Yes Bank Limited vs State

G.M. Akbar Ali, J.—The petitions are filed seeking a direction to call for the records in C.C. Nos. 18382 and 18379 of 2005 on the file of

the learned II Metropolitan Magistrate, Egmore, Chennai and quash the same.

The Petitioner is the first accused in both the cases in a complaint filed u/s 23 of The Contract Labour (Regulation and Abolition act 1970)

(hereinafter called as ""Act"") for the breach of Section 7 of the Act. The Labour Enforcement Officer filed the complaint stating that he inspected

the premises of the Petitioner on 27.5.2005 at 11.30 hours and found engaging contract labours without obtaining certificate of registration from

the Assistant Labour Commissioner and thereby contravened Section 7 of the Contract Labour Act 1970 punishable under penal Section 24 of

the Act. The complaint was taken on file by the II Metropolitan Magistrate Egmore, Chennai in C.C. Nos. 18382 and 18379 of 2005 and on

issuance of summons, the Petitioner appeared. Aggrieved by taking cognizance, the first accused is before this Court to quash the proceedings on

the following grounds:

a) The Contract Labour (Regulation and Abolition) Act, 1970 (hereinafter referred to as the Act) is not applicable to the accused as the Petitioner

is not an ""Establishment"" as per Section 2(e) of the Act when the offences were alleged to be commenced i.e., during May 2005 (27.5.2005) as

the Petitioner commenced commercial operations only in October 2005.

(b) The Provisions of Contract Labour (Regulation and Abolition) Act, 1970 (hereinafter referred to as the Act) and the allegation of offences

alleged to be committed by the Petitioner has no legal basis since the Wooden interior/Electrical interior work being done by service providers is

not a ""Contract of Service"", but ""Contract for Service"" and as such the Act is inapplicable as per the decision of the Supreme Court in the case of

Workmen of Nilgiri Coop. Mkt. Society Ltd. Vs. State of Tamil Nadu and Others, .

(c) The Act is not applicable to the present case as the wooden interior / electrical interior work being done by service Providers is of

casual/intermittent nature as per Section 5(a) of the Act.

(d) Since the wooden interior/electrical interior being done by a service provider is under ""contract for service"" over which Yes Bank has no

supervisory powers or control, the Bank doesn''t come within the ambit of the Act.

Mr. B. Kumar, learned Senior Counsel for the Petitioner submitted that the Petitioner is not the principal employer as defined in the Section 2(g)

of the Act. The learned senior counsel also submitted that the Petitioner is banking establishment which is not covered under the definition 2(e) of

the Act. The learned senior counsel would also draw the attention of this Court to the term ""workmen"" as defined in 2(i) of the Act.

The learned Counsel submitted that the Petitioner is a banking establishment who entrusted the work of interior decoration to a service

contractor who had employed some labourers and therefore, the Petitioner has not committed any offence. According to the learned senior

counsel, the private complaint is only an abuse of process of court which has to be quashed.

On the contrary, Mr. M. Devendran, learned Counsel for the Respondent submitted that the Petitioner has awarded a contract under their letter

dated 2.5.2005 entrusting a labour work in their building. Therefore, it is an establishment falling under the purview of Section 2(e) of the Act. The

learned Counsel submitted that the contractor has agreed to provide certain services enumerated u/s 2(c) of the Act and the Petitioner has full

control over the establishment and therefore, liable to observe the provisions u/s 7 of the act. The learned Counsel pointed out that the Petitioner is

a principle employer under the Act and liable to obtain certificate of registration. Therefore, the Petitioner has contravened the penal provisions and

therefore, liable for prosecution.

Heard and perused the materials available on record.

The Petitioner is a private bank and a company incorporated and represented by the Chairman cum Managing Director. The Petitioner has

awarded a contract to one Kriticons Limited for interior works to be done at their branch office in the ground floor of Door No. 143,

Nungambakkam High Road, Chennai. They have also entrusted the electrical works to one Cap Electromac Private Limited. The Labour

Enforcement Officer (Central), Chennai inspected the premises on 27.5.2003 at 11.30 hours. He found that 25 workmen employed through

contractors viz., Kriticons Limited and the Cap Electromac Private Limited were working. The Labour Enforcement Officer found that the

Petitioner contravened the provision u/s 7 of the Act for failure to obtain certificate of registration and also failure to maintain register of contract

labours in Form XII which is violation of Rule 74 and also failure to intimate the commencement of labour contractors which is violative of Rule 81

(3).

The Petitioners would submit that they are not an establishment as defined u/s 2(e) of the Act when the offences were alleged to have been

committed. According to the Petitioner, they commenced their commercial operation only in October 2005. Secondly, the interior work being

done by a service provider is not a contract of service and as such, the act is not applicable. Thirdly, as the number of labour are less than 20, the

provisions of the Act is not applicable.

The Contract Labour Regulation and Abolition Act, 1970 is an act to regulate the employment of contract labour in certain establishment and to

provide for the abolition of contract labour. The act was passed to prevent the exploitation of the contract labour and to introduce better

conditions of work. It provides for regulation of the service conditions of contract labour. The act intends to abolish the contract labour wherever

and practicable and where it cannot be abolished altogether. The policy of the act is that the working condition of the contract labour should be

regulated so as to ensure payment of wages and provision of essential amenities.

Chapter 7 of the Act deals with registration of establishment employing contract labour. Section 7 reads as follows:

Registration of certain establishment:(1) Every Principal employer of an establishment to which this Act applies shall, within such period as the

appropriate Government may, by notification in the Official Gazette, fix in this behalf with respect to establishments generally or with respect to any

class of them, make an application to the registering officer in the prescribed manner for registration of the establishment:

Provided that the registering officer may entertain any such application for registration after expiry of the period fixed in this behalf, if the registering

officer is satisfied that the applicant was prevented by sufficient cause from making the application in time;

(2) If the application for registration is complete in all respects, the registering officer shall register the establishment and issue to the principal

employer of the establishment a certificate of registration containing such particulars as may be prescribed.

Section 9 reads as follows:

Effect of non-registration:

No principal employer of an establishment, to which this Act applies, shall (a) in the case of an establishment required to be registered u/s 7, but

which has not been registered within the time fixed for the purpose under that section.

(b) in the case of an establishment the registration in respect of which has been revoked u/s 8, employ contract labour in the establishment after the

expiry of the period referred to in clause(a) or

after the revocation of registration referred to in clause(b), as the case may be.

Section 10 prohibits employment of contract labour. Chapter 6 deals with penalties and procedures. Section 24 reads as follows:

Other offences: If any person contravenes any of the provisions of this Act or of any rules made thereunder for which no other penalty is

elsewhere provided, he shall be punishable with imprisonment for a term which may extend to three months, or with fine which may extend to one

thousand rupees, or with both.

Rule 74 of The Contract Labour (Central) Rules 1971 reads as follows:

Register of contractors: Every principal employer shall maintain in respect of each registered establishment a register of contractors in Forms

XII.

Rule 81(3) reads as follows:

Every principal employer shall, within fifteen days of the commencement or completion of each contract work under each contractor, submit a

return to the Inspector, appointed u/s 28 of the Act, intimating the actual dates of the commencement or, as the case may be, completion of such

contract work in Form VI-B.

According to the Petitioner, he was not the principal employer as defined in 2(g)(4) of the Act. It is also further contended that the Banking

Company viz., Yes Bank Limited is not an establishment as defined in the Act and it is also contended that the Petitioner who is the Chairman cum

Managing Director whose office is at Mumbai is not the person directly connected or have control over the labourers engaged by the Contractor at

Chennai.

Section 2(g)(iv) of the Act reads as follows:

(iv) in any other establishment, any person responsible for the supervision and control of the establishment.

u/s 2(e) establishment means (i) any office or department of the Government or a local authority, or (ii) any place where any industry, trade,

business, manufacture or occupation is carried on;

The scheme of Section 7 is that every principal employer of an establishment, employing contract labour shall register within such period with

the registering authority. Such registered establishment shall maintain a register of contractors under Rule 74. Under Rule 81, such principal

employer shall submit a return to the Inspector appointed under the Act.

On inspection dated 27.5.2005, the Labour Enforcement Officer, Central Chennai, found the premises of Yes Bank Limited at Chennai is a

principal employer under 2(g) and they have not registered as per Section 7 and not maintained a register and submitted a return under Rules 74

and 81.

Under 2(g)(iv), the Principal Employer means any persons responsible for the supervision and control of the establishment. Therefore, at no

stretch of imagination, it could be said that the Petitioner who is the Chairman cum Managing Director, whose office is at Mumbai is a person

responsible for the supervision and control of the establishment at Chennai.

It is admitted that in order to open a new Branch at Chennai, the bank has engaged two contractors viz.,Kriticons Limited for interiors and

Cap Electromac Private Limited for electrical work. Admittedly, those contractors have employed labours.

In 1976 LAB I.C 74 (Gammon India Limited v. Assistant Commissioner of Labour Nagpur and Anr. 1976 LAB I.C 74) the Division Bench

of Bombay High Court while dealing with Section 7 of the Act held as follows:

It appears to us that in the present case when the work is carried out by the Petitioner as contractor on behalf of Board, the Board will be

responsible for the control and supervision of the establishment. By giving a contract to the Petitioner, the Board is not deprived of its powers of

supervision and control over the work made by the Petitioner. For the purpose of the Act, it appears to us that it is the Board alone which is

responsible for the control and supervision as contemplated in the Sub-Clause. It is difficult to see how the Petitioner can be said to be a Principal

Employer appears to us that under the Act only one principal employer is contemplated. The Act was passed to prevent the exploitation of the

Contract Labour and to introduce better conditions of work. It provides for regulation of the service conditions of contract labour. The Act intends

to abolish the contract labour wherever possible and practicable and where it cannot be abolished altogether. The policy of the Act is that the

working conditions of the contract labour should be regulated as to ensure payment of wages and provision of essential amenities.

In Aditya Puri v. Uniion of India and Anr. 2004 LLR 311, a Single Judge of Jharkhand High Court held as follows:

The Petitioner has challenged the impugned order on the ground that the premises of the company was inspected at Ranchi whereas the

Petitioner holds his office at Mumbai, and therefore, he has got no direct nexus with the alleged crime and consequently, the cognizance could not

have been taken against him.

Following the above judgments, a learned single Judge of this Court in Crl.O.P. No. 25095 and 25540 of 2004 has held as follows:

It would further be contended that the Kotak Mahindra Limited was very recently started under the licence of the Reserve Bank of India which

was granted very recently for running the Branch at Door No. 555, Anna Salai, Chennai that was only on 3.10.2004 and yet another branch at

CEE BROSS CENTRE at Montieth Road, Egmore, Chennai based on the licence issued on 18.2.2003 and they have only issued the work order

with M/s N.S. Associates Private Limited for interior decoration and for civil and electrical work for a period of one month for setting up a branch

in Anna Salai. It would further be argued on the part of the Petitioners that for installation of the air conditioner in the Company, they have to

engage skilled workmen and the same cannot be construed as engagement of contract labour for turning out any routine banking activity and the

contract referred to in the Inspection report employing the people for safely and security measures cannot be brought under the purview of the

prohibited limits of the Act as it has been held time and again by various Upper Forums of law and therefore on such strong grounds, they would

plead that the impugned proceedings in both the above Calendar cases initiated by the Respondents are only liable to be quashed, particularly

when the Respondent is not able to mention anywhere in the complaint that the Petitioners are the authorities nominated by the Bank in charge and

responsible for carrying out such obligations on behalf of the establishment and therefore would seek the relief sought for in both the above criminal

original petitions.

To attract the provisions of the Act, the establishment must be employing contract labours and the principal employer means the person

responsible for the supervision and control of the establishment. The establishment which is required to register and maintain the register is the

person who actually employ the contract labourers. Therefore, the Petitioner cannot be termed as principal employer as he was not directly

responsible for supervision and control and the banking company is not the establishment which is required to register u/s 7 of the Act as it has

issued a work order for interior decoration and electrical work with two independent contractors who have engaged skilled workmen and the

same cannot be construed as engagement of contract labour by the bank for any routine banking activity.

It is also pertinent to note that the banking company has not even started business at the said premises as the premises was under process of

interior and electrical work. Therefore, I am of the considered view that there is no material to proceed against the Petitioner and the continuation

of the proceedings would only be an abuse of process of law and it is a fit case to exercise the jurisdiction u/s 482 Code of Criminal Procedure

In the result, both the criminal original petitions are allowed and the proceedings in C.C. Nos. 18382 and 18379 of 2005 on the file of the

learned II Metropolitan Magistrate, Egmore, Chennai are quashed as far as the Petitioner is concerned.