Union of India (UOI) vs P. Perumal

Padmini Jesudurai, J.—These appeals are directed against the acquittal of the Respondent in S.T.R. Nos. 69 to 71 of 1985 and S.T.R. No.

331/84 by the Chief Judicial Magistrate, Salem, tried for different offences under the Contract Labour (Regulation and Abolition) Act, 1970 (Act

No. 37 of 1970) and the Rules framed thereunder (hereinafter referred to as the Act and Rules).

The Appellant filed the 4 complaints against the Respondent u/s 24 of the Act read with Rules 79, 81(2), 76(1), 78(1)(b), 65, 75, 78(1)(d),

25(2), 81(i) and Rule 71, on the allegation that the Respondent was a contractor as defined in Section 2(1)(c) of the Act and had been executing

the contract work of transportation, loading and unloading of crude Magnesite from the quarries at Red Hills and Karuppur to the factory of M/s.

Burn Standard Company Limited, Salem, by employing 20 or more contract labourers and that during the inspection of the work spots of the

Respondent by the complainant on 14-9-84 and 15-9-84, the above mentioned infringement and violations of the aforesaid Rules were detected.

The Respondent''s reply to the show cause notice by the Appellant not being satisfactory the complaints had been filed.

During trial, the complainant-Labour Enforcement Officer. (Central) Salem was examined as P.W.1 and two Assistant Managers of M/s. Burn

Standard Company Limited (for short ''company'') as P.Ws.2 and 3. Exs. P.1 to P.4 were marked. The Respondent when questioned, admitted

that he was a transport contractor for the Company, that he had obtained Ex.P.2 license under the Act for the above purpose, but denied that

P.W.1 ever inspected the work-spots and had detected any violations. The Respondent had no evidence to offer. The learned Magistrate, found

that P.W.1 had inspected the work-spots of the Respondent and the Respondent had violated the Rules mentioned above, but relying upon a

judgment of a learned Judge of the Karnataka High Court in B.B. Bhat v. State of Karnataka 1979 M.L.J. 388 that transporting of ore from the

mine to the factory, was a mere supply of goods or articles of manufacture and would not attract the definition of a ''Contractor'' in Section 2(1)(c)

of the Act, acquitted the Respondent in all the cases. Challenging the position of law on which the acquittals are based, the aggrieved complainant

has filed these appeals.

Thiru A.R. Nagarajan, learned Counsel for the Appellant would submit that the interpretation of the learned Judge of the Karnataka High Court

of the definition of ''Contractor'' in Section 2(1)(c) of the Act. is not in line with the principles laid down by the Supreme Court in Gammon India

Ltd. and Others Vs. Union of India (UOI) and Others, wherein the vires of the Act was upheld, that a contract for transport, loading and unloading

of goods or articles of manufacture, cannot be construed as supply of goods and articles of manufacture and that transporting ore fell within the

definition of Section 2(1)(c). The learned Counsel further submitted that the transporting, loading and unloading by the Respondent, was not for his

own purpose but was for the purpose of the activity of the Company, the principal employer and as such. Section 2(1)(b) was also attracted.

Reliance was placed upon a judgment of the Gujarat High Court in State of Gujarat and Another Vs. Sarabhai Chimanlal Sheth and Co., , wherein

the Supreme Court judgment referred to above, had been quoted and applied to the facts of that case.

Per contra, Thiru T.S. Gopalan, learned Counsel for the Respondent would submit that the judgment of the Karnataka High Court in B.B. Bhat

v. State of Karnataka 1979 M.L.J. 388 represents the correct position of law, since magnesite could only be described as goods or articles of

manufacture, which the Respondent had contracted to supply to the Company. The above judgment was on all fours to the facts of the instant

case. On Section 2(1)b, the learned Counsel submitted, that the definition of contract labour requires that the labour should be employed in or in

connection with the work of an establishment and in the instant case, the Respondent is a fleet owner of lorries, maintaining his own workshop and

employing his own labour for transporting goods to different persons and in a like manner, was also transporting the magnesite from the quarry to

the factory site and this cannot be construed as the work of the Company. According to the learned Counsel, on these two grounds, the acquittal

had to be sustained.

The question that arises for consideration is whether the acquittal of the Respondent can be legally sustained.

Taking the first contention, namely, that the Respondent was merely supplying magnesite ore from the quarry to the factory for the manufacture

of other articles by the Company and the contractor engaged in such a supply will not come within the definition of ''Contractor'' in Section 2(1)(c),

it would be appropriate to extract Section 2(1)(c), which is as follows:

(c) Contractor"" in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere

supply of goods or articles of Manufacture to such establishment, through contract labour or who supplies contract labour for any work of the

establishment and includes a sub-contractor

(emphasis supplied).

A reading of the definition would show that a person engaged in mere supply of goods or articles of manufacture to the establishment is excluded

from the purview of the Act. Interpreting the above exclusion - part of the definition, the Karnataka High Court in B.B. Bhat v. State of Karnataka

1979 M.L.J. 388 held that the accused, who was transporting Manganese ore from the mines to Mysore Minerals Ltd., would fall within the

excluded portion of the definition, since Manganese ore can only be goods or articles of manufacture and the accused therein, was merely

supplying them to the establishment. With due respect to the learned Judge who has decided the case, I am unable to accept his interpretation. No

doubt, minerals ore can only be described as goods or articles of manufacture, but cannot miss the import of the term ''supply'' in the context of the

particular legislation, as distinct from the term transport.

Upholding the vires of the Act, the Supreme Court in Gammon India Ltd. and Others Vs. Union of India (UOI) and Others, indicated the

general rules of construction to be adopted while interpreting the provisions of the Act. Being a welfare legislation, it is intended to save labour -

mostly unskilled - from being denied the statutory benefits of the various labour legislations and from being exploited, both by the establishment as

well as by the intermediary contractors. The Act provides for progressive abolition of contract labour and regulation of such labour, which had

existed at the time the Act came into force. The Supreme Court emphasized that the interpretation of the words will be, by looking at the context,

allocation of the words and the object of the words in relation to the whole context and not detached from the context.

While manganese ore are goods or articles of manufacture, it cannot be said that a person with whom there is a contract for merely transporting

ore from the quarry to the factory, is supplying goods or articles of manufacture to the establishment. In the context of this Act, there is a fine

distinction between supplying goods and merely transporting goods. When there is a contract to supply goods, the contractor is the owner of the

goods, until it is supplied to the establishment for a price to be paid by the establishment. The contract is to supply and hence he has to procure the

goods and supply them to the establishment, either at the work spot or at any other place they have agreed to. On supply, the establishment makes

payment, which would include the cost of goods, cost of transport, a profit for the contractor and so on. Unlike such a supply of goods, when

there is a contract for merely transporting certain goods from one spot to another spot, the activity is only one of transport and not of supply. The

contractor has nothing to do with the goods, except to transport it from one point to another. Incidentally, for the transport, he employs workmen

for loading, unloading and for transport. He does not supply his goods to the establishment but transports the goods of the establishment from one

point to another point.

In the instant case, M/s. Burn Standard Company Limited is a Government of India undertaking and the quarries belong to it and the quarrying

also is done by it. The Respondent transports the magnesite ore from the place of quarry to the place of work at the factory. He is not supplying

the magnesite ore from his own source but is transporting, what has been quarried by the Company. The Respondent, therefore, is not supplying

magnesite ore but is only transporting it. He will not come within the exempted category in the definition in Section 2(1)(c) and is a contractor

producing a given result for the establishment, namely transporting the magnesite ore from the place of quarry, to the factory.

The next contention of the learned Counsel for the Respondent is that his workmen are not, deemed to be employed as contract labour, since

the transport of magnesite ore from the quarry to the factory is not the work of M/s. Burn Standard Company Limited, but is his own work of

operating a fleet of lorries to transport goods, not only for this establishment but for anyone who could hire him. The question therefore, is whether

the activity of the Respondent in transporting Magnesite ore loading and unloading is done is connection with the work of M/s. Burn Standard

Company Limited. Section 2(1)(b) is as follows:

Section 2(1)(b) A workman shall be deemed to be employed as ""contract labour"" in or in connection with the work of an establishment when he is

hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer.

Amplifying the above definition, the Supreme Court in the case already referred to namely Gammon India Ltd. and Others Vs. Union of India

(UOI) and Others, observed.

The contractor is employed to produce the given result for the benefit of the principal employer in fulfilment of the undertaking given to him by the

contractor. Therefore, the employment of the contract labour, namely, the workmen by the contractor, is in connection with the work of the

establishment. The Petitioners are contractors within the meaning of the Act. The work which the Petitioners undertake is the work of the

establishment.

Referring to the above passage, the High Court of Gujarat in State of Gujarat and Another Vs. Sarabhai Chimanlal Sheth and Co., observed

as follows:

The above observation clearly indicates that if the work of the contractor is part and parcel of the work of the establishment and is not a separate

activity carried on by the contractor for his own purpose, then such work, would definitely to be the work of the establishment.

The distinction between an activity of the contractor being in or in connection with the work of the establishment or being his own activity is not

difficult to discern. Illustrating the distinction the Supreme Court in Gammon India Ltd. and Others Vs. Union of India (UOI) and Others, pointed

out that if a Bank at Delhi was constructing a building for it at Allahabad, entrusting the construction to a contractor, the work of the contractor,

would none the less, be the work of the Bank and it could not be urged that the only work of the Bank as an establishment, is banking business

and hence the work of construction of the building, was not the banking work of the establishment. The construction of the building was for the

Bank and not for the contractor. This would satisfy the definition of Section 2(1)(b).

The case before the Gujarat High Court referred to in para 12 above, illustrates the converse case. Therein, the contract was for the purchase

of cotton waste yarn by the accused from Sarangpur Mill. Workers were employed by the contractor for cleaning of the bobbins for securing the

waste yarn from them. This was an activity performed by the accused for his own purpose of securing waste yarn, and was therefore, held not to

be an activity undertaken for the mill by the accused.

In the instant case, M/s. Burn Standard Company Limited was engaged in producing minerals and had its own quarries in Red Hills and

Karuppur. Magnesite ore was quarried by the Company, The object of quarrying the mineral ore, was to bring it to the factory for the purpose of

manufacture of minerals. The quarried ore had to be transported from the quarrying site to the factory site. This transport was an activity of the

Company. Instead of itself transporting the ore by engaging labour and vehicles, the company had entered into a contract with the Respondent, for

transporting the quarried ore to the factory safe. The transport was an activity of the establishment, which under the contract, the Respondent had

undertaken to perform. The transport was for the purpose of the Company and not for the purpose of the Respondent. This would fall within the

definition in Section 2(1)(b) of the Act and the labour employed by the Respondent is ""Contract labour"". The Respondent would come within the

purview of the Act and Rules, under both the above provisions of law.

It is also significant that the Respondent himself had understood his position thus and had applied for and obtained Ex.P.2 licence u/s 12(1) of

the Act. Application for licence is to be made in form IV under Rule 21 Sub Rule (1), which requires particulars of the establishment where

contract labour is to be employed, the name and address of the principal employer, particulars of contract labour and so on. A declaration by the

principal employer in Form V, as required under Rule 21(1) has to be enclosed. After complying with all these requirement, Ex.P.2 licence under

the Act, has been issued to the Respondent for the above activity of transporting, loading and unloading, from the quarry site, to the factory site,

showing the company as the principal employer. Copy of Ex.P.2 has therefore been sent to the principal employer also. The Respondent, after the

work had commenced, has sent notice of commencement in Form 6-A under Rule 21(2)(Viii), wherein, it is stated that the contract work of

transportation, loading and unloading of crude Magnesite from the mines of the Company, for which the licence had been issued, has commenced

with effect from 21-12-1983. Even to the show cause notice issued by the Appellant, prior to the prosecution, the Respondent did not choose to

challenge the applicability of the Act, but had replied in Ex.P.10, which is described as compliance report, that all the defects have been complied

with. When questioned in Court, he has admitted that he is a registered contractor under the company.

The acquittal of the Respondent by the learned Magistrate, having been based on erroneous interpretation of law and being contrary to the

legal position, has to be set aside and is accordingly set aside. The Respondent is convicted for all the offences for which he was tried.

On the sentence, since the occurrence had taken place in 1984 and on issuing show cause notice, the Respondent had complied with the

requirements, a lenient view could be taken to invoke the provisions of the Probation of Offenders Act, 1958 (Act xx of 1958), no previous

conviction having been brought to my notice. Since the sentence imposed is the most lenient one, the Respondent is not questioned on the

sentence.

In the result, the appeals are allowed. The Respondent is convicted in all the cases for all the offences, and is released u/s 3 of the Probation of

Offenders Act. He shall appear before the trial court on 16.9.1991 to receive admonition from the learned Magistrate.