MRF United Workers Union vs The Chief Inspector of Factories and Others

K. Chandru, J.—All the four writ petitions were filed by the petitioner Trade Union with registration No. 1169/VLR, represented by its

General Secretary. These writ petitions were directed to be posted before this Court by an order of the Hon''ble the Chief Justice, dated 3.3.2010

on being specially ordered. Hence all these writ petitions were posted before this Court.

In the first writ petition i.e. W.P. No. 5198 of 004, the prayer of the writ petitioner was for a direction to the Superintendent of Police, Vellore

District to act upon the complaint of the petitioner Union, dated 28..2004 and also to remove the unauthorised persons found in the factory

premises belonging to MRF Limited at Itchiputhur Plant in Arakkonam and to investigate into the practices adopted by the MFR Limited and to

take such criminal action as against the offenders. The writ petition was admitted on 5.3.2004.

Pending the writ petition, though one MRF Cycle Tyre Unit Employees Association filed an application in WPMP No. 8586 of 2004 to implead

itself as 9th respondent, no order was passed in that miscellaneous petition. The petitioner also took out an application for an ad interim direction

directing the Superintendent of Police, Vellore to afford police protection to the workmen and members of the petitioner union in their Itchiputhur

plant. This Court on 18.3.2004, after hearing both sides, directed the Chief Inspector of Factories (CIF), Chepauk to inspect the Units in the

presence of the General Secretary of the petitioner Union and to submit a report on 22.3.2004. Accordingly, a report was filed stating that three

factories have obtained licences to employ a maximum number of 2000 workers in the Tyre plant, 500 workers in Tube plant and 50 workers in

Conveyor Belting plant. The total number of contractors in respect of those three factories were 15 contractors in Tyre Plant, 9 contractors in

Tube Plant and 2 contractors in Conveyor Belting Plant. It was also stated that at the time of inspection by the Chief Inspector of Factories, he

found that the contract workers were engaged in the work, for which registration certificate was issued. The Register of Contractors in Form No.

XII was maintained in all the three factories. It was verified and found to be correct. Form No. XVI, which is a muster roll of all contract workers,

was also maintained by the contractors, which was also verified and found to be correct. The Muster Roll under Rule 103 prescribed under the

Tamil Nadu Factories Rules, 1950 was also verified. He also found that there was no unauthorised persons working or available inside the factory

premises.

On notice from this Court, 6th and 7th respondents management have filed a counter affidavit, dated 17.3.2004. In the counter affidavit, it was

stated that such a writ petition is not maintainable, since the management is a private employer. If at all the Union has any grievance, they should

raise an industrial dispute u/s 2(k) of the Industrial Disputes Act, 1947. The factory at Ichiputhur in Arakkonam was started in the year 1972. It

engaged in the manufacturing of Passenger Radial tyres, Bias Tyres, two and three wheeler tyres, tubes, flaps and conveyor belt. There are

approximately 1267 employees working and are having cordial industrial relations with them. They had engaged various contractors in building

construction, civil maintenance, engineering maintenance, security services, boiler maintenance, electrical erection work, gardening, loading and

unloading, house keeping and structural erection, etc. They also have registration certificate for employing contract labours. There are no outsiders

in the factory. The contractors are licensed and their employees are covered both under the ESI and EPF Act. It is the petitioner union which

indulged in violence. The allegation that the workmen engaged by the contractors were doing the same work as that of the permanent employees

was denied. Therefore, they sought for dismissal of the writ petition.

The petitioner had filed an affidavit, dated 15.4.2004, stating that the report submitted by the Chief Inspector of Factories pursuant to his visit

on 19.3.2004 were objected to. The first respondent did not inform the union about his inspection. The General Secretary who was permitted to

accompany the officer was taking his lunch around 11.30 a.m. He skipped his lunch and went to the spot. But he was informed that they had

already visited the plant. In the meanwhile the Contract labours were sent out from doing production work. The management knowing in advance

the visit of the Chief Inspector of Factories had removed the contract workers from the scene. On that day, the production got reduced and that

can be seen from that day''s electricity consumption. They had also filed a typed set of papers about various objections raised by their union and

the report sent by the General Secretary to the President of the Union.

In the meanwhile, the petitioner union filed W.P. Nos. 9102 and 9103 of 2004. Both the writ petitions were admitted on 5.4.2004. In the first

writ petition, the petitioner union prayed for a direction to the third respondent Regional Commissioner of Provident Fund to take an appropriate

action in respect of workers working in the Itchiputhur plant and to cover them under the PF Scheme. Pending the writ petition, a direction was

sought for to give details of workmen who are employed in the factory and whose services were utilized by the management with regard to their

coverage under the Provident Fund Act. In that petition, only notice was ordered.

In W.P. No. 9103 of 2004, the prayer was to direct the respondents, i.e. the Chief Inspector of Factories, Inspector of Factories and the

Government to inspect and investigate the number of workmen utilized by the respondents as contract labours in direct processes and to take

appropriate steps to enforce the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 (for short CLRA Act) and to secure for

them their legitimate right of employment in accordance with law. Pending the said writ petition, an interim injunction was sought for restraining the

management from deploying contract labours in direct manufacturing process and from engaging them in any other process other than for which the

management had obtained registration u/s 7 of the CLRA Act, in which also only notice was ordered.

In the said two writ petitions, on behalf of the management, two counter affidavits, dated 10.10.2009 were filed. In the first counter affidavit, the

management had stated that in the year 2004, there were 1267 permanent workers in the tyre plant. They are having 26 contractors, who are

licensed under the provisions of the Act. The workmen of the contractors were also allowed to us the canteen facility. They are covered by the

ESI Act. In the second counter affidavit, it was denied that the contract workers are engaged in direct process. The Chief Inspector of Factories

who visited the factory found that the allegation made by the union was not correct.

On behalf of the PF Department, a counter affidavit was filed by the Assistant Provident Fund Commissioner (Legal), dated 2.5.2005. It was

claimed that there cannot be any discrimination between the workers engaged directly and those who are engaged by the contractors. In both the

cases, they are covered by the PF Act. As soon as the petitioner union sent its representation, appropriate actions have been taken and the said

representation was under their consideration. Since the management had obtained an interim stay in W.P. No. 6062 of 2004, further proceedings

will be initiated after the disposal of the said writ petition.

It was thereafter, the petitioner union filed the fourth writ petition being W.P. No. 17363 of 2009, seeking for a direction to revoke the

registration certificate issued under CLRA Act to the management and also to revoke the licenses granted to the contractors for engaging contract

labours. The contractors were impleaded as respondents 6 to 38. Various licenses issued in favour of the contractors were also enclosed in the

typed set filed along with the writ petition.

When the matter came up on 26.8.2009, notice was directed to be issued to the respondents privately. Accordingly, notices were issued.

Pending the writ petition, the petitioner filed two miscellaneous petitions. One is for restraining the management in engaging contract labours at their

Itchiputhur plant except in process where valid certificate of registration is issued to the Principal employer and valid licenses are available with the

contractors and to act strictly in accordance with the CLRA Act. In the second miscellaneous petition, the petitioner sought for an assistance of an

independent person to report to this Court as to the number of contract labours engaged at their Itchiputhur plant.

On notice being received privately, the respondents have filed counter affidavits. Most of the contractors have also filed counter affidavits

denying the allegations made by the union.

On behalf of the management (MRF Factory), a counter affidavit, dated 22.10.2009 was filed. In that counter affidavit, they had claimed that

there are about 1400 permanent employees as on date. Upto the year 2008, there were 32 contractors and 59 contracts. In the year 2009,

number of contractors were increased to 43 having 74 contracts. The names of contractors and the license in which maximum number of workers

they can employ as well as number of workers engaged by the contractors were set out in paragraph 8 of the counter affidavit. Apart from

repeating previous averments in the previous affidavits, they had stated that they are going strictly by the provisions of the CLRA Act. It was also

stated that the ESI Act is also extended to the workmen. It was further claimed that a settlement was reached with the recognised union u/s 18(1)

of the I.D. Act on 9.5.2009. Out of 1400 workers, 955 workers have accepted the terms of settlement. The grievance projected by the union

cannot be entertained under Article 226 of the Constitution of India.

In the counter affidavit filed on behalf of the Chief Inspector of Factories and Inspector of Factories, Vellore, it was claimed that the Deputy

Chief Inspector of Factories, I Division, Vellore visited the factory on 27.6.2009. It was claimed that the contract workers are engaged in the

work which are stipulated in the registration certificate and the contract licenses. The instances of contract labours engaged in manufacturing

process were not noticed. These facts were notified to the union. But the union has filed the present writ petition. It was also claimed that since

contractors were having valid licenses and the Principal Employer was having certificate of registration, any revocation can be done only u/s 8 of

the CLRA Act and that too if it is proved that those certificates were obtained by misrepresentation or suppression of any material facts. Since it

was not brought to the knowledge of the Inspector of Factories, the power u/s 8 was not invoked.

It was also claimed that the Government has not issued any prohibitory order u/s 10(1) of the CLRA Act prohibiting employment of contract

labours. In the absence of any express prohibition of engagement of contract labours by the Government, the Inspector of Factories cannot suo

motu stop the workmen engaged by the contractors. It was also stated that the Contract labours were allowed to be engaged on valid licence

given by the department and certain errors found in the licences cannot be magnified. The department was satisfied that the contract workers are

employed in accordance with the provisions of the Factories Act, 1948. The minimum wages are paid to them. The department had not noticed

any violation of sanction of employment in terms of certificate of registration and licence. No offence has been brought to the notice for launching

prosecution under CLRA Act. The renewal of licences have been done in conformity with the provisions of Section 7(2) of the CLRA Act. The

other allegations made by the union were also denied. With reference to the mistakes found in some of the licences, the same was sought to be

explained in paragraph 7 of the counter affidavit, which is as follows:

...All the relevant details such as nature of work, period of work and the maximum number of workmen to be engaged by each contractor are

captured in the annexure to Form 1. It cannot be said that the license is not in accordance with the requirements of the Tamilnadu Contract Labour

Rules just because the nature of work revealed in the Certificate of Registration is not reflected in the License issued by 2nd respondent whereas

item 2 of the License was not properly printed. Hence, the 2nd Respondent had made it a practice to super-scribe by hand on top of the License

the nature of work for which license is granted. It is possible that by oversight a few licenses may not have this detail. But it is respectfully

submitted that the validity of the license cannot be faulted just because a particular detail viz. Nature of work, which is available in Form 1

(Application for License) Form 2 (Certificate of Registration) Form IV (Application for License) is not reflected in Form VI (License) in a very

few cases.

Each of the contractor have filed counter affidavits denying the allegations made against them. They have also stated that filing of a writ petition

was a clear abuse of process of court. Hence the writ petition is not maintainable.

The petitioner union has filed an additional typed set containing representations sent by the union dated 2.1.2010 and 29.1.2010 and a reply

sent by the Deputy Chief Inspector of Factories, Vellore, dated 11.2.2010. In that letter, the department requested the union to furnish the names

of workers'' representative in order to conduct further inspection in the factory.

The petitioner union itself has also produced a copy of communication sent by the Deputy Chief Inspector of Factories, dated 23.7.2009. In

that he had informed the union that when an inspection was made in those three factories, the workers were engaged in the following process, i.e.

transporting the manufacturing parts from one place to other, cleaning work and storing work. Only the number of the workers specified in the

registration certificate and the licenses issued to the contractors alone were found working. During inspection, no workers who are not covered by

the registration certificate or by the contract licences were found working. Only permanent workers are working in the direct processes. In the

complaint sent by the union, they have not given the names of contract workers and the machines in which they are working. If on further

inspections, any contractors are found violating the license terms, they will be duly attended to.

Mr. V. Prakash, learned Senior Counsel appearing for the petitioner union submitted that in a writ petition under Article 226 of the

Constitution of India, this Court has got ample powers to decide whether the Principal employer was registered in terms of Section 7 and whether

the contractors are having valid licences u/s 12. It is one thing to state that on paper, the establishment has registration and some of the contractors

were having licenses. It is other thing to see that whether the workers who are covered by the licenses are working only in the area for which

licenses were issued or that some contractors are using licenses to smuggle the workers to work in places other than for which they were licensed.

He also submitted that when they issued certificate u/s 7 and licenses u/s 12, there must be an application of mind before the grant of such

certificate of registration or licenses, as the case may be.

The learned Senior Counsel refers to Rules 17 and 18 of the Tamil Nadu Contract Labour Rules, 1975 read with Form V. There is aim and

purpose in prescribing the rules, was to mention the maximum number of workers to be employed as contract labours and type of business carried

on including particulars which may be relevant to the employment of the contract labours. If these particulars are not found in the Form of license,

then the very purpose for regulating the contract labours for which the Act has been enacted will be lost. He further submitted that it is under Form

VI, licenses were granted. Any amendment of the license is to be separately made as per Rule 28. The renewal has to be made under Rule 29.

The annexure to the rule contains several clauses to be filled up by the licensing officer. The renewal is granted by merely making an endorsement

after noting the renewal fee. In some of the licenses, the nature of work in which they were engaged was not mentioned. It was also stated that

under Rule 19, if application for registration is not complete in all respects, the registering officer shall require the principal employer to amend the

application. If he fails to do so, the registering officer should reject the application. Similarly, under Rule 23, the licensing officer can make an

enquiry to satisfy himself about the eligibility of the application for license. Such an exercise was not granted.

It was further stated that under Rule 25(2)(v), the workman employed by the contractor if he performs the same or similar kind of work as that

of workman directly employed by the principal employer, then they should enjoy the same service conditions. The registering officer can make a

decision in this regard. Any aggrieved party must file an appeal to the Commissioner for Labour. In other case, the rates of wage, holidays, hours

of work and conditions of service of the workmen of the contractor can be specified by the Commissioner for Labour. The department has not

taken any such steps to rectify the injustice caused to the workers.

The learned Senior Counsel also stated that the licensing authority before the grant of licenses must keep in mind the parameters prescribed u/s

10(2) of the CLRA Act, wherein it is stated that the appropriate Government can prohibit the employment of contract labours in the following

circumstances. Section 10 reads as follows:

Prohibition of employment of contract labour.-

(1) Notwithstanding anything contained in this Act, the appropriate Government may, after consultation with the Central Board or, as the case may

be, a State Board, prohibit, by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any

establishment.

(2) Before issuing any notification under Sub-section (1) in relation to an establishment, the appropriate Government shall have regard to the

conditions of work and benefits provided for the contract labour in that establishment and other relevant factors, such as-

(a) whether the process, operation or other work is incidental to, or necessary for the industry, trade, business, manufacture or occupation that is

carried on in the establishment;

(b) whether it is of perennial nature, that is to say, it is of sufficient duration, having regard to the nature of industry, trade, business, manufacture or

occupation carried on in that establishment;

(c) whether it is done ordinarily through regular workmen in that establishment or an establishment similar thereto;

(d) whether it is sufficient to employ considerable number of whole time workmen.

Explanation.-If a question arises whether any process or operation or other work is of perennial nature, the decision of the appropriate

Government thereon shall be final.

Therefore, when the licensing authority grants license to engage contract labour, he should see to it that he does not grant license in terms of

Section 10(2), which was not done in the present case.

Per contra, Mr. Sanjay Mohan, learned Counsel representing for M/s. Ramasubramaniam Associates, stated that the claim made by the

workmen cannot be countenanced by this Court. In so far as the first writ petition is concerned, it had become infructuous. The second and third

writ petitions were sufficiently answered by the respondents. The fourth writ petition was only a repetition of the first writ petition. In any event, the

petitioner union without exhausting remedies under the Act, cannot file such writ petitions invoking the power of this Court under Article 226 of the

Constitution of India. Inasmuch as the company has got certificate of registration to employ specified number of contract workers in various

processes and the contractors have also been granted licenses, the same cannot be revoked by the order of this Court without there being any

credible material. The fact situation pleaded in the present case are at variance. In fact, the first report of the Chief Inspector of Factories is against

the union. Also the report based upon the inspection, dated 27.6.2009 followed by the counter affidavit by the department will clearly repudiate

the complaint made by the union.

It was further stated that the Deputy Chief Inspector of Factories sent a letter to the union, dated 23.7.2009, wherein he had denied the

allegations made by the union and that is not under challenge. In fact, none of the reports of the department are under challenge. He also stated that

if on application by the employer if the department gives the certificates and licenses in a particular format, neither the management nor the

contractor can be penalised. The non observance of any particular form cannot be put against the employer as it is not their mistake. It was further

stated that neither registering authority nor licensing authority can conduct any enquiry as if they are quasi judicial authorities. They are merely

administrative authorities the provisions of the Act and no quasi judicial determination arises. They cannot deny license if proper criteria were found

in the application made by the principal employer and the contractor. It was also stated that no one can introduce new elements for granting license

which are relevant for abolishing contract labour. The Act contemplates twin objects, i.e. Regulation and Abolition of contract labour. Only in case

where it is abolished, the question of regulation will become insignificant. In the absence of any notification u/s 10(1) of the CLRA Act, no one can

prevent the employer from engaging contract labour whether in direct processes or indirect processes. But, in so far as the respondents are

concerned, even as per the findings of the department, no worker is engaged in direct processes.

Mr. G. Masilamani, learned Senior Counsel for M/s. King and Partridge, Mr. S. Ravindran for M/s. T.S. Gopalan & Co, Mr. P.

Subramanian, (G.A), M/s. K. Gunasekar, D. Jawahar, Srinath Sridevan, K.C. Ramalingam (ESI), Gunasekar (PF), learned Counsels appearing

for other respondents were also heard.

Mr. G. Masilamani, learned Senior Counsel stated that there is no prohibition for engagement of contract labours. The authorities granting

licenses cannot adjudicate upon the issues raised by the union. In the absence of the petitioner union or its members filing an application u/s 8 for

revocation of license, they cannot make such arguments before this Court.

In addition to such submissions, Mr. Srinath Sridevan, learned Counsel for one respondent submitted that in so far as his client is concerned,

they are engaged in construction work duly covered by the licence and such work is not prohibited by the Act. Hence he prayed for dismissal of

the writ petition.

In the light of these contentions, the controversies between the parties will have to be decided.

Before proceeding to consider the rival submissions, the parameters under which this Court can go into the questions in matters arising out of

CLRA Act under Article 226 has to be noted. It is necessary to refer to the constitution bench judgment of the Supreme Court in Steel Authority

of India Ltd. and Others etc. etc. Vs. National Union Water Front Workers and Others etc. etc., . It is necessary to extract paragraphs 125 and

126 of the said judgment, which are as follows:

The upshot of the above discussion is outlined thus:

(1)(a) Before 28-1-1986, the determination of the question whether the Central Government or the State Government is the appropriate

Government in relation to an establishment, will depend, in view of the definition of the expression ''appropriate Government'' as stood in the

CLRA Act, on the answer to a further question, is the industry under consideration carried on by or under the authority of the Central Government

or does it pertain to any specified controlled industry, or the establishment of any railway, cantonment board, major port, mine or oilfield or the

establishment of banking or insurance company? If the answer is in the affirmative, the Central Government will be the appropriate Government;

otherwise in relation to any other establishment the Government of the State in which the establishment was situated, would be the appropriate

Government;

(b) After the said date in view of the new definition of that expression, the answer to the question referred to above, has to be found in Clause (a)

of Section 2 of the Industrial Disputes Act; if (i) the Central Government company/undertaking concerned or any undertaking concerned is

included therein eo nomine, or (ii) any industry is carried on (a) by or under the authority of the Central Government, or (b) by a railway company;

or (c) by a specified controlled industry, then the Central Government will be the appropriate Government; otherwise in relation to any other

establishment, the Government of the State in which that other establishment is situated, will be the appropriate Government.

(2)(a) A notification u/s 10(1) of the CLRA Act prohibiting employment of contract labour in any process, operation or other work in any

establishment has to be issued by the appropriate Government:

(1) after consulting with the Central Advisory Board or the State Advisory Board, as the case may be, and

(2) having regard to

(i) conditions of work and benefits provided for the contract labour in the establishment in question, and

(ii) other relevant factors including those mentioned in Sub-section (2) of Section 10;

(b) Inasmuch as the impugned notification issued by the Central Government on 9-12-1976 does not satisfy the aforesaid requirements of Section

10, it is quashed but we do so prospectively i.e. from the date of this judgment and subject to the clarification that on the basis of this judgment no

order passed or no action taken giving effect to the said notification on or before the date of this judgment, shall be called in question in any tribunal

or court including a High Court if it has otherwise attained finality and/or it has been implemented.

(3) Neither Section 10 of the CLRA Act nor any other provision in the Act, whether expressly or by necessary implication, provides for automatic

absorption of contract labour on issuing a notification by the appropriate Government under Sub-section (1) of Section 10, prohibiting employment

of contract labour, in any process, operation or other work in any establishment. Consequently the principal employer cannot be required to order

absorption of the contract labour working in the establishment concerned.

(4) We overrule the judgment of this Court in Air India case2 prospectively and declare that any direction issued by any industrial adjudicator/any

court including the High Court, for absorption of contract labour following the judgment in Air India case shall hold good and that the same shall

not be set aside, altered or modified on the basis of this judgment in cases where such a direction has been given effect to and it has become final.

(5) On issuance of prohibition notification u/s 10(1) of the CLRA Act prohibiting employment of contract labour or otherwise, in an industrial

dispute brought before it by any contract labour in regard to conditions of service, the industrial adjudicator will have to consider the question

whether the contractor has been interposed either on the ground of having undertaken to produce any given result for the establishment or for

supply of contract labour for work of the establishment under a genuine contract or is a mere ruse/camouflage to evade compliance with various

beneficial legislations so as to deprive the workers of the benefit there under. If the contract is found to be not genuine but a mere camouflage, the

so-called contract labour will have to be treated as employees of the principal employer who shall be directed to regularise the services of the

contract labour in the establishment concerned subject to the conditions as may be specified by it for that purpose in the light of para 6 hereunder.

(6) If the contract is found to be genuine and prohibition notification u/s 10(1) of the CLRA Act in respect of the establishment concerned has been

issued by the appropriate Government, prohibiting employment of contract labour in any process, operation or other work of any establishment

and where in such process, operation or other work of the establishment the principal employer intends to employ regular workmen, he shall give

preference to the erstwhile contract labour, if otherwise found suitable and, if necessary, by relaxing the condition as to maximum age

appropriately, taking into consideration the age of the workers at the time of their initial employment by the contractor and also relaxing the

condition as to academic qualifications other than technical qualifications.

We have used the expression ​industrial adjudicator​ by design as determination of the questions aforementioned requires enquiry into disputed

questions of facts which cannot conveniently be made by High Courts in exercise of jurisdiction under Article 226 of the Constitution. Therefore, in

such cases the appropriate authority to go into those issues will be the Industrial Tribunal/Court whose determination will be amenable to judicial

review.

With reference to the provisions of the Act in respect of contract labours, in the very same judgment in paragraph 87, it was observed as

follows:

Now turning to the provisions of the Act, the scheme of the Act is to regulate conditions of workers in contract labour system and to provide

for its abolition by the appropriate Government as provided in Section 10 of the CLRA Act. In regard to the regulatory measures, Section 7

requires the principal employer of an establishment to get itself registered under the Act. Section 12 of the Act obliges every contractor to obtain

licence under the provisions of the Act. Section 9 of the Act places an embargo on the principal employer of an establishment, which is either not

registered or registration of which has been revoked u/s 8, from employing contract labour in the establishment. Similarly, Section 12(1) bars a

contractor from undertaking or executing any work through contract labour except under and in accordance with a licence. Sections 23, 24 and 25

of the Act make contravention of the provisions of the Act and other offences punishable there under. With regard to the welfare measures

intended for the contract labour, Section 16 imposes an obligation on the appropriate Government to make rules to require the contractor to

provide canteen for the use of the contract labour. The contractor is also under an obligation to provide restrooms as postulated u/s 17 of the Act.

Section 18 imposes a duty on every contractor employing contract labour in connection with the work of an establishment to make arrangement

for a sufficient supply of wholesome drinking water for the contract labour at convenient places, a sufficient number of latrines and urinals of the

prescribed type at convenient and accessible places for the contract labour in the establishment, washing facilities etc. Section 19 requires the

contractor to provide and maintain a first-aid box equipped with prescribed contents at every place where contract labour is employed by him.

Section 21 specifically says that a contractor shall be responsible for payment of wages to workers employed by him as contract labour and such

wages have to be paid before the expiry of such period as may be prescribed. The principal employer is enjoined to have his representative

present at the time of payment of wages. In the event of the contractor failing to provide amenities mentioned above, Section 20 imposes an

obligation on the principal employer to provide such amenities and to recover the cost and expenses incurred therefore from the contractor either

by deducting from any amount payable to the contractor or as a debt by the contractor. So also, Sub-section (4) of Section 21 says that in the

case of the contractor failing to make payment of wages as prescribed u/s 21, the principal employer shall be liable to make payment of wages to

the contract labour employed by the contractor and will be entitled to recover the amount so paid from the contractor by deducting from any

amount payable to the contractor or as a debt by the contractor. These provisions clearly bespeak treatment of contract labour as employees of

the contractor and not of the principal employer.

The Supreme Court also emphasised that only in case of abolition of contract labours notified u/s 10(1), various consequences that may flow

from such notification. Hence the following passage found in paragraph 88 may be usefully extracted below:

If we may say so, the eloquence of the CLRA Act in not spelling out the consequence of abolition of contract labour system, discerned in the

light of various reports of the Commissions and the Committees and the Statement of Objects and Reasons of the Act, appears to be that

Parliament intended to create a bar on engaging contract labour in the establishment covered by the prohibition notification, by a principal employer

so as to leave no option with him except to employ the workers as regular employees directly. Section 10 is intended to work as a permanent

solution to the problem rather than to provide a one-time measure by departmentalizing the existing contract labour who may, by a fortuitous

circumstance be in a given establishment for a very short time as on the date of the prohibition notification. It could as well be that a contractor and

his contract labour who were with an establishment for a number of years were changed just before the issuance of prohibition notification. In such

a case there could be no justification to prefer the contract labour engaged on the relevant date over the contract labour employed for a longer

period earlier. These may be some of the reasons as to why no specific provision is made for automatic absorption of contract labour in the CLRA

Act.

In the absence of any prohibition of engagement of contract labours and if the workmen is able to contend that the contract was mere

camouflage and ruse to evade the complaint to various beneficial legislation so as to deprive the workers of their benefit under it, the remedy of the

petitioner should be only as what was provided in paragraph 125.5 of the said judgment, as set out above.

In the very same judgment, in paragraph 107, it was observed as follows:

An analysis of the cases, discussed above, shows that they fall in three classes: (i) where contract labour is engaged in or in connection with

the work of an establishment and employment of contract labour is prohibited either because the industrial adjudicator/court ordered abolition of

contract labour or because the appropriate Government issued notification u/s 10(1) of the CLRA Act, no automatic absorption of the contract

labour working in the establishment was ordered; (ii) where the contract was found to be a sham and nominal, rather a camouflage, in which case

the contract labour working in the establishment of the principal employer were held, in fact and in reality, the employees of the principal employer

himself. Indeed, such cases do not relate to abolition of contract labour but present instances wherein the Court pierced the veil and declared the

correct position as a fact at the stage after employment of contract labour stood prohibited; (iii) where in discharge of a statutory obligation of

maintaining a canteen in an establishment the principal employer availed the services of a contractor the courts have held that the contract labour

would indeed be the employees of the principal employer.

In a contingency when the contract being found sham and nominal is established before the industrial court, there can be scope for claiming

absorption against the principal employer and even if that employer is a public sector undertaking. Not withstanding the observation made in

Secretary, State of Karnataka and Others Vs. Umadevi and Others, , the said view was reiterated in ONGC v. ONGC Contractual Workers

Union reported in (2008) 12 SCC 275. The following passage found in paragraph 21 may be usefully extracted below:

In the instant case, on a consideration of material produced before it, the Tribunal came to the following conclusions:

(1) That there existed a relationship of master and servant.

(2) That there was no contractor appointed by ONGC.

(3) That ONGC used to supervise and allot works to individual workers.

(4) That ONGC took disciplinary action and called for explanations from the workers.

(5) The workers were paid wages though they did not attend their duties due to Cachar Bandh and due to flood.

(6) The wages were paid directly to the workers by ONGC and the acquaintance roll was prepared by the management to make payment to the

workmen.

It has also been observed that even ONGC had admitted that since 1988, there was no licensed contractor and that the wages were being paid

through one of the leaders of the Union and one such contractor, Manik has been named. The Tribunal then opined that it appeared from the

record that Manik himself was a workman and not a contractor as he too was shown in the acquaintance roll to have received wages. We find that

the real issue was as to the status of the workmen as employees of ONGC or of the contractor, and it having been found that the workmen were

the employees of ONGC they would ipso facto be entitled to all benefits available in that capacity, and the issue of regularisation would, therefore,

pale into insignificance. We find that in this situation, the Industrial Tribunal and the Division Bench of the High Court were justified in lifting the veil

in order to determine as to the nature of employment in the light of the judgments quoted above. We, therefore, find that the ratio of the judgment

in Umadevi (3) case would not be applicable and that the facts of Pandey case are on the contrary more akin to the facts of the present one.

But, in the present case, the petitioner union has not chosen the course of action either for seeking abolition of contract labour on the ground

that the work in which the contract labour were engaged was essentially covered by reasons found in Section 10(2) of the CLRA or that the

licenses issued by the State Government were fraudulently obtained or it is being used for some collateral purposes. They can very well raise an

industrial dispute before the appropriate conciliation officer and get the issue adjudicated.

However, Mr. V. Prakash, learned Senior Counsel appearing for the petitioner contended that notwithstanding those options open to the

union, it can still urge this Court that the licenses have to be revoked for the reasons already set out by him. But, in the present case, the

contractors, who were made as respondents 6 to 38 had obtained licenses in their favour. Therefore, the stage to prevent them from getting license

is already over and their licenses have been renewed from time to time. The only option is to move the appropriate authority u/s 8 for revocation of

registration or u/s 14 for revocation of license as rightly contended by the official respondents. It is when the authority is posted with necessary

information as laid in those provisions, the licenses can be revoked by the authority concerned.

The Supreme Court had forewarned the High Courts from taking over the role of industrial adjudicators as found in paragraph 126 of the

SAIL case (cited supra). Though the learned senior counsel urged that the theory of alternative remedy is only a self imposed restriction and this

Court has power to decide the issue under Article 226 of the Constitution and such power can strike of injustice caused to any person,

theoretically such formulations may be correct. But in the present case, not only private respondents have denied the allegations made by the

petitioner. But even the official respondents that too reports of inspection dated 22.3.2004 and 27.6.2009 have denied the misuse of licenses and

refuted the contentions that licenses have been fraudulently obtained.

The private respondents have contended that they are using the licenses as granted by the department and even it was not strictly in the form

prescribed under the Rule for that reason, they cannot be blamed. The official respondents have stated that in some cases, there could be mistakes

while writing details. Ultimately, the only solution is for the official respondents to strictly prepare a new format encompassing the form prescribed

and grant licenses accordingly. Instead of using the same form for renewal, they can even provide a Booklet under which relevant datas can be

furnished. Though official respondents have contended that as soon as any renewal fee is paid, they are bound to renew the license, such a

contention cannot be accepted. But, at the same time, in the guise of granting a certificate or license, the authority was not expected to take into

account the objects behind Section 10(2). That they can refuse the license if any labours are engaged in such areas as contended by the learned

senior counsel for workmen also cannot be countenanced.

In this context, it is worthwhile to refer to the decision of the Karnataka High Court in M. Gopal v. Assistant Labour Commissioner and

Registrar/Licensing Authority, Bangalore reported in 1997 LAB. I.C. 3428. Almost an identical view was taken by this Court and the following

passage found in para 18 may be reproduced:

The order impugned has sought to exercise its power as if it is exercising the power conferred u/s 10 of the Act and on that basis he has

declined to renew the licence. It has adverted to the decision of the Supreme Court which deals with the power u/s 10. The principles therein is

more apposite while examining the question of abolition. The existence or otherwise of these circumstances may be a ground to consider whether

the registration/licence be declined or granted. But, the circumstance that the contract labour in the larger interest should be abolished in exercise of

the power u/s 10 is not a ground to decline the registration/licence/renewal. Hence, the whole process adopted by the Officer is incorrect....

Yet at the same time, in the same judgment, the purpose of providing complete details in the forms prescribed has also been emphasised in

para 14, which is as follows:

...This will furnish the intimation whether the number of days employed is perennial or intermittent, as the case may be. Hence, when the Rule

mentions ""complete"" details, the inference is that it be complete and correct information required to be furnished. If, therefore, the informations

furnished are incorrect or that it is not true and does not enable the Authority to come to the correct conclusion as to whether the application made

be allowed either u/s 7 or Section 12 of the Act, then necessarily the authority has power to reject the registration or licence, as the case may be,

and on such refusal of registration or licence, it certainly does not amount to abolition of the contract labour.

On the other hand, strict observance of statutory forms by noting the areas in which the workmen were engaged can be a relevant

contemporaneous record and will be helpful to the Government if it ultimately decides to abolish the contract labour by issuing a notification u/s

10(1) of the CLRA Act. Therefore, the authority should not think that there are only two classes of persons alone are involved in implementing the

CLRA Act i.e. one is a form filler and the other is the form filer. There is aim and purpose in gathering information as required by the statutory rule

read with forms prescribed. The excuse given by the official respondents cannot be entertained in this regard. At least in future, they should

carefully follow the rule, failing which this Court will be constrained to take an appropriate action against those officers who are showing either

indifference or lackadaisical approach in administering the provisions of CLRA Act. In fact the authorities under the Act have got a greater role

even in ascertaining whether the workmen employed by the contractor perform same or similar kind of work as the workmen directly employed by

the principal employer. In those cases, they can even direct similar service conditions to be extended to those workmen. At the time of grant of

license, the authority will have to consider under Rule 22(b) by which he has to take into account that whether the appropriate Government had

abolished the contract labour or if there was any settlement or Award abolishing contract labour in respect of a particular type of work in the

establishment. Therefore, it requires application of mind and no renewal can be done immediately on the deposit of renewal fee.

In this context, it is necessary to refer to the judgment of the Supreme Court in Panki Thermal Station and Another Vs. Vidyut Mazdoor

Sangthan and Others, where the Rule 25(2)(v)(a) was considered. In paragraph 14, it was observed as follows:

The pivotal provision for resolving the dispute is Rule 25(2)(v)(a). The same reads as under:

(2)(v)(a) in cases where the workmen employed by the contractor perform the same or similar kind of work as the workmen directly

employed by the principal employer of the establishment, the wage rates, holidays, hours of work and other conditions of service of the workmen

of the contractor shall be the same as applicable to the workmen directly employed by the principal employer of the establishment on the same or

similar kind of work:

Provided that in the case of any disagreement with regard to the type of work the same shall be decided by the Labour Commissioner, U.P. whose

decision shall be final;

A bare reading of the provision makes the position clear that in cases where the workmen employed by the contractor perform the same or similar

kind of work as employed directly by the principal employer of the establishment the wage rates, holidays, hours of work and other conditions of

service of the workmen of the contractor shall be the same as are applicable to the (sic workmen of the) principal employer. In case of

disagreement with regard to the type of work the same shall be decided by the Commissioner.

A learned Judge of this Court held that under Sections 7 and 12, only the establishment or the contractor alone can be a ""person aggrieved"" in

terms of appeals provided u/s 15, workers or their union cannot prefer an appeal vide judgment in Management of Manali Petrochemical Ltd.,

Manali, Chennai v. Deputy Commissioner of Labour II, Chennai and Ors. reported in 2007 (1) LLN 786. In paragraph 15, it was observed as

follows:

Thus, it is clear that in an appeal arising out of an order u/s 7 or 12, only the ""establishment"" or the ""contractor"" alone could be the ""person

aggrieved"" within the meaning of Section 15 and in an appeal arising out of Section 8 or 14, even a third party could be a ""person aggrieved"" if the

order u/s 8 or 14 was passed at his instance. Therefore, I am of the considered view that the appeal filed by the third respondent u/s 15 of the Act

against the order of the second respondent issued u/s 7 of the Act was clearly not maintainable.

That may not be a correct perspective in interpreting a labour enactment, especially where the right of the workers are vitally affected. In fact they

can be heard at all contingencies and their rights cannot be curtailed.

Even the labour enactments having provisions relating to grant of exemption from application of those enactments even if they do not provide

specific hearing to be given to workmen, the Supreme Court vide its judgment in State of T.N. represented by Secretary, Housing Deptt., Madras

Vs. K. Sabanayagam and Another, has held that as a matter of course, while exercising of such power, the Government should hear the worker

either individually or in a representative capacity. Even in interpreting the provisions of Section 75 under the ESI Act, where the ESI Court can

deal with disputes and the Act did not specifically provide any notice to the workmen, the Supreme Court has held that such notices are

mandatory, without which no adjudication is permissible by the ESI Court. See: Employees State Insurance Corporation Vs. Bhakra Beas

Management Board and Another, . Therefore, the labour enactments to have wider meaning it can at no point of time edge out the workmen from

having their views recorded.

The Supreme Court consistently held that any matter affecting the right of workmen either workmen or their representative can make a

grievance to higher forum including this Court. It is only because such remedies are provided under the Act, the Supreme Court has held that such

matter could not be decided by this Court under Article 226. The provisions will have to be interpreted in tune with the spirit of labour enactments.

Therefore, this Court is unable to agree with the stand taken in the case referred to above.

Further, in the present case, private respondents have also seriously disputed the stand of the petitioner union. Preciously for all these reasons,

the petitioner is seeking for an appointment of an outsider to visit the factory and submit a report. Since the Act itself provides sufficient safeguards

and the petitioner union is not seeking for any larger relief, the relief claimed here cannot be granted by this Court. In the light of the SAIL judgment

(cited supra), this Court is unable to countenance the prayer made in these writ petitions.

Hence, all the four writ petitions will stand dismissed. No costs. Consequently, connected miscellaneous petitions stand closed.