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IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
Ahsanuddin Amanullah, J
THE MUNICIPAL COUNCIL, REP. BY ITS COMMISSIONER NANDYAL MUNICIPALITY, KURNOOL DISTRICT, A.P. – Appellant
Versus
K. JAYARAM AND OTHERS – Respondent
CIVIL APPEAL NOS. OF 2025 | SPECIAL LEAVE PETITION (CIVIL) NOS. 17711-17713 OF 2019
Certainly. Based on the provided legal document, the key points relevant to the legal query are as follows:
Nature of Employment through Contractors: The court clarified that employees engaged through a contractor do not have direct employment claims against the municipality. The employment relationship is considered to be between the contractor and the employees, not directly with the municipality (!) [Para 8].
Responsibility and Payment: The municipality's obligation is limited to paying the contractor, who then is responsible for remunerating the employees. This contractual structure creates a layer of separation that prevents direct claims against the municipality by the contractor's employees (!) [Para 8].
Legal Legitimacy of Contractual Employment: The court noted that the mode of employment through a contractor is not inherently illegal or unconstitutional. As long as the contractual terms are clear and do not violate legal provisions, the employment arrangement remains valid (!) [Para 9].
Discrimination and Equal Benefits: While employees engaged through contractors perform similar duties as regular employees, extending the same benefits directly from the municipality would undermine the legal distinctions and the purpose of the contractual employment system. Equal benefits cannot be automatically conferred without considering the employment mode (!) [Para 9].
Discretion and Safeguards in Direct Employment: Direct employment by the municipality involves transparent recruitment procedures and safeguards to prevent favoritism, which are not inherently present in contractual employment arrangements. This difference justifies the variation in employment benefits and rights (!) [Para 9].
Judicial Decision: The court reversed the high court's order that had directed the municipality to grant minimum pay to contractor employees, reaffirming that such claims are not sustainable where employment is through a contractor (!) [Para 10].
Potential for Regularization: The court suggested that, in certain circumstances, employees engaged through contractors who have served for long periods and have not been disengaged could be considered for regularization, but this is a matter to be decided on a case-by-case basis and is limited to the facts of this case (!) [Para 11].
Legal Consequence: The appeals were allowed, and the previous order requiring the municipality to pay minimum wages to contractor employees was set aside, emphasizing the importance of maintaining the distinction between direct and contractual employment relationships (!) [Para 10].
These points collectively highlight the legal principle that contractual employment arrangements through third-party contractors do not automatically confer direct employment rights or benefits against the municipality, unless a direct employment relationship is established.
| Table of Content |
|---|
| 1. employment relationship through contractors lacks direct claims. (Para 2 , 3) |
| 2. arguments presented on employee rights and discrimination. (Para 4 , 5) |
| 3. court observations on contractual employment legitimacy. (Para 7 , 8 , 9) |
| 4. conclusion reversing the high court’s order. (Para 10) |
| 5. final ruling and directions for appellant. (Para 11 , 12 , 13) |
ORDER
Leave granted.
2. The present appeals arise out of a common order dated 23.08.2018 passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh, by which the appellant has been directed to grant minimum time scale of pay to the respondents and also to add annual grade increments as and when they fell due from time to time.
3. The appellant had engaged the respondents not directly, but through a third-party contractor starting from the year 1994. However, upon the change of contractors also, they continued to perform their duties and work for the appellant. They approached the A.P. Administrative Tribunal, Hyderabad, For short ‘the Tribunal’ seeking regularization and for payment of the minimum of the scale of that post which was given to the regular employees. The Tribunal ruled against them and they approached the High Court. The High Court vide the impugned order has reversed the order of the Tribunal and has directed the appellant in the terms as indicated above.
4. Learned counsel for the appellant submitted that the High Court has failed to consider the basic issue involved in the present case, which is that the respondents were never the direct employees of the appellant, inasmuch as, there was no such relationship created by the appellant. The only connection which the appellant had with the respondents is that the contractor who had been given the contract of providing manpower to the appellant had engaged them and on that basis they were assigned various works to be performed by the appellant, for which, payment was made directly to the contractor and the contractor in turn used to pay to the respondents. It was submitted that the contract was given with sufficient safeguards regarding the basic rights of an employee, inasmuch as, it was stipulated that the payment should not be below the minimum wages prescribed by the Government from time to time and further, that statutory deductions/contributions would be made by the contractor with regard to such employees, including the respondents. Thus, it was contended that since the respondents were faceless before the appellant, any claim by such persons, i.e., the respondents, would only lie against the contractor but definitely not against the appellant. In support of her contention, learned counsel referred to and relied upon a decision of this Court in “ Bharat Heavy Electricals Limited vs. Mahendra Prasad Jakhmola and others, (2019) 13 SCC 82 the relevant being at paragraphs no. 21, 22 and 24. She also relied upon a judgment of a Bench of this Court, to which, one of us (Ahsanuddin Amanullah, J.) was a party, dated 17.09.2025 in Civil Appeal No.4014 of 2025, titled ‘Joint Secretary, Central Board of Secondary Education and Another Vs. Raj Kumar Mishra and Another’, the relevant being at paragraphs no. 6 and 9.
5. Per contra, learned senior counsel for the respondents submitted that the stand of the appellant is totally arbitrary and violates the basic constitutional rights of the respondents. It was submitted that besides being discriminatory, it was highly arbitrary as at the end of the day, the respondents had been directed to be paid only the minimum time scale of the pay attached to the regular post of their respective cadre. This, according to him, cannot be objected by any employer, much less an employer which is State under Article 12 of the Constitution of India. Furthermore, it was contented that similarly situated persons in other municipalities had been given the same benefit and denying the same to the respondents in the present case itself wou
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