Steel Authority of India Ltd. & Ors. vs. National Union Water Front Workers & Ors.

In the Supreme Court of India
Appeal (Civil) 6009-6010 of  2001
Petitioner
Steel Authority of India Ltd. & Ors.
Respondents
National Union Water Front Workers & ors.
Date of Judgement
30.08.2001
Bench
Justice S.S.M. Quadri; Justice B.N. Kirpal; Justice M.B. Shah; Justice Ruma Pal; Justice K.G. Balakrishnan

Introduction

Since the time of its inception the aim of the Contract Labour (Regulation and Abolition) Act (CLRA), 1970 has been to prevent exploitation of contractual labor and introduce safe and better conditions of work. According to this Act, the term contract labor refers to a person when he/she is hired as part of the work of an organization through a contractor and are indirect employees. The main points of distinction between contract work and direct work are the terms of the employment, relationship with the establishment, and the salary payment method. Contract work, in general, is not admitted to the payroll and is not paid directly since they are contracted, supervised, and remunerated by the contractor.

The CLRA Act is applicable to all establishments which employ or has employed twenty or more workmen on any day of the preceding twelve months under the terms of contractual labor; and to every contractor who employs or has employed twenty or more workmen on any day of the preceding twelve months.

Background Study

The CLRA Act:

• This Industrial Disputes Act is touted a delicate measure which seeks to alleviate industrial tensions, provide the necessities of dispute-resolutions and set up the necessary infrastructure so that day to day tasks of production is unencumbered, there’s a climate of goodwill and industrial justice is met with the upscale of the economy.
• With reference to Article 15, 16 and 23 of Part three of the Indian Constitution and Article 38, 39, 43 and 43A of the Directive Principles, the CLRA Act was enacted by the Parliament to deal with the abuses of contract labor system. The Parliament adopted twin measures to curb the abuses of employment of contract labor – the first to regulate the employment of contract labor suitably and the second to abolish it in certain circumstances. This approach was clearly discernible from the provisions of the CLRA Act which came into force on February 10, 1971.

Constitutional and Statutory Provisions Discussed

1. Section 10(1) of the CLRA Act, 1970

Facts:

• The appellants- a Central Government Company along with its branch manager, is engaged in the manufacture and sale of various types of iron and steel materials and their business includes import and export of several products and through Central Marketing Organization which is their a marketing unit and has a network of branches in different parts of India.
•  The work of handling the goods in the stockyards of the appellants was being entrusted to contractors after a due tendering process.

On July 15, 1989, the Government of West Bengal issued notification dated July 15, 1989, under Section 10(1) (the prohibition notification) of the CLRA Act prohibiting the employment of contract labor in four specified stockyards in Calcutta.

The Government of West Bengal kept in abeyance the said notification initially for a period of six months by notification dated August 28, 1989, and thereafter extended that period from time to time but did not extend the period beyond August 31, 1994.

HIGH COURT JUDGEMENT: The first respondent-Union representing the cause of these contract laborers filed Writ Petition in the Calcutta High Court seeking a direction to absorb the contract labor in their regular establishment in view of the prohibition notification of the State Government dated July 15, 1989, and further asking that the notification keeping the prohibition notification in abeyance, be abrogated. The High Court allowed the writ petition, set aside all notifications extending and directed that the contract labor be absorbed and regularized within six months from the date of Judgment i.e. April 25, 1994.

The appellants had adopted a two-pronged attack strategy. Assailing the said judgment of the high court, they filed a writ appeal and challenged the prohibition notification in the Calcutta High Court. While these cases were pending before the High Court, this Court delivered judgment[i] holding, that in case of Central Government Companies the appropriate Government is the Central Government and thus upheld the validity of the notification issued by the Central Government under Section 10(1) of the CLRA Act prohibiting employments of contract labor in all establishments of the Central Government Companies.

On July 3, 1998, a Division Bench of the High Court nonetheless dismissed the writ appeal as well as the writ petition filed by the appellants taking the view that on the relevant date “the appropriate Government” was the State Government.

Issues:

1. What is the true and correct import of the expression “appropriate government” as defined in Clause (a) of Sub-section (1) of Section 2 of the CLRA Act?
2. Whether the prohibition notification issued by the Central Government under Section 10(1) of the CLRA Act is valid and applies to all Central Government companies?
3. Whether automatic absorption of contract labor, working in the establishment of the principal employer as regular employees, follows on the issuance of a valid notification under Section 10(1) of the CLRA Act, prohibiting the contract labor?

Arguments

Argument by counsel of Appellants

• Appropriate Government on the relevant date was the State Government and for that reason the notification issued by the Central Government on December 9, 1976, was never sought to be applied to the establishments of FCI and ONGC but in view of the amendment of the definition of the expression, “appropriate Government” with effect from January 28, 1986, the Central Government would thereafter be the appropriate Government., adopted the arguments of the learned Solicitor General on this point.

Argument by counsel of Respondents:

• In the case of FCI the appropriate Government before and after the notification issued by the Central Government on January 28, 1986, was the Central Government.
• All Central Government Undertaking which falls within the meaning of “other authorities” in Article 12 is agents or instrumentalities of the State functioning under the authority of the Central Government, as such the Central Government will be the appropriate Government.The approach of the Court in the Heavy Engineering’s case,[ii]was based on private law interpretation and that the approach of the Court ought to be based on public law interpretation.
•  It has been held that where there is deep and pervasive control, a company registered under the Companies Act or a society registered under the Societies Act would be ‘State’ and, therefore, it would satisfy the requirement of the definition of “appropriate government”.

Judgment:

Ratio Decidendi

• A plain reading of the unamended definition of Sub-Clause (i) shows that it has two limbs. The first limb takes in an establishment pertaining to any industry carried on by or under the authority of the Central Government and the second limb embraces such controlled industries as may be specified in that behalf by the Central Government.
• Definition of ‘appropriate Government’ which bears the same meaning as given in Clause (a) of Section 2 of the Industrial Disputes Act which under interpretation, shows that it is lucid and clear. There is no obscurity, no ambiguity, and no abstruseness. Therefore the words used therein must be construed in their natural ordinary meaning as commonly understood since it is a well-settled proposition of law that the function of the Court is to interpret the Statute to ascertain the intent of the legislature-parliament.
• The definition of the said expression combines three alternatives, viz. (a) any industry carried on by the Central Government; (b) any industry carried on under the authority of the Central Government; (c) any industry carried on by a railway company. Alternatives (a) and (c) indicate cases of any industry carried on directly by the Central Government or a railway company. They are too clear to admit of any polemic. In regard to alternative (b), surety, an industry being carried on under the authority of the central Government cannot be equated with any industry carried on by the Central Government itself. This leaves us to construe the words “under the authority of the Central Government”. The keyword in them is ‘authority’.
• To define “appropriate government’ the meaning words authority and ‘state’ as given in article 12 were delineated[iii] and the court held that the fact of being an instrumentality of a Central/State Govt. or being State within the meaning of Article 12 of the Constitution cannot be determinative of the question as to whether an industry carried on by a Company/ Corporation or an instrumentality of the Govt. is by or under the authority of the Central Government for or within the meaning of the definition of appropriate Government in the CLRA Act.
• The definition of establishment in the CLRA Act takes in its fold purely private undertakings which cannot be brought within the meaning of Article 12 of the Constitution. In such a case ‘appropriate Government’ determined for the purpose of CLRA Act or Industrial Disputes Act is defined by the test whether an undertaking instrumentality of Government is carrying on an industry under the authority of the Central Government and not whether the undertaking is instrumentality or agency of the Government for purposes of Article 12 of the Constitution, be it of Central Government or State Government.
• There cannot be any dispute that all the Central Government companies cannot be equated to Central Government though they may be State within the meaning of Article 12 of the Constitution. Being the instrumentality or agency for the Central Government would not by itself amount to having the authority of the Central Government to carry on that particular industry. Therefore, it is incorrect to say that in relation to any establishment of a Central Government Company/undertaking, the appropriate Government will be the Central Government.
• After a careful perusal of Section 10, it was held that Sub-section (1) commences with a non-obstante clause and overrides the other provisions of the CLRA Act in empowering the appropriate Government to prohibit by notification in the Official Gazette, after consultation with Central Advisory Board / State Advisory Board, employment of contract labor in any process, operation or other work in any establishment.
•  Before issuing a notification under Sub-section (1) in respect of an establishment the appropriate Government is enjoined to have regard to: 
• the conditions of work;
• the benefits provided for the contract labor; and
• other relevant factors like those specified in Clauses (a) to (d) of Sub-section (2).
• Reading the definition of “establishment” in Section 10, the position that emerges is that before issuing a notification under Sub-section (1) an appropriate Government is required to (I) consult the Central Board / State Board; (ii) consider the conditions of work and benefits provided for the contract labor and (iii) take note of the factors such as mentioned in Clauses (a) to (d) of Sub-section (2) of Section 10, referred to above, with reference to any office or department of the Government or local authority or any place where any industry is carried on
• Keeping in mind the impugned notification issued by the Central Government on December 9, 1976makes it manifest that with effect from March 1, 1977, it prohibits employment of contract labor for sweeping, dusting and watching of buildings owned or occupied by the establishment in respect of which the appropriate Government under the said Act is the Central Government. This indicates that the Central Government had not adverted to any of the essentials, referred to above, except the requirement of consultation with the Central Authority Board. Consideration of the factors mentioned above has to be in respect of each establishment, whether individually or collectively, in respect of which notification under Sub-section (1) of Section 10 is proposed to be issued. This notification despite of being a comprehensive notification does not reveal compliance of Sub-section (2) of Section 10. This is ex-facie contrary to the postulates o Section 10 of the Act.

Besides it also exhibits non-application of mind by the Central Government and the consequences of issuing a notification under Section 10(1) of the CLRA act. This was as follows-

• (1) Contract labor working in the concerned establishment at the time of issue of notification will stop functioning ; (2) the contract of the principal employer with the contractor incomes to an end: (3) no contract labor can be employed by the principal employer in any process, operation or other work in the establishment; (4) the contract labor is not rendered unemployed as is generally assumed but continues in the employment of the contractor as the notification does not sever the relationship of master and servant between the contractor and the contract labor; (5) the contractor can avail the services of the contract labor in any other establishment in respect of which no notification under Section 10(1) has been issued where all the benefits under the CLRA Act which were being enjoyed by it, will be available; (6) if a contractor intends to retrench his contract labor he can do so only in conformity with the provisions of the I. D. Act.
• The point under consideration was then whether automatic absorption of contract labor working in an establishment is implied in Section 10 of the CLRA Act and follows as a consequence on the issuance of the prohibition notification thereunder.
• Further, the court felt it was apposite to notice the definition of the terms- contract labor, principal employer, contractor and employer after which it was discussed that the principle that beneficial legislation needs to be construed in favor of the class for whose benefit it is intended, does not extend to reading in the provision’s of the Act what the legislature has not provided whether expressly or by necessary implication, or substitution remedy or benefits for that provided by the legislature.
• The CLRA Act that regulates the conditions of service of the contract labor and authorizes in Section 10(1) prohibition of contract labor system by the appropriate Government on consideration of factors enumerated in Sub-section (2) of Section 10 of the Act among other relevant factors. But, the presence of some or all those factors, the court’s view provided no ground for the absorption of contract labor on issuing a notification under Sub-section (1) of Section 10. Admittedly when the concept of automatic absorption of contract labor as a consequence of issuing a notification under Section 10(1) by the appropriate Government, is not alluded to either in Section 10 or at any other place in the Act and the consequence of the violation of Sections 7 and 12 of the CLRA ACT is explicitly in Sections 23 and 25 of the CLRA Act, it is not for the High Courts or this Court to read in some unspecified remedy in Section 10 or substitute for penal consequences specified in Sections 23 and 25 a different sequel, be it absorption of contract labor in the establishment of the principal employer or a lesser or harsher punishment.
• Such an interpretation of the provisions of the statute was held to be far beyond the principle of ironing out the creases and the scope of interpretative legislation and as such impermissible. It was then held that it is difficult to accept that the Parliament intended absorption of contract labor on the issue of abolition notification under Section 10(1) of the CLRA Act.
• The court was not persuaded to accede to the contention that a workman, who is not an out worker, must be treated as a regular employee of the principal employer and so stated an out worker falls within the exclusionary clause of the definition of “workman.’ The word ‘out worker’ connotes a person who carries out the type of work, mentioned in Sub-clause (c) of Clause (i) of Section 2, of the principal employer with the material supplied to him by such employer either (i) at his home or (ii) in some other premises not under the control and management of the principal employer. A person who is not an out worker but satisfies the requirement of the first limb of the definition of ‘workman’ would be the very definition fall within the meaning of the term ‘workman.’ Even so, if such a workman is within the ambit of the contract labor, unless he falls within the aforementioned classes, he cannot be treated as a regular employee of the principal employer.

Obiter Dicta

• Where the language of the Statute is clear and explicit the Court must give effect to it because in that case words of the Statute unequivocally speak the intention of the legislature. This rule of literal interpretation needs to be adhered to and a provision in the Statute
• To hold that the Central Government is the appropriate Government in relation to any establishment, the Court must be satisfied that the particular industry in question is carried on by or under the authority of the Central Government. Hence, it would be clear that the Central Government will be the “appropriate Government” under the CLRA Act and the I.D. Act provided the industry in question is carried on by a Central Government company/an undertaking under the authority of the Central Government. Where the authority, to carry on any industry for or on behalf of the Central Government is conferred on the Government company/any undertaking by the Statute under which it is created.
• The question of whether there is any conferment of authority on the Government company any undertaking by the Central Government to carry on the industry in question is a question of fact and has to be ascertained on the facts and in the circumstances of each case.[iv]

Conclusion:

The Supreme Court’s decision, in this case, marks an important distinction to the jurisprudence of labor laws in India. It delineated that contract workers would have no right to automatic absorption upon abolition and only own a right to a preference in employment if permanent workers are to be employed to fill in the vacancies created by the removal of the contract workers upon abolition. Similar provisions are given in this judgment effectively filled the lacunae in the labor laws of the country and also cleared all ambiguities about who was an appropriate government thus making the rights of the Indian labor more fruitful and transparent.

“The views of the authors are personal“

Reference

[i] Air India Statutory Corporation v. United Labour Union, MANU/SC/0163/1997 : (1997)ILLJ1113SC.

[ii] Heavy Engineering’s case, MANU/SC/0309/1969: (1969)IILLJ549SC : (1969)IILLJ549SC.

[iii] Ramanna Dayaram Shetty v. International Airport of India, MANU/SC/0048/1979 : (1979)IILLJ217SC.

[iv] Heavy Engineering Mazdoor Union v. State of Bihar, MANU/SC/0309/1969 : (1969)IILLJ549SC. In Hindustan Aeronautics Ltd. v. Workmen, MANU/SC/0347/1975 : (1975)IILLJ336SC.