Case: THE DIRECTOR, STEEL AUTHORITY OF INDIA LIMITED Vs. ISPAT KHADAN JANTA MAZDOOR UNION

1961 and other statutory measures which are applicable over the establishment of the appellant including various welfare schemes which provide safety and security of the workers. To say so, every establishment is under obligation to implement the mandate of law but that could not be a determining factor/denominator to test the contract agreement entered between the parties in arriving to a conclusion that such an agreement is sham, nominal or camouflage as held by the High Court in its impugned judgment.43. The High Court appears to be primarily persuaded with the issuance of a prohibition notification under Section 10(1) of the CLRA Act as one of the salient factor to indicate that the committee constituted under the Act, after examining various factors including perennial nature of work, under the CLRA Act has recommended for abolition of contract labour and accepted by the Central Government coupled with the continuation of employment of contract labour after issuance of the prohibition notification under Section 10(1) of the CLRA Act in holding that the action of the establishment was opposed to the public policy principles enshrined under Section 23 of the Indian Contract Act and taking work from the contract labour was in violation of the statutory notification dated 17 th March, 1993 and that appears to be the reason which persuaded to hold that the finding recorded by the Tribunal that contractors had full control and supervision over the work in view of the functioning of the scheme of mines was unsustainable, instead holding the total control and supervision was that of management of the appellant and the contract was sham and bogus and also the fact that in all the agreements executed between the parties, there was a provision of abolition of contract labour in the matter of work of a perennial in nature and certain other conditions of agreement in recording its satisfaction that the contract was sham and bogus.44. In our considered view, the finding recorded by the High Court under the impugned judgment is not sustainable for the reason that effect of the prohibition notification under Section 10(1) of CLRA Act has been settled by the Constitution Bench of this Court in Steel Authority of India Ltd. and Others (supra) and this Court has made it clear that neither Section 10 nor any provision in the CLRA Act provides for automatic absorption of contract labour on issuance of prohibition notification by the appropriate Government under Section 10(1) of the CLRA Act and the Tribunal in the first place being the fact finding authority has extensively examined the documentary and oral evidence which came on record and also the relationship of principal employer, contractor and contract labour and the fact that their services were terminated by the contractor after the contract labour proceeded on a strike in April 1996.45. The Tribunal also considered various other factors in extenso regarding the wage slips, identity cards and the nature of work being discharged by the contract labour subsequent to the prohibition notification dated 17 th March, 1993 and other documentary evidence which came on record and recorded the finding in return that the contract between the contractor and the employee was not sham and bogus and the workmen were not entitled for their absorption in service of the principal employer.46. To test it further, apart from the statutory compliance which every principal establishment is under an obligation to comply with, its non-compliance or breach may at best entail in penal consequences which is always for the safety and security of the employee/workmen which has been hired for discharge of the nature of job in a particular establishment. The exposition of law has been further considered in International Airport Authority of India case(supra) where the contract was to supply of labour and necessary labour was supplied by the contractor who worked under the directions, supervision and control of the principal employer, that in itself will not in any manner construe the contract entered between the contractor and contract labour to be sham and bogus per se.47. Thus, in our considered view, if the scheme of the CLRA Act and other legislative enactments which the principal establishment has to comply with under the mandate of law and taking note of the oral and documentary evidence which came on record, the finding which has been recorded by the CGIT under its award dated 16 th September, 2009 in absence of the finding of fact recorded being perverse or being of no evidence and even if there are two views which could possibly be arrived at, the view expressed by the Tribunal ordinarily was not open to be interfered with by the High Court under its limited scope of judicial review under Article 226/227 of the Constitution of India and this exposition has been settled by this Court in its various judicial precedents.48. It is true that judgment in Dena Nath and Others (supra) is in reference to failure of compliance of Section 7 and 12 and not in reference to Section 10(1) of the CLRA Act but if we look into the scheme of CLRA Act which is a complete code in itself, non-compliance or violation or breach of the provisions of the CLRA Act, it result into penal consequences as has been referred to in Sections 23 to 25 of the Act and there is no provision which would entail any other consequence other than provided under Section 23 to 25 of the Act.49. In our considered view, the Tribunal under its award dated 16 th September, 2009 has rightly arrived to the conclusion that the contract was not sham and bogus and there shall be no automatic absorption of contract labour on issuance of a prohibition notification under the CLRA Act and the High Court of Madhya Pradesh has committed a manifest error in reversing the finding of fact in return under its impugned judgment dated 6 th September, 2010 which, in our view, is not sustainable and deserves to be set aside.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]33. The exposition of the judgment of the Constitution Bench of this Court made it clear that neither Section 10 nor any other provision in the CLRA Act provides for automatic absorption of contract labour on issuing a notification by the appropriate Government under Section 10(1) of the CLRA Act, and consequently the principal employer is not required or is under legal obligation by operation of law to absorb the contract labour working in the establishment.34. This court in Steel Authority of India Ltd. and Others (supra) further held that on a issuance of notification under Section 10(1) of the CLRA Act, prohibiting employment of contract labour in any process, operation or other work, if an industrial dispute is raised by any contract labour in regard to condition of service, it is for the industrial adjudicator to consider 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 as a mere ruse/camouflage to evade compliance with various beneficial legislations so as to deprive the workers of statutory benefits. If the contract is found to be sham, nominal or camouflage, then the so-called labour will have to be treated as direct employee of the principal employer and the industrial adjudicator should direct the principal employer to regularise their services in the establishment subject to such conditions as it may specify for that purpose in the facts and circumstances of the case.35. On the other hand, if the contract is found to be genuine and a prohibition notification has been issued under Section 10(1) of the CLRA Act, in respect of the establishment, the principal employer intending to employ regular workmen for the process, operation or other work of the establishment in regard to which the prohibition notification has been issued, it shall give preference to the erstwhile contract labour if otherwise found suitable, if necessary by giving relaxation of age as it appears to be in fulfilment of the mandate of Section 25(H) of the Industrial Disputes Act, 1947.These are the broad tests which have been laid down by this Court in examining the nature and control of the employer and whether the agreement pursuant to which contract labour has been engaged through contractor can be said to be sham, nominal and camouflage.39. It was not disputed in the instant case that the contract labourer who were working under a tripartite agreement were allowed to continue under the self-same agreement executed prior to the prohibition notification dated 17 th March, 1993 and extended from time to time by the competent authority even after issuance of the prohibition notification and the services of the contract workers were terminated by the contractor through whom they were engaged after they proceeded on strike in April, 1996.40. The Tribunal in its award dated 16 th September, 2009 has recorded a finding of fact based on oral and documentary evidence placed by the respective parties on record in reference to the fact whether the contract was sham and bogus which was a primary cause of adjudication and it was observed that the contractors employed the contract labour on their own and they were the appointing authority. Witnesses Mangal and Kodulal (contract labourer) were examined and in their cross-examination they have stated that before the issuance of notification dated 17 th March, 1993, they were workers of the contractor and payment was made to them by the contractors, wage slips also show that the wages were being paid by the contractors. Other witnesses also in cross-examination have supported that half of the PF amount of the workers were deposited by their respective contractors. Exh. W/39 to W/54 submitted by the contract labours are the photocopies of the identity cards, pay slips, PF slips etc. These pay slips and identity cards do not show that all 3079 workers were working after the notification dated 17 th March, 1993 without break because number of these documents are of prior to the notification. It further observed that all the agreements between the management and the contractors are entered into prior to the notification dated 17 th March, 1993 prohibiting employment of contract labour and only extended thereafter from time to time. It goes to show that there was no fresh contract thereafter ever entered between the parties. Exh. M/8 filed in R-721/05 and the evidence of the witnesses shows that the contractor had terminated the services of the contract labour in April 1996 and transferred some of the contract labourers from the place of work and was the disciplinary authority.41. It was further observed that the contractors had full control over the skilled and professional work and the SAIL had right to reject the limestone, if it was not within the specified approved grade as per terms and conditions of the agreement and after extensive appreciation of the oral/documentary evidence on record, CGIT recorded a finding of fact holding that the contract was not sham and bogus at least up to the date of issuance of the prohibition notification dated 17 th March, 1993. Although in paragraph 85 of the award the Tribunal has recorded a finding that after the issuance of prohibition notification dated 17 th March, 1993 by operation of law, it became sham and bogus but in our considered view, such a finding recorded in para 85 of the Award dated 16 th September, 2009 is not sustainable in law for the simple reason that mere issuance of the prohibition notification under CLRA Act will not make the contract/agreement to be void ab initio or bad in law and if the employees are allowed to continue in terms of the earlier agreement after the prohibition notification under CLRA Act has come into force, it may be illegal and continuance of service in the absence of any contract which stands extinguished by virtue of prohibition notification has to face the penal consequences as embedded under the scheme of CLRA Act.42. The High Court has taken note of the various provisions of Mines Creche Rules, 1966, Maternity Benefits Act, Mines Act, 1952 and Metalliferous Mines Regulations, 1961 and other statutory measures which are applicable over the establishment of the appellant including various welfare schemes which provide safety and security of the workers. To say so, every establishment is under obligation to implement the mandate of law but that could not be a determining factor/denominator to test the contract agreement entered between the parties in arriving to a conclusion that such an agreement is sham, nominal or camouflage as held by the High Court in its impugned judgment.43. The High Court appears to be primarily persuaded with the issuance of a prohibition notification under Section 10(1) of the CLRA Act as one of the salient factor to indicate that the committee constituted under the Act, after examining various factors including perennial nature of work, under the CLRA Act has recommended for abolition of contract labour and accepted by the Central Government coupled with the continuation of employment of contract labour after issuance of the prohibition notification under Section 10(1) of the CLRA Act in holding that the action of the establishment was opposed to the public policy principles enshrined under Section 23 of the Indian Contract Act and taking work from the contract labour was in violation of the statutory notification dated 17 th March, 1993 and that appears to be the reason which persuaded to hold that the finding recorded by the Tribunal that contractors had full control and supervision over the work in view of the functioning of the scheme of mines was unsustainable, instead holding the total control and supervision was that of management of the appellant and the contract was sham and bogus and also the fact that in all the agreements executed between the parties, there was a provision of abolition of contract labour in the matter of work of a perennial in nature and certain other conditions of agreement in recording its satisfaction that the contract was sham and bogus.44. In our considered view, the finding recorded by the High Court under the impugned judgment is not sustainable for the reason that effect of the prohibition notification under Section 10(1) of CLRA Act has been settled by the Constitution Bench of this Court in Steel Authority of India Ltd. and Others (supra) and this Court has made it clear that neither Section 10 nor any provision in the CLRA Act provides for automatic absorption of contract labour on issuance of prohibition notification by the appropriate Government under Section 10(1) of the CLRA Act and the Tribunal in the first place being the fact finding authority has extensively examined the documentary and oral evidence which came on record and also the relationship of principal employer, contractor and contract labour and the fact that their services were terminated by the contractor after the contract labour proceeded on a strike in April 1996.45. The Tribunal also considered various other factors in extenso regarding the wage slips, identity cards and the nature of work being discharged by the contract labour subsequent to the prohibition notification dated 17 th March, 1993 and other documentary evidence which came on record and recorded the finding in return that the contract between the contractor and the employee was not sham and bogus and the workmen were not entitled for their absorption in service of the principal employer.46. To test it further, apart from the statutory compliance which every principal establishment is under an obligation to comply with, its non-compliance or breach may at best entail in penal consequences which is always for the safety and security of the employee/workmen which has been hired for discharge of the nature of job in a particular establishment. The exposition of law has been further considered in International Airport Authority of India case(supra) where the contract was to supply of labour and necessary labour was supplied by the contractor who worked under the directions, supervision and control of the principal employer, that in itself will not in any manner construe the contract entered between the contractor and contract labour to be sham and bogus per se.47. Thus, in our considered view, if the scheme of the CLRA Act and other legislative enactments which the principal establishment has to comply with under the mandate of law and taking note of the oral and documentary evidence which came on record, the finding which has been recorded by the CGIT under its award dated 16 th September, 2009 in absence of the finding of fact recorded being perverse or being of no evidence and even if there are two views which could possibly be arrived at, the view expressed by the Tribunal ordinarily was not open to be interfered with by the High Court under its limited scope of judicial review under Article 226/227 of the Constitution of India and this exposition has been settled by this Court in its various judicial precedents.48. It is true that judgment in Dena Nath and Others (supra) is in reference to failure of compliance of Section 7 and 12 and not in reference to Section 10(1) of the CLRA Act but if we look into the scheme of CLRA Act which is a complete code in itself, non-compliance or violation or breach of the provisions of the CLRA Act, it result into penal consequences as has been referred to in Sections 23 to 25 of the Act and there is no provision which would entail any other consequence other than provided under Section 23 to 25 of the Act.49. In our considered view, the Tribunal under its award dated 16 th September, 2009 has rightly arrived to the conclusion that the contract was not sham and bogus and there shall be no automatic absorption of contract labour on issuance of a prohibition notification under the CLRA Act and the High Court of Madhya Pradesh has committed a manifest error in reversing the finding of fact in return under its impugned judgment dated 6 th September, 2010 which, in our view, is not sustainable and deserves to be set aside.