Case: Balwant Rai Saluja & Another Vs. Air India Ltd. & Others


Decision reasoning: 0[ds]21. By placing his fingers on Clause (iii) of paragraph 107, the learned counsel would contend that the said observation is the ratio of thedecision and, therefore, it is binding on all other Courts. We do notin our considered view, the observations made by the Constitution Bench in paragraph 107 of the Judgment by no stretch of imagination can be considered ‘the lawby the Court. We say so for the reason, the Court after noticing several decisions which were brought to its notice, has summarised the view expressed in those decision in three categories.In our view, the binding nature of a decision would extend to only observations on points raised and decided by the Court and neither on aspects which it has not decided nor had occasion to express its opinion upon. The observation made in a prior decision on a legal question which arose in a manner not requiring any decision and which was to an extent unnecessary, ought to be considered merely as an obiter dictum. We are further of the view that a ratio of the judgment or the principle upon which the question before the Court is decided must be considered as binding to be applied as an appropriate precedent.26. The Constitution Bench in Steel Authority ofcase (supra), decided on the limited issue surrounding the absorption of contract workers into the principal establishment pursuant to a notification issued by the appropriate Government under Section 10 of the Contract Labour (Abolition and Regulation) Act, 1970. The conclusion in paragraph 125 of Steel Authority ofcase (supra), inter alia, states that on issuance of a notification under Section 10(1) of Contract Labour (Abolition and Regulation) Act, 1970 passed by the appropriate Government would not entail the automatic absorption of contract workers operating in the establishment and the principal employer will not be burdened with any liability thereof. The issue surrounding workmen employed in statutory canteens and the liability of principal employer was neither argued nor subject of dispute in the Steel Authority ofcase (supra). Therefore, in our considered view the decision on which reliance was placed by learned counsel does not assist him in the facts of the present case.We conclude that the question as regards the status of workmen hired by a contractor to work in a statutory canteen established under the provisions of the Act, 1948 has been well settled by a catena of decisions of this Court. This Court is in agreement with the principle laid down in the Indian Petrochemicals case (supra) wherein it was held that the workmen of a statutory canteen would be the workmen of the establishment for the purpose of the Act, 1948 only and not for all other purposes. We add that the statutory obligation created under Section 46 of the Act, 1948, although establishes certain liability of the principal employer towards the workers employed in the given canteen facility, this must be restricted only to the Act, 1948 and it does not govern the rights of employees with reference to appointment, seniority, promotion, dismissal, disciplinary actions, retirement benefits, etc., which are the subject matter of various other legislations, policies, etc. Therefore, we cannot accept the submission of Shri Jayant Bhushan, learned counsel that the employees of the statutory Canteenbecome the employees of the principal employer.39. We may now refer to the various decisions, cited by learned counsel, Shri Jayant Bhushan.We are in agreement with the view expressed in MMR Khan case (supra). We further observe that the reasoning of the Court, as noticed hereinabove, was based on the Railway Establishment Rules and the relevant Administrative instructions issued by the Government of India. By virtue of the aforesaid Rules and Administrative instructions, it was made mandatory that the complete administrative control of the canteen be given to the Railway Administration. Such mandatory obligations are not present in the instant case. In light of the same, the given case cannot be said to be a precedent on the general proposition as regards the status of employees of a statutory canteen established under the Act, 1948.47. We have already referred to the decision of this Court in Parimal Chandra Raha case (supra), and, therefore, we are not referring to the said decision once over again.In light of the above discussion, in our view, the case laws on which the reliance is placed by learned counsel would not assist him to drive home the point canvassed.In the present reference, this Court is required to ascertain whether workmen, engaged on a casual or temporary basis by a contractor to operate and run a statutory canteen on the premises of a factory or corporation, can be said to be the workmen of the said factory or corporation.Articles of Association, it is stated therein that the HCI shall be asubsidiary of the Air India and that its share capital shall be held by the Air India and/or its nominees. Furthermore, the said Articles included provisions whereby Air India controls the composition of the Board of Directors of the HCI, including the power to remove any such director or even the Chairman of the Board. Further, Air India has the right to issue directions to the HCI, which the latter is bound to comply with. In this regard, it may be contended that the Air India has effective and absolute control over the HCI and that therefore latter is merely a veil between theand Air India. We do not agree with this contention.79. In support of the above we find that nothing has been brought before this Court to show that such provisions in the Articles of Association are either bad in law or would impose some liability upon the Air India, in terms of calling the appellants to be its own workers. In our view, the said Articles are not impermissible in law. It is our considered opinion that the doctrine of piercing the veil cannot be applied in the given factual scenario. Despite being a wholly owned subsidiary of the Air India, Respondent No. 1 and Respondent No. 2 are distinct legal entities. The management of business of the HCI is under its own Board of Directors. The issue relating to the appointment of the Board of Directors of the HCI by the Air India would be a consequence of statutory obligations of a wholly owned subsidiary under the Act,a perusal of the said documents, it is found that the said matters were, again, in the nature of supervision. In fact, most of these were as a consequence of the obligations imposed under the Rules, 1950. Air India, being the entity bearing the financial burden, would give suggestions on the running of the canteen. Furthermore, in light of complaints, issues or even suggestions raised by its own employees who would avail the said canteen services, Air India would put forth recommendations or requests to ensure the redressal of said complaints or grievances. As regards discussions over uniforms, prices, subsidies, etc., it may be noted that the same are obligations under the Rules, 1950 as applicable to Air India.84. In our considered view, and in light of the principles applied in the Haldia case (supra), such control would have nothing to do with either the appointment, dismissal or removal from service, or the taking of disciplinary action against the workmen working in the canteen. The mere fact that the Air India has a certain degree of control over the HCI, does not mean that the employees working in the canteen are the Airemployees. The Air India exercises control that is in the nature of supervision. Being the primary shareholder in the HCI and shouldering certain financial burdens such as providing with the subsidies as required by law, the Air India would be entitled to have an opinion or a say in ensuring effective utilization of resources, monetary or otherwise. The said supervision or control would appear to be merely to ensure due maintenance of standards and quality in the said canteen.85. Therefore, in our considered view and in light of the above, thecould not be said to be under the effective and absolute control of Air India. The Air India merely has control of supervision over the working of the given statutory canteen. Issues regarding appointment of the said workmen, their dismissal, payment of their salaries, etc. are within the control of the HCI. It cannot be then said that the appellants are the workmen of Air India and therefore are entitled to regularization of their services.86. It would be pertinent to mention, at this stage, that there is no parity in the nature of work, mode of appointment, experience, qualifications, etc., between the regular employees of the Air India and the workers of the given canteen. Therefore, thecannot be placed at the same footing as the Airregular employees, and thereby claim the same benefits as bestowed upon the latter. It would also be gainsaid to note the fact that themade no claim or prayer against either of the other respondents, that is, the HCI or the Chefair.87. In terms of the above, the reference is answered as follows :The workers engaged by a contractor to work in the statutory canteen of a factory would be the workers of the said factory, but only for the purposes of the Act, 1948, and not for other purposes, and further for the said workers, to be called the employees of the factory for all purposes, they would need to satisfy the test ofrelationship and it must be shown that the employer exercises absolute and effective control over the said workers.To ascertain whether the workers of the Contractor can be treated as the employees of the factory or company on whose premises they run the said statutory canteen, this Court must apply the test of complete administrative control. Furthermore, it would be necessary to show that there exists anrelationship between the factory and the workmen working in the canteen.Thus, it can be concluded that the relevant factors to be taken into consideration to establish anrelationship would include, inter alia, (i) who appoints the workers; (ii) who pays the salary/remuneration; (iii) who has the authority to dismiss; (iv) who can take disciplinary action; (v) whether there is continuity of service; and (vi) extent of control and supervision, i.e. whether there exists complete control and supervision. As regards, extent of control and supervision, we have already taken note of the observations in Bengal Nagpur Cotton Mills case (supra), the International Airport Authority of India case (supra) and the NALCO case (supra).62. In the present set of appeals, it is an admitted fact that the HCI is a wholly owned subsidiary of the Air India. Ithas been urged by the learned counsel for the appellants that this Court should pierce the veil and declare that the HCI is a sham and a camouflage. Therefore, the liability regarding the appellants herein would fall upon the Air India, not the HCI. In this regard, it would be pertinent to elaborate upon the concept of a subsidiary company and the principle of lifting the corporate veil.Thus, on relying upon the aforesaid decisions, the doctrine of piercing the veil allows the Court to disregard the separate legal personality of a company and impose liability upon the persons exercising real control over the said company. However, this principle has been and should be applied in a restrictive manner, that is, only in scenarios wherein it is evident that the company was a mere camouflage or sham deliberately created by the persons exercising control over the said company for the purpose of avoiding liability. The intent of piercing the veil must be such that would seek to remedy a wrong done by the persons controlling the company. The application would thus depend upon the peculiar facts and circumstances of each case.72. Having considered the relevant judicial decisions and the well established and settled principles, it would be appropriate to revert back to the controversy as found in the present factual matrix.73.In the present reference, this Court is required to ascertain whether workmen, engaged on a casual or temporary basis by a contractor to operate and run a statutory canteen on the premises of a factory or corporation, can be said to be the workmen of the said factory or corporation.It has been noticed above that workmen hired by a contractor to work in a statutory canteen established under the provisions of the Act, 1948 would be the said workmen of the given factory or corporation, but for the purpose of the Act, 1948 only and not for all other purposes. Therefore, thein the present case, in light of the settled principle of law, would be workmen of the Air India, but only for the purposes of the Act, 1948. Solely by virtue of this deemed status under the Act, 1948, the said workers would not be able to claim regularization in their employment from the Air India. As has been observed in the Indian Petrochemicals case (supra), the Act, 1948 does not govern the rights of employees with reference to recruitment, seniority, promotion, retirement benefits, etc. These are governed by other statutes, rules, contracts or policies.