper for the same was purchased on January 3, 1994. The handling contract with Bardhan & Co. was for a period of 4 1/2 years. Bardhan & Co. had obtained licence under the Act on December 17, 1993, which was valid for one year regarding which intimation was communicated to the registering authority under the Act by SAIL on October 22, 1993. 7. On failure of conciliation proceedings, following dispute was referred to the Industrial Tribunal, Ahmedabad, by the Deputy Commissioner of Labour, Ahmedabad vide order dated July 31, 1993 under Section 10 of the I.D.Act, for adjudication. "Whether the workmen shown below should be treated as permanent workmen from the day they are working in Steel Authority of India Ltd., Kaligam yard and whether they should be paid wages, dearness allowance and other allowances as per the rules of the company from that date?" 8. On behalf of the concerned workmen, statement of claim at Exh.6 was filed by the President of Gujarat Mazdoor Panchayat. In the statement, it was mentioned that the concerned workmen were/are working in Kaligam yard since years and were/are doing work of unloading, separating and stacking materials at different places as well as work of loading the same in trucks of customers of SAIL. It was claimed in the said statement that the abovereferred to works are permanent in nature and without these activities, business of Company would come to a standstill. It was further mentioned therein that all these works/activities would continue so long as the stockyard is in existence, and that concerned workmen were/are doing the job manually and also with cranes, tools etc. supplied by SAIL. The case pleaded in the statement of claim was that the iron material was/is coming for sale to the yard from different manufacturing plants of SAIL through trains and trucks, and that all types of materials were/are separated and stacked at different places in the stockyard as per stacking plan as well as handling and storage guidelines laid down by SAIL. Further, it was stated in the statement of claim that the workmen were/are also doing the work of loading materials in the trucks and trailers brought by the customers from the stockyard and that the work of stockyard is going on in three shifts i.e. round the clock. As per the claim advanced in the statement of claims, names of concerned workmen were not mentioned in the Registers of SAIL, but were mentioned in the Registers of dubious intermediaries i.e. contractors engaged by SAIL. What was asserted was that, in fact, the work which the concerned workmen were/are performing, was/is not of the contractor nor for the benefit of the contractor, but the contractor being a dubious intermediary, a make-believe trapping, a name lender and facade brought in by SAIL with the sole motive of exploiting the concerned workmen, the workmen were entitled to be treated as employees of SAIL. After referring to the tests laid down by the Supreme Court to ascertain whether the contractor employed by principal employer was sham and bogus, it was pleaded in the statement of claim that having regard to continued employment of workmen concerned in the stockyard under the control and supervision of SAIL and other factors, the workmen should be regarded as employees of SAIL. By filing statement of claim, Gujarat Mazdoor Panchayat prayed the Industrial Tribunal to render an award declaring that the concerned workmen working in the stockyard of SAIL located at Kaligam were/are permanent workmen of SAIL from the date they were working in the stockyard and entitled to basic pay, dearness allowance and other allowances as per the Rules and Regulations of the said Company. 9. On service of summons, SAIL filed reply at Exh.9 and contended, inter alia, that having regard to the liberalized imports as well as competition from private sectors and unsteady supply of materials from manufacturing plants, it was/is not in a position to maintain regular, systematic or permanent labour force for its handling operations carried out at the stockyard, and had entered and enters into a contract with handling contractor capable of handling iron and steel materials at the stockyard, who engages his own labourers and handles steel materials on the terms and conditions mentioned in the contract and, therefore, the workmen employed in the stockyard are not entitled to the declaration sought for in the statement of claim. It was averred in the written statement that SAIL pays amount to handling contractor per tonne and as there is no privity of contract between the workers engaged by handling contractor and SAIL, the reference should be dismissed. According to SAIL, the wages of concerned workmen were/are paid by the handling contractor/s as per terms and conditions determined between the handling contractor and the workmen with which SAIL has no concern whatsoever and, therefore, reliefs claimed should be denied to the workmen. What was pleaded in the written statement was that officers of SAIL are signing Salary Register of the concerned workmen only as a witness and as the work which is being performed by workmen is not of a permanent nature, reliefs claimed should be denied to the workmen. It was also pointed out in the written statement that the handling contractor regularly sends returns to the Labour Officer, deducts provident fund from the wages payable to the workmen as well as deposits the same in the accounts of the workmen and, therefore, the demands made in the statement of claim should not be granted. 10. SAIL produced five documents vide list Exh.25 in support of its case pleaded in the written statement. They were (i) original contract dated October 23, 1993 entered into with Bardhan & Co., (ii) statement of terms of the contract dated August 20, 1993, (iii) guidelines to be complied with by the handling contractor, (iv) a xerox copy of the registration certificate issued to the handling contractor, and (v) a xerox copy of labour licence granted under the provisions of the Act. In support of the reference, Gujarat Mazdoor Panchayat examined Dhanu Prasad Ram Ajor at Exh.10; whereas in support of averments made in the written statement, SAIL examined Rajeshsing Shyamkishoresing, who was manager of Bardhan & Co. at Exh.20 and M.Narayan Pillai, an officer of SAIL, at Exh.22. 11. On the basis of (i) statement of claim, (ii) written statement filed by SAIL, (iii) documentary evidence produced by SAIL, (iv) oral evidence adduced by the parties, and (v) arguments advanced on behalf of the parties, four issues for determination were framed by the Tribunal. They were, (i) whether tools with which concerned workmen work and the place of yard belong to the Company? (ii) whether contractor Bardhan & Co. has recruited the concerned workmen? (iii) whether Steel Authority of India Ltd. proves that the contract of Bardhan & Co. is legal? and (iv) whether the concerned workmen are entitled to get salary, dearness allowance and other benefits which are being given to other permanent workmen of the Company? 12. On critical analysis of the evidence adduced by the parties, the Industrial Tribunal held that it was proved that Kaligam Yard is of the ownership of SAIL. After referring to the xerox copy of the Registration Certificate produced at Exh.30, the Tribunal noticed that during the period from May 19, 1973 to May 18, 1975, Ratansing and Madanlal Sharma were awarded handling contracts, but no particulars were produced by SAIL to indicate as to whether, thereafter, any contract for handling materials received at the stockyard was entered into with any handling contractor, or whether the Company itself was taking the work of loading and unloading materials from the concerned workmen. The Industrial Tribunal deduced that the concerned workmen were not recruited/employed by Bardhan & Co. and were rendering services in the stockyard since years. The Industrial Tribunal further deduced that concerned workmen were/are serving under the supervision, control and direction of SAIL since years. The Tribunal noticed that the reference of the dispute was made to the Tribunal on July 31, 1993, after which handling contract was entered into by SAIL with Bardhan & Co. on October 23, 1993, for which stamp paper was purchased on January 3, 1994, but, there were no signatures or seals of any officers of SAIL on the agreement and, therefore, the handling contract was fabricated to deprive the workmen concerned of their lawful rights. The Tribunal further found that the term of the handling contract with Ratansing and Madanlal Sharma was over in the year 1975, but no evidence was adduced by SAIL to establish that it had entered into contract with any other handling contractor for carrying out handling operations after 1975, which indicated that SAIL itself was taking work of loading and unloading from the concerned workmen since years and that concerned workmen were entitled to declaration that they were permanent workmen of SAIL. In view of the abovereferred to conclusions, the Tribunal by award and order dated November 8, 1996 has held that the concerned workmen working in the stockyard located at Kaligam, Sabarmati, Ahmedabad, are permanent workmen/employees of SAIL, and has directed SAIL to pay salary, dearness allowance and other benefits to them as per the rules and regulations of the Company from July 31, 1993, giving rise to the abovenumbered two petitions. 13. Mr.K.S.Nanavati, learned Senior Advocate of the petitioner company, argued that if the contract is sham and bogus and/or not genuine, the workmen of the so-called contractor can raise an industrial dispute for declaring that they were always employees of the principal employer, and for claiming appropriate service conditions, but if the industrial adjudicator comes to a conclusion that the contract is not sham and is genuine, the reference will have to be rejected. After emphasising that while recording findings of facts, the Tribunal has not considered material evidence, and reached conclusions on the manifest misreading of evidence, it was argued that a writ of certiorari should be issued as conclusions reached are perverse. The learned counsel contended that not only the evidence on record namely, different clauses of contract between the petitioner and Bardhan & Co. are not considered, but wrong test is applied while deciding the reference and as findings recorded on jurisdictional facts have been reached unreasonably and arbitrarily, the matter should be remanded to the Tribunal for a fresh consideration after setting aside the impugned award. What was argued was that evidence of witness of Bardhan & Co. and that of SAIL would indicate that all the workmen were serving under supervision, control and direction of Bardhan & Co. since years and, therefore, the reference should have been dismissed. The learned Senior Advocate of the petitioner contended that Dhanu Prasad Ram Ajor, who is examined by the respondent No.1, has admitted in his evidence that at the time when he joined the service, Mangadhram was the contractor and after Mangadhram, Nebrus was the contractor, after which, Intercity and New Maha Gujarat were the contractors and thereafter, Nitex came as contractor and then Western Caterers, Durga Crane Company, Shri Chand Rolling Mills, Bhatia Company, R.C.Gupata and Bardhan & Co. were the contractors, which indicates that right from the beginning, genuine contract system was in existence and, therefore, the reference should have been dismissed. According to the learned Senior Advocate of the petitioner, declaration made by the Tribunal to the effect that concerned workmen working in the stockyard located at Kaligam, Sabarmati, Ahmedabad, are permanent workers of SAIL, is based on the finding that labour contract between the petitioner and Bardhan & Co. was fabricated and as the said finding is perverse, the award of the Tribunal should be set aside. The learned Senior Advocate urged that evidence on record indicates that after issuing tender notice for appointment of handling contractor, Bardhan & Company (Handling) Contractors Private Limited was appointed as handling contractor and as the said contract was neither sham nor bogus, the declaration made by the Tribunal that the workmen working in the stockyard of SAIL located at Kaligam, Sabarmati, Ahmedabad, are permanent workmen of SAIL deserves to be set aside. It was emphasised that it is an undisputed position that tender submitted by Bardhan & Co. was accepted by SAIL in the year 1993 and in cross examination of the witness examined by the petitioner, it was nobody's case that the contract with Bardhan & Co. was fabricated or that Bardhan & Co. had started work as contractor in the year 1994 and, therefore, the declaration, which is essentially based on the finding that the contract with Bardhan & Co. was fabricated, should be set aside. The learned Senior Advocate of the petitioner referred to the averments made in the written statement filed by the petitioner to the Statement of Claim, for emphasising the fact that permanent workmen of SAIL are doing office work, clerical work and supervisory work whereas the concerned workmen employed in the stockyard are doing work of loading and unloading materials, which is not being performed by the regular employees of SAIL and, therefore, the workmen employed in the stockyard are not entitled to declaration that they are permanent employees of SAIL. What was asserted was that the evidence on record establishes the facts, namely, that; (a) wages are being paid to the workmen employed in the stockyard by the contractor, (b) Pay Register is being maintained by the contractor, (c) the contractor has to prepare bill in terms of the workmen engaged by him, (d) the contractor regularly sends returns to the Labour Officer as required by law, (e) Presence Register is maintained by the contractor, (f) the contractor regularly deducts provident fund from salary of the workmen and deposits the same in the accounts of workmen, which in turn indicate that the workmen working in the stockyard of SAIL are workmen of the contractor appointed by SAIL, but not of SAIL and, therefore, the petition should be accepted. The learned Senior Advocate of the petitioner pleaded that the fact that the workmen concerned were working in the stockyard since years is of little importance inasmuch as workmen were continued in service in view of directions issued by the High Court in Special Civil Application Nos.8007 of 1990 & 8167 of 1990 wherein prayers for abolition of labour contract system and referring the matter to the Advisory Body constituted under the Act for opinion are made and, therefore, the said factor which is relied upon by the Tribunal while making the declaration in favour of the concerned workmen, should not be given undue importance by this Court. After referring to the provisions of Section 2 of the Act, it was contended by the learned Senior Advocate of the petitioner that it is presupposed that the employees will be working in the place belonging to principal employer and, therefore, the fact that the concerned workmen were working in the place belonging to SAIL should not have been overemphasized by the Tribunal while answering the reference. What was maintained was that the tests laid down in Section 10(2) of the Act which are relevant for abolition of contract system cannot be taken into consideration while determining whether the contract is sham or bogus and as the Tribunal has taken into consideration those tests for coming to the conclusion that the labour contract entered into between SAIL and Bardhan & Co. was not genuine, the award impugned in the petition should be set aside. According to the learned Senior Advocate of the petitioner, the fact that tools were made available to the workmen for discharging their duties is of little consequence inasmuch as the same were made available for a price to the contractor and, therefore, the award which is based on irrelevant considerations should be set aside. Commenting upon the finding recorded by the Tribunal to the effect that there was control and supervision of SAIL over the work performed by the concerned workmen in the stockyard, it was emphasised that the nature of the work performed is such which needs supervision and giving of instructions by SAIL and, therefore, it should not have been taken into consideration while answering the reference. The learned Senior Advocate emphasised that burden of proof is on the workmen to establish that they are not employees of independent contractor engaged by SAIL, but they are, in fact, employees of SAIL and as the concerned workmen have failed to discharge burden of proof, the petition should be allowed by setting aside the impugned award. After exhaustively reading over the award impugned in the petition, it was stressed that what has weighed with the Tribunal in granting the declaration in favour of the concerned workmen is that the contractor and SAIL have violated