Krishan Lal vs Union of India

T.S. Doabia.

The in built human desire to seek permanency is once again reflected in these petitions.

The petitioners came to be initially engaged through a contractor. They were to look after the various establishments of the respondent/Food

Corporation of India (hereinafter referred to as the Corporation) in the State of Jammu and Kashmir. The majority of the petitioners came to

appointed on 1.1.1995, though it is also not in dispute that some of them were appointed even earlier to that date also. It is also not in dispute that

initially they came to be appointed through a contractor. This contract between the Contractor and respondents Food Corporation was for three

months only. It could be renewed but was not renewed by the Corporation. This was because the contractor was not having a valid licence in

terms of Section 12 of the Contract Labour (Regulation and Abolition) Act, 1970 (hereinafter referred to the Act of 1970). It is the case of the

petitioners that the Labour Department of the State of J&K had called upon the said Contractor to indicate as to whether he was competent to

engage contract labour under the Act of 1970. It is also pleaded that when these proceedings were taken by the Labour department, the

contractor disappeared from the scene and the petitioners continued to work with the respondentCorporaton. The further case of the petitioners is

that after the notice was issued to the contractor by the Labour department and the alleged contractor disappeared they have been getting these

wages directly from the Food Corporation of India, there being no intermediary between hem. This aspect of the matter is being denied by the

respondentsCorporation of India. It is submitted that these direct payments were made only when interim orders were passed by this Court. The

further case of the petitioners is that even though initially they came to engaged through a contractor but the need being permanent they are part

and parcel of watch and ward staff.

They submit that for watch and ward staff there is a specific prohibitory provision in the Act of 1970. This prohibition is to the effect that as the

need of watch and ward staff is permanent, the employees are not to be employed through a contractor. Reference is being made to the contract

said to have been entered into between the Food Corporation of India and one H. Rehman Proprietor M/s Security Services of India. Paragraph

3"" of the Contract is being expressly relied upon. For facility of reference, this is being reproduced below :

That the security staff will be responsible to work on the directions of the management issued from time to time and shall be responsible to

perform security duty and watch and ward of the Corporation in accordance with the rules and regulations in force. Any lapse in this connection

shall be punishable under law.

There is yet another communication on which reliance is being placed by the petitioners. This is dated 4.12.1998. This has also been placed on

record through CMP No. 2376 of 99. This has been marked as Annexure ""E"". For facility of reference, this is being reproduced below :

Food Corporation of India

Zonal Office (North)

FAX

No. PS/ZM/IR/98/NZ

After an informal meeting with representatives of a category IV Employees Union, the following course of action is to be done (sic).

Firstly, regular checks are to be carried out to see whether deduction made by security agency from pay of security guards is deposited in time

with the RPEC. Secondly, we have to ensure that payment of security guards are made inside the office premises during office hours in the

presence of Depot Manager or the office Asst. Manager. Preferably payment should be made by cheque to the security guards. Thirdly, long

pending promotions within category IV, for example GEST. Operators, daftry and head watchman etc. are to be expedited in monthly meetings of

regional promotion committee.

Above three points are to be enquired and monitored personally by SRH with Progress report sent to zonal office for discussion and review in

each Z.P.R.

Sd/

(Alok Sinha)

Zonal Manager (North)

In a nutshell the case of the petitioners is

I) That they are part and parcel of watch and ward staff of the Corporation;

II) That the nomenclature and description of petitioners as security guards is a camouflage. This is a veil and if this veil is lifted, then it would

become apparent that the duties which the petitioners are performing are same which are performed by watch and ward. For this reliance is being

on clause ""3"" of the Contract. This clause has already been noticed above.

III) Even if it be presumed that the security guards do not fall within the definition of watch and ward staff, and even though they came to be

appointed by the contractor yet as the contractor has disappeared, they have started getting payments directly from the Food Corporation of

India. It is accordingly, submitted that they have become employees of the Food Corporation of India and as such are entitled to regularisation;

IV) That if the principles laid down by the Supreme Court in various decisions are taken note of, then it becomes apparent and if the need is

permanent, then the provisions of Contract Labour (Regulations and Abolition) Act of 1970 are not to be applied.

The case put forward by the respondents be now noticed.

What is said is that Food Corporation of India had entered into a contract with respondent No. 5. For this reliance is being placed on annexure

R/1"". Clause ""3"" thereof has already been noticed above. It is stated that in pursuance of this contract the Security Guards came to be appointed.

These security guards were those persons who had formally served the Indian Army and had requisite training in the use of arms. It is submitted

that the Security Guards were engaged with a view to protect not only the life of the employees of Food Corporation of India but also it property,

and, therefore, they do not fall within the definition of watch and ward staff. It is urged that they would be covered by the Special Act, enacted by

the Central Government, namely Security Guards Regulation Act of 1981. It is thus stated there is a distinction between security guards and watch

and ward staff and the petitioners fall within the definition of Security Guards.

The learned counsel for the petitioners place reliance on a decision given by the Supreme Court of India reported as Air India Statutory

Corporation etc. v. United Labour Union and others, AIR 1997 SC 645. It is submitted that if the ratio of the aforementioned judgment is taken

note of then it becomes apparent that the contract labour is to be engaged on Contract basis if need is temporary. If the labour is required

permanently, then the concept of engaging them on contract basis would not be there. Particular reliance is being placed on paragraph ""58"" of the

judgment of the Supreme Court of India. This para reads as under :

What would be the consequence that ensue from abolition is the question ? It is true that we find no express provision in the Act declaring the

contract labour working in the establishment of the principal employer in the particular service to be the direct employees of the principal employer.

Does the Act intend to deny the workman to continue to work under the Act or does it intend to denude him of the benefit of permanent

employment and if so, what would be the remedy available to him. The phrase ""matters connected therewith"" in the preamble would furnish the

consequence of abolition of contract labour. In this behalf the Gujarat Electricity Board case (1995 AIR SCW 2942) attempted, by interpretation

to fill in the gap but it also fell short of full play and got beset with insurmountable difficulties in its working which were not brought to the attention

of the Bench. With due respect, such scheme is not within the spirit of the Act. As seen, the object is to regulate the contract labour so long as the

contract labour is not perennial. The labour is required to be paid the prescribed wages and are provided with other welfare benefits envisaged

under the Act under direct supervision of the principal employer. The violation visit with the penal consequences. Similarly, when the appropriate

Government finds that the employment is of perennial nature etc., contract system stands abolished, thereby it intended that if the workmen were

performing the duties of the post which were found to be of perennial nature on par with regular service, they also require to be regularised. The

Act did not intend to denude them of their source of livelihood and means of development, throwing them out from employment. As held earlier, it

is a socioeconomic welfare legislation. Right to socioeconomic justice and empowerment are constitutional rights. Right to means of livehood is

also constitutional right. Right to facilities and opportunities are only part of and means to right to development. Without employment or

appointment the workmen will be denuded of their means of livelihood and resultant right to life, leaving them in the lurch since prior to abolition

they had the work and thereby earned livelihood. The Division Bench in Dena Nath's case (1991 AIR SCW 3026) has taken too narrow a view

on technical consideration without keeping at the back of the mind the constitutional animations and the spirit of the provisions and the object which

the Act seeks to achieve. The operation of the Act as structured on an inbuilt procedure leaving no escape route. Abolition of contract labour

system ensures right to the workman for regularisation of them is employees in the establishment in which they were hitherto working as contract

labour through the contractor. The contractor stands removed from the regulations under the Act and direct relationship of ""employer and

employee"" is created between the principal employer and workmen. Gujarat Electricity's case (1995 AIR SCW 2942), being of the coordinate

Bench, appears to have softened the rough edges of Dena Nath's ratio. The object of the Act is to prevent exploitation of labour. Section 7 and

Section 12 enjoin the principal employer and the contractor to register under the Act, to supply the number of labour required by the principal

employer through the contractor, to regulate their payment of wages and conditions of service and to provide welfare amenities during subsistence

of the contract labour. The failure to get the principal employer and the contractor registered under the Act visits with penal consequences under

the Act. The object thereby is to ensure continuity of work to the workmen in strict compliance of law. The conditions of the labour are not left at

the whim and fancy of the principal employer. He is bound under the Act to regulate and ensure payment of the full wages and also to provide all

the amenities enjoined under Sections 16 to 19 of the Act and the rules made thereunder. On abolitation of Contract labour, the intermediary, i.e.

contractor, is removed from the field and direct linkage between labour and principal employer is established. Thereby the principal employer's

obligation to absorb them arises. The right of the employer (employee ?) for absorption gets ripened and fructified. If the interpretation in Dena

Nath's case (1991 AIR SCW 3026) in given acceptance, it would be an open field for the principal employer to freely flout the provisions of the

Act and engage workmen in defiance of the Act and adopt the principle of hire and fire making it possible to exploit the appalling conditions in

which the workmen are placed. The object of the Act, thereby gets rudely shattered and the object of the Act easily defeated. Statutory

obligations of holding valid licence by the principal employer under Section 7 and by contractor under Section 12 is to ensure compliance of the

law. Dena Nath's ratio falls foul of the constitutional goals of the trinity; they are free launchers to exploit the workmen. The contractor is an

intermediary between the workmen and the principal employer. The moment the contract labour system stands prohibited under section 10(1), the

embargo to continue as a contract labour is put an end to and direct relationship has been provided between the workmen and the principal

employer. Thereby, the principal employer directly becomes responsible for taking the service of the workmen hitherto regulated through the

contract. The object of the penal provisions was to prevent the prohibition of the employer to commit breach of the provisions of the Act and put

an end to exploitation of the labour and to deter him from acting in violation of the constitutional right of the workmen to his decent standard of life,

living wages, right to health etc.

The respondents on the other hand are placing reliance on an unreported judgment of the Delhi High Court, given in Writ Petition No. 4221 of

1997 and other connected petitions, which were decided by the Delhi High Court on 25.3.2000. It is urged that the decision of the Supreme Court

of India referred to above has been taken note of in the aforementioned judgment and, therefore, what has been said by the Delhi High Court

should be taken note of. In particular reliance is being placed on nine conclusions which have been laid by the Delhi High Court. These are as

under :

1) The exservicemen, petitioners in the instant cases who are engaged as contract workers by specialised security agencies have got the job

because of the scheme of resettlement framed by Central Government.

2) Security agencies are approved by DGR and they employ those ex servicemen on the basis of licence granted to the security agencies and the

terms and conditions granted to the security agencies by DGR which include service conditions of these exeservicemen as well as prescribed the

rate of wages to be paid to them.

3) The Government of India has issued instructions to the public sector undertakings for engaging such security agencies which not only enables

establishments and their sensitive installations also get the security cover.

4) The Security cover being provided by the security agencies to these installations cannot be turned as ""watching the building"" as it is a highly

sensitive security and surveillance.

5) In 1976 when notification dated 9.12.1976 was issued abolishing contract labour in respect of `watching the buildings', it was not intended to

cover such kinds of security services.

6) Security and watch and ward are treated separately under Section 2(i) of the Security Guards Regulation Act, 1981. This Act came after 1976

notification and therefore can be treated as clarifying that security work was not contemplated to be included in the expression `watching the

buildings'.

7) Giving of interpretation as suggested by the petitioner would amount to defeating the very purpose for which DGR was formed and rehabilitation

scheme framed by the Government.

8) While framing such scheme and giving licence to the contractors reference is made by notification dated 9.12.1976 which leads to obvious

conclusion that providing such a security is not treated as `watching the building' and, therefore, as per Government's view such activity is still not

abolished.

9) Proper care is taken to provide good service conditions and wages to the security men who are also recipient of pension etc. from their parent

department. The consequence of the interpretation given by the petitioners would be doing more harm than subserving the same.

There can be no dispute with the proposition that if the need is permanent, then the labour is not to be engaged on contract basis. This is the

basic concept and the import of law as contained in the Act of 1970 as interpreted by the Supreme Court of India. Taking note of these statutory

guidelines laid down by the Supreme Court of India, it would be apt to take notice of the facts which have been brought on record. These are as

per aggrement which was entered into between respondent/Food Corporation of India and the Contractor, security guards were to be engaged for

performing the watch and ward duty. Therefore, to say that petitioners were not engaged for watch and ward duty factually be incorrect. If clause

3"" is to be read, then it becomes apparent that in the garb of security guards the petitioners were actually engaged for doing watch and ward duty.

If this be the factual position, then the judgment of Delhi High Court on which much reliance has been placed by the respondents, would not be

attracted in this case.

Independently of the above, the contract which was entered between the contractor and the Food Corporation of India was only for a period

of three months. This is apparent from letter dated 29.12.1994. In this it has been specifically mentioned that the agreement would be for a period

of three months only with a further rider that further extension would be at the discretion of the competent authority, and the contractor would be

free to terminate the contract by giving seven days prior notice. After initial period of three months, the contract in question was not renewed. As a

matter of fact from the later correspondence which has been placed on the record it is apparent that the contractor was not available and he was

given notices from time to time. One such notice is dated 24.8.1999. For facility of reference this is being reproduced below :

Shri H. Rehman

Proprietor,

Security Service of India,

Bari Brahama, Jammu

Sir,

Kindly refer to this officer letter No. ESH 3(5) SG/99/1078 dt. 5.8.1999, vide which you were directed to obtain licence from Asst. Labour

Commissioner, `Jammu within a week's time but you have failed till date.

You are hereby given last opportunity to either obtain the license or produce yourself before Regional Manager/Sr. Regional Manager tomorrow

on 25.8.1999 at 10 A.M. (Ten AM) positively, lest legal action is initiated against you.

Yours faithfully,

Sd/

Dy. Manager (Security)

If this be the factual position, then what was said by the Supreme Court in the judgment reported as Air India Statutory Corporation etc. v.

United Labours Union and others, AIR 1997 SC 645, would be squarely attracted to the facts of the present case. This is because :

I) That as by virtue of an agreement entered into between the Food Corporation of India and the contractor, the petitioners came to be engaged to

perform the duties of watch and ward staff;

II) That the contractor with whom the Food Corporation of India entered into a contract was not a licenced contractor in terms of the Act of

1970;

III) That as a matter of fact penal provisions contained in the Act of 1970 came to be attracted in this case. If a statutory body like Food

Corporation of India enters into business with a person who is not duly licenced for the same, then the situation can very well be imagined. As the

contractor with whom the contract was entered into had no valid licence, therefore, that contract would be void ab initio. As a matter of fact, this

position was precisely noticed by the Food Corporation of India itself. They have not extended the contract and the petitioners are continuing with

the Food Corporation of India and they are getting direct payments from them.

As a matter of fact, the latter decision of the Supreme Court of India, reported as Secretary, Haryana State Electricity Board v. Suresh and

others, 1999(2) SCT 600 (SC) : 1999(3) SCC 601, can very well be cited with advantage. The proposition of law which has been laid down in

the aforementioned judgment of the Supreme Court also comes to the rescue of the petitioner. The appellant Haryana State Electricity Board is a

statutory Board. It is a licensee, within the meaning of Electricity Act, 1910 and Electricity (Supply) Act of 1948. It supplies power throughout the

State of Haryana, through its various plants and stations. In order of keeping the plants and stations clean and hygienic, it entered into contractual

relationship. The contract was to engage Safai Karamcharis, minimum of 42 Safai Karamcharis was to be engaged. After completion of more than

240 days of working in the year, services of these Safai Karamcharis were brought to an end. They raised an industrial dispute. The question was

whether these Safai Karamcharis were employees of the Board or not. The Labour Court answered in favour of the workmen. The High Court of

Punjab and Haryana affirmed that decision. It was found that the Board exercised supervision over the attendance of the Safai Karamcharis and

maintained record of other statutory duties and liabilities. Documents showed that overall control on workers of the Contract labour including

administrative control was with the Board. The Supreme Court of India upheld the view expressed by the Labour Court which stood affirmed by

the High Court. It was observed that the doctrine of lifting of the veil should be applied. It was also observed that while interpreting legislation

dealing with the workmen, the principles of justice, equity and good conscience should be taken note of. It was found that there was no genuine

contract labour system prevailling with the appellant Board. What was said in paragraph ""19"" is being reproduced below :

Reliance on the decision in the case of Dena Nath v. National Fertilisers Ltd., 1992(1) SCT 107 (SC) : 1992(1) SCC 695 , in support of the

Board's contention, however, stands diluted by reason of the decisions of this Court in Gujarat Electricity Board Thermal Power Station, Ukai,

Gujarat v. Hind Mazdoor Sabha, 1995(3) SCT 524 (SC) : 1995(5) SCC 27 and Air India Statutory Corpn v. United Labour Union, 1997(9)

SCC 377. The ratio as has been decided in Air India case, appears to have softened the edges of Dena Nath ratio. While dealing with this issue in

Air India case this Court has, as a matter of fact taken note of more or less the entire catena of cases pertaining to contract, labour and we do thus

feel it wholly unnecessary to deal with the same in extenso excepting however recording some observations of this Court in Air India case as below

:

In this behalf, it is necessary to recapitulate that on abolition of the contract labour system, by necessary implication, the principal employer is

under statutory obligation to absorb the contract labour. The linkage between the contractor and the employee stood snapped and direct

relationship stood restored between the principal employer and the contract labour as its employees. Considered from this perspective, all the

workmen in the respective services working on contract labour are required to be absorbed in the establishment of the appellant.

In Paragraph 20 it was further observed that :

It is also pertinent to note that nothing was brought on record to indicate that even the Board at the relevant time was registered as the principal

employer under the Contract Labour Regulation and Abolition Act, Once the Board was not a principal employer and the socalled contractor

Kashmir Singh was not a licensed contractor under the Act, the inevitable conclusion that had to be reached was to the effect that the socalled

contract system was a mere camouflage, smoke and a screen and disguised in almost a transparent veil which could easily be pierced and the real

contractual relationship between the Board, on the one hand, and the employees, on the other, could be clearly visualised.

What is said by the Supreme Court of India in Haryana State Electricity Board's case would again apply to the facts of this case also. As such

this petition is allowed. A direction is given to the Food Corporation of India to regularise the services of the petitioners. These petitions are

allowed with the costs of Rs. 3,000/.