Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1967 Supreme(SC) 231

SUPREME COURT OF INDIA
M. HIDAYATULLAH AND V. BHARGAVA, JJ.
Ghatge and Patil Concerns, Employees Union, Appellant
Versus
Ghatge and Patil (Transports) Private Ltd. and another, Respondents.
Civil Appeal No. 437 of 1966,
D /- 22-8-1967.
Advocates Appeared
M/s. H. K. Sowani, K. Rajendra Chaudhuri and K. R. Chaudhuri, Advocate, far Appellant; Mr. H. R. Gokhale, Senior Advocate, (Mr. I. N. Shroff, Advocate, with him), for Respondent No. 1.

Advocates:
H.K.SOVANI, H.R.GOKHALE, I.M.SHROFF, K.R.CHAUDHARY, K.RAJENDRA CHAUDHARY

A person is free to arrange his business in a way that avoids a regulatory law and its penal consequences, as long as he does not break that or any other law.

Headnote:
MOTOR TRANSPORT WORKERS ACT, 1961 - CONTRACT SYSTEM FOR RUNNING VEHICLES - VALIDITY - UNFAIR LABOUR PRACTICE - EXPLOITATION OF LABOUR - INTERPRETATION OF STATUTES.
Fact of the Case:

A transport company introduced a contract system for running its trucks, under which former drivers and cleaners resigned their jobs and entered into agreements to operate the trucks on a contract basis. The union representing the workers challenged the system, alleging that it amounted to an unfair labour practice and exploitation of labour, and that it violated the Motor Transport Workers Act, 1961.
Finding of the Court:

The Supreme Court held that the contract system was not illegal and did not amount to an unfair labour practice or exploitation of labour. The drivers and cleaners had voluntarily resigned their jobs and entered into the agreements, and there was no compulsion or coercion involved. The operators were free agents who could do the work as and when they liked and even accept work from others. The court also held that the operators were not Motor Transport workers within the meaning of the Act, as they were not employed in the Motor Transport Undertaking in the sense of persons kept in service.
Issues: 1. Whether the contract system for running vehicles introduced by the company amounted to an unfair labour practice or exploitation of labour? 2. Whether the contract system violated the Motor Transport Workers Act, 1961?
Ratio Decidendi: 1. The court held that the contract system was not an unfair labour practice or exploitation of labour because: - The drivers and cleaners had voluntarily resigned their jobs and entered into the agreements. - There was no compulsion or coercion involved. - The operators were free agents who could do the work as and when they liked and even accept work from others. 2. The court held that the contract system did not violate the Motor Transport Workers Act, 1961 because: - The operators were not Motor Transport workers within the meaning of the Act, as they were not employed in the Motor Transport Undertaking in the sense of persons kept in service.
Final Decision: The Supreme Court dismissed the appeal filed by the union, holding that the contract system introduced by the company was not illegal and did not violate any law.

Judgement

HIDAYATULLAH, J. :- This is an appeal by special leave against the award dated March 31, 1964 of the Industrial Tribunal, Maharashtra in a Reference by Government under S. 10 (1) (d) of the Industrial Disputes Act, 1947. The appellant is a Trade Union established on January 1, 1962 by the employees of Ghatge and Patil (Transports) Private Ltd. and the respondent is the Company. The Company has its registered office at Kolhapur and is engaged in the transport and removal of goods by road. It operates on a large scale owning at the material time as many as 70 trucks and plies them from Kolhapur (where the registered office of the Company is situate) to far off places such as Bombay, Poona, Bangalore, Goa and Madras.

2. On January 14, 1963, the Union served a notice of demand upon the Company asking for the abolition of a newly introduced contract system for the running vehicles. This was referred first to the Conciliation Officer, but later the reference was made by Government as stated already. The dispute arose in the following circumstances :

3. For the operation of its trucks the Company was previously employing 70 drivers ors and an equal number of cleaners. On January 8, 1963 the Company advertised in a local newspaper of Kolhapur that it had trucks in walking condition for sale and also trucks in working condition to be given plying on a contract system. As many as 54 drivers applied for obtaining contracts having resigned their service as drivers. The Company then entered into agreements with these drivers between January 9 and 31. Each driver received one motor truck for operation according to the terms of the agreement. A model agreement has been produced in the case in which the parties, after reciting that there were difficulties in operating motor transport vehicles, because of the passing of the Motor Transport Workers Act, stated that the agreement was being entered into for the operation of the trucks. It is not necessary either to set out the agreement or to analyse all its terms. For our purpose it is sufficient to say that the Company let to these former drivers (to whom we may refer as operators) a truck each on condition that they paid the Company Re. 1.00 per mile for its use. The Company on its part undertook to supply fuel, oil, tyres, tubes, etc. for the purpose of running the vehicle. Under this agreement the operator was at liberty to canvass for goods and transport them but he was required to give the utmost priority to the goods entrusted to the Company for transport. In this way the goods booked with the Company were transported by the operators in priority and they paid Re. 1.00 per mile for the use of the truck, all other expenses being borne by the Company. The operators were required to bring all the gross receipts to the Company which deducted its own charges at Re. 1.00 per mile and handed over the balance. The operators were responsible for any damage to the vehicle, save normal wear and tear, and were required to observe the terms and conditions of the permit held by the Company. In this way, the Company continued to function as a transport undertaking while the trucks were not run through paid servants but through independent contractors.

4. The above move by the Company was necessary (so the Company admits) because of the passing of the Motor Transport Workers Act 1961, on May 20, 1961. This Act was passed to provide the welfare of Motor Transport workers and to regulate the conditions of their work. It applies to Motor Transport Undertakings, by which is meant among other things, undertakings engaged in carrying goods by road for hire or reward. Such undertakings are required to register under the Act and an inspecting staff is brought into existence for the purpose of seeing that the requirements of the Act are carried out. The fourth chapter of the Act (headed "Welfare and Health") requires the Motor Transport Undertakings to provide canteens in every place where 100 Motor Transp

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