1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.2527 OF 2004 Bhartiya Kamgar Sena ) Shiv Sena Bhavan ) Dadar, Mumbai 400 028 ) representing 36 workmen ) ....Petitioner. V/s 1. M/s. UDHE India Limited ) UDHE, House, LBS ROAD, ) Vikhroli (W), Mumbai 400 083 ) ) 2. M/s. Kamal Enterprises ) B-59, Vanrai Vishwakarama ) Nagar, Mulund (W), Mumbai- 80 ) ....Respondents. ----- Mr. R.D. Bhat for the Petitioner. Mr. J.P. Cama, Senior Counsel i/b A.K. Jalisatgi for Respondent No.1. ---- ALONGWITH WRIT PETITION NO.486 OF 2005 Udhe India Ltd; ) A Company registered under ) the Companies Act, 1956. ) having Registered Office at Udhe ) House, L.B.S. Marg, Vikhroli (West) ) Mumbai - 400 083 ) ..... Petitioner. V/s 1. Bharatiya Kamgar Sena ) a union registered under the ) Trade Unions Act, 1926, having ) office at Shivasena Bhavan, Shivaji ) Park, Dadar, Mumbai - 400 020 ) ) 2 2. Kamal Enterprises, ) a Proprietory concern having ) office at 59, Vanraj, Vishwakarma ) Nagar, Nahar Road, Mulund, West, ) Mumbai - 400 080. ) .....Respondents. ---- Mr. J.P. Cama Senior Counsel i/b A.K. Jalisatgi for the Petitioner. Mr. R.D. Bhat for Respondent No.1 CORAM: V.M. KANADE, J. DATE : 27 th June, 2007 ORAL JUDGMENT:- 1. Both these Petitions can be disposed of by a common order since the parties to both these Petitions have challenged the common order which is passed by the Industrial Tribunal in Reference (IT) No. 43 of 2002. 2. The Industrial Court partly allowed the Reference and directed the appropriate Government to take necessary action under section 10(1), (2)(a) to (d) of the Contract Labour (Regulation & Abolition) Act, 1970 [hereinafter referred to as “CLRA Act”] within a reasonable period. The Tribunal held that the contract which was entered into 3 between the Contractor and the Company was not sham and bogus but was a genuine contract. However, on the basis of other material on record, it directed the appropriate Government to take necessary action under the aforesaid provisions of the CLRA Act. 3. Being aggrieved by the directions given by the Industrial Court to the appropriate Government to take action under the provisions of section 10(1)(2)(a) to (d) of the CLRA Act, the Company filed Writ Petition No.486 of 2005. The Union, on the other hand, has filed Writ Petition No.2527 of 2004, challenging the findings recorded by the Industrial Court, wherein, it held that the workmen were not employees of the Company and were not entitled to get status of permanency and further held that the contract between the Company and the Contractor was not sham and bogus. FACTS: 4. M/s Udhe India Limited is a Company engaged in 4 engineering consultancy and it has three offices; one at Churchgate, one at Ghatkopar and other at Vikhroli (hereinafter referred to as “the Company”). 5. The workmen concerned in this Petition are doing the work with the Company from 1985 onwards. Earlier, they were working in all three offices. They were doing the work of electrical maintenance, Plumbing, attending to pantry, distribution of mail, house keeping and other work in the office of the Company. On 01/04/1986, the Company entered into contract with one Karunakar Shetty. He was shown to be the Proprietor of Kamal Enterprises (hereinafter referred to as “the Contractor”). The said contract specified number of workmen required, the timing, hours of their break and nature of work. This contract was extended from year to year. Subsequently, the Company also specified the rates which were to be given to these workmen for doing overtime in the Company i.e beyond the scheduled working hours. Initially, two complaints were filed in the year 1995 by two workmen being Complaint (ULP) No. 254 of 1995 and 258 of 1995. These two complaints, however, were 5 dismissed on the basis of the judgment of the Apex Court in Kalyani Steel and Cipla. Thereafter, a Petition was filed by the workmen being Writ Petition No.2743 of 2001 in which this Court directed the Government to treat the two complaints as industrial dispute and refer the matter for adjudication. Accordingly, the matter was referred for adjudication to the Industrial Tribunal vide Reference (IT) No.43 of 2002. 6. After the reference was made, Company made an application for adding the Contractor as party in the said reference and the said application was allowed and the Contractor viz M/s Kamal Enterprises came to be added as party to the said reference. 7. On 15/09/2003, an award was passed by the Industrial Tribunal allowing the said reference and the Company was directed to absorb 34 workmen concerned in the reference as permanent workmen of Respondent No.1. A further direction was given that they should be paid wages and benefits as applicable to the permanent workmen of the Company. Being aggrieved by the said order, the Company 6 filed Writ Petition No.3070 of 2003. The Contractor also filed Writ Petition No. 4 of 2004. This Court by a common order dated 13/01/2004 remanded the matter to the Tribunal. After the matter was remanded, the Industrial Court has passed the impugned order which is challenged by the Union and by the Company under Article 226 of the Constitution of India. 8. I have heard Mr. Cama, the learned Senior Counsel appearing on behalf of the Company and Mr. Bhat the learned Counsel appearing on behalf of the Union at length. SUBMISSIONS: 9. Mr. Bhat, the learned Counsel appearing on behalf of the Union, has submitted that the Tribunal has not taken into consideration the documentary evidence which was brought on record by the Union and has given a finding that the contract is genuine only on the basis of certification of institution and the license which was issued in favour of the Contractor. He submitted that the Industrial Tribunal was required to look behind the veil and then come to the 7 conclusion whether the contract is sham and bogus. He then submitted that substantial number of documents which were filed before the Industrial Court were not considered and, on the basis of certificate of registration, the Court has arrived at a finding that the contract is genuine. He then submitted that the award is self-contradictory, as the Industrial Court had recorded a finding that the reference was maintainable and, at the same time, after recording the finding that the contract was genuine, had further held that the Tribunal had jurisdiction to try the reference. He submitted that this finding was, therefore, self-contradictory. He then submitted that the finding of fact recorded by the Industrial Court was perverse since the Tribunal had misread the documents on which reliance was placed by the Union. He invited my attention to Exhibit- A which is a list of Chart which gives the names of the workmen, the date on which they joined the Company, the nature of work undertaken by them and department in which they were working. On the basis of the said Chart, he submitted that the workmen mentioned in the said Chart were not doing only the work of house keeping but were also the workmen who were working as 8 electricians, some were working in pantry and they were also working in other departments. He submitted that the Contractor was initially working as a Supervisor and, thereafter, the Company entered into contract with him. He submitted that this fact itself indicated that the Contractor was, in fact, a workman of the Company and he was falsely shown as a Contractor in 1986. He submitted that even after 1986, the Contractor was being paid as workman by the Company. He submitted that this fact itself indicated that the Contractor was, in fact, a workman of the Company and he was falsely shown as Contractor in 1986. He submitted that even after 1986, the Contractor was being paid as a workman by the Company. He submitted that this circumstance clearly indicated that the contract was not genuine and it was only executed as and by way of arrangement between the Company and the Contractor to deprive the legitimate dues and wages to the workmen who were continuously working from 1985. He submitted that, all along, the Company was paying provident fund dues of the workmen and the Contractor registered himself with the Provident Fund Office on 21/01/1992. Mr. Bhat, the learned 9 Counsel, has prepared a compilation of documents which were tendered before the Industrial Court. He submitted that these documents were not taken into consideration by the Tribunal. He invited my attention to the contract which was executed between the Company and the Contractor dated 21/03/1996, 31/05/1990, 08/04/1996, 01/04/1997, 01/04/1998 and 26/11/1998. He submitted that the Tribunal had not considered the contents of the said contract and had not analysed the terms and conditions of the contract. He submitted that the terms and conditions of the said contract clearly indicated that the workmen were continuously working since 1985 and the contract itself indicated that the ultimate supervision and control was with the Company and not with the Contractor. He then invited my attention to the Certificate of Registration granted by the Registering Authority of Maharashtra and pointed out that from the perusal of the said document, it was clear that the said document was anti-dated. He further invited my attention to the terms and conditions of the license which was granted by the Government and submitted that clause (v)(a) and (b) clearly stipulated that the conditions of service of the 10 workmen were to be in accordance with the provisions of the Minimum Wages Act and that clause (b) also prescribes that where the workmen employed by the contractor performs the same kind of work which is performed by the workmen employed by the principal employer then, in that case, hours of work and the other conditions of service of workmen of the Contractor will be the same as applicable to the workmen directly employed by the principal employer. He then invited my attention to the records of attendance of the workmen maintained by the Company. He submitted that this clearly indicated that the control and supervision of the workmen was exclusively with the Company and not with the Contractor. Further, he invited my attention to the plea of declaration and Nomination Form sent by the Company as also the Form No.3A of E.P.F. Scheme, 1952 which was filled up by the Company. He also invited my attention to the register of complaints maintained by Company. He submitted that only few pages of the complaints were annexed to the compilation in order to show that the said complaints were not pertaining only to house keeping but also pertaining to various other jobs which were performed 11 by the workmen for and on behalf of the Company. He cited this circumstance which indicated that the contract was not genuine. He further referred to various other documents such as record of over time done by the employees which was maintained by the Company, xerox copies of Register maintained by the Contractor of work entrusted to workmen, various amounts paid to workmen for purchase of umbrellas and towards travelling expenses incurred for official work, copies of Mail Register maintained by Respondent No.1 and also photographs of workmen concerned with the Petition taken during the course of working and the application for production of documents by the Company. He submitted that, with great difficulties, all these documents were procured by the Union and remaining documents were with the Company and these documents had not been produced and, therefore, the Tribunal ought to have drawn an adverse inference for non-production of documentary evidence. It is submitted that the Tribunal had erred in coming to the conclusion that these documents were inadequate for the purpose of establishing that the contract was not genuine. He then submitted that while deciding issue Nos. 4 and 5, 12 though the conclusion was drawn from the documents which were referred to by the Tribunal, the finding which was recorded was, in fact, contrary to the record. He submitted that It was the duty of the Tribunal to have analysed the contract and then, after lifting the veil, decide whether the contract was genuine or not. He submitted that this exercise had not been performed by the Tribunal. He invited my attention to the orders passed by the Tribunal and submitted that the said findings, being perverse, were liable to be set aside by this Court and that the appropriate direction should be given to the Company to grant permanent status to the workmen. He then submitted that only in cases the contract was found to be invalid, their could be abolition of contract under section 10 of the CLRA Act and where the Tribunal found that the contract was sham and bogus then, in that case, employees were entitled to be absorbed as permanent employees of the Company. 10. The learned Counsel appearing on behalf of the Union then relied upon the judgment of Supreme Court in Dharangadhra Chemical Works Ltd. Vs. State of Saurashtra 13 and others reported in AIR 1957 SC 264. He submitted that in para 14 of the said judgment the Supreme Court has laid down the test of determining who was the workman of the Company. He submitted that if the said test was applied to the facts of the present case, it would be apparent that the workmen were permanent workmen of the Company. He then relied upon the judgment of the Apex Court in Birdhichand Sharma Vs. First Civil Judge, Nagpur and others reported in 1961 FLR 577 in which the Supreme Court again considered the prima facie test to determine whether the person was worker within the definition of section 2(1) of the Factories Act, 1948. He then relied upon the judgment of the Apex Court in Silver Jubilee Tailoring House and others Vs. Chief Inspector of Shops and Establishments reported in 1973(27) FLR 350. He relied upon the observations made by the Apex Court in the said case wherein the Supreme Court, after examining its earlier judgments, had further held that control by itself was not the only factor decisive for determining whether the person was an employee of the Company. He then relied upon the judgment of the Apex Court in Hussainbhai, Calicut Vs. The Alath Factory Thezhilali, 14 Union, Kozhikode and others reported in 1978 (37) FLR 136 wherein the Apex Court again considered the question as to who could be the employee in labour law. He then relied upon the judgment of the Apex Court in Secretary, Haryana State Electricity Board Vs. Suresh and other etc. etc reported in AIR 1999 SC 1160. He invited my attention to the observations made by the Apex Court on the doctrine of lifting of the veil and the scope of the CLRA Act. He then relied upon the judgment in Bharat Heavy Electrical Ltd. Vs. State of U.P. & Ors reported in 2003 III CLR 188. He invited my attention to the observations made by the Apex Court in paras 8 to 11 wherein the Apex Court had reiterated what was observed and held in Hussainbhai, Calicut (supra) that supervision and control were two important factors which will have to be taken into consideration for determining whether the workman was an employee of the Company. He then relied upon the judgment of the Apex Court in Indian Petrochemicals Corporation Ltd and another Vs. Shramik Sena and others reported in 1999 (4) LLN 49 wherein the Apex Court in para 17 of the said judgment has considered various factors which have to be taken into consideration 15 while determining the status of the workman. He submitted that the factors which were considered by the Apex Court in the said case clearly exist in the facts and circumstances of the present case. He also relied upon the judgment of the Apex Court in Ram Singh and Ors Vs. Union Territory, Chandigarh & Ors reported in 2004 I CLR 81. He also relied upon the judgment of the Apex Court in Workmen of Nilgiri Co-op. Mkt. Vs. State of Tamil Nadu & Ors reported in 2004 I CLR 802 and then he finally relied upon the judgment of the Apex Court in Gujarat Electricity Board, Thermal Power Station, Ukai, Gujarat Vs. Hind Mazdoor Sabha & Ors reported in 1995 I CLR 967. 11. The learned Counsel appearing on behalf of the Union, therefore, urged that this is a fit case where the award passed by the Tribunal was liable to be set aside. He submitted that this Court, while exercising its writ jurisdiction under Article 226 of the Constitution of India could set aside the finding of the Tribunal and hold that the contract was sham and bogus. He further submitted that so far as the Petition which was filed by the Company was concerned, the 16 said Petition is liable to be dismissed. He submitted that, if this Court came to the conclusion that the contract was genuine, in that event, the order of the Tribunal directing the State Government to abolish the contract should not be interfered with. He submitted that the Tribunal, on the basis of other material which was on record, had held that the workmen working in the said Company were not given benefits which were available to the permanent workmen of the Company and, therefore, the Tribunal was justified in directing the Government to abolish the contract under the provisions of the CLRA Act. 12. On the other hand, Mr. Cama, the learned Senior Counsel appearing on behalf of the Company submitted that the order passed by the Tribunal directing the appropriate Government to abolish the contract was patently illegal. He submitted that having held that the contract was genuine, it was not open for the Tribunal to direct the appropriate Government to abolish the contract under section 10 of the CLRA Act. He submitted that Union had to exercise its option in choosing the relief which they were claiming from this 17 Court. He submitted that the relief of direction being given to the appropriate Government to abolish the contract could not only be granted on the assumption that the contract is not genuine. He submitted that the Union was pressing for the said relief which was granted by the Tribunal and, in that event, it could not pursue the argument that the contract was sham and bogus at the same time. He then submitted that in view of the ratio laid down in Gujarat Electricity Board (supra), it was not open for the Tribunal to give a direction to the State Government to take action under section 10 of the CLRA Act since, admittedly, the Union which was espousing the cause of workmen was not a Union of permanent workmen. He invited my attention to paragraphs 44 and 55 of the said judgment in Gujarat Electricity Board (supra) in support of the said submission. He, therefore, submitted that, under any circumstances, the order passed by the Tribunal directing the Government to abolish the contract was liable to be set aside. He also relied upon the judgment of the Apex Court in Steel Authority of India Ltd vs. Union of India and Others reported in (2007) 1 SCC (L&S) 630. He also submitted, after inviting my attention to para 121 clause (5) 18 of the judgment of the Apex Court in Steel Authority of India Ltd & Ors. etc. etc. Vs. National Union Water Front Workers & Ors. etc. etc reported in 2001 III CLR 349, that in view of the observations made by the Apex Court in the said para, the words “on issuance of prohibition notification under section 10(1)” clearly indicated that it was not open for the Tribunal to decide the question regarding genuineness or otherwise of the contract as long as notification under section 10 had not been issued by the appropriate Government. He submitted that, therefore, on that count also, the order of the Tribunal directing the appropriate Government to issue notification was liable to be set aside. 13. The learned Senior Counsel appearing on behalf of the Company then submitted that mere continuous service by workmen in the Company need not, by itself, convert a legitimate contract into a sham and bogus contract. He, therefore, submitted that merely because the workmen had worked with the Company since 1985 that, by itself, need not be a factor which would decide whether the contract was genuine or not. He then invited my attention to the CLRA 19 Act and submitted that the existence of a genuine contract was a rule and the burden of proof that it was otherwise, was on the workmen who alleged that the said contract was not genuine. After inviting my attention to the provisions of the CLRA Act, he invited my attention to para 10 of the judgment in National Union Water Front Workers (supra) wherein the Apex Court had directed the circumstances under which the said Act was enacted. He then invited my attention to para 102 of the said judgment wherein the Apex Court has specifically held that there would not be any automatic absorption of contract labour on the issuance of notification for abolition of contract under section 10(1) of the CLRA Act. He then invited my attention to para 103 of the said judgment and submitted that there would be no automatic absorption of the contract labour in the establishment in either of the three classes of cases as arising in the said judgment. He then invited my attention to the judgment in the case of Bharat Heavy Electrical Ltd. (supra) and submitted that, in the said judgment, the circumstances under which Hussainbhai Calicut’s case was distinguishable was considered. After inviting my attention to para 11 of the 20 said judgment, he submitted that the Apex Court had clearly held that whether the workman is an employee of the principal employer or not depends on the facts and circumstances of each case and that the case of Hussainbhai Calicut neither dissented nor diluted in the Judgment of National Union Water Fronts Workers (supra). He submitted that the emphasis which was placed by the learned Counsel for the Union on the ratio of the said judgment was misplaced. He then invited my attention to the judgment in Ram Singh’s case (supra) and drew my attention to para 16 of the said judgment and submitted that the crux of the entire issue of determining whether the workmen were employees of the Company or not, was the control of the Company over the means and the method of getting the work done from the employees and if the workmen were in a position to demonstrate that, only then the normal rule of “contract is genuine” is vitiated. He then submitted that the judgment in Indian Petrochemicals Corporation Ltd (supra) was limited to its own facts and the ratio of the said judgment should not be ipso facto made applicable to the facts of the present case. He then invited my attention to the 21 judgment of the Supreme Court in State Bank of India and Others Vs. State Bank of India Canteen Employee’s Union (Begal Circle) and Others reported in (2000) 5 SCC 531 and the judgment in Employers in relation to the Management of Reserve Bank of India Vs. Reserve Bank of India, reported in (1996) 3 SCC 267. He submitted that in both these cases, the Apex Court had held that merely because the employer had been paying 95% of the subsidy, that alone should not be a test to determine whether the contract was sham and bogus or not. He submitted that, on the contrary, when the ratio of the said judgment was applied to the facts of the present case, the Tribunal correctly applied the ratio of the said judgment to the facts of the present case. He then invited my attention