1. Contract labour abolition notification — Claim for direct employment with principal employer — Dispute regarding genuineness of contract. (Para 1 )
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2002 Supreme(SC) 358
SUPREME COURT OF INDIA
K.G.Balakrishnan : S.N.Phukan
Nitinkumar Nathalal Joshi
Versus
Oil And Natural Gas Corporation
Case No. : 2078 of 2002
Date of Decision : 3/14/02
Advocates Appeared: Andhyarujina T.R. : Nanavati I.M. : Rohtagi Mukul
A prohibition notification under Section 10(1) of the CLRA Act does not result in automatic absorption of contract labour. Status as a regular employee depends on whether the contract was a sham, which must be determined by an industrial adjudicator.
Headnote:(A) Contract Labour (Regulation and Abolition) Act, 1970 - Section 10(1) - Industrial Disputes Act - Prohibition of contract labour - Automatic absorption - Upon issuance of a prohibition notification under Section 10(1) of the Act, there is no automatic absorption of contract labourers as regular employees of the principal employer - The industrial adjudicator must examine whether the contractor was interposed under a genuine contract or as a mere ruse/camouflage to evade beneficial legislation - Where the contract is found to be a sham, the workers shall be treated as employees of the principal employer - Where the contract is genuine and the principal employer intends to employ regular workmen in that process or operation, preference shall be given to the erstwhile contract labour, subject to suitability and potential relaxation of non-technical qualifications and age limits. (Paras 3, 4)
(B) Application of Precedent - Rules regarding non-automatic absorption apply where directions for absorption were not given effect to or were modified by a higher court prior to the finality of the decision. (Paras 6, 7)
Facts of the case:
Contract labourers employed as boiler operators through a contractor sought to be treated as employees of the principal employer following a notification issued under Section 10(1) of the Act prohibiting contract labour in those posts. A single judge of the High Court initially ruled that the workers were performing duties directly under the principal employer and should be granted the terms of service applicable to regular employees. This was challenged before the Division Bench, which held that disputed questions of fact regarding service conditions existed and directed the parties to approach the Conciliation Officer and the Industrial Tribunal.
Findings of Court:
The Court found that the allegations regarding the termination of one contract and the initiation of new contracts, as well as discrepancies in payments, were disputed questions of fact. Such matters cannot be settled in a writ petition under Article 226 of the Constitution and require investigation by an Industrial Tribunal or Labour Court.
Issues: Whether the issuance of a prohibition notification under Section 10(1) of the Contract Labour (Regulation and Abolition) Act results in the automatic absorption of contract labourers, and whether the presence of disputed factual claims necessitates a reference to an industrial adjudicator.
Ratio Decidendi: There is no automatic absorption of contract labour into the service of the principal employer solely by virtue of a prohibition notification. The legal status of the workers depends on whether the contract was genuine or a sham, a determination that must be made by an industrial adjudicator. Because the current case involves disputed facts regarding the nature of employment and service conditions, the Industrial Tribunal is the appropriate forum for adjudication.
Result: Appeal disposed of.
Legal Category Hierarchy
- labour and industrial law
- practice and procedure
Table of Contents
2. Workmen claimed absorption after prohibition notification; principal employer disputed facts and genuineness of contract. (Para 1 , 2 , 4 )
3. Disputed questions of fact exist — Industrial Tribunal should investigate genuineness of contract and absorption claims. (Para 2 , 4 , 5 , 7 )
4. No automatic absorption upon prohibition notification; Industrial adjudicator must determine if contract is genuine or camouflage. (Para 3 )
5. Appeal disposed — Division Bench directions upheld with observations; Tribunal to consider allegations and apply Steel Authority decision. (Para 7 , 8 )
6. Does issuance of a notification under Section 10(1) of the Contract Labour (Regulation and Abolition) Act automatically result in absorption of contract labour as regular employees of the principal employer?
No. There is no automatic absorption. The industrial adjudicator must decide whether the contract is genuine or a camouflage to evade labour laws. (Para 3 , 4 , 7 )
7. What is the effect of the prospective overruling of Air India case in Steel Authority of India Ltd. on pending claims of contract labour?
Directions for absorption given effect to before the overruling remain valid. Pending claims where absorption was not given effect are governed by the new principle. (Para 3 , 6 , 7 )
8. What categories of cases arise regarding contract labour after prohibition of contract labour?
Three categories: (i) no automatic absorption on prohibition; (ii) sham/camouflage contracts treated as direct employment; (iii) statutory obligations like canteens lead to direct employment. (Para 4 )
K.G.BALAKRISHNAN, J.
(1) LEAVE granted The judgment of the Division Bench of the High Court of Gujarat at Ahmedabad in Letters Patent Appeal No. 395 of 1999 is challenged before us. The appellants alleged that they were workmen employed as contract labourers in the capacity of Boiler Operators through the Contractor, Ahmedabad Electricity Co. Limited. According to these appellant workmen, they were employed as contract labour with the first respondent principal employer, namely. Oil and Natural Gas Corporation Limited (hereinafter being called as "ONGC Limited"). Consequent. upon the notification dated September 8, 1994 under Section 10(1) of the Contract Labour (Regulation and Abolition) Act, 1970 by the Central Government, the contract labour in the post of Boiler Operators, Attendants, Helpers and Peons was prohibited and these appellants claimed that they should be treated as the employees of the first respondent. They filed a Writ Petition before the High Court of Gujarat and learned single Judge held that these appellants were persons engaged for attending different; operations of the boiler in the boiler house of ONGC Ltd. through the contractor, which was clearly in breach of the provisions of the Act It was held that these appellants must be deemed to be performing duties directly under the first respondent ONGC Limited and they must be given the terms of service as applicable to other employees of ONGC Limited with effect from the date of notification.
(2) THE judgment of the learned single Judge was challenged before the Division Bench and the Division Bench was of the view that there were some disputed questions of fact and an investigation into facts regarding service conditions of contract labour was necessary before granting them the relief of direct employment with the principal employer and that the proceedings under Article 226 of the Constitution were not appropriate. It also held that there should be an investigation by the Industrial Tribunal and these appellants were directed to approach the Conciliation Officer of the concerned area and further direction was given to the Conciliation Officer to complete the conciliation proceedings within three months and if the dispute survived, the matter be referred to the Industrial Tribunal under Section 10 of the Industrial Disputes Act and the Industrial Tribunal/Labour Court to take a final decision in the matter within a period of four months thereafter. These directions are challenged before us.
(3) WE heard Mr. T.R. Andhyarujina, learned senior counsel on behalf of the appellants and Mr. Mukul Rohtagi, learned ASG on behalf of the respondents What is the effect of abolition of contract labour by virtue of the notification issued by Central Government under Section 10 of the Industrial Disputes Act was considered in detail in Steel Authority of India Ltd. and Others v National Union Waterfront Workers and Others, AIR 2001 SC 3527 2001 (7) SCC 1 : 2001-II-LLJ-1087 The main question that arose for consideration in that case was whether there should be an automaticabsorption of contract labourers working in the establishment of principal employer as regular employees consequent upon the notification under Section 10(1) of the Act. This Court held m Clauses (5) and (6) of paragraph 119 at 1132 of LLJ:
"ON issuance of prohibition notification under Section 10(1) of the CLRA Act prohibiting employment of contract labour or otherwise, in an industrial dispute: brought before it by any contract labour in regard to conditions of service, the industrial adjudicator will have to consider the question whether the contractor has been interposed either on the ground of having undertaken to produce any given result for the establishment or for supply of contract labour for work of the establishment under a genuine contract or is a mere ruse / camouflage to evade compliance with. various beneficial legislations so as to deprive the workers
