.....

WORKMEN OF NILGIRI COOP. MKT. SOCIETY LTD.

. v.

STATE OF TAMIL NADU AND ORS.

FEBRUARY 5, 2004

(Y. K. SABHARWAL ANDS. B. SINHA, JJ.] B

Industrial Disputes Act, 1947-Section 2 (s)- Workme~ Determination of- Organisation and Control Test- Applicability of_;_ Lifting of veil- Applicability of- Marketing yard of a cooperative society for sale of farmers' C produce- Porters and graders cariying on jobs at the yard- Their services hired directly by farmers and merchants and paid by them- Society only supervising the work- Held, not workmen.

Industrial Dispute Act, 1947- Section 2 OJ- Industry-- Meaning of-· Farmers' cooperative societyfor marketing their produce- Services on(v to D . its members-- l'!atform provided to the farmers and the merchants for sale and purchase of agricultural produce by auction- No control on either farmer or merchants- Commission charged .from parties for rendering service- Held, not an ind11st1y

Certain small and economically weak farmers formed a Co-operative E Society for sale of their produce. The Society had two big marketing yards where produce were brought by the farmers in trucks and lorries, unloaded, unpacked, graded, weighed, packed into stitched gunny bags and auctioned. For the convenience of the farmers as well as the merchants (who came to the marketing yards to purchase the produce), porters and F graders were always available at the yards. The porters did the job of unloading, unpacking, stitching and loading the bags of produce whereas the graders performed the job of grading, weighing and packing the produce. It was open to the farmers as well as the merchants to get the work done either through their own men or to engage the services of the porters and graders. The farmers and the merchants paid the porters and G graders directly for the work done by them. The Society also made payment to the porters an.d workmen on behalf of farmers in case of financial difficulty which was reimbursed to the Society by the workmen .

The Society charged commission for its services from its members as well

159 H

A as the merchants. The Society did not maintain any attendance register

of the porters and graders and no working hours were fixed or insisted. l-lowever, the Society gave gifts to the porters and graders during the festival season.

In 1982 the porters and graders claimed permanency in service and B other benefits from the Society. As attempts at conciliation failed, in 1984, the State Government referred the dispute to the lndustria_I Tribunal. The Industrial Tribunal was to decide "whether the non-employment of the workmen referred to in the reference (was) justified''.

C The Industrial Tribunal opined that there was no relationship of employer and employee between the parties. The porters and graders thereafter filed writ petitions before the l-ligh Court, which were dismissed by the High Court. The Letters Patent Appeals filed by the porters and graders were also dismissed.

D Being aggrieved, the porters and graders filed appeals before the

Court. Before the Court, the appellant, inter alia, contended that the High Court erred:

(i) in not applying the 'organisation test';

(ii) in holding that the supervision and control exercised by the

Society on the workmen were not on its own behalf but on behalf of its members.

Dismissing the appeals, the Court

HELD: I.I. Determination of the vexed questions as to whether a F contract is a contract of service or contract for service and whether the concerned employees are employees of the contractors has never been an easy task. It is not possible to lay down any hard and fast rule. The question in each case has to be answered having regard to the fact involved therein. No single te_stbe it control test, be it organisation or any other testhas been held to be the determinative factor for determining the jural relationship of employer and employee. 1173-F, GI

1.2. Su1fervision and control test is the prima facie test for determining the relationship of employment. The nature or extent of control required to establish such relationship would vary from business H to business and, thus, cannot be given a precise definition. The nature of

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WORKMENOFNILGIRI COOP. MKT. SOCY. LTD. v. STATE

J6]

business for the said purpose is also a relevant factor. The control test A and the organisation test are, therefore, not the only factors which can be said to be decisive. (174-B; 174-Ff

Shivanandan Sharma v. Punjab National Bank Ltd, AIR (1955) SC 404 and Dharangadhara Chemical Works Ltd v. State of Saurashtra and Ors., AIR (1957) SC 264, referred to.

1.3. The court is required to consider several factors which would have a bearing on the result: (a) who is the appointing authority; (b) who is the pay master; (c) who can dismiss; (d) how long alternative service lasts; (e) the extent of control and supervision; (t) the nature of the job, C e.g. whether, it is professional or skilled work; (g) nature of establishment;

(h) the right to reject. With a view to find out reasonable solution in the problematic case of this nature, what is needed is an integrated approach meaning thereby integration of the relevant tests wherefor it may be necessary to examine as to whether the workman concerned was fully integrated into the employer's concern meaning thereby independent of D the concern although attached therewith to some extent. Law in this behalf is not static. 1174-G-H; 175-A; 176-EJ

Ram Singh and Ors. v. Union Territory, Chandigarh and Ors., JT (2003) 8 SC 345 and Punjab National Bank v. Ghu/am Dastagir, ( 19781 2 SCC 358, referred to.

Mersey Docks and Harbour Board v. Coggins & Griffith Liverpool Ltd

(1947) A.C. 1, referred to.

Industrial Law by I. T. Smith and J. C. Wood, (3rd Edn.), referred to.

1.4. If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kind of contract and the person doing the work will not be a servant. (176-D)

Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and

National Insurance (1968) 2 W.L.R. 775, referred to.

2.1. The concept of employment involves three ingredients, which are: (i) Employerone who employs, i.e. engages in the services of other persons; (ii) Employeeone who works for another for hire; and (iii) Contract of employmentthe contract of service between the employer and the employee whereunder the employee agrees to serve the employer H

A subject to his control and supervision. On the other hand, non-employment being negative of the expression "employment" would ordinarily mean a dispute when the workman is out of service. When non-employment is

referable to an employment which at one point of time was existing would be a matter required to be dealt with differently than a situation where B non-employment would mean a contemplated employment. The question of non-employment in the latter category would arise only when the employer refuses to give work to a person who pleads and proves to the satisfaction of the management that he was entitled thereto. However, dispute regarding the refusal to employ the persons who were promised to be employed is not connected with employment or non-employment C within the meaning of Section 2 (k) of !, he Industry Dis1mtes Act. (183-G-H; 184-A-Bf

Workers of Sadar Talkies v. Odean Cinema, (1957) (1) L.L.J. 639, referred to.

D 2.2. In a given case it may not be possihle to infer that a relationship

of employer and employee has come into being only because some persons had been more or less continuously working in a particular premises in as much as even in relation thereto the actual nature of work done by them coupled with other circumstances would have a role to play. It is a question of fact in each case whetfler the relationship of master and servant exists between the management and the workmen and there is no abstract a priori test of the work control required for establishing the control of service. (174-C-D-EI

V. P. Gopala Rao v. Public Prosecutor, Andhra Pradesh, AIR (1970) SC 66, referred to.

2.3. The question whether the relationship between the parties is one of the employer and employee is a pure question of fact and ordinarily the High Court while exercising its power of judicial review shall not interfere therewith unless the finding is manifestly or obviously erroneous G or perverse. ( 179-CI

3. The person who sets up a plea of existence of relationship of employer and employee, the burden would be upon him to prove it

(178-F)

H N. C. John v. Secretary Thodupuzha Taluk Shop and Commercial

WORKMEN 01' NILGIRI COOP. MKT. SOCY. LTD. v. STA TE 163

Establishment Workers' Union and Ors., (f973) Lab.LC. 398 and Swapan A Das Gupta and Or~·. v. The First Labow: Court of West Bengal and Ors., (1975) Lab. I. C. 202, referred to.

4. 1. Different tests have been applied in different cas.es having regard to the nature of the problem arising in the fact situation obtaining therein.

Emphasis on application of control test and organisation test have been B laid keeping in view the question as to whether the matter involves a contract of service vis-a-vis contract for service; or whether the employer had set up a contracor for the purpose of employment of workmen by way of a smoke screen with a view to avoid its statutory liability.

1194-CI C

D. C. Dewan Mohideen Sahib & Sons v. The Industrial Tribunal, Madras

11964) 7 SCR 646; Silver Jubilee Tailoring House and Ors. v. Chief Inspector of Shops and Establishments and Anr., 11974) 3 SCC 498; W. H. D. Cruz and Sons v. M. E. Thomas., (1996) 1 L.L.J. 706 (Ker.); Mis Shining Tailors v.

Industrial Tribunal II, U. P., Lucknow and Ors., 11983) 4 SCC 464; Indian D Overseas Bank v. I. 0. B. Staff Canteen Workers' Union and Anr., 120001 4 SCC 245; Employers in relation to the Management of Reserve Bank of India

v. Workmen, 119961 3 SCC 267; Steel Authority of India Ltd. and Ors. v.

National Union Waterfront Workers and Ors. (2001) 7 SCC 1, Mishra Dhatu f\igam Ltd. etc. v. M. Venkataiah and Ors. etc. etc., JT 120031 795; Indian Banks Association v. Workmen of Syndicate Bank and Ors., [2001) 3 SCC E 36; Union of India and Ors. v. K. V Baby and Anr., 11998) 9 SCC 252; Bharat Heavy Electricals Ltd. v. State of U. P. and Ors., 12003) 6 SCC 528; Shri Chintaman Rao and Anr. v. The State of Madhya Pradesh, [1958) SCR 1340; Shankar Balaji Waje v. The State of Maharashtra, AIR (1962) SC 517; Dharangadhara Chemical Works Ltd. v. State of Saurashtra and Ors., AIR p

(1957) SC 264; Management of Mis Puri Urban Cooperative Bank v.

Madhusudan Sahu and Anr., AIR (1992) SC 1452; Bombay Canteen Employees' Association v. Union of India Ltd., (1997) 6 SCC 723; Air India Statuto1y Corporation and Ors. v. United Labour Union and Ors~, (19971 9 SCC 377; Mis Gammon India Ltd. and Ors. etc. v. Union of India and Ors., 1197 4) 1 SCC 596 and Hussainbhai, Calicut v. The Allath Factory Thezhilali G Union, Kozhikode and Ors., (1978) 4 SCC 257, referred to.

4.2. Whether a contract is a sham or camouflage is not a question of law. It is for the industrial adjudicator to decide the said question keeping in view the evidence brought on record. (184-E) H

A Municipal Corporation of Greater Mumbai v. K. V. Shramik Sangh and Ors., 12002) 4 SCC 609 and Sarya Shramik Sangh v. Mis Indian Smelting & Refining Co. Ltd. and Ors., JT (2003) 8 SC 243, referred to.

4.3. There cannot be any doubt whatsoever that where a person is engaged through an intermediary or otherwise for getting a job done, a B question may arise as the appointment of an intermediary was merely

sham and nominal and rather than camouflage where a definite plea is raised in the Industrial Tribunal or the Labour Court, as the case may be, and in that event, it would be entitled to pierce the veil and arrive at the finding that the justification relating to appointment of a contractor C is sham or nominal and in effect and substance there exists a direct relationship of employer and employee between the principal employer and the workman. 1193-F-G]

5.1. The High Court has rightly affirmed the award of the Industrial Tribunal. The Tribunal as also the High Court further rightly arrived at D the finding to the effect that the concerned workmen were not able to discharge their burden of proof that they were employed by the Society.

(194-B]

5.2. The farmers themselves are indigent persons. It is not a case where the concerned workmen are without any master. The third parties E employ and pay them their salary or wages invariably. They have right to appoint or not to appoint and the little amount of supervision made by the officers of the Society are for the purpose of overseeing the smooth transactions and not for its own benefit. The services of the workmen by the farmers or traders may or may not be taken. 1183-B, CJ F

5.3. In a situation of this nature and particularly having regard to the fact that the respondent is a co-operative Society which only renders services to its own memhers and despite the fact that in relation thereto it receives commission at the rate of 1 % both from the farmers as also the traders, it does not involve in any trading activity. [1Q5-C-D)

6. The reference made by the State Government was absolutely vague. The very fact that reference suggests that the workmen are not being employed by the Society is itself a pointer to the fact that it is not the case where the State Government has proceeded on the basis that there existed such a relationship. Save an except in certain situations, as for H example when there exists a provision in the standing order certified under

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WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD. v. STATE [SINHA, J.) 165

Industrial Employment (Standing Orders) Act, 1946 or a memorandum A of settlement require the employer to employ certain persons, directions ordinarily cannot be issued by the Industrial Tribunal directing the employer to give employment. (184-C-DJ

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1351-53 of 2002.

From the Judgment and Order dated 12.12.2000 of the Madras High Court in W.A. No. 109-110/89 and W.P.No. 14659 of 1989.

N.G.R. Prasad, S. Guru Krishna Kumar and S.R. Setia for the Appellant.

Sudarsh Menon and Bharat Swaroop Sharma for the Respondent No. 2.

Subramonium Prasad, Gopalakrishnan, S.N. Jha, Abhay Kumar and P.N. Ramalingam (NP) for the Respondent No. I.

The Judgment of the Court was delivered by

S.B. SINHA, J .: BACKGROUND FACTS:

'Nilgiris' is a hill district in the State of Tamil Nadu. Mettupalayam is

a small town situate in Nilgiris. The villagers of the surrounding villages for their livelihood depend on growing of vegetables and tea. With a view to see E that the small vegetable growers are not exploited by the vegetable merchants, a society known as 'Nilgiris Cooperative Marketing Society Limited' (Society for short) was formed as far back as in 1935 with only 116 members.

The Society, however, grew in course of time and at present it has about 22000 members. The memberships of the Society are of two categories. F In the first category only the vegetable or food growers, agricultural cooperative credit societies and agricultural improvement societies are Aclass members having voting rights; whereas traders, commission agents and

merchnts dealing in the commodities grown by the agriculturists are class.ified as B-class members. They have no right to vote or participate in the G management of the Society. The B-class members only, however, are entitled to take part in auctions held in the marketing yards of the Society. Any dispute between the seller member and the purchaser member is resolved through arbitration in terms of the provisions of the Tam ii Nadu Cooperaive

Societies Act, 1961.

A The. land holdings of the members of the society varies from I /4th acre to five acres averaging two acres per member. They mainly depend on the rainfall as irrigational facilities are not available. The small farmers are economically weak and have no holding power. Many of them have to take loans for their subsistence, when the weather is not good. ~..1any of them are B illiterate. The vegetables produced from their lands being subjected to the vagaries of the weather, the merchants with a view to pressurize them either used to force them to sell that at a very low price or would make them wait for days so that the vegetables become useless. The majority of the members belong to 'Badaga' community which had been declared to be a backward class by the Government of Tamil Nadu. Mettupalayam is a centre for potatoes C and vegetables trade.

The Society has two big marketing yards at Mettupalayam. In the said yards, auction of vegetables takes place. Infrastructure therefore such as ofticl:!s, godowns yards, weighing machines etc. are provided by the Society. There are two separate yards with pucca godowns, one for potatoes and another for D vegetables. The primary members of the Society bring their agricultural produce to the yards by hired lorries or trucks. They remain present till the agricultural produce brought by them is auctionsold and they receiye the sale price. The number of primary members visiting the marketing yards of the Society, depending upon the season varies from I 00 to 200 members per E day. The number of merchants coming to purchase these commodities also varies from 30 to 100. The Society provides for accommodation to the members on a nominal rent. It also pr?vides dormitory type of acco111modation free of charge. The months of July to October of year are said to be a peak season. Whereas during the peak season about I 00 lorries arrive everyday; during the 'off season' average number of lorries arriving at the yard would F be around I 0. For the purpose of bringing potatoes gunny bags are supplied by the Society free of cost.

The following main jobs are carried out in the said premises:

(i) unloading of the gunny bags containing potatoes from the lorries;

(ii) unpacking the gunny bags and keeping the potatoes in lots inside the godown;

(iii) grading the potatoes into different sorts;

(iv) weighing the auctioned potatoes in 45 kgs. and packing them into H gunny bags brought by the merchants;

WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD.'" STATE [SINHA, J.]

J 67

(v) stitching the gunny bags and loading them into lorries hired by A the merchants.

Throughout the process, lots brought by the primary members are kept separate with clear demarcation as regard the ownership thereof. Sometimes small farmers unload the bags of potatoes themselv.es; some of them bring their potatoes upon proper grading in their farms and place it in the yard in B a so1ted condition. However, if proper grading is not done by the vegetable growers, they are graded into the different sorts.

The number of persons undertaking the job varies depending upon the quantum of work.

Admittedly an industrial dispute was raised by 407 persons; of whom 73 are porters and 335 are graders. The job of unloading, unpacking of gunny bags, stitching the gunny bags and putting them into lorrief) are done by po1ters whereas gradation of potatoes, weighing the auctioned potatoes in 45 kgs. and packing them into gunny bags are done by graders. Most of them are women.

It is stated that the members of the Society or their authorized representatives remain present throughout the auction. The auction is confi1111ed only with the consent of the members. The member has a right to decline to sell his produce, if he is not satisfied with the highest rate offered by the merchants and is entitled to hold over the same till the next auction takes place.

The Society contends that for doing various items of work in the yards, services of ce1tain third parties are made available to the members. They are always available in the yards and any member whether producer or merchant may engage them. The work is done through the workers of the concerned F third parties. Payment therefor is to be made by the persons engaging them to the said third parties (contractors). However, sometimes as the producer members may not have enough money with them, the Society makes the payment on their behalf by way of advance, wherefor allegedly written authority is obtained. The Society further contends that the farmers and G merchants are at liberty to engage their own men for doing these items of work and some of them do the work themselves. There is no obligation on the part of the member to bring his produce to the Society's yards. He is free - to sell is produce in any manner through it.

It is not in dispute that the Society does not maintain any attendance H

A register or wages register. The third parties are free to engage men of their own choice and no working hours are fixed or insisted. Any person normally doing the job may come on any day to work. The third parties engage more number of persons during peak season and during lean season less number of persons are engaged. The porters and graders may take up any other job.·

B DISPUTE BETWEEN THE PARTIES:

The appellant-Union, however, on or about 19.4. 1982 served a charter of demands upon the Society claiming, imer alia, permanency in service and other benefits. A strike notice was also given wherefor a conciliation C proceeding was initiated. The Society thereafter filed a suit being O.S. No.2293 of 1982. A writ petition was filed before this Court being W.P. No.23 of 1983 praying for minimum facilities like drinking water, toilet, rest-room, maternity benefits etc. The Society is said to have declared a lock out and a conciliation proceeding thereupon started again. The writ petition was thereafter withdrawn. The conciliation proceeding ended in a failure.

REFERENCE:

On or about 19.5.1984, the State of Tamil Nadu issued a notification in exercise of its power under Section I 0( I ){d) of the Industrial Disputes Act, 1947 referring the following disputes for adjudication of the Industrial Tribunal

"(i) Whether the non-employment of the workmen referred in the reference is justified ?

(ii) To what relief ?"

PROCEEDINGS BEFORE THE TRIBUNAL:

In the aforementioned industrial reference before the Tribunal, witnesses were examined on behalf of the parties. Documents were also produced. By reason of an award dated 5.?.1989, the Tribunal opined that there did not exist any rel.ationship of employer and employee between the Society and the .

G concerned persons, observing :

"36. In view of the above finding, if we approac" this case, there is no convincing evidence placed by the petitioner to establish the master and servant relationship to hold that the persons referred in this dispute are only workmen of the Respondent-Society.

37. Viewed from any angle, either on facts or on law, the petitioner- ,

WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD.1'. STATE [SINHA . .I ! 169

Union has not substantiated that the persons mentioned in thl' Annexure A are workmen and therefore their non-employment is not justified.

Hence this point is found against the Petitioner Union."

On the said findings the refere.nce was rejected.

PROCEEDINGS BEFORE THE HIGH COURT:

Aggrieved thereby the appellant preferred a writ petition before the High Court marked as Writ Petition No.14659 of 1989.

During the pendency of the said proceeding, other disputes also ensued resulting in closure of the yards; whereafter, again conciliation proceedings C were initiated on or about 3.8.1985. The respondent-Society issued an advertisement in a Tamil newspaper inviting tenders for operations.

Questioning the said action on the part of the Society, a writ petition was filed in the Madras High Court which was marked as W.P. No.9333 of 1985 praying therein for issuance of writ of mandamus directing the State to prohibit introduction of contract labour system in the Society. Another writ petition D being W.P. No.9334 of 1985 was also filed wherein the petitioners prayed for issuance of a writ of or in the nature of mandamus directing the Society not to engage contract labour purported to be on the ground that the same is contrary to Sections 25-0 and 25-T of the Industrial Disputes Act and Sections 7 and 12 of the Contract Labour (Regulation and Abolition) Act, 1970. Certain E interim orders were passed by the High Cou1t and some appeals were also filed and the matter came up before this Court also, being Civil Appeal No.5381 of 1985 on or about 26.9.1986 wherein this Court passed the following order :

"On behalf of the Marketing Society, Dr. Y.S. Chitale, learned Counsel assures us that hereafter workmen will not be permitted to be employed by contractors to work within the yard of the Society. He also assures us that the 407 workers previously employed may come back and work in the yard without any objection. It is open to any worker to

go and seek employment, but.contractors will be excluded. The case now pending before Industrial Tribunal may be disposed of G expeditiously. Civil Misc. Petition is disposed of accordingly."

By another interim order passed in Writ Petition No.19310 and J 9311 of 1986, a learned Single Judge of the Madras High Court directed :

"The third respondent shall give employment dii-ectly to all the 407 workers. If, after providing employment to these 407 workers, any H

A more lands are required, then the management is free to give employment to such of these persons. The Collector of Coimbatore will see to it that the order of the Supreme Court extracted above is implemented in its true spirit."

In an appeal carried out by the Society being W.A. No. 1372 of 1986, B the High Court of Madras issued the following directions :

"Apparently it appears to us that the order made by the learned single Judge runs counter to the order of the Supreme Court dated 4.12.1985.

Therefore, the order of the learned Single Judge is. stayed. Since the order which is in controversy is that of the Supreme Court, this is eminently a fit case where the parties are at liberty to get necessary clarification from the Supreme Court. Till the order is clarified by the Supreme Court, if the parties approach the Supreme Court for this, the appellant will implement the order dated 4.12.1985 by way of an interim arrangement."

On an application, this Comt by an order dated 13.4.1987, observed:

"The interim arrangement will continue till disposal of the writ petition

in the High Court. Meanwhile the trial of the industrial dispute will be stayed. No order on the application for impleading party. All the CMPs are disposed of accordingly."

Another interim order was passed on 29.8.1988 in Writ Petition N0.9334 of 1985 in the following terms :

"In the result, the 3rd respondent is directed to give employment directly to all the 407 workers and pay the wages directly to them as per the order of the Supreme Court dated 4.12.1988. Th is petition is ordered accordingly."

On an appeal preferred by the Society before a Division Bench marked as W.A. No.1261 of 1988, it was directed :

G . "To give quietus to the controversy in the writ petition, we direct that

W.P. 9334/85 along with the connected writ petition viz. W.P.

No. 9333185 be listed for final hearing on 26.10.1988 at the top of the list before the learned Single Judge, who hears the date.-fix-ed writ petitions."

WORKMEN OF NILGIRI COOi!. MK'r. SOCY. LTD. v. STATE [SINHA, J)

J 71

JUOGMENT OF THE HIGH COURT:

All the three writ petitions came up for hearing before a learned Single Judge of the Madras High Court. The said writ petitions were dismissed observing :

"The writ petitions are liable to be dismissed. However, having B regard to the fact that the petitioner has made an application to the State Government as early as on 9 .8.1985 as seen from paragraph 13 of the affidavit to prohibit the employment of contract labour under section 10 of the Act for loading, unloading and other activities of the 3rd respondent society, a reference to the counter affidavit filed by the government is necessary. C Paragraphs 12 and 13 of the counter affidavit are extracted :

"It submit that the averments in paragraph 13 are not correct.

The Union has applied to the State Advisory Contract Labour Board to issue directions to the Management prohibiting the employment of contract labour under Sec. I 0 of the Act. I submit D that after consultation with State Advisory Contract Labour Board the Government will take a decision in this matter."

This counter affidavit has been sworn to on 5th December, 1986.

Even though there was no order pending these W.Ps. Prohibiting the Government from passing orders under Sec. I 0 of the Act, the E Government has not taken any action in spite of the averments contained in paragraphs 12 and 13 of the counter affidavits. It is for the Government to pass orders under Sec. I 0 of the Act as expeditiously as possible, one way or other."

Three letters patent appeals were preferred by the appellant herein being F aggrieved by and dissatisfied therewith. By reason of the impugned judgment the said appeals were dismissed.

The appellant is, thus, before us in these appeals. Civil Appeal No.1351- 52 arise out of Writ Petition No. I 09 and 110 of 1989 wherein certain interim orders were passed. Civil Appeal No.1353 of 200 I is the main appeal which G arises out of an award of the Industrial Tribunal.

SUBMISSIONS:

Mr. N.G.R. Prasad, learned counsel appearing on behalf of the appellant would take us through the evidences adduced by the parties both oral and H

. A documentary as also the findings of the lndustrialTribunal and would submit that it and consequently the High Court committed a manifest error:

(i) in passing the impugned award insofar as they failed to apply the 'organisation test' in the light !>f the decisions of this court;

(ii) despite having arrived at the conclusion that the respondents society exercises supervision and control over the concerned workmen, in concluding that such supervision and control were not on its own behalf but on behalf of its members;

. (iii) in arriving at the finding that as the society does not carry out any manufacturing activities; it is not industry, inasmuch as supply of the services by. an organisation would also give rise to formation of relationship of an employer and employees.

Elaborating his submissions, Mr. Prnsad would contend that it is not in dispute that the 407 workmen had been working in the market yard on a daily D wage. basis and although they are said to have been employed by the third parties but indisputably, the society pays wages to them although the same is said to be reimbursed by the members of the society. It was pointed out tJ1at the dispute between the members and members are resolved by the society and furthermore as the concerned persons have been given token and are given gifts during festival season, would lead to an irresistible inference E that the concerned workmen are employees of the society.

Mr. Prasad would argue that the principal question which was required to be asked was for whom do the workmen work and to whom they look up for their wages. It was submitted that the relationship between the Society and the wo.rkmen was required to be determined having regard to the following F fact:

(i) work is being carried out in the premises belonging to the society;

(ii) wages are paid by the society;

(iii) from Ex. W7 and WS, it would <jppear, that the society exercises G control over the workmen;

 (iv) on festival occasions, the workmen look to the society for gift.

It was contended that the Tribunal and the High Court overlooked the evidences on record as regard nature of the job performed by the workmen as has been admitted by MWI and furthermore no finding has been arrived H at to the effect that the so-called third parties are contractors.

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WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD. v. STATE[SINHA, .I.] 173

The learned counsel would submit that the Tribunal has committed a A manifest error also in holding that only because the society takes commission from its members, it cannot be an employer. It was contended that for determining the question as regard existence of the relationship of employer and employee what is required to be considered is as to whether the concerned workmen are part and parcel of the organisation. Economic reality, the learned B counsel would contend, has also some role to play.

The learned counsel would urge that this Court in a large number of cases lifted the veil so as o come to the conclusion that the engagement of third parties or contractors may be a camouflage and there existed a relationship of employer and employee. Determination of such relationship, Mr. Prasad C would aruge, do not depend upon the statutory liability of the employer as even in relation to non-statutory <; anteens this Court has held that the socalled workmen of the contractors are in effect and substance the workmen of the principal employer.

Mr. Sudarsh Menon, learned counsel appearing on behalf of the D respondent society, on the other hand, would submit that the society is a service society and having regard to the fact that the members are both growers and merchants and as the porters and the graders are appointed by both growers and merchants independently, it cannot be said that the society is the employer of the concerned workmen. The learned counsel would contend that the Industrial Tribunal, the learned Single Judge as also the Division E Bench of the High Court having arrived at a finding of fact that there does not exist any relationship of employer and employee, this Court should not interfere therewith.

DETERMINATION OF RELATIONS HIP:

Determination of the vexed questions as to whether a contract is a contract of service or contract for service and whether the concerned employees are employees of the contractors has never been an easy task. No decision of this Court has laid down any hard and fast rule nor it is possible to do so

The question in each case has to be answered having regard to the fact G involved therein. No single test - be it control test, be it organisation or any other test - has been held to be the determinative factor for determining the jural relationship of employer and employee .

There are cases arising on the borderline between what is clearly an employer-employee relation and what is clearly the independent entrepreneurial H

A dealing.

TESTS:

This Court beginning from Shivanandan Sharma v. Punjab National Bank ltd., (1955) I L.L.J. 688 : AIR (1955) SC 404 and Dharangadhara B Chemical, Works Ltd. v. State of Saurashtra and Ors., (1957) 1 L.L.J. 477: AIR (1957) SC 264 observed that supervision and control test is the prima .facie test for determining the relationship of employment. The nature or extent of control required to establish such relationship would vary from business to business and, thus, cannot be given a precise definition. The nature of business for the said purpose is also a relevant factor. Instances are C galore there where having regard to conflict in decisions in relation to the

simila~ set of facts, the Parliament has to intervene as, for example, in the case of workers rolling bid is.

In a given case it may not be possible to infer that a relationship of employer and employee has come into being only because some persons had D been more 6r less continuously working in a particular premises inasmuch as

even ii1 relation thereto the actual nature of work done by them coupled with other circumstances ould have a role to play. '

In V'; P. Gopala Rao v. Public Prosecutor, Andhra Pradesh, (1970) 2 E L.L.J. 59 : AIR (1970) SC 66, this Court said that it is a question of fact in each case whether the relationship of master and servant exists between the management and the workmen and there is no abstract a priori test of the work control required for establishing the control of service. A brief resume of the development of Jaw in this point was necessary only for the purpose of showing that it would not be prudent to search for a formula in the nature F of a single test for determining the vexed question.

RELEVANT FACTORS:

The control test and the organization test, therefore, are not the only factors which can be said to decisive. With a view of elicit the answer, the G court is required to consider several factors which would hve a bearing on the result : (a) who is appointing authority; (b) who is the pay master; (c) who can dismiss; (d) how long alternative service lasts; e) the extent of control and supervision; (t) the nature of the job, e.g. whether, it is professional or skilled work; (g) nature of establishment; (h) the right to reject.

H With a view.to find out reasonable solution in a problematic case of

• \

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this nature, what is needed is an integrated approach meaning thereby A integration of the relevant tests wherefor it may be necessary to examine as to whether the workman concerned was fully integrated into the employer's concern meaning thereby independent of the concern although attached therewith to some extent.

I. T. Smith and J.C. Wood in 'Industrial law', third edition, at page 8- B 10 stated:

"In spite of the obvious importance of the distinction between an employee and an independent contractor, the tests to be applied are vague and may, in a borderline case, be difficult to apply. Historically, the solution lay in applying the 'control' test, i.e., could the employer C control not just what the person was to do, but also the manner of this doing it - if so, that person was his employee. In the context in which it mainly arose in the nineteenth century, of domestic, agricultural and manual workers, this test had much to commend it, but with the increase sophistication of industrial processes and the greater numbers D of professional and skilled people being in salaried employment, it soon became obvious that the test was insufficient (for example in the case of a doctor, architect, skilled engineer, pilot, etc.) and so, despite certain attempts to modernise it, it is now accepted that in itself control is no longer the sole test, though it does remain a factor and perhaps, in some cases, a decisive one. In the search for a substitute E test, ideas have been put forward of an 'integration' test, i.e. whether the person was fully integrated into the employer's concern, or remained apart from and independent of it. Once again, this is not now viewed. as a sufficient test in itself, but rather as a potential factor (which may be useful in allowing a court to take a wider and p more realistic view). The modern approach has been to abandon the search for a single test, and instead to take a multiple or 'pragmatic' approach, weighing upon all the factors for and against a contract of employment and determining on which side the scales eventually settle. Factors which are usually of importance are as follows - the power to select and dismiss, the direct payment of some form of G remuneration, deduction of PAY and national insurance contributions, the organisation of the workplace, the supply of tools and materials (though there can still be a labour-only sub-contract) and the economic realities (in particular who bears the risk of loss and has the chance of profit and whether the employee could be said to be 'in business H

\ill his own account'). A further development in the recent case law (particularly concerning atypical employments) has been the idea of 'mutuality of obligations' as a possible factor, i.e. whether the course of dealings between the parties demonstrates sufficient such mutuality for there to be an overall employment relationship."

B (See also Ram Singh and Ors.v. Union Territory, Chandigarh and Ors.,

. JT (2003) 8 SC 345.

In Mersey Docks and Harbour Board v. Coggins & Griffith.Liverpool Ltd., [1947] A.C. I, Lord Porter pointed out:

"Many factors have a bearing on the result. Who is paymaster, who can dismiss, how long the alternative service lasts, what machinery is employed, have all to be kept in mind. The expressions used in any individual case must always be considered in regard to the subjectmatter under discussion but amongst the 111any tests suggested I think that the most satisfactory, by which to ascertain who is the employer at any particular time is to ask who is entitled to tell the employee the way in which he is to do the work upon which he is engaged."

If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some othei" kind of contract and the person doing the work will not be a servant. (See Ready Mixed Concrete E (South East) Ltd v. Minister of Pensions and National Insurance, 1 ( 1968)

2 W.L.R: 775)

The decisions of this Court lead to one conclusion that law in this behalf is not static. In Punjab National Bank v. Ghulam Dastagir, (1978) I I.L.J. 312 - [1978] 2 SCC 358, Krishna Iyer, J. observed "to crystalise criteria conclusively is baffling but broad indications may be available from decisions".

The case at hand, as noticed hereinbefore, poses intricate question having regard to the facts and circumstance of the case.

In our endevour to find out an answer, let us at the first instance look G at the object of the Society.

SOCIETY:

The Society had a humble beginning but it had a laudable object, as would appear from its bye-laws. The objects. of the Society are stated as H under:

WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD.'' STATE [SINHA, J.]

J 77

"(a) To encourage self help, thrift and cooperation among members; A

(b) To purchase seeds, manure, implements and other agricultural requirements for sale or distribution to members or members of the affiliated cooperative societies or to other cooperative societies;

(c) To arrange for sale of potatoes, other vegetables and fruits of the B members and the members of affiliated cooperative societies to their best advantage;

(d) To advance loans to members and members of affiliated cooperative societies on the pledge of their agricultural produce and for the purchase of manure to deserving members of primary C societies provided the loans are given to such members through the societies concerned;

(e) To act as agents of the cooperative institutions in marketing their produce;

(f) To act as agents for the joint purchase of the domestic and other requirements of its members and members of affiliated cooperative societies;

{g) To act as agent of those members which are affiliated societies

in the matter of disbursing and receiving loans sanctioned to E individual members of such societies;

(h) To act as the agent of those members which are affiliated societies in the matter of receiving for safe custody in its godowns or elsewhere the produce pledged to such societies by their individual members;

(i) To propagate and supply pure seeds;

U) To own and hire lorries whenever necessary for the use of the members, members of affiliated cooperative societies and other public for hire, for the transport of manure, potatoes, other

vegetables, fruits, implements etc.; G

(k) To disseminate among the members and members of the affiliated cooperative societies a knowledge of the latest improvement in agriculture by arranging actual demonstration carried out by each individual member in his own land according to the advice of the agricultural department; H

(I) To process raw material belonging to the members and members

of affiliated cooperative societies or purchased by the society; and

(m) To arrange for packing and grading of agriculural produce of the members and members of the affiliated cooperative societies.

(n) Economically weak and small farmers having no holding power, thus, subjected to exploitation of the trading .-:ommunity are the beneficiaries.

(o) Clause 34 of the bye-laws states :

"That the Board of Directors may arrange for the sale of produce of members and members of affiliated cooperative societies pledged to or deposited with the society and disburse sale proceeds to them immediately after such lots are sold. In arranging for the sale they shall act only as the agent of the members and members of affiliated cooperative societies concerned and shall not do the business as owner on behalf of the society. Any loss arising out of the business shall be borne by the'lnembers of the affiliated cooperative societies concerned and not by the society."

It is not in dispute that the Society is not a trading society. It cannot buy or sell the agricultural produce or the fruits except in a case where the E proviso appended to bye-law 34 is attracted wh!ch is in the following terms:

"When the society enters into a contract with the Government of Military Department of cooperative institutes or with any firm which has entered into a contract with the Government or military department for supply of produce, the Board may purchase the produce outright whenever necessary and sell it as owner on behalf of the society."

BURDEN OF PROOF:

It is a well-settled principle of law that the person who sets up a plea of existence of relationship of employer and employee, the burden would be G upon him.

In N. C. John v. Secret01y Thodupuzha Tal11k Shop and Commercial Establishment Workers' Union and Ors., [ 1973] Lab. l.C. 398, the Kera la High Court h71d:

H "The burden of proof being on the workmen to establish the employer-

\ ...-

WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD. 1. STATE [SINHA. J.J

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employee relationship an adverse inference cannot be drawn against A the employer that if he were to produce books of accounts they would have proved employer-employee relationship."

In Swapan (.fas Gupta and Ors. v. The First labour Court of West Bengal and Ors., (1975) Lab. LC. 202 it has been held:

"Where a person asserts that he was a workmen of the Company, and it is denied by the Company, it is for him to prove the fact. It is not for the Company to prove that he was not an employee of the Company but of some other person."

The question whether the relationship between the pa11ies is one of the C employer and employee is a pure question of fact and ordinarily the High Cow1 while exercising its power of judicial review shall not interfere therewith unless the finding is manifestly or obviously erroneous or perverse.

APPLICATION OF LAW IN THE PRESENT CASE: D Having regard to the materials on rt:cords, we may at the outset notice the findings of the Industrial Tribunal which are : (I) having regard to the object of the Society, there is no need to employ labourers far less giving continuous employment to them. Exs.W-7, W-8 and W-12 do not show that superintendence control in respect of grading, weighing etc. is absolute. The E memo. dated 27.8.1982 appears to have been issued having regard to a complaint made by traders who participate in the auction to the effect that the staff are not showing proper care in grading, weighing and stacking the goods in the Society and they have to purchase th~ under-quality and underweight vegetables resulting in continuous loss to them. It is in that situation a direction was issued. A further complain was made that the Society employs small boys in grading, weighing and stacking of goods. In that situation the Godown Assistants were directed to see that no person who is less than 18 years is engaged for unloading, grading and stacking of cabbage and the workmen should be classified into two groups, one for unloading and another for grading, weigliing and stacking.

The Tribunal in this behalf observed :

" .. .Incidentally it is also significant to note that the society has been formed to protect the interest of the members. The society canriot keep quiet by stating it is the contractors job and it has no responsibility. In my opinion nothing is wrong in issuing the circular H

A Ex. W-8, only to pull up the irresponsible of the staff and other workers.

Therefore it would not amount to that the Respondent-Society has exercised its powers on their own workers and therefore they are employees."

Although in the said letter, the word 'workmen' of the Society had B been used, in all probability, the said expression had been used loosely. The Office Order dated 22.8.1963 provides for the job assigned to their regular staff.

The job of the Marketing Supervisor is as under :

"7. Marketing supe1,1isor :

He should attend to the speedy disposal of the potato stocks of the members to their best advantage. He *should see that all the stocks purchased by the Merchants are taken delivery of without delay. He should contfol the staff working in the potato godowns and see that no complaints are received from members and merchants etc., regarding purchase or sale of potatoes. He should supervise grading, weighing and packing of potatoes promptly and properly."

The job of the Marketing Supervisor, therefore, do not show that complete control and supervision is upon the society. The Marketing E Supervisor was allotted the job to see that the work is carried out smoothly so that neither the purchaser inembers nor the merchant members are put to any disadvantage.

Having regard to the interest of the farmers as also the merchants, the Marketing Supervisor was. asked to supervise grading, weighing and packing of potatoes promptly and properly.

The purported decision of the Society to ive certain benefits to the workmen too is not decisive as the same had become a conciliation proceeding.

The said conciliation proceeding, as noticed hereinbefore, had to be initiated G having regard to the consequence upon a strike notice given by the workmen which could be averted due to conciliatory efforts. It would appear from the same that the conciliation efforts were made by the concerned Conciliation Officer. However, despite conciliation, graders and porters went on strike on 19.10.1982 whereafter again a coneiliation proceeding was held pursuant whereto or in furtherance whereof certain advises and suggestions had been H given by the conciliation officer based on agreement between the parties.

WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD.'" STATE[SINHA, J.] 181

The finding of the Tribunal in respect of Ex.W-12 is in the following A terms :

" ... Even under Ex.W-12 it has been stated to pay the festival advance to the graders through the representatives. Therefore it cannot be said they have been asked to pay directly the festival advance amount.

That apart, it is relevant to note at this stage that this document has B not been signed by any party. Considering these above facts and mainly taking into account the object of the society coupled with the duties envisaged under Clause 34 under Ex.M-22 bye-laws, it is impossible to come to a conclusion that the society has exercised these powers under Ex.W-7, Ex.W-8 and Ex.W-12 as an employer ... " C

The Tribunal has fu11her come to the conclusion that token number had been given to the porters during emergency to save them from police harassment and no such token was issued after cessation of emergency.

It is true, as contended by Mr. Prasad, that the Tribunal sought to D distinguish certain cases relied upon. by the learned counsel for the parties holding that in those cases, the employers were manufacturing units and were doing regular work but the observation of the Tribunal must be understood having regard to the totality of the circumstances as it has observed that in such cases employers being manufacturing units and were doing regular work and the nature of business was such which required continuous supervision E and furthermore the workmen who were required to work on fixed hours which was not the case in the present one.

The learned Tribunal has further found that the volume of job as also the number of persons working depend upon the season inasmuch in the peak season a large number of persons would be appointed whereas in the off F season the number of appointments would be less. The Tribunal had further held that the Society acts as a commission agent. The submission of Mr.

Prasad to the effect that the Tribunal has ignored the question of employment 9f contractor, some of whom may be under a legal focapacity tq do so but the same again would not be decisive. Furthermore, even in terms of Section G 21 of the Contract Labour (Regulation and Abolition) Act, the principal employer has a statutory obligation to see that the concerned employees are paid their wages and deduct the same from the bills of the contractors. It has also come on records that the remuneration paid by the Society on behalf of

its members are done through Maistry and not directly to the concerned workers. We have noticed hereinbefore in details the nature of the services H

A rendered by the Society to the different categories of its members, as also the

right of the members to approach the third parties to take the services of the workmen working under them for unloading, grading and loading.

In nutshell, the following can be deduced :

I .

Growers and merchants are free to engage their own po11ers and graders or can do the work by themselves. There is, thus, no obligation on the societies godovm or engage service of the workers, waiting in the yard.

No attendance registers or wage registers are maintained in respect c of graders and porters. ·

The society has no control as who should do the work and the members are free to engage any worker available in the yard.

No working hours are fixed for porters and graders. They are free to come and go at will.

D 5.

The workmen have no obligation to report to work everyday.

Society has no control regarding the number of workers to be engaged and the work to be turned out by the porters and graders.

No appointment order is issued by the society.

E 8.

No disciplinary control over the poi1ers and graders is exercised by the Society.

Total supervision or control is not exercised by the Society over the work done by porters or graders.

10. Porters and graders can go for other work and there is no obligation to work only in the yards.

11. Payment is normally made to a worker by the member. No direct payment is made to workers by the society. The society makes payment on.ly on the authorization on behalf of that member.

12. Under the price guarantee scheme introduced by the society if the prices offered by the merchants are not acceptable to the members then the society guarantees the minimum price. If the produce sold by the society fetches more than the minimum guaranteed price excess is passed on to the member, if the price

H is less than the minimum price, the loss therefor is horne by the

WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD. v. STATE [SINHA, J.) 183

society.

13. Po11ers and graders also work under the supervision of members and merchants. Amounts paid by the society to a worker/ authorized by a member is distributed by him to other workmen and the Society is not concerned ith the number of workers engaged and amounts distributed to them.

The farmers themselves are indigent persons. It is not a case where the concerned workmen are without any master. The third parties employ and pay them their salary or wages invariably. They have the right to appoint or not to appoint and the little amount of supervision made by the officers of

the Society are for the purpose of overseeing the smooth transactions and not C for its own benefit. The contract is entered into by different parties for different purposes. The services of the workmen by the farmers or traders may or may not be taken. There may be disputes between one class of members with the other which incidentally may have some bearing on the performance of job by the concerned workmen.

We may further notice that the learned counsel appearing on behalf of D

the respondents has drawn our attention to the statements made in the counter affidavit to the effect that the President of Petitioner Association runs the biggest private mundy in Mettupalayam and adopts the same procedure of engaging workers and the job of unloading, cleaning, so11ing, grading etc. is E done by the Respondent society. It has fu11her been stated that there are about 60 such private mundies at Mettupalayam and although every mundy adopts the same pattern of engaging workers but except in the case of the respondent ilo industrial dispute had been raised in respect of any other mundy.

EMPLOYMENT AND NON-EMPLOYMENT : F

Employment and non-employment indisputably is a matter which is specified in the Second and the Third Schedules of the Industrial Disputes Act. The concept of employment involves three ingredients, which are : (i) Employer - one who employs, i.e. engages the services of other persons; (ii) Employee - one who works for another for hire; and (iii) Contract of G employment - the contract of service between the employer and the employee whereunder the employee agrees to serve the employer subject to his control and supervision. On the other hand, non-employment being negative of the expression "employment" would ordinarily mean a dispute when the workmen is out of service. When non-employment is referable to an employment which H

A at one point of time was existing would be a matter required to be dealt with differently than a situation where non-employment would mean a contemplated employment.

The question of non-employment in the later category would arise only when the employer refuses to give work to a person who pleads and B proves to the satisfaction of the management that he was entitled thereto.

However, the dispute regard(ng the refusal to employ the persons who were promised to be employed is not connected with the employment or nonemployment within the meaning of Section 2(k) of the Act. (See Workers of Sagar Talkies v. Odean Cinema, (1957) I L.L.J. 639)

The reference made by the State of Tamil Nadu was absolutely vague.

The very fact that reference suggests that the workmen are not being employed by the Society is itself a pointer to the fact that it is not the case where the State Government has proceeded on the basis that there existed such a relationship. Save and except in certain situations, as for example when there D exists a provision in the standing order certified under Industrial Employment

(Standing Orders) Act, 1946 or a memorandum of settlement require the employer to employ certain persons, directions ordinarily cannot be issued by the Tribunal directing the employer lo give employment.

CAMOUFLAGE:

Whether a contract is a sham or camouflage is not a question of law which can be arrived at having regard to the provisions of Contract Labour (Regulation and Abolition) Act, 1970. It is for the industrial adjudicator to decide the said question keeping in view the evidences brought on records.

F In Municipal Corporation of Greater Mumbai v. K. V. Sharamik Sangh and Ors .• (2002] 4 SCC 609, non-maintenance of records by the contractors was held to be not conclusive for determination as to whether the workmen were working under the contractor. The Court held that such disputed questions of fact cannot be gone into in a civil proceeding.

G In Sarva Shramik Sangh v. Mis Indian Smelting & Refining Co. Ltd. & Ors., JT (2003) 8 SC 243, this Court observed :

" ... A jurisdictional fact is one on the existence or otherwise of which depends assumption or refusal to assume jurisdiction by a court, tribunal or the authority. Said fact has to be established and its H existence proved before a Court under the Maharashtra Act can assume

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jurisdiction of a particular case. If the complaint is made primafacie A accepting existence of the contractor in such a case. what has to be first established is whether the arrangement or agreement between the complainant and the contractor is sham or bogus. There is an inherence admission in such a situation that patently the arrangement is between the complainant and the contractor and the claim for a new and different relationship itself is a disputed fact. To put it differently, the B complainant seeks for a declaration that such arrangement is not a real one but something which is a fagade. There is no direct agreement between the complainant and the principal employer and one such is sought to be claimed but not substantiated in accordance with law.

The relief in a sense relates to a legal assumption that the hidden C agreement or arrangement has to be surfaced ... "

It was also observed :

"The common thread passing through all these judgments is that the threshold question to be decided is whether the industrial dispute D could be raised for abolition of the contractor tabour system in view . of the provisions of the Maharashtra Act. What happens to an employee engaged by the contractor if the contract made is abolished is not really involved in the dispute. There can be no quarrel with the proposition as contended by the appellants that the jurisdiction to decide a matter would essentially depend upon pleadings in the plaint. E But in a case like the present one, where the fundamental fact decides the jurisdiction to entertain the complaint itself the position would be slightly different. In order to entertain a complaint under the Maharashtra Act, it has to be established that the claimant was an employee of the employer against whom complaint is made, under F the ID Act. When there is no dispute about such relationship, as noted in paragraph 9 of CIPLA 's, case (supra) the Maharashtra Act would have full application. When that basic claim is disputed obviously the issue has to be adjudicated by the forum which is competent to adjudicate: .. "

CASE LAWS:

In the aforementioned backdrop, let Lis take note of certain decisions operating in the field vis-a-vis the factual matrix obtaining therein.

D.C. Dewan Mohideen Sahib & Sons v. The Industrial Tribunal, Madras, H

A (1964) 7 SCR 646 = (1964) 2 LLJ 633 is a case which involved work_.ers who used to take leaves home for cutting them in proper shape. However, the actual rolling by filling the leaves with tobacco took place in places what were called contractors' factories. The bidis so rolled would be delivered to the appellant and nobody-else. The price of the raw .. material as also the B finished product would remain the same as fixed by the appellant therein.

This Court having regard to the materials on records arrived at a finding of . fact that the intermediaries were mere agents or branch managers appointed by the management and the relationship of employer and employee subsisted between the appellant and the bid is rollers, inter alia, on the ground that the so-called independent contractors served no particular duties and discharged C no special functions and had no independence at all. They were impecunious persons who could hardly afford to have any factory of their own and in fact some of them were ex-employees of the appellant.

In Silver Jubilee Tailoring House and Ors. v. Chief Inspector of Shops and Establishm<!/1/S and Anr., [ 1974] 3 sec 498, the job required to be D perfom1ed was skilled and professional in nature. Mathew, J. speaking for the Bench observed that the test of right tO control the manner of doing the work as traditionally formulated cannot be treated as an exclusive test. The cou11 applied organization test in the fact situation obtaining therein laying importance on the fact that the employer provides the equipment and stating that where a person hires out a piece of work to an independent contractor, E he expects the contractor to provided all the necessary tools and equipme :.s,

whereas if he employs a servant he expects to provide th_e same himself. 1he supply of machine was highlighted having regard to that fact that the sewing machine on which the workers do the work generally belong to the employer is an important consideration for deciding the relationship of master and F servant. Besides the same the right of the employer to reject the end product and directing the worker to restitch it also led this court to conclude that the element of coritml and supervision was also present.

However, in a slightly different fact situation where a person working as a part-time accountant for a long number of years who used .to look after G his own partnership business after working hours, was held to be not a workman. (See W.H.D. Cruz & Sons v. M.£. Thomas, (1996] I L.L.J. 706 (Ker.))

In Mis Shining Tailors v. Industrial Tribunal II, U.P .• luclu10w and Ors. [ 1983] 4 SCC 464, payments used to be made to the workmen on piece- H rates in a big tailoring establishment. Desai, J. in the facts and circumstances


WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD. v. STATE [SINHA, J.)

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of the case observed that right of removal of the workmen or nol to give the A work had the element of control and supervision which had been amply satisfied in that case. The question which arose for consideration was as to whether only because the concerned workman was paid on piece rate was itself indicative of the fact that there existed a relationship of principal employer and independent contractor.

It is, however, relevant to note that therein also an observation was made to the effect that the method of payment in various occupations is different in different industries.

In Indian Overseas Bank v. 1.0.B. Staff Canteen Workers' Union and C Anr., [2000] 4 SCC 245, this Court observed :

"The standards and nature of tests to be applied for finding out the existence of master and servant relationship cannot be confined to or concretized into fixed formula(e) for universal application, invariably in all class or category of cases. Though some common standards can D be devised, the mere availability of any one or more or their absence in a given case cannot by itself be held to be decisive of the whole issue, since it may depend upon each case to case and the peculiar device adopted by the employer to get his needs fulfilled without rendering him liable. That being the position, in order to safeguard the welfare of the workmen, the veil may have to be pierced to get E at the realities. Therefore, it would be not only impossible but also not desirable to lay down abstract principles or rules to serve as a ready reckoner for all situations and thereby attempt to compartmentalize and peg them into any pigeonhole formulae, to be insisted upon as proof of such relationship. This would only help to perpetuate practicing unfair labour practices than rendering substantial F justice to the class of persons who are invariably exploited on account of their inability to dictate terms relating to conditions of their service.

Neither all the tests nor guidelines indicated as having been followed in the decisions noticed above should be invariably insisted upon in every case, nor the mere absence of any one of such criteria could be G held to be decisive of the matter. A cumulative consideration of a few or more of them, by themselves or in combination with any other relevant aspects, may also serve to be a safe and effective method to ultimately decide this often agitated question. Expecting similarity or identity of facts in all such variety or class of cases involving different H type of establishments and in dealing with different employers would

A mean seeking for things, which are only impossible to find."

Having regard to the fact that therein a cooperative canteen was promoted with the consent of the management by serving members of the Bank staff, which was running within the bank's , premises and with the funds, subsidy and infrastructural facilities provided exclusively by the Bank, it was held B that there existed a relationship of master and servant.

Howt:ver, we may notice that almost in a similar situation in Employers in relation to the Management of Reserve Bank of India v. Workmen., [ 1996} 3 sec 267, it was held that in the absence of statutory or other legal obligations and in the absence of any right in the Bank to supervise and control the work C or details there in any manner regarding the canteen workers employed in the three types of canteens, it cannot be said that relationship of master and servant existed between the Bank and the various persons employed in the three types of canteens and in that situation, the demand for regularization was considered to be unsustainable.

In our opinion, the statutory canteen or other canteen run by the employer in his premises stands absolutely on a different footing. In detennining the relationship of employer and employee, as has been noticed by this C.ourt in Steel Authority of India ltd. and Ors. v. National Union Wate1front Workers and Ors. [200 I} 7 SCC l, the said question hils no relevance.

In Mishra Dhatu Nigam ltd., etc. v. M. Venkataiah & Ors. etc. etc. JT

(2003) 7 SC 95, as the appellants were required by the Factories Act to provide canteen facilities and since. the workers engaged through the contractors had been held to be the employees of the principal employers, this Court held that the wokers engaged through contractors were entitled for regularization of their services. Although we have reservation about the correctness or otherwise of the said decision but we need, not go into the said question inasmuch even therein, the court noticed that the decision in Steel Authority of India ltd., (supra) stands on a different footing.

In Indian BankS'Association v. Workmen of Syndicate Bank and Ors., G [200 I] 3 SCC 36, the question which arose for consideration was as to whether the deposit collectors who received commission is in reality a wage which would depend on the productivity. Such commission was paid for promoting the business 'of the bank. Having regard to the fact that the banks have control over the 'deposit collectors, they were considered to be their own H workers. . . .

WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD."· STATE[SINHA, J.J

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In Indian Banks Association, (supra) the reference which was made for A adjudication of the Industrial Tribunal was as follows :

"Whether the demands of the Commission Agents or as the case may be Deposit Collectors employed in the banks listed in the annexure that they are entitled to pay scales, allowances and other service conditions available to regular clerical employees of those banks is B justified ? If not, to what relief are the workmen concerned entitled and from which date ?"

Having regard to the evidences both oral and documentary led by the parties, the Tribunal directed :

"All those Deposit Collectors and Agents who are below the age of c

45 years on 3.10.1980 (the date of the first reference of this industrial dispute) shall be considered for regular absorption for the post of clerks and cashiers if they are matriculates and above including qualified graduates and postgraduates. They may be taken to banks services as regular employees if they pass the qualifying examinations D conducted by the banks. Those who are absorbed shall be treated on a par with regular clerical employees of the Bank. Those who have qualified 8th class a'nd below matriculation shall be considered for absorption as sub-staff by conducting qualifications examination.

As regards the Deposit Collectors and Agents who are above 45 years of age on the date 3.10.1980 and also those who are unwilling to be absorbed in regular banks service shall be paid the full back wage ?f Rs.750.00 per month linked with a minimum deposit of Rs.7500.00 per month and they should be paid incentive remuneration

at 2% for collection of over and above 7500.00 per month and they F should also pay uniforn1 conveyance of Rs.SO per month for deposit of less than Rs. I 0,000.00 and Rs. I 00.00 per month for deposits of more than Rs. I 0,000.00 up to or above Rs.30,000.00 per month they should be paid gratuity of 15 days' commission for each year of service rendered."

Thus in that decision, a scheme was formulated.

However, we may notice that in Union of India and Ors. v. K. V. Baby and Anr., [1998] 9 SCC 252, this Court observed :

" ... However, persons who are engaged on the basis of individual H

contracts to work on a commission basis cannot, by the very nature of their engagement, be equated with regular employees doing similar work ... "

In Bharat Heavy. Electricals ltd. v. State of U.P. and Ors., (2003] 6 SCC 528, the concerned workmen were engaged as gardeners to sweep, B clean, maintain and look after the lawns and parks inside factory premises and campus of the residential colony of the appellant through the agencies of the Respondent Nos.3 to 5; therein their services were terminated pursuant whereto an industrial dispute was raised before the Tribunal, the employer did not produce any records. Having applied the control test and in view of C the fact that the records of the concerned workmen had not been produced, this Court did not interfere with the award of the Tribunal and the judgment of the High Court.

In Shri Chintaman Rao and Anr v. The State of Madhya Pradesh, (1958] SCR 1340, this Court observed :

" ... The concept of employment involves three ingredients (I) employer

(2) employee and (3) the contract of employment. The employer is one who employs, i.e. one who engages the services of other persons.

The employee is one who works for another for hire. The employment is the contract of service between the employer and the employee whercunder the employee agrees to serve the employer subject to his control and supervision ... "

Following the decision of this Court in Shri Chintaman Rao (supra), this Court in Shankar Balaji Waje v. The State of Maharashtra AIR (1962) SC 517, held:

"Employment brings in the contract of service between the employer and the employed. We have mentioned already that in this case there was no agreement or contract of service between the appellant and Pandurang. What can be said at the most is that whenever Pandurang went to work, the appellant agreed to supply him tobacco for rolling bidis and that Pandurang agreed to roll bidis on being paid at a ce11ain rate for the bid is turned out. The appellant exercisedno control and supervision over Pandurang"

In Dharangadhara Chemical Works ltd v. State of Saurashtra and Ors., AIR ( 1957) SC 264, this Court upon noticing several authorities held:

WORKMEN Of NILGIRI COOP. MKT. SOCY. LTD. v. STATE [SINHA, J.] 191

"The principle which enterges from these authorities is that the prima A facie test for the determination of the relationship between master and servant is the existe11ce 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 page 23 in Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool) B. ltd, [[1947] I A.C. I, at p. 23.], "The proper test is whether or not the hirer had authority to control the manner of execution of the act in question".

The nature or extent of control which is requisite to establish the C 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, D 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 (Vide observations o/Somervell, l.J., in Cassidy v. Ministry of Health (supra), and Denning. l.J., in.

Stevenson, Jordan and Harrison ltd. v. MacDonald and Evans (supra).

E 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 or to use the words of Fletcher Moulton, L.J., at page 549 in Simmons v. Health la1111d1y Company, [[1910] I K.B. 543 at pp. 549, 550] :- F "In my opinion it is impossible to lay down any rule of law distinguishing the one from the other. It is a question of fact to be decided by all the circumstances of the case. The greater the amount of direct control exercised over the person rendering the services by the person contracting for them the stronger the grounds for holding it to be a contract of service, and similarly the greater the degree of G independence of such control the greater the probability that the services rendered are of the nature of professional services and that the contract is not one of service."

In Management of Mis Puri Urban Cooperative Bank v. Madhus11da11 H

A Sahu and Anr., AIR ( 1992) SC 1452, this Court observed :

" ... It stands established that Industrial Law revolves on the axis of master and servant relationship and by a catena of precedents it stands established that the prima facie test of relationship of maste{ and servant is the existence of the right in the master to supervise and control the work done by the servant (the measure of supervision and control apart) 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 ... "

However, we may note that in Workmen of the Canteen of Coates of India ltd. v. Coates of India ltd., (Civil Appeal No.34 7911987 disposed of C on 28.8.1996, this Court observed :

" ... some requirement under the Factories Act of providing. a canteen in the industrial establishment, is by itself not decisive of the question or sufficient to determine the status of the persons employed in the canteen. The effect, if any, relating to compliance of the provisions of Factories Act is a different matter .which does not arise for consideration in the present case." .

[See also Bombay Canteen Employees' Association v. Union of India, ( 1997] 6 sec 723]

On the aforementioned backdrop of legal principles, we may now consider the Constitution Bench judgment of this. Cou11 in Steel Authority of India limited, (supra). The principal question which arose for consideration therein was as to whether having regard o the provisions contained in Section

10 of the Conti-act Labour (Regulation and Abolition) Act, the workmen F employed by the contractors in the event of abolition of contract labour were entitled to be automatically absorbed in the services of the principal employer.

While answering the question in the negative the court reversed the earlier decision of this Court in Air India Statutory.Corporation and Ors. v. United labour Union and Ors., (1997] 9 SCC 377. This Court referring to a large number of decisions and tracing the history of the Contract Labour (Regulation G and Abolition) Act, noticed that the Industrial Tribunal although prior to coming into force could issue directions for such regularization but such directions could not be issued after coming into force of the Act. In view of the Constitution Bench decision in Mis Gammon India lid. and Others etc.

v. Union of India and Ors., (1974] I SCC 596, the Court held that although H the principle that a beneficial legislation needs to be construed liberally in

....-._,

' -

WORKMEN OF NILGIRI COOP. MKT. SOCY. LTD. v. STATE [SINHA, J.) 193

favour of the class for whose favour it is intended, the same would not extend A to reading in the provisions of the Act what the legislature has not provided whether expressly or by necessary implication, or substituting remedy or benefits for that provided by the legislature. Upon analyzing the case law, the categories of cases were sub-divided into three stating :

"An analysis of the cases, discussed above, shows that they fall in B three classes : (i) where contract labour is engaged in or in connection with the work of an establishment and employment of contract labour is prohibited either because the industrial adjudicator/c_ourt ordered abolition of contract labour or because the appropriate Government issued notification under Section IO(l) of the CLRA Act, no automatic C absorption of the contract labour working in the establishment was ordered; (ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case the contract labour working in the establishment of the principal employer were held, in fact and in reality, the employees of the principal employer himself. Indeed, such cases do not relate to abolition of contract labour but present instances D wherein the Court pierced the veil and declared the correct position as a fact at the stage after employment of contract labour stood' prohibited; (iii) where in discharge of a statutory obligation of maintaining a canteen in an establishment the principal employer availed the services of a contractor the courts . have held that the E contract labour would indeed be the employees of the principal employer."

The instant case although was sought to be put in category (ii) as referred to Steel Authority (supra) by Mr. Prasad, he, as noticed hereinbefore, took us also to the case law falling in Class (i) and Class (iii) aforementioned. F

There cannot be any doubt whatsoever that where a person is engaged through an intermediary or otherwise for getting a job done, a question may arise as the appointment of an intermediary was merely sham and nominal and rather than camouflage where a definite plea is raised in Industrial Tribunal or the Labour Court, as the case may be, and in that event, it would be G entitled to pierce the veil and arrive at a finding that the justification relating to appointment of a contractor is sham or nominal and in effect and substance there exists a direct relationship of employer and employee between the principal . employer and the workman. The decision of this Court in Hussainbhai, Calicut v. The A/lath Factory Thezhilali Union, Kozhikode and H

SUPREME COIJRT REPORTS

(2004] 2 S.C.R.

A Ors .. [1978] 4 sec 257 will fall in that category.

ANALYSIS:

Having regard to the aforementioned findings, we .are of the opinion, the High Court has rightly affirmed the award of the Industrial Tribunal. The B Tribunal as also the High Court further rightly arrived at a finding to the effect that the concerned workmen were not able to discharge their burden of proof that they were employed by the Society.

The decisions referred to hereinbefore are indicative of the fact that the different tests have been applied in different cases having regard to the nature C of the problem arising in the fact situation obtaining therein. Emphasis on

application of control test and organization test have been laid keeping in view the question as to whether the matter involves a contract of service visa-vis contract for service; or whether the employer had set up a contractor for the purpose of employment of workmen by way of a smoke screen with a D view to avoid its statutory liability.

In the present case we are faced with , a peculiar situation. The society is a service society which has been formed with the object of protecting the growers from being exploited at the hands of the traders. it has been found that the employment of the workmen for doing a particular piece of work is E at the instance of the producer or the merchants on an ad hoc basis or job to job basis and, thus, the same may not lead to the conclusion that relationship of employer and employee has come into being. Furthermore, when an employee has a right to work or not when an offer is made to him in this behalf by the producer or by the merchants will also assume significance.

F For the purpose of earning livelihood, a person has to involve himself into certa.in kinds of activities wherefor, he must subject himself to some sort of discipline or control, which is even otherwise implicit:

The findings arrived at by the learned Tribunal as well as the High G Court would clearly go to show that the concerned workmen are engaged both by the growers as also the traders. Only on some occasions, payment is made to the concerned workmen through the third parties only in a case where the grower is not immediately in a position to pay the same as he was yet to receive the price of the vegetables to be auctioned. We must bear in mind that the Society deals with small and marginal farmers who themselves H look after the Society for obtaining such assistance as may be necessary from

WORKMEN OFNILGIRI COOP. MKT. SOCY. LTD.1'. STATE[SINHA, J.] 195

not being exploited by the traders and had been facing the problem of a A forced sale of their produce at the throw away price. The totality of the circumstances as opined by the Tribunal and affirmed by the High Court would clearly go to show that although certain activities are carried out in the market yards wherefor requisite infrastructures are provided, the Society in general does not have the necessity of employing any workman either for the B purpose of loading, unloading or grading. Ultimately, the remuneration to the concerned workmen are borne either by the farmers or by the merchants.

Presumably the amount paid to the loaders, unloaders and the graders would vary, as for example whereas there would be cases where the growers themselves would unload their merchandise either from trucks or carts. In case growers take the assistance of the concerned persons for unloading after C the auction is held the payment would be made by the traders. In a situation of this nature and particularly having regard to the fact that the respondent is a cooperative society which only renders services to its own members and despite the fact that in relation thereto it receives commission at the rate of one per cent both from the farmers as also the traders; it does not involve in D any trading activity. Although rendition of such service may amount to carrying out an industrial activity within the meaning of the provisions of the Industrial Disputes Act, 1947 but we are in this case not concerned with the said question. What we are concerned with is as to whether the concerned workmen have been able to prove that they are workmen of the Society. They have not.

CONCLUSION :

In view of what has been found hereinbefore, we are of the opinion that the decision of the Tribunal as affirmed by the High Court cannot be said to be perverse warranting our interference.

For the reasons aforementioned, we do not find any merit in these appeals which are dismissed accordingly. No costs.

However, before parting with the matter, we may observe that we have no doubt in our mind keeping in view the assurances given to the High Court by the Society, as recorded in its order dated 12.12.2000, the Respondent will G continue to see that the concerned employees are provided with employment.

B.K.M.

Appeals dismissed.