Judges: S.S.M. Quadri, B.N. Kirpal, M.B. Shah, Ruma Pal and K.G. Balakrishnan, JJ.

Facts:

Appellants, a Central Government Company, entrusts the work of handling the goods in the stockyards to contractors after calling for tenders in that behalf. Government of West Bangal issued notification dated July 15, 1989 under Section 10(1) of the CLRA Act (hereinafter, 'the prohibition notification') prohibiting the employment of contract labour in four specified stockyards of the appellants at Calcutta.

On the representation of the appellants, the Government of West Bangal kept in abeyance the said notification initially for a period of six months, and thereafter extended that period from time to time, but not beyond August 31, 1994.

First respondent/Union representing the cause of 353 contract labourers filed writ petition in the Calcutta High Court seeking a direction to the appellants to absorb the contract labour in their regular establishment in view of the prohibition notification of the State Government dated July 15, 1989 and further praying that the notification dated August 28, 1989, keeping the prohibition notification in abeyance, be quashed.

High Court allowed the writ petition, set aside the notification dated August 28, 1989 and all subsequent notifications extending the period and directed that the contract labour be absorbed and regularized from the date of prohibition notification.

Assailing the said judgment, appellant filed writ appeal and challenging the prohibition notification of July 15, 1989 they filed writ petition in the Calcutta High Court.

While these cases were pending before the High Court, Supreme Court delivered judgment in Air India Statutory Corporation v. United Labour Union MANU/SC/0163/1997 holding, inter alia, that in case of Central Government Companies the appropriate Government is the Central Government. It thus upheld the validity of the notification dated December 9, 1976 issued by the Central Government under Section 10(1) of the CLRA Act prohibiting employments of contract labour in all establishments of the Central Government Companies.

On July 3, 1998, a Division Bench of the High Court dismissed the writ appeal as well as the writ petition filed by the appellants taking the view that on the relevant date "the appropriate Government" was the State Government. The legality of this judgment and order was challenged in present appeals.

Issues:

(i) What is the true and correct import of the expression "appropriate government" as defined in Section 2(1)(a) of the CLRA Act?

(ii) Whether the notification dated December 9, 1976 issued by the Central Government under Section 10(1) of the CLRA Act is valid and applies to all Central Government companies?

(iii) Whether automatic absorption of contract labour, working in the establishment of the principal employer as regular employees, follows, on issuance of a valid notification under Section 10(1) of the CLRA Act, prohibiting the contract labour in the concerned establishment?

Laws:

Contract Labour (Regulation and Abolition) Act, 1970 - Section 2(1)(a) - Defines the term 'appropriate Government'.

Contract Labour (Regulation and Abolition) Act, 1970 - Section 2(1)(b) - Defines 'contract labour' to mean a workman, 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.

Contract Labour (Regulation and Abolition) Act, 1970 - Section 10 - Stipulates prohibition of employment of contract labour.

Contentions:

Appellants

(i) State Government is the appropriate Government in respect of the establishments of the Central Government companies in questions.

(ii) An omnibus notification like the notification dated December 9, 1976 issued by the Central Government would be contrary to the requirements of Section 10 of the CLRA Act and is illustrative of non application of mind.

(iii) CLRA Act is a beneficial legislation, the benefits which the Parliament thought it fit to confer on the contract labour, are specified in the Act and the Court by way of interpretation cannot add to those benefits.

(iv) If the Court were to hold that automatic absorption should follow a notification prohibiting employment of contract labour, it would be adding a sub-section to Section 10 of CLRA Act prescribing for automatic absorption on issuance of notification under Section 10(1) of CLRA Act, which would be impermissible.

Respondents

(i) For all Central Government Undertaking which fall within the meaning of "other authorities" in Article 12 of Constitution are agents or instrumentalities of the State functioning under the authority of the Central Government, and as such the Central Government will be the appropriate Government.

(ii) A contract employing contract labour for any work of an establishment would, in law, create relationship of master and servant between the establishment and the labour.

(iii) CLRA Act provided for absorption of the contract labour on issuing abolition notification by necessary implication and provided penal consequences to prevent exploitation and abuse, of the contract labour.

(iv) Section 10 of CLRA should be interpreted to hold that as a result of issuance of prohibition notification, the contract labour working in an establishment at that time should stand absorbed automatically.

Analysis:

Expression "appropriate government" in Section 2(1)(a) of CLRA Act - Meaning of

(i) Central Government will be the appropriate Government in relation to an industrial dispute concerning -

1. any industry carried on by or under the authority of the Central Government, or by a railway company; or
2. any such controlled industry as may be specified in this behalf by the Central Government; or
3. the enumerated industries.

In relation to any other establishment, the Government of the State, in which the establishment in question is situated, will be the appropriate Government.

(ii) An industry being carried on under the authority of the central Government cannot be equated with any industry carried on by the Central Government itself.

Any industry carried on under the authority of the Central Government implies an industry which is carried on by virtue, of, pursuant to, conferment of, grant of, or delegation of power or permission by the Central Government to a Central Government Company or other Government Company / undertaking.

(iii) Instrumentality of a Central/State Government or being State within the meaning of Article 12 of the Constitution cannot be determinative of the question as to whether an industry carried on by a Company/ Corporation or an instrumentality of the Government, by or under the authority of the Central Government, for the purpose of or within the meaning of the definition of appropriate Government in the CLRA Act.

Criterion is whether an undertaking instrumentality of Government is carrying on an industry under the authority of the Central Government and not whether the undertaking is instrumentality or agency of the Government for purposes of Article 12 of the Constitution, be it of Central Government or State Government.

Notification dated December 9, 1976 issued by the Central Government under Section 10(1) of CLRA Act - Validity of

(i) Before issuing notification under Section 10(1) of CLRA Act, an appropriate Government is required to -

1. consult the Central Board / State Board;
2. consider the conditions of work and benefits provided for the contract labour,
3. take note of the factors such as mentioned in Clauses (a) to (d) of Section 10(2) of CLRA Act.

(ii) Notification in question makes it manifest that with effect from March 1, 1977, it prohibits employment of contract labour for sweeping, cleaning, dusting and watching of buildings owned or occupied by establishment in respect of which the appropriate Government under the said Act is the Central Government.

This clearly indicates that the Central Government had not adverted to any of the essentials, referred to above, except the requirement of consultation with the Central Authority Board. Consideration of the factors mentioned above has to be in respect of each establishment, whether individually or collectively, in respect of which notification under Section 10(1) of CLRA Act is proposed to be issued.

Impugned notification apart from being an omnibus notification does not reveal compliance of Section 10(2) of CLRA Act. Impugned notification dated December 9, 1976 issued by the Central Government is not legally sustainable.

Absorption of contract labour - Whether automatic on issuance of a valid notification under Section 10(1) of CLRA Act

(i) Consequence of prohibition notification under Section 10(1) of the CLRA Act prohibiting employment of contact labour, is neither spelt out in Section 10 nor indicated anywhere in the Act. Consequences shall be -

1. contract labour working in the concerned establishment at the time of issue of notification will cease to function;
2. the contract of principal employer with the contractor in regard to the contract labour comes to an end:
3. no contract labour can be employed by the principal employer in any process, operation or other work in the establishment to which the notification relates at any time thereafter;
4. the contract labour is not rendered unemployed as is generally assumed but continues in the employment of the contractor as the notification does not sever the relationship of master and servant between the contractor and the contract labour;
5. the contractor can utilize the services of the contract labour in any other establishment in respect of which no notification under Section 10(1) has been issued where all the benefits under the CLRA Act which were being enjoyed by it, will be available;
6. if a contractor intends to retrench his contract labour he can do so only in conformity with the provisions of the ID Act.

(ii) Automatic absorption of contract labour working in an establishment is not implied in Section 10 of the CLRA Act.

(iii) Parliament, by enacting CLRA Act, 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 worker as regular employees directly.

(iv) No implicit requirement of automatic absorption of contract labour by the principal employer in the concerned establishment on issuance of notification by the appropriate Government under Section 10(1) of CLRA Act prohibiting employment of contract labour in a given establishment.

Conclusions:

(i) In the case of a Central Government company/ an instrumentality of the Government, carrying on an industry, the criteria to determine whether the Central Government is the appropriate Government within the meaning of the CLRA Act, is that the industry must be carried on by or under the authority of the Central Government and not that the company/undertaking is an instrumentality or an agency of the Central Government for purposes of Article 12 of the Constitution.

(ii) Notification dated December 9, 1976 issued by the Central Government under Section 10(1) of CLRA Act, prohibiting the contract labour in the concerned establishment, is not valid.

(iii) 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 appropriate Government under Section 10(1) prohibiting employment of contract labour.

Important Precedents:

(i) Air India Statutory Corporation & Ors. v. United Labour Union & Ors. MANU/SC/0163/1997

(ii) Dena Nath and Ors. v. National Fertilisers Ltd. and Ors. MANU/SC/0077/1992