IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION WRIT WRIT WRIT PETITION NO.1431 OF 2003 PETITION NO.1431 OF 2003 PETITION NO.1431 OF 2003 MAHINDRA & MAHINDRA LIMITED ) A Company incorporated under ) Companies Act, 1913, having ) its registered office at ) Gateway Building, Apollo Bunder, ) Mumbai and Automotive Division ) Factory at Akurli Road, Kandivli ) (East), Mumbai - 400 101. )..Petitioner. V/s. 1. General Employees’ Union, A ) registered trade union, having ) its office at Bhaktawar, 2nd ) floor, 2 station road, Andheri ) (West), Mumbai - 400 058. ) ) 2. Shri Ganpat Laxman Bambade, ) C/o. General Employees’ Union ) 2, station road, Andheri (West) ) Mumbai - 400- 058 ) ) 3. Mahindra & Mahindra Limited ) Central Jeep Plant Employees ) Co-operative Society Ltd., A ) Society registered under the ) Maharashtra Co-op. Societies ) Act, having its office at ) Akurli Road, Kandivli (East), ) Mumbai - 400 101 )..Respondents. Mr.C.U.Singh, Senior Advocate with Geetanjali Prabhu and Sushma Joshi i/b. M/s.Haresh Mehta & Co. for Petitioner. Mr.R.D.Bhat for Respondent No.1. Mr.R.N.Shah with Piyush Shah for Respondent No.3. CORAM CORAM CORAM : DR.D.Y.CHANDRACHUD, J. : DR.D.Y.CHANDRACHUD, J. : DR.D.Y.CHANDRACHUD, J. DATED DATED DATED : 26TH JULY, 2006. : 26TH JULY, 2006. : 26TH JULY, 2006. -= : 2 : =- ORAL ORAL ORAL JUDGMENT JUDGMENT JUDGMENT . The Petitioner filed an application in a complaint instituted by the first Respondent of unfair labour practices under the provisions of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 ("the Act"). Besides the Petitioner, the Third Respondent which is an Employees’ Co-operative Canteen Society has been impleaded as a party to the proceedings in the Industrial Court. The relief which is sought in the complaint is a direction to the petitioner to treat the workmen engaged in the canteen as regular and permanent workmen of the Petitioner with retrospective effect from the date on which they joined service and to extend benefits to them at par with similarly situated workmen. The maintainability of the complaint was questioned in the application filed by the Petitioner on the ground that there is no relationship of employer and employee between the workmen of the Canteen and the Petitioner herein. A complaint under the Act is not maintainable in the absence of a relationship of employer and the employee in view of the Judgments of the Supreme Court in Vividh Kamgar Sabha V/s. Kalyani Vividh Kamgar Sabha V/s. Kalyani Vividh Kamgar Sabha V/s. Kalyani Steels Steels Steels Ltd. [2001 CLR 532 (S.C.)], Cipla Ltd. V/s. Ltd. [2001 CLR 532 (S.C.)], Cipla Ltd. V/s. Ltd. [2001 CLR 532 (S.C.)], Cipla Ltd. V/s. Maharashtra Maharashtra Maharashtra General Kamgar Union [2001 I CLR 754 General Kamgar Union [2001 I CLR 754 General Kamgar Union [2001 I CLR 754 -= : 3 : =- (S.C.)] (S.C.)] (S.C.)] and Sarva Shramik Sangh V/s. Indian Smelting & and Sarva Shramik Sangh V/s. Indian Smelting & and Sarva Shramik Sangh V/s. Indian Smelting & Refining Refining Refining Co. Ltd. [(2003) 10 Supreme Court Co. Ltd. [(2003) 10 Supreme Court Co. Ltd. [(2003) 10 Supreme Court Cases,455] Cases,455] Cases,455]. The Petitioner prayed for the rejection of the complaint since the canteen employees on whose behalf the complaint was moved have been engaged by a Co-operative Society. The Industrial Court by its order dated 28th June, 2006 dismissed the said application. A Review Application was also rejected by an order dated 27th March, 2003. That led to the institution of these proceedings. 2. The first Respondent has filed a complaint under Items 5 & 9 of Schedule IV of the Act. The complaint relates to the workmen engaged in the Canteen at the Automotive unit of the Petitioner at Kandivli. The basic averment is that, according to the first Respondent, the workmen are in fact employees of the Petitioner and not of the Co- operative Canteen Society, which has been incorporated in order to manage the affairs in the Canteen. The allegation in the complaint is that the Petitioner and the Co- operative Society have colluded to show that the workmen are employees of the Society. The complainant Union alleges that the workmen are supervised by Officers of the Company and perform work of a perennial nature. According to the complainant, the Co-operative Society -= : 4 : =- is only a camouflage. The averment in paragraph 2(e) of the complaint is to the following effect: " The society is a fictitious contractor. It is fictitious in the sense that it exists only to camouflage the true employer-employee relationship that exists between the company and the workmen. It is meant to keep the workmen in a permanent state of insecurity. The co-operative society is entirely supervised, run and finally controlled by the company. " The Union relies on the circumstance that the Canteen is maintained in pursuance of the mandatory requirement of section 46 of the Factories Act, 1948, and the contention is that the employees of the factory are in law and in fact employees of the company. 3. The law in regard to the maintainability of a complaint under the M.R.T.U. & P.U.L.P., 1971 is settled. The Act requires for the assumption of jurisdiction by the Industrial Court, the existence of a relationship of employer and employee. In the absence of a relationship of employer and employee, the Industrial Court does not have jurisdiction to entertain a complaint of unfair labour practice. When a complainant alleges that a contractor or an intermediary acting between the principal employer and the workmen is a camouflage or sham, that will require -= : 5 : =- adjudication by an appropriate forum in a reference under the Industrial Disputes Act, 1947. Only when a direct relationship of employer and employee is established in a complaint under the provisions of the M.R.T.U. & P.U.L.P. Act, 1971 maintainable. 4. This principle was initially recognised in the Judgment of the Supreme Court in Central Labour Union Central Labour Union Central Labour Union (Red (Red (Red Flag) Bombay V/s. Ahmedabad Mfg. & Calico Flag) Bombay V/s. Ahmedabad Mfg. & Calico Flag) Bombay V/s. Ahmedabad Mfg. & Calico Printing Printing Printing Co. Ltd. [1995 II LLJ. 765 (S.C.) Co. Ltd. [1995 II LLJ. 765 (S.C.) Co. Ltd. [1995 II LLJ. 765 (S.C.). Subsequently, in Vividh Kamgar Sabha V/s. Kalyani Vividh Kamgar Sabha V/s. Kalyani Vividh Kamgar Sabha V/s. Kalyani Steels Steels Steels Ltd.[2001 CLR 532] Ltd.[2001 CLR 532] Ltd.[2001 CLR 532], Mr.Justice S.N.Variava, speaking for a Bench of two learned Judges reiterated the principle in the following observations:- " The provisions of MRTU & PULP Act can only be enforced by persons who admittedly are workmen. If there is dispute as to whether the employees are employees of the company, then that dispute must first be got resolved by raising a dispute before the appropriate forum. It is only after the status as a workmen is established in an appropriate forum that a complaint could be made under the provisions of MRTU & PULP Act. " The issue was revisited in Cipla (supra). The Judgment in Cipla is significant to the present case, because the Supreme Court specifically ruled that in a case where the contract between the employer and the intermediary is alleged to be a mere camouflage, it is -= : 6 : =- necessary to have an adjudication into the said claim before a complaint of unfair labour practices under M.R.T.U. & P.U.L.P., 1971 is entertained. In para 7 of the Judgment, the Supreme Court observed thus:- But one thing is clear - if the employees are working under a contract covered by the Contract Labour (Regulation and Abolition) Act then it is clear that the Labour Court or the industrial adjudicating authorities cannot have any jurisdiction to deal with the matter as it falls within the province of an appropriate Government to abolish the same. If the case put forth by the workmen is that they have been directly employed by the appellant-company but the contract itself is a camouflage and, therefore, needs to be adjudicated is a matter which can be gone into by appropriate Industrial Tribunal or Labour Court. Such question cannot be examined by the Labour Court or the Industrial Court constituted under the Act. The object of the enactment is, amongst other aspects, enforcing provisions relating to unfair labour practices. If that is so, unless it is undisputed or indisputable that there is employer-employee relationship between the parties, the question of unfair practice cannot be inquired into at all. The respondent union came to the Labour Court with a complaint that the workmen are engaged by the appellant through the contractor and though that is ostensible relationship the true relationship is one of master and servant between the appellant and the workmen in question. By this process, workmen repudiate their relationship with the contractor under whom they are employed but claim relationship of an employee under the appellant. That exercise of repudiation of the contract with one and establishment of a legal relationship with another can be done only in a regular Industrial Tribunal / Court under the I.D. Act. " -= : 7 : =- 5. The same view now finds reiteration in the more recent Judgment in Sarva Shramik Sangh V/s Sarva Shramik Sangh V/s Sarva Shramik Sangh V/s. Indian Indian Indian Smelting & Refining Co. Ltd. & Ors. [(2003) Smelting & Refining Co. Ltd. & Ors. [(2003) Smelting & Refining Co. Ltd. & Ors. [(2003) 10 10 10 Supreme Court Cases 455] Supreme Court Cases 455] Supreme Court Cases 455]; wherein Mr.Justice Arijit Pasayat speaking for a Bench of two learned Judges formulated the principle thus:- " In order to entertain a complaint under the Maharashtra Act it has to be established that the claimant was an employee of the employer against whom complaint is made under the ID Act. When there is no dispute about such relationship, as noted in para 9 of Cipla case the Maharashtra Act would have full application. When that basic claim is disputed obviously the issue has to be adjudicated by, the forum which is competent to adjudicate. The sine qua non for application of the concept of unfair labour practice is the existence of a direct relationship of employer and employee. Until that basic question is decided, the forum recedes to the background in the sense that first that question has to be got separately adjudicated. Even if it is accepted for the sake of arguments that two forums are available, the court certainly can say which is the more appropriate forum to effectively get it adjudicated and that is what has been precisely said in the three decisions. Once the existence of a contractor is accepted, it leads to an inevitable conclusion that a relationship exists between the contractor and the complainant. According to them, the contract was a facade and sham one which has no real effectiveness. As rightly observed in Cipla case it is the relationship existing by contractual arrangement which is sought to be abandoned and negated and in its place the complainant’s claim is to the effect that there was in reality a relationship between the employer and the complainant directly. It is the establishment of the existence of such an arrangement which decides the jurisdiction. That being the position. Cipla case rightly -= : 8 : =- held that an industrial dispute has to be raised before the Tribunal under the ID Act to have the issue relating to actual nature of employment sorted out. " 6. The principles which emerge from these cases have been followed in several Judgments of this Court. In Hindustan Coca Cola Bottle S/W Pvt. Ltd. V/s. Hindustan Coca Cola Bottle S/W Pvt. Ltd. V/s. Hindustan Coca Cola Bottle S/W Pvt. Ltd. V/s. Bhartiya Bhartiya Bhartiya Kamgar Sena & Ors. [2001 III CLR 1025] Kamgar Sena & Ors. [2001 III CLR 1025] Kamgar Sena & Ors. [2001 III CLR 1025], Hon’ble Mr.Justice A.P.Shah (as he then was) speaking for a Division Bench of this Court held that unless the relationship of employer and employee is undisputed or indisputable, the complaint under the M.R.T.U. & P.U.L.P. Act would not be maintainable. Hon’ble Mr. Justice R.M.Lodha reaffirmed the same principle, while delivering the Judgment of a Division Bench in Quadricon Quadricon Quadricon Pvt. Ltd. & Ors. V/s. Maxi D’Souza & Ors. Pvt. Ltd. & Ors. V/s. Maxi D’Souza & Ors. Pvt. Ltd. & Ors. V/s. Maxi D’Souza & Ors. [(2004) [(2004) [(2004) III CLR 530] III CLR 530] III CLR 530], in the following words: " ....The Industrial Court constituted under the MRTU & PULP Act is not clothed with the jurisdiction to adjudicate the employer - employee relationship nor there is anything like prima facie consideration of relationship of employer-employee in the complaint under the said Act...." 7. In the present case, however, it has been asserted on behalf of the first respondent that the workmen on whose behalf the complaint has been filed are employees of a canteen, which is required to be -= : 9 : =- provided and maintained under section 46 of the Factories Act, 1948. Hence, it has been submitted that since the Canteen is maintained pursuant to the obligation cast by Section 46, all the employees of the canteen are deemed to be employees of the occupier of the factory and this being the deeming fiction of law, a complaint of unfair labour practice was maintainable. This submission falls for consideration. 8. Sub-section 1 of Section 46 of the Factories Act, 1948 empowers the State Government to make rules requiring that in any specified factory wherein more than 250 workers have been ordinarily employed a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. Sub-section (2) entails what the rules can provide. Clause (b) thereof provides for the constitution of a managing committee for the canteen and representation of the workers in the management of the canteen. The State Government has notified the Maharashtra Factories Rules, 1963. Rules 79 to 85 elaborate upon the requirement enacted in Section 46 of providing and maintaining a canteen. Under Rule 79, the occupier of every factory wherein more than 250 workers are ordinarily employed is required to provide an adequate canteen according to the standards prescribed in the -= : 10 : =- Rules. The Maharashtra Factories Rules, 1960 throw some light upon the controversy involved in the present case because there are three provisions therein which recognise that a Co-operative Society registered under the Maharashtra Co-operative Societies Act, 1960 may be entrusted with the management of the canteen. Proviso (2) of Rule 83 provides that where the canteen is managed by a Co-operative Society registered or deemed to be registered under the Maharashtra Co-operative Societies Act, 1960, the accounts pertaining to such canteen may be audited in accordance with the provisions of the Maharashtra Co-operative Societies’ Act, 1960. Rule 84 requires the constitution of a Managing Committee for each canteen as provided in clause (1). Howeover, the proviso carves out an exception in the case of a Co-operative Society registered under the Maharashtra Co-operatives Societies Act, 1960. Rule 85 (2) provides that where the canteen is managed by a co-operative society registered or deemed to be registered under the Maharashtra Co-operative Societies Act, 1960 such a society may include in the charges to be made for any such food, drink or other items served, a profit of upto 5% of its working capital employed in running the canteen. The substantive aspect of these Rules does not fall for determination but these provisions of the -= : 11 : =- Rules recognise that the obligation that is cast by Rule 79 in pursuance of section 46 can be discharged by the occupier of the factory providing and maintaining a canteen through a Co-operative Society. The appointment of a Co-operative Society to run and manage the canteen is a valid arrangement in the eyes of law. 9. The position and status of the workmen engaged in a statutory canteen maintained in pursuance to the Rules framed under section 46 of the Factories Act, 1948 has to come up for consideration in several cases before the Supreme Court. The Judgment of the Supreme Court in The Saraspur Mills Co. Ltd. V/s. Ramanlal The Saraspur Mills Co. Ltd. V/s. Ramanlal The Saraspur Mills Co. Ltd. V/s. Ramanlal Chimanlal Chimanlal Chimanlal & Ors. [1974 (3) S.C.C.66] & Ors. [1974 (3) S.C.C.66] & Ors. [1974 (3) S.C.C.66] turned on the definition of ‘employee’ in section 3(13) of the Bombay Industrial Relations Act, 1946. The expression ‘employee’ is defined in section 3 (13) in an extensive sense to include a person who is employed in execution of any work in respect of which the owner of an undertaking is an occupier within the meaning of sub-clause (e) of clause 14. Under sub-clause (e) of clause 14, where the owner of any undertaking entrusts the execution of the work of the undertaking to any other person other than as the servant or agent of the owner of the undertaking, the owner of the undertaking is defined to be the employer. -= : 12 : =- 10. In Parimal Chandra Raha V/s. Life Insurance Parimal Chandra Raha V/s. Life Insurance Parimal Chandra Raha V/s. Life Insurance Corporation Corporation Corporation of India [1995 II CLR 194 (S.C.)] of India [1995 II CLR 194 (S.C.)] of India [1995 II CLR 194 (S.C.)] the issue was dealt with by two learned Judges of the Supreme Court and the principles that emerged were summarised. In relation to the workmen of a statutory canteen, the Supreme Court held thus: 27(i) Where, as under the provisions of the Factories Act, it is statutorily obligatory on the employer to provide and maintain canteen for the use of his employees, the canteen becomes a part of the establishment and, therefore, the workers employer in such canteen are the employees of the management." Subsequent thereto a larger Bench of 3 Judges considered the correctness of the decision in Parimal Chandra Raha in Indian Petrochemicals Corporation Ltd. Indian Petrochemicals Corporation Ltd. Indian Petrochemicals Corporation Ltd. & Anr. V/s, Shramik Sena & Ors. [1999 II CLR 634] Anr. V/s, Shramik Sena & Ors. [1999 II CLR 634] Anr. V/s, Shramik Sena & Ors. [1999 II CLR 634]. The Supreme Court held, relying on the earlier decisions in M.M.R. Khan & Ors. V/s. Union of India M.M.R. Khan & Ors. V/s. Union of India M.M.R. Khan & Ors. V/s. Union of India & Ors. [1990 II CLR 262 S.C.] Ors. [1990 II CLR 262 S.C.] Ors. [1990 II CLR 262 S.C.] and Employers in Employers in Employers in relation relation relation to the Management of Reserve Bank of India to the Management of Reserve Bank of India to the Management of Reserve Bank of India V/s. V/s. V/s. Workmen [(1996 I CLR 740 S.C.] Workmen [(1996 I CLR 740 S.C.] Workmen [(1996 I CLR 740 S.C.] that the workmen of a statutory canteen would be workers of the establishment for the purpose of the Factories Act, 1948 only and not for all other purposes. The Supreme Court held that the Factories Act, 1948 does not govern -= : 13 : =- the rights of employees with reference to recruitment, seniority, promotion, retirement benefits and other matters. These matters, the Court held are governed by statute, rules, contracts and policy. Therefore, the contention that workmen employed in a statutory canteen ipso facto become workmen of the Company was held to be not capable of acceptance. Proposition (i) of the principles laid down in Parimal Chandra Raha was explained in the Judgment of the larger Bench in IPCL: " If the argument of the workmen in regard to the interpretation of Raha’s case is to be accepted then the same would run counter to the law laid down by a larger Bench of this Court in Khan’s case (supra). On this point similar is the view of another three-Judge Bench of this Court in the case of Employers in relation to the Management of Reserve Bank of India V. Workmen, (1996 I CLR 740 S.C.). Therefore, following the judgment of this Court in the case of Khan and R.B.I. (supra), we hold that the workmen of a statutory canteen would be the workmen of the establishment for the purpose of the Factories Act only and not for all other purposes. " In Workmen of the Canteen of Coates India Limited Workmen of the Canteen of Coates India Limited Workmen of the Canteen of Coates India Limited V/s. V/s. V/s. Coates of India Limited decided Coates of India Limited decided Coates of India Limited decided on 28th August, 1996 (but reported in 2004 3 SCC 547 2004 3 SCC 547 2004 3 SCC 547) a Bench of the Supreme Court consisting of Mr.Justice J.S.Verma & Mr. Justice B.N.Kirpal (as the learned Chief Justices then were) held: -= : 14 : =- " It is sufficient for us to state that some requirement under the Factories’ Act of providing a canteen in the industrial establishment, is by itself not decisive of the question or sufficient to determine the status of the persons employed in the canteen." 11. In VST Industries Ltd. V/s. VST Industries VST Industries Ltd. V/s. VST Industries VST Industries Ltd. V/s. VST Industries Workers’ Workers’ Workers’ Union [(2001) 1 LLJ 470], Union [(2001) 1 LLJ 470], Union [(2001) 1 LLJ 470], a Bench of two learned Judges of the Supreme Court considered an appeal against a decision of the Andhra Pradesh High Court where a Writ Petition under Article 226 had been entertained and a writ of mandamus was issued for the absorption of canteen workers in a canteen maintained by a public limited company under Section 46 on the ground that a public duty was owed. The Supreme Court held that the High Court was in error in entertaining the Petition and holding that it had jurisdiction. However, having regard to the special features of the case upon which an adjudication had been rendered by the High Court on merits, the Supreme Court clarified that it was not disturbing the ultimate decision. 12. In Hari Shankar Sharma V/s. M/s. Artificial Hari Shankar Sharma V/s. M/s. Artificial Hari Shankar Sharma V/s. M/s. Artificial Limbs Limbs Limbs Manufacturing Corporation [2002 I CLR 13] Manufacturing Corporation [2002 I CLR 13] Manufacturing Corporation [2002 I CLR 13], a Bench of two learned Judges of the Supreme Court held that it cannot be regarded as a universal or invariable principle that employees in a canteen provided under -= : 15 : =- the provisions of Factories Act, 1948 would ipso facto be deemed to be employees of the occupier. The Supreme Court noted that the manner in which the obligation of maintaining the canteen should be discharged is left to the discretion of the occupier and where, instead of running a canteen itself, the occupier of a factory engages a contractor, it cannot be postulated that in such an event the persons working in the canteen would be the employees of the establishment. Ultimately, the Supreme Court held that the issue is, therefore, primarily and ultimately one of fact to be determined by a fact finding tribunal. The Supreme Court held as follows: " ...assuming that section 46 of the Factories Act was applicable to the respondent no.1, it cannot be said as an absolute proposition of law that whenever in discharge of a statutory mandate, a canteen is setup or other facility provided by an establishment, the employees of the canteen or such other facility become the employees of that establishment. It would depend on how the obligation is discharged by the establishment. It may