Case: Hindustan Steelworks Constrn Vs. Commr. Of Labour

2. The appellant, Hindustan Steelworks Construction Ltd., is a Government company within the meaning of Section 617 ofthe Companies Act, 1956. It is engaged in the work of construction of various types in India and abroad. At all times material to this appeal, the appellant had undertaken to carry out civil engineering work for the 5th respondent, Vishakpatnam Steel Plant under various contractors. The appellant had registered itself as an employer under Section 7 ofthe Contract Labour (Regulation and Abolition) Act, 1970.3. Respondent No. 4, M/s. Investigation and Security Services India Pvt. Ltd., is a Private Limited Company which carries on the business of providing security services through contract labour for various companies and individuals. It maintains officers and workmen to render, inter alia, security services to various establishments and individuals. Respondent No. 4, at all material times, possessed a licence as a contractor under Section 12 ofthe Contract Labour (Regulation and Abolition) Act, 1970, read with Andhra Pradesh Contract Labour (Regulation and Abolition) Rules, 1971.4. On or about 11th December, 1980, the appellant entered into an agreement with respondent No. 4 by which respondent No. 4 agreed to supply to the appellant (i) Security Guards, (ii) Shift Incharge, and (iii) Security Sergeants on the terms and conditions specified in that agreement. The agreement specifies that the appellant would pay to respondent No. 4 monthly amounts at the rate of Rs. 400, Rs. 500 and Rs. 600 as remuneration for the supply of Security Guards, Shift Incharge and Security Sergeants respectively. The appellant has accordingly paid to respondent No. 4 the said amounts by way of monthly remuneration for each of the categories of workmen supplied by the 4th respondent. Respondent No. 4, however, in turn, paid to the Security Guards Rs. 317.77 instead of Rs. 400; to the Shift Incharge Rs. 360.13 instead of Rs. 500; and to the Security `Sergeants Rs. 359.46 instead of Rs. 600 thus retaining Rs. 82.23 in respect of Security Guards, Rs. 139.87 in respect of Shift Incharge or Head Guards and Rs. 240.54 in respect of Security Sergeants.5. The Assistant Commissioner of Labour connected with the enforcement of provisions of the said Act visited the site of the appellant where the contract labour supplied by the 4th respondent was employed. He found that there was difference between the wages paid by the appellant to its own watch and ward staff and the contract labour supplied by the 4th respondent who were doing similar work. On 19th of May, 1983, he filed a complaint before the Commissioner of Labour. Under the proviso to Rule 25(v)(a) of the Andhra Pradesh Contract Labour (Regulation and Abolition) Rules, 1971, in the case of any disagreement with regard to the type of work, the same is required to be decided by the Commissioner of Labour, Andhra Pradesh whose decision shall be final. The Commissioner of Labour accordingly by an order dated 13th of August, 1984, held that the appellant was the principal employer and the respondent No. 4 was the contractor who had supplied contract labour under the said Act. He further held that the Security Guards supplied by the 4th respondent to the establishment of the appellant were performing the same kind of work as that performed by the Security Guards engaged by the appellant itself.6. The 4th respondent thereupon filed a writ petition before the Andhra Pradesh High Court, being Writ Petition No. 12963 of 1984 challenging the order of the Commissioner of Labour. A learned Single Judge of the High Court by his order dated 6th of July, 1988 dismissed the writ petition and upheld the order of the Commissioner of Labour. Aggrieved by this order, respondent No. 4 preferred an appeal before the High Court being Appeal No. 1196 of 1988. The Division Bench of the High Court decided to examine the legality of the agreement dated 11th December, 1980 entered into between the appellant and the 4th respondent. It held this agreement to be ultra vires. It proceeded to give a direction to the 4th respondent to pay the amounts retained by it from out of the amounts which were paid by the appellant in respect of the wages of the Security Guards supplied by the 4th respondent. It further gave a direction to the appellant to pay to the contract labour the difference between the wages paid by the contractor and the wages which were paid by the appellant to its own security staff. The Division Bench further gave a direction that in case the contractor failed to pay the amounts to the contract labour concerned, the appellant shall pay the same to the contract labour employed by it and may thereafter recover the amount so paid from the 4th respondent either by deduction from any amount payable by the appellant to the 4th respondent under any contract or may recover the same as a debt payable by the 4th respondent to the appellant. Being aggrieved by these directions, the appellant has come by way of the present appeal.

Court's reasoning:
11. The 4th respondent has, in the present case, obtained a licence under Section 12(1) ofthe Contract Labour (Regulation and Abolition) Act, 1970 in accordance with the Andhra Pradesh Contract Labour (Regulation and Abolition) Rules, 1971. The 4th respondent had applied for a licence under Rule 21 and the licence which was granted to the 4th respondent contained, inter alia, the condition specified in Rule 25(v)(a) to the effect that the 4th respondent was required to pay to the workmen employed by it the same wages as those paid by the appellant in its establishment to workmen performing the same or similar kind of work. Apparently, the 4th respondent-contractor did not comply with this term of itsDivision Bench seems to have relied upon Section 21(4) of the said Act for this purpose. Section 21(1), however, provides that the contractor shall be responsible for the payment of wages to each worker employed by him. Section 21(4) provides that if the contractor fails to make this payment or any part thereof, the principal employer is liable to make this payment and may recover the same from the contractor as set out in that sub-section. Looking to the definition of wages under the said Act read with the definition of wages in the Payment of Wages Act, which we have set out earlier, it is clear that Section 2 only deals with the payment of contractual wages by the contractor to each of his workers. The definition of wages would cover within its scope, inter alia, also those amounts which the contractor is liable to pay to his workers under any award, settlement or order of court as well as other amounts falling within the definition of ``wages under the Payment of Wages Act. Sub-section (2) provides for a representative of the principal employer supervising this payment. Clearly, therefore, the wages which are the subject-matter of Section 21 are specified sums which are payable in praesenti by the contractor under the terms of his contract of employment with each worker as well as under any existing award, settlement or order of the court. Section 21 does not deal with, nor does it cover the obligations which are imposed upon a contractor under the provisions such as the Andhra Pradesh Contract Labour (Regulation and Abolition) Rules, 1971. Hence Section 21(4) will not apply to such obligations of the contractor which may be the subject-matter of dispute between the contractor and his workers at the time of disbursement of wages and which do not fall within the definition of ``wages under the Act.13. Rule 25 of the Andhra Pradesh Contract Labour (Regulation and Abolition) Rules, 1971 imposes on the contractor certain conditions subject to which a licence is granted to him. One such condition is to the effect that the contractor shall not pay to the contract labour in his employment wages which are lower than the wages paid by the principal employer to his own workers which do the same or similar kind of work. This is a condition of the contractors licence. There is no provision under these rules by which the principal employer is made liable for payment in the event of non- compliance by the contractor with this condition. If the contractor commits a breach of the conditions of his licence he alone will take the consequences. The right of the workers to recover any additional wages which may be so determined would be against the contractor. Section 21(4) has no application to a situation where a contractor may have paid the wages but has not complied with the condition imposed by Rule 25(v)(a) of the Andhra Pradesh Contract Labour (Regulation and Abolition) Rules, 1971. The definition of wages under Section 2 of Contract Labour (Regulation and Abolition) Act, 1970 read with the definition of wages underthe Payment of Wages Act, 1936, does not cover any additional amount found payable under Rule 25(v)(a) if the principal employer has its own workers doing similar work. If the principal employer does not have any employees doing similar work that question will not arise. Such contingencies are not covered by Section 21 ofthe Contract Labour (Regulation and Abolition) Act, 1970. The contractor cannot recover any such additional amount from the principal employer under Section 21(4). Significantly, in the present proceedings the workers are not a party at all. It is the contractor who sought to quash a finding given by the Commissioner of Labour under the proviso to Rule 25(v)(a) of the Andhra Pradesh Contract Labour (Regulation and Abolition) Rules, 1971. In the present appeal before us also the contract workers employed by the 4th respondent are not a party. The dispute is between the contractor and the principal employer. We are, therefore, not called upon to pronounce on the rights of the contract labour employed by the 4th respondent to recover these amounts. The appellant, however, who is the principal employer, is not liable to pay this additional amount under Section 21(4). The appellant would, however, be liable under Section 21(4) to pay to the workers any difference between the wages contracted for under its agreement with the 4th respondent-contractor and the lesser wages actually paid by the contractor to contract labour, and recover the same from the contractor.