Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(Online)(Mad) 11480

IN THE HIGH COURT OF JUDICATURE AT MADRAS
A.D. Maria Clete, J
Management, Tiruchengode Agricultural Producers Co-operative Marketing Society Limited – Appellant
Versus
Assistant Commissioner of Labour (Implementation) – Respondent
W.P.No. 24333 of 2021|W.M.P.Nos.25640 of 2021, 2623, 2625, 2627, 2628, and 2629 of 2022

Advocates:
For the Appellants/Petitioners: Lakshmi Priya
For the Respondents: R. Kumaravel, K. Elango, G. Chamki Raj, M. Thenmozhi, M. Mahalakshmi, M. Balaji

The status of an employee is determined by the reality of the work relationship—specifically economic control and performance of permanent functions—rather than contractual labels, lack of sanctioned cadre, or piece-rate payment, with labour courts empowered to rectify unfair labour practices by granting permanency.

Headnote:(A) Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981 - Sections 3 and Explanation II - Industrial Disputes Act, 1947 - Sections 25-T and 25-U - Minimum Wages Act, 1948 - Section 2(i) - Constitution of India - Articles 23, 38, 39, 42, 43 and 43-A - Conferment of permanent status - Employer-employee relationship - Piece-rate workers - Unfair labour practices. Section 3(1) of the 1981 Act contains a non-obstante clause overriding contrary provisions, and Explanation II clarifies that 'law' includes any contract of service. (Paras 8, 9, 10)

(B) Industrial Jurisprudence - Nature of employment - The true test of employment, regardless of contractual labels, is whether the worker provides goods or services for the business of another who exercises economic control. The court must look beyond 'maya of legal appearances' to determine the real employer. (Para 28)

(C) Unfair Labour Practice - Employment of temporary workers for years in permanent roles to deprive them of benefits is prohibited under the 1947 Act. Courts have the authority to grant permanency where employees are victims of such practices. (Paras 19, 20, 32)

Facts of the case:
The employer challenged an order directing the conferment of permanent status upon workers engaged as distributors of products. The employer contended that these individuals were piece-rated, engaged without following recruitment protocols, and that no master-servant relationship existed. The workers contended that their long-term continuous service and coverage under social security schemes established their status.

Findings of Court:
The court found that the workers were directly engaged with no intermediaries, were subject to disciplinary control, and performed essential services that yielded substantial profit. The exclusion of such workers from sanctioned cadre strength, while engaging them for permanent functions, constituted an unfair labour practice.

Issues: Whether the workers engaged on a piece-rate basis, who were not part of the sanctioned cadre strength, were entitled to permanent status under the 1981 Act, and whether the employer-employee relationship existed despite claims of it being an independent contractual arrangement.

Ratio Decidendi: Where workmen provide necessary services for an enterprise and the management exercises control over their subsistence and work, the lack of formal recruitment or inclusion in the cadre strength cannot be a shield against the application of labour welfare legislation. Courts must be astute to prevent exploitative practices and prioritize social justice over procedural technicalities.

Result: Writ petition dismissed and the impugned order upheld.

Table of Content
1. factual background regarding the dispute on employment status and engagement of workers. (Para 2 , 3 , 4 , 5 , 6 , 7)
2. applicability of the permanent status act to cooperative societies and judicial interpretation of non-obstante clauses. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16)
3. determination of employer-employee relationship and prohibition of unfair labour practices under the industrial disputes act. (Para 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28)
4. application of labour law welfare principles over strict adherence to procedural recruitment formalities. (Para 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38)
5. final dismissal of the writ petition upholding the authority's original order. (Para 39)

J U D G M E N T

1.Heard.

2.The Petitioner is the Tiruchengode Agricultural Producers Co-operative Marketing Society Limited. In the present writ petition, the Petitioner challenges the order dated 16.09.2021 passed by the 1st Respondent, the competent authority under the Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981 (hereinafter referred to as the “Permanent Status Act”). By the said order, the Authority directed the Petitioner Society to confer permanent status upon Respondents 2 to 6. In the operative portion of the order, the Authority recorded the respective dates of engagement of the workmen, the dates on which they had completed 480 days of service within a continuous period of 24 calendar months, and the dates from which they were to be deemed permanent. The Authority further directed that the order be implemented within a period of 30 days.

3.When the writ petition was listed on 17.11.2021, this Court ordered notice to the Respondents. Pursuant to such notice, the contesting Respondents entered appearance and filed five miscellaneous petitions seeking a direction to the Petitioner Society to provide them employment pending final disposal of the writ petition. The learned Judge, upon hearing the parties, passed the following order on 18.07.2022:—

“The learned counsel for the respondents 2 to 6 / employees would submit that the petitioner / Management have not permitted them to attend the work and therefore, they violated the order passed by the first respondent/Assistant Commissioner of Labour. In view of the writ petition is pending, the respondents 2 to 6 / employees are unable to seek remedy before the Assistant Commissioner of Labour.

2. As of now, no interim order has been passed by this Court. Therefore, it is open to the respondents 2 to 6/employees to approach the concerned authority for the above said claim in accordance with law and in the light of the order passed by the Commissioner of Labour.”

4.Separate counter affidavits dated 04.01.2022 were filed on behalf of the Respondents. When the matter was taken up on 05.11.2024, it was directed to be placed before the National Lok Adalat scheduled for 14.12.2024. However, as the matter could not be amicably settled, it was returned to the regular court for final adjudication. Thereafter, both sides advanced detailed arguments and relied upon several judicial authorities in support of their respective contentions.

5.The case of the Management is that the Petitioner Society also functions as a distributor of Indane Gas Cylinders manufactured by the Indian OilCorporation and maintains a godown for storing such cylinders. For the purpose of distributing the cylinders to consumers, the Society engaged seven auto-rickshaw owners to undertake home delivery. Respondents 2 to 6 were among those so engaged for distribution purposes. It is the Petitioner’s case that these individuals were paid Rs. 11.80 per cylinder delivered and were under no obligation to report for duty at the Society’s premises. They were neither paid regular wages nor was any attendance or wage register maintained in respect of their services. The Management contends that Respondents 2 to 6 are not employees of the Society and

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2025 Supreme(Online)(Mad) 11480

Cases Referred (4)