1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR 1. S.B. CIVIL WRIT PETITION NO.6803/1993 M/s. DCM Shriram Consolidated Ltd. Vs. State & Ors. 2. S.B. CIVIL WRIT PETITION NO.2184/1993 M/s. DCM Shriram Consolidated Ltd. Vs. State & Ors. Date of order : : 4th March, 2009. HON'BLE MR.JUSTICE MOHAMMAD RAFIQ Shri B.S. Ratnu for the petitioner. Shri Vigyan Shah for the respondent-Union. Shri Hemant Gupta, Addl. Govt. Counsel for the State. ****** REPORTABLE These two writ petitions have been filed by M/s. D.C.M. Shriram Consolidated Ltd. challenging the orders dated 17.9.1993 and 11.1.1993 respectively. The appropriate government vide order dated 17.9.1993 passed in Civil Writ Petition No.6803/93 exercising its powers under Section 10(1) read with Section 12(5) of the Industrial Disputes Act, 1947 (for short-`the Act of 1947') referred an industrial dispute to the Industrial Tribunal on the question whether closure of the establishment of Shriram Khad Programme by Executive Director of Shriram Fertilizers & Chemicals or by M/s. Grain Conservation 2 and Ware Housing Industrial Private Ltd. was legal and justified and further whether the employees engaged with the said establishment Shri Ram Khad Programme could be considered to be employees of M/s. Shriram Fertilizers & Chemicals Ltd. and if they are not held to be employees thereof and are held to have been engaged through contractor M/s. Grain Conservation and Ware Housing Industrial Private Ltd., then what is the liability of M/s. Shriram Fertilizers and Chemicals Ltd. towards them? In Civil Writ Petition No.2184/93, reference was made only to the effect whether action of the both the above mentioned principal employer and the contractor in terminating services of the employees concerned was legal and justified and if not, what relief they are entitled to? Since both the matters pertain to the employees engaged through the same contractor in the same establishment and for the same principal employer, therefore they were heard together and are being decided by this common judgement. Petitioner is a company registered under Indian Companies Act, 1956 and is a 3 Proprietor of the unit M/s. Shriram Fertilizers and Chemicals, which manufacturers and markets urea fertilizers. Petitioner company is one of the subsidiary companies of M/s. DCM Ltd. It had established its fertilizer plant at Kota some time in the year 1969 and got the same registered under the provisions of Contract Labour (Regulation & Abolition) Act, 1970 (for short-CLRA Act). The petitioner engaged M/s. Grain Conservation and Ware Housing Industries Private Ltd. which too was a registered company, for promoting sales of its products. An agreement was entered into between both of them on 9.5.1968 which was extended and substituted by subsequent agreements from time to time. M/s. Grain Conservation and Ware Housing Industrial Private Ltd. engaged services of various employees all over the India including the employees engaged for Shri Ram Khad Programme, Jaipur for whose benefit the present reference was made. According to the petitioner, the State Government earlier on the same subject matter and at the instance of the same respondent no.2 declined to make 4 reference on the same dispute by order dated 3.3.1993. Subsequently, however, the respondent union submitted a representation to the Government on 27.3.1993 for reconsideration of the matter. The Government served upon the petitioner a show cause notice on 26.4.1993 calling upon it to submit its comments / response to such a representation. Petitioner submitted reply to such notice and opposed the prayer for reconsideration. The Government however by the order impugned dated 17.9.1993 made the reference in first of these writ petitions. Reference in another writ petition being S.B. Civil Writ Petition No.2184/1993 was independently made by order dated 11.1.1993. I have heard Shri B.S. Ratnu, learned counsel for the petitioner and Shri Vigyan Shah, learned counsel for the respondent- Union. Shri B.S. Rantu, learned counsel for the petitioner argued that it was M/s. Grain Conservation and Ware Housing Industrial Private Ltd. which issued appointment letters to all the workmen engaged and exercised full supervision and control over 5 them. It used to charge commission and other remunerations payable to such employees from the petitioner-company. It also exercised disciplinary control over such employees. The petitioner was neither supervising nor controlling, nor taking any disciplinary action against the employees engaged through the said contractor. M/s. Grain Conservation and Ware Housing Industrial Private Ltd. used to transfer them in accordance with the exigencies of the work from one place to another. Some of the specimen copies of the appointment orders, transfer orders and sanction of T.A. bills and disciplinary orders passed against such employees have been placed on record. It was argued that the contractor also contributed towards provident fund of such employees. With the passage of the time, network of the petitioner-company itself expended and the use of fertilizers also became common and well known. There was therefore no further need to provide promotion of sale and incurring heavy financial liabilities by the petitioner-company in continuing its sales promotion programme through the contractor. 6 Contract with the respondent no.2, which is valid upto 30.6.1992, was therefore not extended any further and thus the contractor closed its establishment in respect of such promotion scheme known as Shri Ram Khad Programme and accordingly issued order of its closure dated 23.7.1992. It also tendered the amount of compensation and other dues to the employees. Shri B.S. Ratnu, learned counsel further argued that all those factors which weighed with the Government in subsequently making reference were already considered by it when the reference was earlier declined and there could be no legal justification for reviewing the matter again. It was argued that after the CLRA Act of 1970 was enforced, both the principal employer and the contractor in this case being registered under the said Act, the appropriate Government had no jurisdiction to make reference regarding any dispute relating to the employees of the contractor. The State Legislature brought about amendments in the definition of `workman' under Section 2(s) of the Industrial Disputes Act to include 7 even an employee engaged through the contractor and that of the employer under Section 2(g) so as to include owner of the industry for the purpose of contract employment. Even otherwise, general provisions of the Industrial Disputes Act would have to yield to the CLRA Act, which is a special enactment. Reliance in this connection was placed on the judgements of this Court in M/s. Delhi Cloth & General Mills Co. Ltd. vs. State of Rajasthan & Ors.-RLR 1991 (1) page 265 and another single bench judgement of this Court in M/s. Delhi Cloth & General Mills Co. Ltd. vs. State of Rajasthan, S.B. Civil Writ Petition No.1007/1980 decided on 26.11.l990. It was argued that when the employer has closed down the Shriram Khad Programme, there could be no valid dispute as regards the closure of the establishment. Learned counsel argued that the CLRA Act under its Section 21 has been given overriding effect over any other enactment even if there be inconsistency therewith. The Government has no jurisdiction to make the reference impleading the petitioner-company as party 8 in the adjudication proceedings as there did not exist employer and employee relationship between the petitioner-company and the employees of the contractor. Learned counsel in support of this submission relied on the judgement of the Supreme Court in Vegoils (P) Ltd. vs. Workmen-(1971) 2 SCC 724, Deena Nath & Ors. vs. National Fertilisers Ltd. & Ors.-(1992) 1 SCC 695. Per contra, Shri Vigyan Shah, learned counsel appearing for the respondent Shriram Khad Programme Employees Union argued that there is no impediment in law for making a reference with regard to closure of an establishment because whether or not the closure is valid, can be adjudicated by the industrial court itself. In doing so, such industrial court can entertain the additional question to this effect and enquire whether the compliance of sections 25FF or 25FFF of the Act has been made or not. Responding to the argument that since the Government earlier declined to make a reference, it could not subsequently refer the dispute, Shri Vigyan Shah, the learned counsel argued that power of the appropriate 9 Government under Section 10(1) of the Act does not cease to refer the dispute even if it has earlier taken a decision not to make such reference. Section 10 enables the State Government to make a reference of an industrial dispute, which exists or is apprehended “at any time” to one of the authorities mentioned in the Act. Learned counsel relied on the judgement of the Supreme Court in M/s. Avon Services Production Agencies Pvt. Ltd. vs. Industrial Tribunal Haryana & Ors.-(1979) 1 SCC 1 and argued that the Supreme Court in that case held that merely because the Government rejects a request for reference or declines to make a reference, it cannot be said that the industrial dispute has ceased to exist, nor could it be said to be a review of any judicial or quasi judicial order or determination. Having declined to make reference once, the Government does not lack the power to make a reference at a later point of time. The expression `at any time' in Section 10(1) will clearly negate the contention that once the Government declines to make a reference under section 10(1) its 10 power in respect of same subject matter gets exhausted. It was argued that even it is not mandatory for the appropriate government to hear the parties if it decides to make a reference after reviewing its earlier decision refusing to do so. Reliance in this connection was placed on the judgement of Bombay High Court in Automobile Corporation of Goa Ltd. vs. State of Goa-1995 (3) LLJ (Suppl.) Bombay (DB). However, in the present case, the appropriate Government prior to making the reference at the later stage, has duly served upon the petitioner a notice dated 26.4.1993 and the petitioner has joined issues with the Government and submitted reply to such notice. Shri Vigyan Shah, the learned counsel counsel argued that the Industrial Court has the power to adjudicate on a reference whether the contract is genuine or not, and if it comes to the conclusion that it is not, it will also have jurisdiction to grant suitable relief. Even when the contract is genuine and it is abolished by the appropriate government u/s.10 of the Act, the industrial court will have jurisdiction 11 to determine the status of the workmen of the erstwhile contractor. In regard to two judgments of this Court both titled M/s. Delhi Cloth and General Mills, supra, wherein it was held that State Government after promulgation of the CLRA Act, 1970 has no jurisdiction to refer dispute under Section 10 of the Act, it was argued that these judgements proceeded on the premise that CLRA Act, which is Central Act, will override the State amendment in the definition of workman under Section 2(s) and employer under section 2(g) in the Act of 1947 because Section 30 of the CLRA Act clearly provides that this Act shall have effect notwithstanding anything inconsistent therein contained in any other law. It was held by the judgements of this Court in M/s. Delhi Cloth Mill & General Mills, supra that CLRA Act being special enactment, which has been indicated by the legislature to apply on the subject of contract labour, would prevail. Learned counsel sought to distinguish the judgement of this Court in the aforesaid cases on the premise that these judgements are based on the earlier 12 judgement of Supreme Court in Vegoils Pvt. Ltd., supra and Sanghi Jeevraj Ghewar Chand vs. Secy., Madras Chillies, Grains Kirana Merchants Workers' Union-AIR 1969 SC 530 but this Court in the aforesaid judgments has not considered as to what would be the situation if the contract is sham or mere camouflage. Learned counsel in this connection relied on the judgement of Supreme Court in Gujarat Electricity Board vs. Hind Mazdoor Sabha-(1995) 5 SCC page 27 wherein the Supreme Court after considering th case of Vagoils, supra and Deena Nath, supra held that the appropriate Government has power to refer the dispute also in relation to contract labour u/s.10 of the Act and the industrial court can adjudicate whether the contract is a sham or camouflage to hide the reality and in case that is so, what relief the workmen were entitled to? It was held that even where the contract is genuine but it came to be abolished by the State Government u/s 10 of the CLRA Act, the industrial adjudicator will have jurisdiction to determine the right of the workmen of the erstwhile contractor. 13 Reliance was also placed on the constitution bench judgement of Supreme Court in Steel Authority of India & Ors. vs. National Union Waterfront Workers and Ors.-(2001) 7 SCC 1 in which it has been held that industrial adjudicator will have to consider the question 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 compliances with various beneficial legislations so as to deprive the workers of the benefits thereunder. If 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 regularize the services of the contract labour in the establishment concerned subject to the conditions as may be specified by it for that purpose. It was argued that in view of the subsequent development of the law on the subject matter following the judgement of Steel Authority 14 of India Ltd., industrial court can pass appropriate orders even for absorption of the workmen appointed through contractor if it comes to the conclusion that either the contract is not genuine or even if the contract is genuine, on abolition of it, workman can be absorbed in the industrial establishment if the works undertaken by them is still continuing in the establishment. This view was expressed by the Supreme Court in M/s. Steel Authority of India and has recently been reiterated in G.M. ONGC, Shilchar vs. ONGC Contractual Workers Union-JT 2008 (7) SC 309. It is therefore prayed that the writ petitions be dismissed. I have given my anxious consideration to the rival submissions and perused the material on record. Contention that the appropriate government having earlier declined the reference by order dated 3.3.1993 could not at later point of time on the same subject matter make the reference is devoid of any substance and is therefore liable to be rejected for the reasons that may be stated 15 just now. The appropriate government after it had passed the earlier order dated 3.3.1993 declining to make reference, received representation from the respondent union and its employees. It thereafter served upon the petitioner a specific notice calling upon it to show cause as to why the reference be not made to the industrial court. The petitioner duly replied that notice raising most of the arguments which it has raised before this Court now including the argument that the question of closure could not be examined by the industrial court because when the very establishment ceases to exist and with the clause of establishment, no dispute can be said to subsist. The appropriate government duly considered the objections raised by the petitioner and then passed a comprehensive order of reference taking care thereof. The mere fact that Shriram Khad Programme has been abandoned would not be a determinative factor for answering the formulated questions for adjudication of the industrial dispute as ultimately everything would turn on determination of the fact whether the 16 workmen concerned are held to be direct employees of the principal employer-namely any finding is returned as to the relationship of master or servant between them or otherwise. The Supreme Court in M/s. Avon Services Production Agencies (P) Ltd. vs. Industrial Tribunal, Haryana & Ors.- (1979) 1 SCC 1 in the context of Section 25FFF held that closure of a separate and distinct business or commercial or trading or industrial activity would merely amount to closure of a section of the manufacturing process and therefore would not amount to closure of an industrial undertaking and therefore Section 25FFF would not be attracted. In this very judgement it was held by the Supreme Court that the power of the appropriate government under Section 10 (1) to make reference of an industrial dispute was discretionary power and exercise of such power was an administrative function. Even if it has earlier declined to make reference, it can at a subsequent point of time, refer the same dispute. It was held that fresh or additional material to refer was not absolutely necessary, which would 17 depend upon the existence or continuance of the industrial dispute. The expression `at any time' as appearing in Section 10(111) clearly indicates the legislative intent that such dispute can be referred at any time. This argument of the petitioner therefore merits rejection and is accordingly rejected. Resistance of the petitioner to the orders of reference made by the appropriate government in the present case is primarily founded on the interpretation of law rendered by two coordinate benches of this Court in matters with the same titles namely; Delhi Cloth and General Mills Co. Ltd. and the judgement of Supreme Court in Vegoils (P) Ltd., supra and Deena Nath, supra. I shall proceed to first examine the law enunciated by coordinate bench of this Court in the above referred to judgements in the case of Delhi Cloth and General Mills Co. Ltd. In fact, the first judgement in S.B. Civil Writ Petition No.1007/1980 dated 26.11.1990 is itself based on the earlier judgement of Supreme Court in Vegoils (P) 18 Ltd. and relying on the authority of this judgement, it was held by this Court that after the CLRA Act came into force, the jurisdiction to decide the matters connected with prohibition of contract labour is now vested in the appropriate Government which could only do so after following the due procedure and in accordance with the provisions of that Act and that the Industrial Tribunal in the circumstances would have no jurisdiction. It was held that CLRA Act being special act would prevail upon the provisions of Industrial Disputes Act which is a general act and on that note, the order of reference made by the appropriate government was quashed. In second judgement rendered in S.B. Civil Writ Petition No.1218/1981 decided on 22.10.1991, while examining the efficacy of state amendments in the definition of workman under Section 2(s) and the employer under Section 2(g), it was held that CLRA Act which is a special enactment and a central enactment would in any case prevail upon the state amendment so made and further relying on Vegoils (P) Ltd. and Sanghi Jeevraj, it 19 was held that the order of reference on the matter of a contract labour was without jurisdiction. Position of law has since thereafter undergone a significant change. While Deena Nath was decided by the Supreme Court in 1991, the Supreme Court in Gujarat State Electricity Board while revisiting Vegoils (P) Ltd. in 1995, has sounded a discordant note. While revisiting Deena Nath, supra, and Vegoils (P) Ltd, and Sanghi Jeevraj, supra, the Supreme Court categorically held that industrial adjudicator has the jurisdiction to change the contractual relationships and also make new contracts between the employer and the employees under the Industrial Disputes Act. It is for this reason that in all cases where the contract labour is abolished, the industrial adjudicator depending upon the facts of the case will have the authority to direct the principal employer to absorb such of the workmen of the erstwhile contractor, on such terms as he may determine on the basis of relevant material before him. If the contract is a sham or not genuine, the 20 workmen of the so-called contractor can raise an industrial dispute for declaring that they were always the employees of the principal employer for claiming the appropriate service benefits. It was held that when such dispute is raised, it is not a dispute for abolition of the labour contract, hence the provisions of Section 10 of the CLRA Act will not bar either the raising or the adjudication of the dispute. When such dispute is raised, the industrial adjudicator has to decide whether the contract is a sham or genuine. It is only if the adjudicator decides that the contract is a sham, that he will have jurisdiction to adjudicate the dispute. If, however, he comes to the conclusion that the contract is genuine, he may refer the workmen to the appropriate Government for abolition of the contract labour under Section 10 of the Act and keep the dispute pending. It was categorically held that the industrial adjudicator is not debarred from investigating the factors mentioned in Section 10 of the CLRA Act, which enactment is not a complete code on contract labour. 21 Where the contract labour were on facts are found to be employees of the principal employer, determination of their espouse as such could not be denied merely on the ground of consequential difficulties likely to be faced by principal employer. Change in the position of law following judgement of the Supreme Court in Gujarat Electricity Board has thus completely taken away the premise on which was founded the judgement of this Court in M/s. Delhi Cloth and General Mill Ltd., supra and then the law enunciated by the Supreme Court in Gujarat Electricity Board was affirmed by Constitutional Bench of Supreme Court in Steel Authority of India Ltd. when a reference was made to the Constitutional Bench in view of the conflicting views expressed by different benches of equal strength by the Supreme Court. All the aforenoticed judgements of the Supreme Court which have been cited by learned counsel appearing on both the sides, were considered by the Constitutional Bench in Steel Authority of India in para 125(3) and (6) wherein it was held by the Supreme Court as 22 under: “125. The upshort of the above discussion is outlined thus: (1) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (2) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (3) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (4) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (5)On issuance of prohibition notification under Section 10(1) of the CLRA Act Prohibiting employment of contract labour or otherwise, in an industrial dispute brought before it by any contract labour in regard to question 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 thereunder. If 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 23 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 fond suitable and if necessary, by relaxing the condition as to maximum age appropriately, taking consideration the age of the workers at the time of their initial employment by the contract and also relaxing the condition as to academic qualifications other than technical qualifications.” A somewhat similar controversy in the