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2025 Supreme(Online)(Mad) 73855
IN THE HIGH COURT OF JUDICATURE AT MADRAS
HEMANT CHANDANGOUDAR, J
Bhel Valaga Oppanda Thozhilalar Nala Sangam Rep. by its General Secretary M.Sekar – Appellant
Versus
The Executive Director Bharat Heavy Electricals Ltd. – Respondent
W.P.No.20302 of 2023|W.M.P.No.19656 of 2023
For the Appellants/Petitioners: Mr.R.Viduthalai, Mr.D.Veerasekharan
For the Respondents: Mr.A.V.Arun, Mr.M.Abinu Monisha, Mr.M.S.Palaniswamy
The court concluded that contract employees were de facto employees of the principal employer, warranting regularization and benefits due to the existence of substantial control over work and management.
Headnote:(A) Industrial Disputes Act, 1947 - Section 2(s) - Contract Labour (Regulation and Abolition) Act, 1970 - Regularization of contract labour - Writ filed challenging the rejection of worker absorption by the Labour Court - The petitioner argued that the second respondent was a sham entity created to deny employees the benefits of direct employment - Evidence established that the first respondent retained control over employee management - Rejection of absorption deemed unjustified by the Court, which ruled that labourers must be treated as direct employees entitled to benefits - Court found the arrangement between first and second respondents to be a sham designed to undermine workers' rights - The Court ordered regularization with arrears and benefits commencing from the dispute date. (Paras 1, 4, 60, 64)
Facts of the case:
The petitioner union represents contract workers seeking regularization from the first respondent, claiming that the second respondent was created to obscure direct employment. Initially, approximately 1121 members were engaged under this sham arrangement.
Findings of Court:
The Labour Court's order was ruled arbitrary as substantial evidence of control and supervision by the first respondent was overlooked, revealing a clear employer-employee relationship between them.
Issues: Whether a genuine employer-employee relationship exists between the first respondent and the members of the petitioner Union, and whether the rejection of their regularization demand was justified.
Ratio Decidendi: The court reaffirmed that where effective control and supervision exist by the principal employer, arrangements presented as contractor-based work may be deemed unjust and superficial; workers must be treated as employees of the principal employer in such cases.
Result: Writ Petition allowed; the impugned award was set aside, and members were ordered to be regularized as permanent employees.
| Table of Content |
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| 1. establishment of employment relationship (Para 2) |
| 2. contentions of parties regarding employment (Para 3) |
O R D E R
The captioned Writ Petition (hereinafter referred to as “WP” for the sake of brevity, convenience, and clarity) has been filed seeking the issuance of a writ of certiorari to assail the award dated 01.12.2022 passed by the Central Government Industrial Tribunal-cum-Labour Court, Chennai (hereinafter referred to as “Labour Court” for the sake of brevity) in I.D. No.121 of 2015 (hereinafter referred to as the “impugned order”). By the said order, the Industrial Dispute referred to by the Central Government, Ministry of Labour and Employment regarding whether the demand of the petitioner-Union to absorb and regularize the members of BHEL Complex Cooperative Labourers is legal and justified came to be rejected.
2. Factual Background :
2.1. The petitioner claims to be a registered labour union established to safeguard the welfare of all members of the second respondent. Initially, 1121 members were working under the first respondent. The first respondent, in order to reduce expenditure on its workforce, introduced a system of contract labour to carry out regular and permanent work, and accordingly established the second respondent. The petitioner contends that the second respondent is not a genuine entity but was created under a sham and nominal arrangement solely to deprive the workers of absorption, regular employment, and attendant financial benefits. The petitioner further claims that the control and management of the second respondent vest with the first respondent, and that the service conditions of the members of the petitioner-Union, who are working with the first respondent as regular employees, are also controlled and regulated by the first respondent.
2.2 An industrial dispute was raised before the Assistant Commissioner of Labour (Central), Puducherry. The Assistant Commissioner initially sent a failure report under Section 12(4) of the Industrial Disputes Act, 1947 (hereinafter referred to as “the 1947 Act” for the sake of brevity). Consequently, the Central Government refused to refer the matter to the Labour Court for adjudication. The petitioner challenged the said refusal before this Court in W.P. No. 9271 of 2015, and the same was disposed of with a direction to the Central Government to refer the dispute. Accordingly, the Central Government made the reference.
2.3. The first respondent challenged the reference made by the Central Government before this Court in W.P. No. 34247 of 2015. The interim stay initially granted was later vacated, which was challenged before the Hon’ble Division Bench in W.A. No. 163 of 2016. The Hon’ble Division Bench directed the Labour Court to entertain the dispute on the preliminary issue of whether the order of reference made by the Central Government was maintainable and to decide the same in accordance with law. The said order was confirmed by the Hon’ble Supreme Court in the SLP filed by the first respondent.
2.4 Thereafter, the Labour Court passed an order on the preliminary issue. Aggrieved, the first respondent filed W.P. (MD) No. 2330 of 2017, which was allowed by this Court, directing the Labour Court to decide the preliminary issue as to whether the order of reference made by the Central Government was maintainable, after framing the two issues referred to in the previous paragraph and after affording adequate opportunity to both sides.
The said order has attained finality.
2.5 Pursuant to the directions of this Court and based on the pleadings of the parties, the Labour Court framed the following three issues:
(i) Whether there exists any employer–employee relationship between the first respondent, Bharat Heavy Electricals Ltd. (BHEL), and the members of the second respondent, the BHEL Complex Co-operative Labour Contract Society?
(ii) Whether the demand of the first party Sangham for absorption and regularization of its members by the first respondent–
