IMPORTANT POINT
Tests to find out the real employer stated.

JUDGMENT

R.V. Raveendran, J. —

Leave granted. IA 5/2007 for bringing on record an additional document (certificate relating to employment of first respondent with another employer from 1985) is allowed. Heard.

2. The appellant entered into a security service agreement dated 2.12.1975 with the second respondent, for its Mills premises, governed by the provisions of Contract Labour (Regulation & Abolition) Act, 1970 (‘CLRA Act’ for short). The first respondent was one of the persons appointed by the second respondent, and he was deployed for guard duties at the appellant’s Mill on 15.12.1980. The second respondent discharged the first respondent from service on 27/28.7.1982. The appellant terminated the security service agreement with the second respondent on 16.8.1982.

3. Five years after his termination, in the year 1987, the first respondent filed an application under section 31(3) of the Madhya Pradesh Industrial Relations Act, 1960 (for short ‘MPIR Act’) for a declaration that his termination from service was illegal. He also sought a consequential direction to the appellant and second respondent to extend all the benefits which the employees of the appellant were being extended, from the date of termination, alleging that he was unemployed and without income. The appellant contested the claim and the second respondent remained ex parte. The Labour Court by order dated 28.10.1991 allowed the application in part and directed the appellant to reinstate the first respondent in his previous post and pay him all arrears. Feeling aggrieved, the appellant filed an appeal before the Industrial Court against the said award of the Labour Court. While admitting the appeal, the Industrial Court directed the appellant to comply with section 65(3) of the MPIR Act which required the employer to pay to the employee the full wages last drawn by him, during the pendency of the appeal.

4. The appellant issued a letter dated 25.2.1992 offering reinstatement from 30.12.1991 on a salary of Rs.1000/- per month, though he was getting only a salary of Rs.200/- from second respondent at the time of his disengagement. Shortly thereafter the appellant’s mills were closed on 31.10.1992 and it was declared to be a sick industry by the Board for Industrial & Financial Reconstruction on 6.5.1993.

5. The Industrial Court heard and dismissed the appellant’s appeal by judgment dated 19.5.2001. The Industrial Court held that after the CLRA Act came into force, it would not be possible to rely upon the definition of ‘employee’ under Section 2(13) of MPIR Act to contend that a workman employed by the contractor was a workman of the principal employer. The Industrial Court also held that first respondent was appointed by the second respondent. However it held that the agreement between appellant and second respondent was sham/nominal and the first respondent should be treated as a direct employee of appellant for the following reasons: (i) the appellant failed to establish by adducing necessary evidence that the salary of first respondent was not directly paid by it and that it was being paid by the second respondent and therefore it should be deemed that the appellant was directly paying wages to the first respondent; and (ii) the officers of appellant were assigning duties directly to the first respondent and therefore it should be deemed that he was working under the direct control and supervision of the appellant.

6. The appellant challenged the order of the Industrial Court by filing a writ petition in the High Court. The High Court by judgment dated 12.1.2006 dismissed the writ petition without examining the contentions of the appellant on merits, merely on the ground that the appellant did not comply with section 65(3) of the MPIR Act and the scope of interference under Article 226/227 was very limited. The said order is challenged in this appeal by special leave.

7. The appellant relied upon the decisions of this Court in National Thermal Power Corporati