IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 03.12.2010 CORAM: THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN WRIT PETITION NO.27449 OF 2006 & M.P.NO.2 OF 2006 1 J. ELANGOVAN 27 RAJI STREET KAMARJAR NAGAR AYYANPURAM CHENNAI - 23. 2 V. KARTHIKEYAN NO.60 KANNIAH STREET AMINJIKARAI CHENNAI - 29. 3 P. BABU NO.15 II CROSS STREET BV NAGAR CHENNAI - 114. 4 V. UMAPATHY THIRUKUPATTU VILLAGE ANJUR POST SINGAPERUMAL KOIL 603 204. 5 C. KARTHIRAJ NO.5 SUBRAMANI BHARATHI STREET BALAJI NAGAR ANAKAPUTHUR CHENNAI - 70. 6 VENKATESAN NO.22/2 VELAYUTHACHETTY STREET 3 LANE PUDUPET CHENNAI. 7 JOHN NO.7 III STREET MANGALAPURAM WEST MAMBALAM CHENNAI – 45. .... PETITIONERS VERSUS 1 THE CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL CUM LABOUR COURT REP. BY ITS PRESIDING OFFICER I FLOOR B-WING NO.26 HADDOWS ROAD SHASTRI BHAVAN, CHENNAI - 06. https://hcservices.ecourts.gov.in/hcservices/ 2 THE DIRECTOR INTERNATIONAL AIRPORTS AUTHORITY OF INDIA MEENAMBAKKAM CHENNAI - 27. 3 M/S. SAI ELEVATORS T-8 NITHYA APARTMENTS NO.1 THOMAS ROAD T. NAGAR CHENNAI – 17. RESPONDENTS PETITION under Article 226 of The Constitution of India praying for the issuance of Writ of Certiorari calling for the records relating to the award dated 25.04.2006 passed in I.D.No.18 of 2005 by the 1st respondent Tribunal and quash the same in so far as the petitioner herein and hold that the petitioners are direct labour of the 2nd respondent entitled to all benefits granted to regular lift operators. For Petitioners : Mr.N.G.R.Prasad for M/s.Row and Reddy For Respondents : Mr. R.Parthiban – R2 O R D E R The petitioners herein have filed this Writ Petition as against the award of the Tribunal in I.D.No.18 of 2005 dated 25.04.2006 holding that the petitioners are not entitled to be declared as workers of the second respondent. 2. The petitioners were employed as lift operators in the second respondent Airport Authority of India. Admittedly, their services were taken through the third respondent, who remained ex parte before the Tribunal as well as before this Court. The petitioners contend that having regard to Section 12 of the National Airports Authority of India Act, 1985, the provision of providing lift facility being part of its functioning, the employment of the petitioners through the agency of the third respondent is a sham transaction. Hence, the second respondent, in law, is bound to treat them as their employees with all the service benefits. 3. Under order dated 12.10.2004, the issue now raised was referred to under the Industrial Disputes Act to the Central Government Industrial Tribunal – cum – Labour Court by the Central Government, Ministry of Labour. The parties herein had filed their claim statement and the counter statement. Evidence was let in by the petitioners herein through one Karthikeyan, who is also a petitioner herein as W.W.1 and on behalf of the second respondent, the Deputy General Manager (Law) of the second respondent was examined as M.W.1. The Tribunal considered the claim of the parties herein by raising the following issues for its consideration: https://hcservices.ecourts.gov.in/hcservices/ "(i) Whether the dispute raised by the petitioners against the 1st respondent/Management to declare them as workers of 1st Respondent with effect from the date of their joining of service and for granting all benefits applicable to the employees of 1st respondent is justified? (ii) To what relief the petitioners 2 to 9 are entitled?" 4. In considering the various evidence of M.W.1 and W.W.1, the Tribunal came to the conclusion that the control and supervision exercised by the second respondent was only to ensure efficiency and quality of work, which is technical in nature and which has to be carried on under technical guidance. Going by the terms of the contract, which was marked as Ex.M.1 dated 12.8.1996, the Tribunal came to the conclusion that the entire control and supervision of the petitioners could not be treated as with the second respondent. The production of attendance register and duty roster did not establish the effective control by the second respondent. Thus the Tribunal came to the conclusion, based on Ex.M.1, that the contract is a genuine contract and there is nothing sham and nominal to reject the contention of the second respondent only to hold that the petitioners are the staff of the second respondent. 5. Principally, the contention of the petitioner rests on the following: (i) The test for determining as to whether the workers hired through the contractors could be treated as employees of the principal employer rests on nature of activity entrusted. where the nature of work entrusted to the contract workers are integral part of the activity of the establishment, the intervention of an intermediary, the absence of direct relationship between workers and the principal employer and the absence of control by the principal employer, payment of salary by the contractor and maintenance of attendance register by the contractor are not of any consequence. Hence, one has to lift the veil to look at the actual state of affairs governing employment. (ii) When the nature of job entrusted to the contract worker are the same as the one done by the regular employee, the agreement through which these contract labour are employed is a sham and fit to be rejected. 6. Going by Section 12(3)(o) of the Airport Authority of India Act, the obligation, be it incidental or convenient for the discharge of the function conferred or imposed on the respondent, the providing of a lift facility is an integrated activity. As such, the question of who has control over the contract labour is not of any consequence. Hence, the principle of integration is a relevant consideration to be applied in this case to find out the existence of employer-employee relationship. https://hcservices.ecourts.gov.in/hcservices/ 7. Before going into the contentions, the principle involved in a matter of this nature needs to be noted. 8. Learned counsel appearing for the petitioners placed reliance on the decisions reported in (1978) 4 SCC 257 (Hussainbhai, Calicut V. The Alath Factory Thezhilali Union, Kozhikode and others); (1987) 1 SCC 700 (Catering Cleaners of Southern Railway V. Union of India and another); (1974) 3 SCC 498 (Silver Jubilee Tailoring House and others V. Chief Inspector of Shops and Establishments and another); (2003) 7 SCC 488 (Mishra Chatu Nigam Ltd. and others V. M.Venkataiah and others); (1990) (Supp) SCC 668 (Sankar Mukherjee and others v. Union of India and others) and lastly (2004) 1 SCC 126 (Ram Singh and others V. Union Territory, Chandigarh and others) only to emphasize that the issue on the sham and nominal character of the contract has to be seen from the point of the integral activity of providing lift service by the second respondent and not by the mere terms of the agreement. In the context of the statutory obligations, the issue like maintenance of log book, attendance register, payment of salary and disciplinary action recite to the background and are not of much relevance to the case. In the circumstances, the view of the Tribunal suffers from fundamental error in its approach. 9. In the decision reported in (1978) 4 SCC 257 (Hussainbhai, Calicut V. The Alath Factory Thezhilali Union, Kozhikode and others), the Supreme Court laid the test for determining the workmen employed by the independent contractor to work in employer's factory. The said issue relates to hiring workmen through contractors by an industry manufacturing ropes. The Supreme Court pointed out to the admitted fact that the work done by the contract labour was an integral part of the industry concerned and the workmen were broadly under the control of the Management. In considering the obligation of the Management to treat them as their employees, the Supreme Court pointed out as follows: "5. The true test may, with brevity, be indicated once again. Where a worker or group of workers labours to produce goods or services and these goods or services are for the business of another, that other is, in fact, the employer. He has economic control over the workers' subsistence, skill, and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off. The presence of intermediate contractors with whom alone the workers have immediate or direct relationship ex contractu is of no consequence when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the Management, not the immediate contractor." https://hcservices.ecourts.gov.in/hcservices/ 10. In the decision reported in (1990) (Supp) SCC 668 (Sankar Mukherjee and others v. Union of India and others), the Apex Court considered the notification issued under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970. The said notification by the Government of West Bengal dealt with prohibiting the employment of contract labour in 16 departments covering 65 jobs in the establishment of Indian Iron & Steel Company Ltd. The list of Departments and the jobs are annexed in the schedule to the notification. One of the Departments related to Brick Department excluding the job of loading and unloading of bricks from the wagons and trucks. On a challenge made by the affected workers that they had been subjected to hostile discrimination so much so that the workmen doing the same job in other departments and allied jobs in the same department had been rescued from the system of contract labour, the Supreme Court pointed out that the bricks handled by the Brick Department were used in furnaces of the company as refractory and incidental to the industry carried on by the company. The petitioners therein were employed as contract labour by the company for the last 15 to 20 years. The Supreme Court further pointed out that even though the petitioners therein were not doing the job of stacking the bricks, there was no denial or any averment or material to show that the job of loading and unloading of bricks was not incidental or alike to the stacking of the bricks; on the other hand, they are one continuous process. That being so, the workers performing these jobs which are of perennial nature, are to be treated alike. The Supreme Court pointed out that the workers doing the job of loading and unloading from the wagons and trucks in the Brick Department are to be treated on par with those who are doing the job of cleaning and stacking in the said Department. The Supreme Court further pointed out that there was no reason as to why others doing the same job should be treated differently. 11. Great emphasis was placed by the learned counsel appearing for the petitioners on this judgment by contending that when the nature of job entrusted to the petitioners are no different from those who are permanently employed and that the operation of lifts is an integral activity of the second respondent herein, there are no grounds to treat these petitioners differently. Given the fact that the work performed by these petitioners, under the contract with the third respondent, are self-same as that of the regular employees, the second respondent cannot act in a discriminatory manner. Hence, it is not possible to engage one set of workers discharging the very same responsibilities as coming under contract labour. He further submits that the provisions contained in Section 12(3)(o) of the Airports Authority of India Act assumes significance. Read in the context of the said provision, the contract itself is sham and nominal. https://hcservices.ecourts.gov.in/hcservices/ 12. In considering the question as to the integrated activity, the decision reported in (1987) 1 SCC 700 (Catering Cleaners of Southern Railway V. Union of India and another), relied on by the petitioners, also needs to be noted. 13. This decision relates to a case of a contract labour engaged for cleaning catering establishments and pantry cars in Southern Railway. The Supreme Court pointed out that although contract system of employment has been abolished in almost all other Railways, the Southern Railways continued employing contract labour through a private agency for cleaning catering establishment and pantry cars to serve the public better. In considering the claim of the contract labour, the Supreme Court pointed out that the work of cleaning catering establishments and pantry cars is necessary and incidental to the industry or the business of the Southern Railway; the employment is of perennial nature and that the work required employment of sufficient number of whole-time workmen. Thus these factors satisfy the provisions under Section 10(2) of the Contract Labour (Regulation and Abolition) Act, 1970. Considering such factors, instead of issuing a Mandamus, the Supreme Court directed the Central Government to take appropriate action under Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970 in the matter of prohibiting employment of contract labour in the work of cleaning catering establishments and pantry cars in Southern Railway. The Supreme Court further directed that these workmen, who were previously employed by the contractor on the same wages and conditions of work as are applicable to those engaged in similar work in Western Railway, be absorbed without waiting for the decision of the Central Government. 14. Thus the above-said decision considered the case where the Railway Administration went in for a service to be extended to the travelling public, which does not, per se, come as an integrated activity or out of a statutory obligation. 15. The decision reported in (1974) 3 SCC 498 (Silver Jubilee Tailoring House and others V. Chief Inspect or of Shops and Establishments and another) relates to a case where certain employees claim the status of regular workers in a tailoring house "as employed in the establishment" within the meaning of Section 2(14) of the Shops and Establishments Act. The workers therein attended the shop every day, if there is work. The rate depended upon the skill of the worker and the nature of the work. If there is no work, the employee is free to leave the shop before the shop closes. It was pointed out that almost all the workers therein worked in the shop. Some workers were allowed to take cloth for stitching to their homes on certain days with the permission of the Proprietor of the shop. https://hcservices.ecourts.gov.in/hcservices/ 16. In considering the question as to whether there existed employer-employee relationship between the workers and the Management, the Supreme Court pointed out that the control test, which is normally adopted for considering the question like this, although it may be an important fact, yet, it is not an exclusive test or a decisive test. The Apex Court pointed out that if the ultimate authority over the performance of the work of the employee rested in the employer so that he was subject to the supervision of the principal employer, that would be sufficient. 17. On the facts of the case, the Supreme Court pointed out that where a person hires out a piece of work to an independent contractor, it follows that even if a person is not wholly employed, but if he is principally employed in connection with the business of the shop, he will be a 'person employed' within the meaning of Sub- Section (14) to Section 2 of the Shops and Establishments Act. 18. The decision reported in (2004) 1 SCC 126 (Ram Singh and others V. Union Territory, Chandigarh and others) relates to engaging of trained electricians through the instrument of contract in the sub-station to maintain supply of electricity. The Apex Court reiterated that in determining the relationship of employer and employee, even though 'control' test is an important test, it is not the sole test. On a claim made by these persons for regularisation of service, the Supreme Court considered the question as to whether the contract was genuine, sham or camouflage. In deciding such an issue, in paragraph 15 of the judgment, the Supreme Court pointed out that "in determining the relationship of employer and employee, no doubt, "control" is one of the important tests but is not to be taken as a sole test." It observed that "it is necessary to take a multiple pragmatic approach weighing up all the factors for and against the employment instead of going by the sole "test of control". An integrated approach is needed. "Integration" test is one of the relevant tests. It is applied by examining whether the person was fully integrated into the employer's concern or remained apart from and independent of it. The other factors which may be relevant are – who has the power to select and dismiss, to pay remuneration, deduct insurance contributions, organise the work, supply tools and materials and what are the "mutual obligations" between them. " 19. The Supreme Court further pointed out that the relationship of employer and employee may exist between him and the servants of such a contractor. The mere fact of formal employment by an independent contractor will not relieve the master of liability where the servant is, in fact, in his employment. In that event, it may be held that an independent contractor is created or is operating as a subterfuge and the employee will be regarded as the servant of the principal employer. https://hcservices.ecourts.gov.in/hcservices/ 20. In so considering this issue, the Apex Court referred to the decision in the case of Steel Authority of India Ltd. V. National Union Waterfront Workers reported in (2001) 7 SCC 1, where the Supreme Court considered the effect of Section 10 of the Contract Labour (Regulation and Abolition) Act. Ultimately, the Supreme Court held that the existence of a contract would be of material assistance when the question as to the integrated employment aspect comes to surface. In the above circumstances, the nature of the contract, the controlling aspect, or for that matter the mutual obligation, as such, would not be of prime importance in considering the question of employer-employee relationship. 21. In the decision reported in (2001) 7 SCC 1 (Steel Authority of India Ltd. V. National Union Waterfront Workers), the Supreme Court considered the question of automatic absorption of Contract Labour and the establishment of principal employer as a consequence of a abolition notification issued under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970. 22. The judgment referred to series of decisions of the Apex Court on the question of employing contract labour with reference to the integrated approach. In considering the said issue, the Supreme Court considered the earlier decision reported in (1978) 4 SCC 257 (Hussainbhai, Calicut V. The Alath Factory Thezhilali Union, Kozhikode and others), which was relied on by the learned counsel appearing for the petitioners. The Apex Court pointed to the contract labour employed in or in connection with the work of the establishment and cases where in discharge of the statutory obligation, the Management engaged the services through contract employment and pointed out as follows: "107. An analysis of the cases, discussed above, shows that they fall in three classes: (i) where contract labour is engaged in or in connection with the work of an establishment and employment of contract labour is prohibited either because the industrial adjudicator/court ordered abolition of contract labour or because the appropriate Government issued notification under Section 10(1) of the CLRA Act, no automatic absorption of the contract labour working in the establishment was ordered; (ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case the contract labour working in the establishment of the principal employer were held, in fact and in reality, the employees of the principal employer himself. Indeed, such cases do not relate to abolition of contract labour but present instances wherein the Court pierced the veil and declared the correct position as a fact https://hcservices.ecourts.gov.in/hcservices/ at the stage after employment of contract labour stood prohibited; (iii) where in discharge of a statutory obligation of maintaining a canteen in an establishment the principal employer availed the services of a contractor the courts have held that the contract labour would indeed be the employees of the principal employer. " 23. When a dispute is raised by any contract labour, the same has to be adjudicated upon by the Industrial Adjudicator to find out: " 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 is a mere ruse/camouflage to evade compliance with various beneficial legislations so as to deprive the workers of the benefit there under. Where the contract is found to be not genuine but a mere camouflage, the so-called contract labour will have to be treated as employees of the principal employer who shall be directed to regularise the services of the contract labour in the establishment concerned subject to the conditions as may be specified by it for that purpose in the light of para 6 hereunder." "6. If the contract is found to be genuine and prohibition notification under Section 10(1) of the CLRA Act in respect of the establishment concerned has been issued by the appropriate Government, prohibiting employment of contract labour in any process, operation or other work of any establishment and where in such process, operation or other work of the establishment the principal employer intends to employ regular workmen, he shall give preference to the erstwhile contract labour, if otherwise found suitable and, if necessary, by relaxing the condition as to maximum age appropriately, taking into consideration the age of the workers at the time of their initial employment by the contractor and also relaxing the condition as to academic qualifications other than technical qualifications." 24. The decision reported in (2003) 7 SCC 488 (Mishra Dhatu Nigam Ltd. and others V. M.Venkataiah and others) is also a case of contract employment in statutory canteens run by the contractor. The Supreme Court pointed out that where in discharge of a statutory https://hcservices.ecourts.gov.in/hcservices/ obligation of maintaining a canteen in an establishment the principal employer availed the services of a contractor, the contract labour would indeed be the employees of the principal employer and that such cases do not relate to or depend upon the abolition of contract labour. 25. The decision reported in (2005) 5 SCC 51 (Haldia Refinery Canteen Employees Union v. Indian Oil Corpn. Ltd.), relied on by the respondents, is also a case of statutory canteen. Repelling the contention of the Union that they are to be treated as employees of the Company, the Apex Court pointed out that the workers working in the canteen on contract labour are employees of the company only for the purposes of the Factories Act and are not the employees of the company. The Apex Court pointed out that the supervisory control exercised by the Management was only to ensure that the workers employed were well qualified and capable of rendering the services to the employees of the Management. Thus the Apex Court held the contract employees as not entitled to the relief of treating the contract employees as the workers of the principal employer. So too the decision reported in (2002) 1 SCC 337 (Hari Shankar Sharma Vs. Artificial Limbs Manufacturing Corporation), a case of statutory canteen. While considering the case of International Airport Authority of India giving licence to a private company to be its ground handling agent in respect of export import and transhipment of cargo consignments, the Apex Court held that merely because the contract labour is working under the supervision of the officers of the principal employer, it cannot be taken to be a direct evidence of direct employment under the principal employer. Exercise of some control over the activities of the contract labour while they discharge the service as labourers, is inevitable and such exercise is not sufficient to hold that the contract labour would become the direct employees of the principal employer. The Apex Court rejected the claim of the labour that the agreement was sham and nominal or a camouflage. 26. The decisions above-cited bring out two classes of employment taken on contract labour for