IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 04 .01.2010 Coram The HONOURABLE MR.JUSTICE K.K.SASIDHARAN W.P.No.10861 of 2000 The General Manager Bharat Heavy Electricals Ltd., Ranipet. : Petitioner vs. 1. Canteen Wrokers of BHEL rep.by the BHEL Canteen Workers Union (Regd. 796/NAT) 282-N-Block Anna Nagar East Chennai-102. 2. The Secretary Indco Service Society Ltd., BHEL, Factory Complex Ranipet-632 406. 3. The Presiding Officer Labour Court Vellore. : Respondents PRAYER :- Writ Petition filed under Article 226 of the Constitution of India praying to issue a writ of Certiorari calling for the records connected with I.D.No.93/92 on the file of the third respondent and quash the award dated 17.12.1999. For Petitioner : Mr.Sanjoy Mohan for M/s.Ramasubramaniam Associates For Respondents : Mr.K.M.Ramesh for R1 M/s.Gupta and Ravi for R2 R3- Court. ORDER This writ petition is directed against the award of the Labour Court, Vellore dated 17-12-1999 in I.D.No.93 of 1992 whereby and whereunder the Labour Court declared the canteen workers of Bharat Heavy Electricals Limited (hereinafter referred to as "BHEL"), https://hcservices.ecourts.gov.in/hcservices/ Ranipet as their regular workers and directed the management to grant such status with effect from 23.11.1987 with all monetary benefits. BACKGROUND FACTS:- 2. The petitioner is a Public Sector Undertaking Company wholly owned by the Government of India, engaged in the manufacture of Heavy machinery. The petitioner Unit is located at Ranipet in the State of Tamil Nadu. 3. The petitioner has provided a canteen to its employees in accordance with Section 46 of the Factories Act, 1947. The canteen was originally managed by an independent contractor. Subsequently in the year 1986, the second respondent Society was formed by the workmen of the contractor. The second respondent (hereinafter referred to as "Society") is a labour Co-operative Society registered under the Tamil Nadu Co-operative Societies Act, 1961. 4. The petitioner has entered into a written agreement with the Society and as per the said agreement, the Society has to provide food to BHEL employees by employing their own personnel to run the canteen and the petitioner would pay the agreed amount. The Society was a separate entity by virtue of its constitution and registration as a Co-operative Society. The Society is governed by its own by- laws. 5. The management of the Society vests with the Board of Directors and the profit and loss as the case may be shall be borne by the Society. The Society is answerable to the Registrar of Industrial Co-operative Societies. The admission and expulsion of the members of the Society are as per the terms of the by-laws and the status of the members of the Society is totally independent and unconnected with the employees of BHEL. The petitioner has no financial or supervisory control over the Society. 6. The Society had obtained a separate licence under Section 12 of the Contract Labour (Regulation and Abolition) Act, 1970 and as such it is a "Contractor" within the meaning of the said Act. The workmen employed by the Society are neither directly nor indirectly employed by BHEL. They have no lien on BHEL in terms of their employment, wages or conditions of service. The workmen were under the direct control of the Society and there never existed Master – Servant relationship between the members of the first respondent Union (hereinafter referred to as "Union") and BHEL. BHEL was nothing more than a principal employer as defined under the Contract Labour Act, 1970. The Society has been functioning as a separate entity catering to the needs of the workers of BHEL on the basis of the agreement executed from time to time. https://hcservices.ecourts.gov.in/hcservices/ 7. While the matters stood thus, the Union made a demand that the workmen of the Society should be conferred with permanent status in BHEL. The Union approached the Labour Officer for conciliation. BHEL appeared before the Labour Officer and submitted their explanation on 13.1.1988. BHEL maintained that the workmen employed by the Society never functioned as their employees and as such there was no legal relationship of employer-employee between the parties. However the Union persisted in their demand. Ultimately the Government of Tamil Nadu referred the matter to the Labour Court for adjudication. The order of reference was challenged by the petitioner before this Court in W.P.No.15145 of 1988. The writ petition was disposed of as per order dated 3.12.1997 directing the Labour Court to decide the issues taking note of the objections submitted by BHEL. 8. The dispute was originally pending before the II Additional Labour Court, Madras. Subsequently it was transferred to the Labour Court, Vellore and it was registered as I.D.No.93 of 1992. The dispute was initially raised by the Anna Workers Union. Subsequently BHEL Canteen Workers Union stepped into the shoes of Anna Workers Union and the dispute was prosecuted by them before the Labour Court. 9. Before the Labour Court, BHEL demonstrated that there was no employer-employee relationship between the parties. BHEL has also placed reliance on various provisions of the by-laws of the Society to substantiate their contention that the Society is an independent entity and BHEL has no control in respect of its affairs. 10. The agreement entered into between BHEL and the Society was also placed before the Labour Court. However the Labour Court concluded that the agreement was sham and nominal and it was only BHEL, who was running the canteen. Accordingly the dispute was answered by directing the management of BHEL to grant permanent status to the workers of the canteen. Accordingly BHEL is before this Court. SUBMISSIONS:- 11. The learned counsel for the petitioner would contend thus:- (a) BHEL is a factory employing more than 250 workers and as such there was a statutory requirement to provide canteen. Section 46 of the Factories Act, 1948 provides for establishment and maintenance of such canteens. The Government of Tamil Nadu framed rules and those rules also indicates the mandatory requirement of providing various facilities in the canteens. It was only in such circumstances BHEL has appointed the Society to run the canteen. https://hcservices.ecourts.gov.in/hcservices/ (b) The second respondent Society is a separate legal entity. The Society has its own by-laws. The Society is manned by the Board of Directors comprising the representatives of both BHEL and the workers of the Soceity. The Government is also entitled to nominate one Director. The Chief Executive Officer of the Society is a Government servant. Therefore the Society has an independent existence and BHEL has no persuasive control over the Society. (c) The mere fact that the canteen is a statutory canteen established by BHEL as per Section 46 of the Factories Act, it cannot be said that the factory is run by BHEL and the workers of the canteen are its workers. (d) The Labour Court posed a wrong question and answered the same in a perverse manner. (e) The finding recorded by the Labour Court that BHEL through its officers exercises control over the management of the Society and the canteen, has no factual basis and as such it was a perverse finding. (f) The Society has got an elected Board of Management and the daily administration of the Society is conducted by none other than the officer appointed by the Government. Therefore the Society does not satisfy the management test so as to arrive at a finding that the management of the Society is being carried on only by BHEL . (g) BHEL is obliged to conduct the canteen in its factory premises. The rules also contain a mandate that the canteen should be inside or near the factory. Therefore merely on the ground that the canteen is located inside the factory, it cannot be said that the Society is controlled by BHEL. (h) The Labour Court observed that finance to run the Society was made available only by BHEL. However the accounts shows that the Society has got its own finance and it also collects share capital from members. Therefore the said finding is also erroneous. (i) The supply of basic materials were given to the Society only as per the agreement. BHEL was giving subsidised food to its workers and as such responsibility to procure groceries and other materials vests with BHEL. Similarly the vessels, crockeries and other items necessary for running the canteen are also to be provided by BHEL as per agreement. Therefore BHEL was providing these items only as per the agreement executed with the Society. In such circumstances it cannot be said that the supply of these materials would prove that the canteen was run by none other than BHEL. https://hcservices.ecourts.gov.in/hcservices/ (j) The economic control test was taken as another ground to decide the matter against BHEL. It is true that BHEL has engaged its own workers to supervise the canteen. That was only for the purpose of satisfying itself that quality food was given to the workers of the factory. The said fact cannot be taken as a reason to come to the conclusion that the canteen was run only by BHEL through its workers. (k) The Labour Court has placed reliance on Ex.W.10 dated 29.2.1998 and observed that the recruitment of the staff to the canteen were also done by BHEL. The document in Ex.W.10 was a stray document which has nothing to do with BHEL. Merely because BHEL recommended the case of a candidate for appointment it cannot be said that the recruitment was conducted only by BHEL. (l) The Labour Court observed that the salary and other allowances of the workers were conditioned by BHEL. BHEL was only giving the agreed amount to the Society. It was the look out of the Society to disburse wages to its members as per the pay structure devised by the Society. (m) The Labour Court by taking note of the fact that the supervisors of BHEL were employed in the canteen observed that the canteen was supervised and run by none other than BHEL. The supervisors were engaged by BHEL only to ensure that its workers were given superior quality food on time. The quality and quantity of food was of serious concern to BHEL and it was only to protect the interest of the workers, supervisors were posted in the canteen. The said supervisory control cannot be treated as an effective control of the Society. (n) The medical and other facilities to the workers of the Canteen were provided by BHEL only to run the canteen in an efficient manner. The workers of the canteen are the workers of the factory within the meaning of the Factories Act. Therefore BHEL was bound to give medical facilities to the workers of the canteen. Those factors cannot be taken against BHEL as conclusive proof of management of the canteen by BHEL. (o) The statutory obligation of BHEL under Section 46 of the Factories Act was also taken as a pointer by the Labour Court to decide the matter against BHEL. The statutory requirement under Section 46 of the Factories Act was considered by the Supreme Court time and again and it was categorically held that merely because the company was providing a statutory canteen, it cannot be said that the workers of the canteen are in effect the workers of the company. (p) The accounts of the Society clearly shows that it was having a budget and provisions were made for payment of salary and https://hcservices.ecourts.gov.in/hcservices/ dividend to its members. Therefore the Society was managing its affairs independently without the control of BHEL. (q) The learned counsel for the petitioner placed reliance on the following judgments to substantiate his contentions . (1) M.E. Ilangovan and Ors. v. Madras Refineries Ltd. (2005(1) MLJ 686) (2) Haldia Refinary Canteen Employees Union v. Indian Oil Corportion Ltd., 2005 (5) SCC 51. (3) International Airport Authoirty of India v. International Air Cargo Workers' Union and Anr. (JT 2009(8) SCC 661). 12. The learned counsel for the Union supported the award passed by the Labour Court. The learned counsel made the following submissions:- (a) The workmen of the Society were originally employed by the contractor. During the year 1986, BHEL represented that it was difficult to absorb the canteen workers in BHEL. Accordingly it was agreed to organise an Industrial Co-operative Society with a clear understanding that the workers then working with the contractor would be given preference for regular employment in BHEL subject to vacancy. Their seniority in the canteen also would be taken into consideration for such appointments. Therefore BHEL has specifically agreed to treat the workers of the canteen as its workers and the Society was formed only as an interim measure till the actual absorption of the workers of the Society hitherto employed under the contractor. (b) Though the Society was having a Board of Management, the actual control of the Society was always in BHEL. BHEL has employed its own supervisors and they are looking after the affairs of the canteen. The provisions and other groceries used to be purchased only by BHEL and it would be kept only in their godown. It would be given to the canteen daily wise. The godown is also under the lock and key of BHEL. Therefore the day-to-day management of the Society was conducted only by BHEL. (c) The wages of the workers used to be revised now and then by BHEL. Whenever there was revision of wages in BHEL, the same would be extended to the workers of the canteen. The said practice is evident from the exhibits marked before the Labour Court. (d) The food coupons were issued to the workers only by BHEL employees and the cash box of the canteen was also handled only by BHEL employees. Therefore the effective management was only with BHEL. https://hcservices.ecourts.gov.in/hcservices/ (e) The learned counsel placed reliance on the following judgments. (1) Parimal Chandra Raha v. LIC, 1995 Supp (2) SCC 611. (2) Indian Petrochemicals Corpn. Ltd. v. Shramik Sena, (1999) 6 SCC 439. ANALYSIS:- 13. The petitioner is a factory within the meaning of Section 2(m) of the Factories Act, 1948. The Factories Act contains provisions for the welfare of the workers. Section 46 of the Act provides that in any specified factory wherein more than two hundred and fifty workers are ordinarily employed, a canteen or canteens shall be provided and maintained by the occupier for the use of the workers. Since the petitioner has employed more than two hundred and fifty workers, they are bound to provide and maintain a canteen for the use of its workers. 14. There is no dispute that originally the canteen was entrusted to a private contractor by BHEL. The contractor was running the canteen on the basis of an agreement executed with BHEL. The members of the Union were the workers of the contractor. It was only in the year 1986, the idea of incorporating a Co-operative Society was emerged in the meeting between the management of BHEL and the Union. The letter dated 12.6.1986 sent by the Union to BHEL contains a reference about the discussion. In fact the Labour Commissioner as per letter dated 30.11.1985 called upon the management of BHEL to inspect MRL Industrial Co-operative Service Society Limited and to form a Society of such kind in BHEL. It appears that the said suggestion also made an impact in coming to an agreement with the workers to organise an Industrial Co-operative Society. 15. The Society was constituted as an Industrial Service Co- operative Society. The membership of the Society was restricted to the workers of the contractor engaged for running canteen and to look after sanitation at BHEL, Ranipet. Those persons who are above eighteen years of age and whose lands were acquired under the Land Acquisition Act for the establishment of BHEL, Ranipet and eligible for employment in BHEL but not employed in BHEL on the date of registration of the Society were also given the right to be enrolled as members of the Society. 16. The Board of management of the Society consists of three nominees of BHEL, one from the State Government and another three to be elected from the worker members. As per the by-laws, the Society has to be managed by the Board of Management and the day-to-day affairs would be conducted by the President through the Chief Executive Officer. The President shall have a general control over https://hcservices.ecourts.gov.in/hcservices/ the affairs of the Society and he was expected to monitor the day-to- day administration of the Society. 17. There is no dispute about the constitution of the Society and the fact that its original members were none other than the workers employed in the statutory canteen till the formation of the Society. There are agreements entered into between BHEL and the Society which contains provisions regarding the nature of functioning of the Society. 18. The core question to be decided in this writ petition is as to whether the employees of the Society are in effect the employees of BHEL by virtue of the persuasive control of BHEL over the Society. 19. Disputes regarding nature of employment of workmen in statutory and non-statutory canteens were the subject matter before the Supreme Court time and again. There were two kinds of canteens. Those canteens which were established as per the provisions of the Factories Act were termed as statutory canteens. Other canteens which were established by the management without such compulsion were termed as non-statutory canteens. 20. Before considering the facts of this case, for the purpose of coming to a conclusion as to whether the canteen was run only by BHEL and the Society was only sham and nominal, it is necessary to consider the decisions of the Supreme Court on point. PRECEDENT:- 21. In Dhrangadhra Chemical Works Ltd. v. State of Saurashtra, {AIR 1957 SC 264 = 1957 SCR 152} the Supreme Court indicated the principles according to which the relationship of an employer and employee or Master and Servant has to be determined. "13. The principle which emerges from these authorities is that the prima facie test for the determination of the relationship between master and servant is the existence of the right in the master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do but also the manner in which he shall do his work, or to borrow the words of Lord Uthwatt at p. 23 in Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool) Ltd.5 “The proper test is whether or not the hirer had authority to control the manner of execution of the act in question”. https://hcservices.ecourts.gov.in/hcservices/ 14. The nature or extent of control which is requisite to establish the relationship of employer and employee must necessarily vary from business to business and is by its very nature incapable of precise definition. As has been noted above, recent pronouncements of the Court of Appeal in England have even expressed the view that it is not necessary for holding that a person is an employee, that the employer should be proved to have exercised control over his work, that the test of control was not one of universal application and that there were many contracts in which the master could not control the manner in which the work was done. 15. The correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer." 22. In Silver Jubilee Tailoring House v. Chief Inspector of Shops & Establishments, {1973(2) LLJ 495 = (1974) 3 SCC 498} the workmen were engaged by the management on piece-rate basis. The workers were also paid on piece-rate basis. The Workers generally attend the shops every day if there was work. The rate of wages paid to the workers were not uniform. The rate depended on the skill of the worker and the nature of work. When cloth was given for stitching to a worker after it has been cut, the worker was told how he should stitch it. If he does not stitch it according to the instruction, the employer rejects the work and he generally asks the worker to re- stitch the same. When the work was not done by a worker according to the instructions, generally no further work would be given to him. If a worker does not want to go for work to the shop on a day, he does not make any application for leave, nor was there any obligation on his part to inform the employer that he will not attend for work on that day. If there was no work, the employee was free to leave the shop before the shop closes. Almost all the workers did their work in the shop. Some workers were allowed to take cloth for stitching to their homes on certain days. But it was done always with the permission of the proprietor of the shop. The machines installed in the shop absolutely belonged to the proprietor of the shop and the premises and the shop in which the work was carried on also belongs to him. https://hcservices.ecourts.gov.in/hcservices/ The question posed before the Supreme Court was whether from the above circumstances, the conclusion drawn by the Chief Inspector of Shops and Establishments and the High Court that there existed employer-employee relationship was correct. The Supreme Court considered series of cases including D.C.Dewan Mohideen Sahib and Sons v. The Industrial Tribunal, Madras (1964(2) LLJ 633) relating to contractors supplying leaves and tobacco from the owner and employing workmen for manufacturing beedies. The Supreme Court observed thus:- "28. It is exceedingly doubtful today whether the search for a formula in the nature of a single test to tell a contract of service from a contract for service will serve any useful purpose. The most that profitably can be done is to examine all the factors that have been referred to in the cases on the topic. Clearly, not all of these factors would be relevant in all these cases or have the same weight in all cases. It is equally clear that no magic formula can be propounded, which factors should in any case be treated as determining ones. The plain fact is that in a large number of cases, the Court can only perform a balancing operation weighing up the factors which point in one direction and balancing them against those pointing in the opposite direction. 29. During the last two decades the emphasis in the field has shifted and no longer rests so strongly upon the question of control. Control is obviously an important factor and in many cases it may still be the decisive factor. But it is wrong to say that in every case it is decisive. It is now no more than a factor, although an important one. 35...... The degree of control and supervision would be different in different types of business. If an ultimate authority over the worker in the performance of his work resided in the employer so that he was subject to the latter’s direction, that would be sufficient." 23. In Hussainbhai v. Alath Factory Thezhilali Union, (1978) 4 SCC 257, the issue before the Supreme Court was as to whether the workmen employed by an independent contractor to work in the factory https://hcservices.ecourts.gov.in/hcservices/ for manufacturing ropes were workers and as to whether there was a relationship of employer-employee between them. In Hussainbhai's case, the industry was engaged in the manufacture of ropes. Large number of workmen were engaged to make ropes within the factory. When their engagement was put an end, it was challenged before the Tribunal. The Tribunal allowed the claim of the workers and it was confirmed by a learned Single Judge as well as the Division Bench of the High Court. The Supreme Court indicated the factual position thus:- "2. ......It is not in dispute that the work done by these workmen was an integral part of the industry concerned; that the raw material was supplied by the Management; that