Supreme Court of India
AIR INDIA STATUTORY CORPORATIONversusUNITED LABOUR UNION AND ORS.
- Citation
- 1996 INSC 1442
- Decided
- 6 December 1996
- Bench
- K RAMASWAMY
Holding
The Court held that the Central Government is the appropriate Government, that abolition of contract labour under Section 10 creates a direct employer‑employee relationship requiring the principal employer to absorb the workers from the date of abolition (9 December 1976), and that the High Court may issue such directions under Article 226; the Heavy Engineering, Dena Nath and Gujarat Electricity Board precedents were overruled.
Summary
The Air India Statutory Corporation, originally a statutory authority and later a company, employed union members as contract labour for cleaning and related services. The Central Government, as the appropriate Government under the Contract Labour (Regulation and Abolition) Act, 1970, issued a 1976 notification abolishing contract labour for those services, but the corporation failed to comply. The Union filed writ petitions seeking direction to enforce the notification and to absorb the workers as regular employees. The Supreme Court examined the meaning of "appropriate Government", overruled the Heavy Engineering precedent, held that the Central Government was the appropriate Government from the Act's inception, and that abolition of contract labour creates a direct employer‑employee relationship obligating the principal employer to absorb the workers from the date of abolition (9 December 1976). The Court affirmed the High Court’s power under Article 226 to issue such directions and overruled the Dena Nath and Gujarat Electricity Board decisions. The appeals were dismissed.
Issues considered
- What is the meaning of "appropriate Government" under Section 2(1)(a) of the Contract Labour Act?
- Is the view in Heavy Engineering Mazdoor Union v. State of Bihar correct in law?
- Do contract labourers become entitled to absorption on abolition of the contract labour system, and if so, from what date?
- Does the High Court have power under Article 226 to direct absorption of contract labour, and from what date?
- Is a reference under Section 10 of the Industrial Disputes Act required for adjudicating absorption disputes?
- Is the view taken in Dena Nath v. National Fertilizers Ltd. and Gujarat Electricity Board v. Hind Mazdoor Sabha correct in law?
Legislation cited
- Companies Act, 1956
- Constitution of Indias. Articles 12,14,15,16,19(2),21,38,39,41,43A,46,51A,226,142
- Contract Labour (Regulation and Abolition) Act, 1970s. 10, s. 12, s. 14, s. 16-19, s. 20, s. 21, s. 2(1)(a), s. 2(1)(b), s. 23-25, s. 8, s. 9
- Contract Labour (Regulation and Abolition) Central Rules, 1971s. 18(3), s. 21-25, s. 75, s. 77, s. 78
- Industrial Disputes Act, 1947s. 10
Subjects
contract labourappropriate governmentabsorption of workersArticle 226industrial disputessocio‑economic justicefundamental rightsdirective principlespublic law remedyjudicial reviewbasic structure doctrine
Judgment
AIR INDIA STATUTORY CORPORATION A
v.
UNITED LABOUR UNION AND ORS.
DECEMBER 6, 1996
[K. RAMASWAMY, B.L. HANSARIA AND S.B. MAJMUDAR, Jl] B
Contract Labour (Regulation and Abolition) Act, 1970:
Sections 2(1)(a) (As it stood before and after Amendment Act 14 of
1986), 2( 1)(b }, 8, 9, 10, 12, 14, and 16 to 19, 20, 21, 23 to 25. C
Contract Labour (Regulation and Abolition) Central Rules, 1971
Rules 18(3), 21 to 25, 75, 77 and 78.
''Appropriate Government''-Meaning of-Establishment pertaining to
an industry carried on by Central Government-i'linciples for determinatiori D
of appropriate Government laid down-Appellant initially a statutory
autho1ity later reconstituted as a Company-fleld Central Government was
appropriate Government before and after 1986 Amendment.
Contract Labour-Abolition of-Effect-Held on abolition Contractor
stands removed from Regulation under the Act, and direct relationship of E
employer and employee is created between employer and
workmen-Employee is obliged to absorb the workmen-On employer's
failure to do so, High Court can give directions under Article 226-0bject of
the Act explained.;
F
Industrial Disputes Act, 1947: Section 10.
Reference-Contract Labour-Abo/itiOn of-Employer is obliged to ab-
sorb the workers-In such a case reference of dispute for absorption is not
necessary.
G
'· Constitution of India, 1950 :
Articles 14 and 21-Right to work-Not a fundamental light-But after
en1ploynient a person 1nust be dealt with assuring hini equality.
Article 38-Preamble--Social Justice-Relevance of for workmen. H
579
580 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A Article 226-High Courf--Power to issue directions for absorption
of-Contract Labour-Upheld.
Judicial Review-Basic structure of Constitution-High Court has con-
stitutional duty to enforce law by appropriate directions.
B Public Law-Private /aw-Distinction between Constitution-inter-
pretation of-Principles for.
Words and Phrases :
C Regulation-Meaning of-Contract Labour (Regulation and Abolition)
Act, 1970.
The appellant Corporation, initially a statutory authority, was sub-
sequently reconstituted as a Company under the Companies Act, 1956. It
engaged, as contract labour, the respondent union's members, for sweep-
D ing, clearing, dusting and watching of the buildings owned and occupied
by it. Subsequent to the coming into force of the Contract Labour (Regula-
tion and Abolition) Act, 1970 the appellant obtained a certificate of
Registration from Regional Labour Commissioner (Central) under the
Act. Thereafter by a notification dated December 9, 1976 the Central
Government prohibited employment of contact labour for sweeping, clean-
E ing, dusting and watching of buildings owned or occupied by the estab-
lishments in respect of which the appropriate Government under the Act
was the Central .Government. By a letter dated January 20, 1972, the
Regional Labour Commissioner (Central), Bombay informed the appel·
lant that the State Government was the appropriate Government under
F the Act. Therefore, by proceedings dated May 22, 1973 the Regional Labour
Commissioner (Central) bad revoked the registration. By Amendment Act
46 of 1982, the Industrial Disputes Act, 1947 was made applicable to the
appellant and was brought on statute book specifying the appellant as one
of the industries in relation to which the Central Government is the
appropriate Government and the appellant has been carrying on its busi-
G ness "by or under its authority" with effect from August 21, 1982. The Act
was amended bringing within its ambit the Central Government as ap-
propriate Government by Amendment Act 14 of 1986 with effect from
January 28, 1986. Since the appellant did not abolish the contract system
and failed to e,nforce the notification of the Government of India dated
H December 9, 1976, the respondents filed writ petition for directions to the
AIR INDIASTATUTORY CORPN. v. UNION LABOUR UNION 581
appellant to enforce forthwith the notification abolishing the contract A
labour system in the aforesaid services and to absorb all the employees
doing cleaning, sweeping, dusting, washing and watching of the buildings
owned or occupied by the appellant-establishment, with effect from the
respective dates of their joining as contract Labour in the appellant's
establishment with all consequential rights/benefits, monetary or other-
B
wise. The writ petition was allowed by a single Judge on November 16, 1989
directing that all contract workers be regularised as employees of the
appellant from the date of filing of the writ petition. Preceding thereto, on
November 15, 1989, the Government of India referred to the Central
Advisory Board known as Mobile Committee under Section 10(1), which
recommended to the Central Government not to abolish the contract C
labour system in the aforesaid setvices ..The Division Bench dismissed the
appeal. Similar was the fate of othejRp~~als.
In appeals to this Court, on the questions :
1. What is the meaning of the word "appropriate Government under D
Section 2(1) (a) of the Act?
2. Whether the view taken in Heavy Engineering case is correct in law?
3. Whether on abolition the contract labour- are entitled to be ab-
sorbed; if so, from what date?
E
4. Whether the High Court under Article 226 has power to direct
their absorption; if so, from what date?
5. Whether it is necessary to make a reference under Section 10 of F
the ID Act for adjudication of dispute qna absorption of the contract
labour?
6. Whether the view taken by this Court in Dena Nath and Gujarat
-
State Electricity Board's case is correct in law?
G
' Disposing the appeals, this Court
HELD : Per Ramaswamy, !.
1. The appropriate Government is the Central Government from the
inception of the Act. The notification published under Section 10 on H
''
J
582 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A December 9, 1976, therefore, was in exercise of its power as appropriate
Government. So it is valid in law. [603-G]
2. Before the Central or State Advisory Board advises the ap-
propriate Government under Section 10(1) on the issue whether or not to
B abolish the contract labour system, it has before it all the relevant factual
material and the appropriate Government after the receipt and considera-
tion of the recommendations and the material and then taken decision. It
is not right to contend that the relevant factors for abolition of the contract
labonr system in the establishment or the appellant was not before the
Central Advisory Board before its recommendation to abolish the contract
C Jabonr system in the establishment of the appellant. Tue minutes of the
Board and the material furnished indicate that the work in all the estab-
lishments inclnding those of the appellants, is of perennial nature satisfy-
ing all the tests engrafted in Section 10(2) of the Act. Accordingly, on
finding the work to be of perennial nature, it had recommended and the
D Central Government had considered and accepted the recommendation
to abolish the contract Jabour system in the aforesaid services. Having
abolished it, the Central Government was denuded of its power under
Section 10(1) to again appoint insofar as the above services of the Mobile
Committee to go once over into the self-same question and the recommen-
dations of the latter not to abolish the contract Jabour system in the above
E services and the acceptance thereof by the Central Government are without
any legal base, and, therefore, non est. [619-G-H; 620-A·B]
3. Constitutional issues require interpretation broadly not by play
of words or without the acceptance of the line of their growth. Preamble
F of the Constitution, as its integral part, is designed to realise socio
economic justice to all people including workmen, harmoniously blending
the details epumerated in the Fundamental Rights and the Directive
Principles. The Contract Labour (Regulation and Abolition) Act, 1970 is
a social welfare measure to further the general interest of the community
of workmen as opposed to the particular interest of the individual
G entrepreneur. It seeks to achieve a public purpose, i.e. regnlated condi-
tions of contract Jabour and to abolish it when it is found to be of perennial
nature etc. Tue individual interest can, therefore, no longer stem the
-
forward Rowing tide and must, of necessity, give way to the broader pnblic
purpose of establishing social and economic democracy in which every
H workmen realises socio-economic justice assured in the Preamble, Articles
AIR INDIA STATUTORY CORPN. v. UNION LABOUR UNION 583
14, 15 and 21 and the Directive Principles of the Constitution. (608-A-D] A
4. Courts are sentinal in the qui vive of the rights of the people, in
particular, the poor. The judicial function of a Court, therefore, in inter-
preting the Constitution and the provisions of the Act, requires to build
up continuity of socio-economic empowerment to the poor to sustain B
equality of opportunity and status and the law should constantly meet the
needs and aspiration of the society in establishing the egalitarian social
order. Therefore, the concept engrafted in the statute require interpreta-
tion from that perspective, without doing violence to the language. Such
an interpretation would elongate the spirit and purpose of the Constitu-
tion and make the aforesaid rights to the workmen a reality lest estab· C
lishment of an egalitarian social order would be frustrated and
Constitutional goal defeated. (609-D-F]
His Holiness Kesavananda Bharati Sripadagalavaru v. State of Kera/a,
(1973] Supp. SCR 1; S.R. Bommai v. Union of India, [1994] 3 SCC 1; D
Minerva Mills Ltd. & Ors. v. Union & Ors., [198Jl 1 SCR 206 = AIR (1980)
SC 1789; Francis Coralie Mullin v. The Administrator, Union Tenitory of
Delhi & Ors., AIR (1981) SC 746; Olga Tellis v. Bombay Municipal Corpora-
tion, AIR (1986) SC 180; Delhi Transport Corporation v. D. T.C. Mazdoor
Congress, AIR (1991) SC 101; State of Maharashtra v. Chandrabhan, AIR
(1983) SC 803; Consumer Education and Research Centre and Ors. v. Union E
of India, [1995] 3 SCC 42 = [1995] 1 SCALE 354; D.S. Nakara & Ors. v.
Union of India, [1983] 2 SCR 165; State of Kamataka v. Shri Ranganath
Reddy & Anr., (1978] 1 SCR 641; Sanjeev Coke Manufacturing Co. v. Bharat
Cooking Coal Ltd. & Anr., (1983] 1 SCR 1000; LIC of India & Anr. v.
Consumer Education & Research Centre & Ors., [1995] 5 SCC 482; Murlid- F
har Dayandeo Kesekar v. Vishwanath Pandu Barde & Anr., (1995] Supp. 2
SCC 549; R. Chandevarappa & Ors. v. State of Kamataka and Ors., [1995]
6 SCC 309; Peerless General Finance and Investment Co. Ltd. & Anr. v.
Reserve Bank of India, (1992] 2 SCC 343; D.K Yadav v. !.M.A. Industries
Ltd., [1993] 3 SCC 259; Da/mia Cement (Bharat) Ltd. & Anr. v. Union of
India & Ors. Etc., JT (1996) 4 SC 555; Bandhu Mukti Morcha v. Union of G
India, [1984] 3 SCC 161; C.E.S.C. Ltd. & Ors. v. S.C. Bose & Ors., [1992]
1 SCC 441; P.G. Gupta v. State of Gujarat & Ors., (1995] Supp. 2 SCC 182;
Mis. Shantisar Builders v. Narayan Khim/a/ Totame, [1990] 1 SCC 520;
Chameli Singh & Ors. v. State of U.P. & Anr. [1996] 2 SCC 549 and D.K V.
Prasad Rao & Ors. v. The Government of Andhra Pradesh represented by its H
584 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A Secretary, Home Department Secretariat Buildings, Andhra Pradesh
Hyderabad & Anr., (1983) 2 AWR 344 = AIR (1984) AP, referred to.
Munn v. The People of Illinois, 94 US 115; Horatio, J. Olcott v. County
Board of Supervisors of Fond Du Lac County, 21 L. Ed. 382; John 0.
Graham, Commissioner, Depa1tment of Public Welfare, State of Arizona v.
B Cannen Richardson Etc., 29 L. Ed. 2nd 534; Grace Marsh v. State of
Alabama, 90 L. Ed. 265; Republic Ayiation Corporation v. National Labour
Relations Board, 324 US 793 = 89 L. Ed. 1372; Georgia & Banking Co. v.
James M; Smith, 128 US 377 = 32 L. Ed.174 and Gennan Aliance Insurance
Co. v. IKL L~ws, 58 L. Ed. 1011 = 233 US 387, referred to.
c Justice K.K. Mathew,. "Right to Equality and Property under the India
Constitution pp. 47-48; St: Thomas Acquinas "Selected Political Writing"
' 169; Dean Rosco Pound ''An Introduction to Philosophy of Law"
(1948 Ed.)
(1954 Edn.) page 125; M. Cohen, "Property and Sovereignty" (13 Cornell Law
Quarterly page 8; Edward Kent "Property, Power and Authority"; Herald
D Laski, "Congress Socialist" dated April 11, 1936; Mahatma Gandhiji,
"Socialism of My Concept; Pandit Jawahar Lal Nehru ''Independence and
After That" (Collection of Speeches 1946-49) Publication Division, Govern-
ment of India 1949 Edn. page 28; Agnes Heller, "Beyond Justice" page 180,
referred to.
E 5. It is axiomatic, whether or not industry is controlled by Govern-
ment or public Corporations by statutory form or administrative clutch
or private agents, juristic persons, Corporation whole or Corporation sole,
their constitution, control and working would also be subject to the same
constitutional limitations in the trinity, viz., Preamble, the Fundamental
F Rights and the Directive Pri.nciples. They throw open an element of public
interest in its workings. They share the burden and shoulder constitutional
obligations to provide facilities and opportunities enjoined in the Directive
Principles, the Permeable and the fundamental rights enshrined in the
Constitution. The word 'control', therefore, requires to be interpreted in
G the changing commercial scenario broadly in keeping with the aforesaid
constitutional goals and perspectives. From this the following principles
would emerge :
(a) The Constitution of the Corporation or instrumentality or agency
or Corporation aggregate or Corporation sole is not of sole material
H relevance to decide whether it is by or under the control of the appropriate
AIR INDIASTATUTORY CORPN. v. UNION LABOUR UNION 585
Government under the Act. A
(b) If it is a statutory Corporation, it is au instrumentality or agency
of the State. Ifit is a company owned wholly or partially by a share capital,
floated from public exchequer, it gives indicia that it is controlled by or
under the authority of the appropriate Government.
B
(c) In commercial activities carried on by a Corporation established
by or under the control of the appropriate Government having protection
under Articles 14 and 19(2), it is an instrumentality or agency of the State.
(d) The State is a service Corporation. It acts through its instrumen- c
talities, agencies or persons - natural or juridical.
(e) The governing power, wherever located, most be subject to the
fundamental constitutional limitations and abide by the principles laid
down in the Directive Principles.
D
(0 The framework of service regulations made in the appropriate
rules or regulations should be consistent with and subject to the same
public law principles and limitations.
(g) Through the instrumentality, agency or persons conduct com- E
mercial activities according to business principles and are separately
accountable nuder their appropriate bye-laws or Memorandum of Associa-
tion, they become the arm of the Government.
(h) The existence of deep and pervasive Sl&te control depends upon
the facts and circumstances in a given situation'and in the altered situa- F
tion it is not the sole criterion to decide whether the agency or instrumen-
tality or persons is by or under the control of the appropriate Government.
(i) Functions of an instrumentality, agency or person are of public G
importance following public interest element.
(j) The instrumentality, agency or person most have an element of
authority or ability to affect the relations with its employee or public by
virtue of power vested in it by law, memorandum of association or by~-laws
or articles of association. H
586 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A (k) The instrumentality, agency or person renders an element of
public service and is accountable to health and strength of the workers,
men and women, adequate means of livelihood, the security for payment of
living wages, reasonable conditions of work, decent standard of life and
opportunity to enjoy full leisure and social and cultural activities to the
workmen.
B
(I) Every action of the public authority, agency or instrumentality or
the person acting on public interest or any act that gives rise to public
element should be guided by public interest in exercise of public power or
action hedged with public element and is open to challenge. It must meet
C the test of reasonableness, fairness and justness.
(m) If the exercise of the power is arbitrary, unjust and unfair, the
public authority, instrumentality, agency or the person acting in public
interest, though in the field of private law, is not free to prescribe any
unconstitutional conditions or limitations in their actions.
D
(617-A-H; 618-A-H]
Hindustan Aeronautics Ltd. v. The Workmen & Ors., (1975) 4 SCC 679;
Rashtriya Mill Mazdoor Sangh v. Model Mills, Nagpur & Anr., (1984) Supp.
SCC 443; Food Corporation of India Workers Union v. Food Corporation of
E India & Ors., [1985) 2 SCC 294; Sukhdev Singh & Ors. v. Bhagatram Sardar
Singh & Anr., (1975) 3 SCR 619; R.D. Shetty v. Airport Authority & Ors.,
(1979) 3SCR1014; Managing Director, UP. Warehousing Corporation &Anr.
v. f.N. Vajpayee, (1980) 2 SCR 773; Ajay Hasia Etc. v. Khalid Mujib Seh-
ravardi & Ors. Etc., (1981) 2 SCR 79; Rajasthan State Electricity Board, Jaipur
v. Mohan Lal & Ors., (1967) 3 SCR 377; Praga Tools Corporation v. C.V. ·
F !manual, (1969) 3 SCR 773; Delhi Transport Corporation v. D. T.C. Mazdoor
Corporation, AIR (1991) SC 101; Som Prakash Rekhi v. Union of India &
Ors., (1981) 2 SCR 111; Manmohan Singh Jaitla v. Commissioner, Union
Tenitory of Chandigarh & Ors., (1984) Supp. SCC 540; P.K. Ramachandra
Iyer & Ors. v. Union of India & Ors., [1984) 2 SCC 141; A.L. Katra v. Project
G and Equipment Corpn. ofIndia Ltd., (1984) 3 SCC 316; Central Inland Water
Transport Corporation Ltd. & Anr. v. Brojonath Ganguly & Anr., (1986) 3
SCC 156;LucknowDevelopmentAuthorityv.M.K Gupta, (1994) 1 SCC243;
Star Enterprises & Ors. v. C.I.D. C. of Maharashtra Ltd., (1990) 3 SCC 280;
LIC of India &Anr. v. Consumer Education & Research Centre & Ors., (1995)
5 SCC 482; G.B. Mahajan & Ors. v.Jalgaon Municipal Council & Ors., (1991)
H 3 SCC 91; Shrisht Dhawan (Smt.) v. M/s. Shaw Brothers, (1992) 1 SCC 534;
AIR INDIA STATUTORY CORPN. v. UNION IABOUR UNION 587
Khwaja v. Secretary of State for the Home Department & Ors., (1983) 1 All. A
E.R. 765 and M/s. Gammon India Ltd. & Ors. v. Union of India & Ors.,
[1974] 1 sec 596, referred to.
6. The two Judge Bench in Heavy Engineering casr narrowly inter-
preted the words 'Appropriate Government' on the Common Law Prin-
ciples which no longer bear any relevance when it is tested on Article 14. B
[619-C]
Heavy Engineering Mazdoor Union v. The State of Bihar & Ors., [1969]
3 SCR 995, overruled.
7. In a socialist democracy governed by the rule of law, private
c
property, right of the citizen for development and his right to employment
and his entitlement for employment to the labour, would all harmoneously
be blended to serve larger social interest and public purpose. All essential
facilities and opportnnities to the poor people are fundamental means to
development, to live with minimum comforts, food, shelter, clothing and D
health. Due to economic constraint, though right to work was not declared
as a fundamental right, right to work of workman, lower class, middle class
and poor people is the means to development and source to earn
livelihood. Though, right to employment cannot, as a right be claimed but
after the appointment to a post or an office, be it under the State, its E
agency, instrumentality, juristic person or plivate entrepreneur it is re ..
quired to be dealt with as per public element and to act in public interest
, assuring equality, which is a genus of Article 14 and all other concomitant
rights emanating therefrom are species to make their right to life and
dignity of person real and meaningful. [639-C; 637-F-H]
F
8. So long as the contract labour system continues, the principal
employer is enjoined to ensure payment of wages to the contract labour and
to provide all other amenities envisaged under the Act and the Rules
including provisions for food, potable water, health and safety and failure
thereofvisits with penal consequences. The Act contains various provisions G
in this regard. All of them are fundamental human rights to the workmen
and are facets of rights to life guaranteed under Article 21. When the
principal employer is enjoined to ensure those rights and payment of wages
while the contract labour system is under regulation, the question arises
whether after abolition of the contract labour system the workmen should
be left in a lurch denuding them of the me~ns of livelihood and the enjoy- H
588 SUPREME COURT REPORTS [1996) SUPP. 9 S.C.R.
A ment of the basis fundamental rights provided while the contract Iabonr
system is regulated under the Act. The scheme of the Act gives indication
that on the abolition of the contract labour system by publication of the
notification in the Official Gazette, the necessary concomitant is that the
whole time workmen are required for carrying on the process, operation or
other work being done in the industry, trade, business, manufacture, or
B occupation in that establishment. When the condition of the work which is
of perennial nature etc., as envisaged in sub-section (2) of Section 10, thus
are satisfied, the continuance of contract labour stands prohibited and
abolished. The concomitant result would be that source of regular employ-
ment becomes open. [646-B-E; G-H; 647-A-B]
c
9. It is true that there is no express provision in the Act declaring
the contract labour working in the establishment of the principal employer
in the particular service to be the direct employees of the principal
employer. The phrase "matters connected therewith" in the Preamble wonld
fnrnish the consequence of abolition of contract labour. In this behalf, the
D Gujarat Electricity Board case, attempted, by interpretation, to fill in the gap
but it also fall short or full play and got beset with insurmonntable difficul-
ties in its working which were not brought to the attention of the Bench. The
object of the Act is to regulate the contract labour so long as the contract
labour is not perennial. The Iabonr is required to be paid the prescribed
E wages and are provided with other welfare benefits envisaged under the Act
direct sµpervision of the principal employer. The violation visits with penal
consequences. Similarly, when the appropriate Government finds that the
employment is of perennial nature etc. contract system stands abolished,
thereby, it intended that if the workmen were performing the dnties of the
post which were fonnd to be of perennial nature on par with regular service,
F they also require to be regularised. The Act did not intend to dennde them
of their source of livelihood and means of development, throwing them out
from employment. An Act is a socio-economic welfare legislation. Right to
socio-economic justice and empowerment are constitutional rights. Right
to means of livelihood is also constitutional right. Right to facilities and
G opportunities are only part of and means to right to development. Without
employment or appointment, the workmen will be denuded of their means
oflivelihood and resultant right to life, leaving them in·the lurch since prior
to abolition, they had the work and thereby earned livelihood. [647-B-G]
Gujarat Electricity Board v. Hind Mazdoor Sabha & Ors., (1995) 5 SCC
H 27, partly overruled.
AIR INDIA STATUTORY CORPN. v. UNION LABOUR UNION 589
10. The Division Bench in Dena Nath's case has taken too narrow a A
view on technical consideration without keeping at the back of the mind
the constitutional animations and the spirit of the provisions and the
object which the Act seeks to achieve. The operation of the Act is stru<·
tured on an inbuilt procedure leaving no escape route. Abolition of con-
tract labour system ensures right to the workmen for regularisation of B
them as employees in the establishment in which they were hitherto work·
.ing as contract labour through the contractor. The contractor stands
removed from the regulation under the Act and direct relationship of
"employer and employee" is created between the principal employer and
workmen. [647-G·H; 648-A·B]
c
Dena Nath and Ors. v. National Fertilizers and Ors., (1992] 1 SCC 695,
overruled.
11. The object of the Act is to prevent exploitation of labonr. The
object, thereby, is to ensure continuity of work to the workmen in strict D
compliance of law. The conditions of the labour are not left at the whim
and fancy of the principal employer. He is bound under the Act to regulate
and ensure payment of the full wages, and also to provide all the amenities
enjoined under the Act and the rules made thereunder. On abolition of
- contract labour, the intermediary i.e. contractor, is removed from the field
and direct linkage between labour and principal employer is established. E
Thereby, the principal employer's obligation to absorb them arises. The
right of the employee for absorption gets ripened and fructified. If the
interpretation in Dena Nath's case is given acceptance, it would be an open
field for the principal employer to freely flout the provisions of the Act and
engage workmen in defiance of the Act and adopt the principle of hire and F
lire making it possible to exploit the appalling conditions in which the
workmen are placed. The contractor is an intermediary between the
workmen and the principal employer. The moment the contract labour
system stands prohibited under Section 10(1), the embargo to continue as
a contract labour is put an end to and direct relationship has been
provided between the workmen and the principal employer. Thereby, the G
principal employer directly becomes responsible for taking the services of
the workmen hitherto regulated through the contractor. [648-B·H; 649·A]
Dena Nath and Ors. v. National Fertilizers Ltd. and Ors., [1992] 1 SCC
695, overruled. H
590 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A The Standard-Vacuum Refining Co. of India v. Its Workmen & Ors.,
[1960] 3 SCR 466; Security Guanis Board for Gmater Bombay and Thane
District v. Security & Personnel Service Pvt. Ltd. & Ors., [1987] 3 SCC 413;
I
Sankar Mukhe1jee & Ors. v. Union of India & Ors., AIR (1990) SC 532;
National Federation of Railway Porters, Vendors & Bearers v. Union of India
B & Ors., [1995] 3 SCC 152; Anadi Mukta v. V.R. Rudani, [1989] 2 SCC 691;
Unni Krishnan v. State of A.P., [1993] 1 SCC 645 and Comptroller &Auditor
General of India v. K.S. Jagannathan, [1986] 2 SCC 679, referred to.
12. The legal right of an individual may be founded upon a contract
or a statute or an instrument having the force of law. For public law
C remedy enforceable nnder Article 226 of the Constitution, the action of
the authority need to fall in the realm of public law - be it a legislative
act of the State, an executive act of the State or an instrumentality or
a person or authority imbued with public law element. The question
requires to be determined in each case. However, it may not be possible
D to generalise the nature of the action which would come either nnder
public law remedy or private law field nor is it desirable to give
exhaustive list of such actions. [650-C·Dl
13. The public law remedy given by Article 226 of the Constitntion
E is to issne not only the prerogative writs provided there but also any
order or direction to enforce any of the fundamental rights and "for any
other purpose'. The distinction between public law and private law
remedy by judicial adjudication gradually marginalised and became
obliterated. [649.E-F]
F
LL C. v. Escourts Ltd. & Ors. [1986] 1 SCC 264; M. C. Mehta & Ors.
v. Union of India & Ors., [1987] 1 SCC 395; Calcutta Gas Co. Ltd. v. State
of West Bengal, AIR (1961) SC 1044; Mulchand v. State of M.P., AIR (1968)
SC 1218; State of West Bengal v. V.K. Manda! & Ors., AIR (1962) SC 779;
New Marine Coal Co. Ltd. v. Union of India, [1964] 2 SCR 859; Gujarat
G State Financial CDlporation v. Lotus Hotel, [1983] 3 SCC 370; Mahabir Auto
Store v. Indian Oil Corporation, [1990] 3 SCC 752; Shreelekha Vidyarthi v.
State of U.P., [1991] 1 .>CC 212; Gillie v. West Noifolk and Wisbech Area
Health Authority, (1986) AC 112; Dr. Roy v. Kensinstone and Chelsea Family
Practioners Committee, (1992) IAC 624 and R.K. Panda & Ors. v. Steel
H Authority of India & Ors., [1994] 5 SCC 304, referred to.
AIR INDIASTATIJTORY CORPN. v. UNION LABOUR UNION 591
14. The founding fathers placed no limitation or fetters to the power A
of the High Court under Article 226 of the Constitution except self-imposed
limitation. The arm of the Court is long enough to reach injustice wherever
it is found. The Court as sentinal in the qui vive is to mete out justice in I
given facts. On finding that either the workmen were engaged in violation
of the provisions of the Act or were continued as contract labour, despite
B
prohibition of the contract labour under Section 10(1), the High Court has,
by judicial review as the basic structure, constitutional duty to enforce the
law by appropriate directions. It would, therefore, be necessary that in-
stead of leaving the workmen in the lurch, the Court would properly mould
the relief and grant the same in accordance with law. Though there is no
express provision in the Act for absorption of the employees whose con- c
tract labour system stood abolished by publication of the notification
under Section 10(1) of the Act, in a proper case, Conrt as sentinal in the
qui vive is required to direct the appropriate anthority to act in accordance
with law and submit a report to the Court and based thereon proper relief
should be granted. [649-C-E; 654-C-D] D
Indira Gandhi v. Raj Narayan, AIR (1975) SC 2299 and S.R. Bommai
v. Union of India, [1994] 3 SCC 1, referred to.
15. All the workmen in the respective services working on contract
labour are required to be absorbed in the establishment of the appellant. E
Though there exists no specific scale of pay to be paid as regular
employees, it is for the establishment to take such steps as are necessary
to prescribe scale of pay like class 'D' employee. There is no irnjJediment
in the way of the appellants to absorb them in the last grade, namely, grade
IV employees on regular basis. It is seen that the criteria to abolish the F
contract labour system is the duration of the work, the number of
employees working on the job etc. That would be the indicia to absorb the
emp.loyees on regular basis in the respective services in the establishment.
Therefore, the date of engagement will be the criteria to determine their
inter se seniority. In case, there would be any need for retrenchment of any
excess staff, necessarily, the principle of "last come, first go" should be G
applied subject to his re-appointment as and when the vacancy arises. The
-- award proceedings as suggested in Gujarat Electricity Board case are beset
with several incongruities and obstacles in the way of the contract labour
for immediate absorption. Since the contract labour gets into the service
of the principal employer, the Union of the existing employees may not H
592 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A espouse their cause for reference under Section 10 of the ID Act. The
workmen on abolition of contract labour system have no right to seek
reference under Section 10 of the ID Act. Moreover, the workmen imme-
diately are kept out of job to endlessly keep waiting for award and there-
after resulting in fnrther litigation and delay in enforcement. The
B management would always keep them at bay for absorption. It would be
difficult for them to work out their right. Moreover, it is a tardy and
time-consuming process and years would role by. Without wages, they
cannot keep fighting the litigation endlessly. The right and remedy would
be a teasing illusion and would be rendered otiose and practically compell·
ing the workman at the mercy of the principal employer. Considered from
C this pragmatic perspective, the remedy carved out in Gujarat Electricity
Board case would be unsatisfactory. In the judgments nnder appeal, High
Court has directed to absorb the services of the workmen from the date of
the judgment. The respondent-Union did not challenge it. Therefore, the
benefit to the employees of the respondent-Union from the date of the
D abolition of the contract labour system cannot be granted. The direction
issned by the fligh Court to regularise their services with effect from the
respective dates of judgments of the High Court with all consequential
benefits is therefore upheld. [654-G-H; 665-A·H]
Gujarat Electricity Board v. Hind Mazdoor Sabha & Ors., (1995] 5
E sec 21, partly overruled.
Per Majmudar, !. (Concurring)
1. On abolition of contract lab.our system from any establishment
under Section 10 of the Act by the appropriate Government the logical and
F legitimate consequences thereof will be that the erstwhile regulated con·
tract labour covered by the sweep of such abolition for the concerned
activities would be entitled to be treated as direct employees of the
employer on whose establishment they were earlier working and they would
be entitled to be treated as regular employees at least from the day on
G which the contract labour system in the establishment for the work which
they were doing gets abolished. (662-A·B]
2. Under the Contract Labour (Regulation and Abolition) Act, 1970
twin methodology had been adopted by the legislature. In the first instance,
-
it sought to regulate contract labour employed in any establishment
H wherein snch labour was not of a perennial nature but had to be regulated
ll
11
AIR JNDIASTATIJTORY CORPN. v. UNION LABOUR UNION 593
so that the right to life available to workmen as per Article 21 would not be A
rendered illusory. Various welfare measures have been provided by the Act
in connection with such regulations. The contract workers \tho are engaged
by the contractor for the benefit of the principal employer are brought
within the beneficial sweep of Chapter V of the Act. This is one facet of the
Act. The other object of the Act is to abolish the contract labour system. In B
cases where the contract labour is employed on a writ which is of perennial
natnre; that is to say, it is of sufficient duration having regard to the nature
of industry, trade, business, manufacture or occupation that is carried on
in the establishment of the principal employer. (666-E-G; 667-C-D)
3. The qnestion is whether after abolition of contract labour system, C
the contract labourers who were earlier having regulatory protections
would be rendered persona non grata and would be thrown out from the
establishment and told off the gates. Then in such a case the remedy of
abolition of contract labour would be worse than the disease and it has to
be held that the legislature while trying to improve the lot of erstwhile D
contract labourers who are doing work of perennial nature for the prin-
cipal employer and are doing work which is otherwise to be done by regular
workmen had really left them in the lurch by making them lose all the
facilities available to contract labour ou the establishment as per Chapter
V and desired them to wash their hands off the establishment and get out
and face starvation. It is axiomatic that if they continued to be contract E
labourers their wages would have been guaranteed under Section 21 of the
Act with an obligation oii the principal employer to pay them if the
contractor fails to discharge his obligation in connection with payment of
wages. (658-A-D)
F
4. Wages are the livelihood of workman and his large number of
departments. If on abolition of contract labour system, contract labour
itself is to be abolished, it would cause economic ruin and economic death
to contract labourer and his dependentB for amelioration of whose lot,
order under Section 10 is to be passed. If it is held that on abolition of
contract labour system, the erstwhile contract labourers are to be thrown G
out of the establishment lock, stock and barrel, it would amount to
throwing the baby out with the bath water. That obviously cannot be the
scope, ambit and purport of Section 10 of the Act. (658-D-F]
5. When the contract workers carry out the work of the principal H
594 SUPREME COURT REPORTS [1996) SUPP. 9 S.C.R.
A employer which is of a perennial nature and if provisions of Section 10
gets attracted and such contract labour system in the establishment gets
abolished on fulfilment of the conditions requisite for that purpose, it is
obvious that the intermediary contractor vanishes and along with him
vanishes the term 'principal employer'. Unless there is a contractor agent
there is no principal. Once the contractor intermediary goes the term
B
'principal' also goes with it: Then remains ont of this tripartite contractual
scenario only two parties the beneficiaries of the abolition of the erstwhile
contract labour system i.e. the workmen on the one band and the employer
on the other who is no longer the principal employer but necessarily
becomes a direct employer for these erstwhile contract labourers. Implicit
C in the provision of Section 10 is the legislative intent that on ab.iliiion of
contract labour system, the erstwhile contract-workmen would become
direct employees of the employer on whose establishment they were earlier
working and were enjoying all the regulatory facilities on that very estab-
lishment under Chapter V prior to the abolition of such contract labour
D system. [658-G-H; 659-A-D]
6. Though the legislature has expressly not mentioned the conse-
quences of such abolition, but the very scheme and ambit of Section 10 of
the Act clearly indicate the inherent legislative intent of making the
erstwhile contract labourers direct employees of the employer on abolition
E of the intermediary contractor. The very condition engrafted in Section
10(2) (d) shows that while abolishing contract labour from the given estab·
lishment, one of the relevant consideration for the appropriate Govern-
ment is to ascertain whether it is sufficient to appoint considerable number
of whole time workmen. Even otherwise there is an inbuilt safety valve in
F Section 21 of the Act which enjoins the principal employer to make
payment of wages to the given number of contract workmen whom be has
permitted to be brought for the work of the establishment if the contractor
. fails to make payment to them. It is, therefore, obvious that the principal
employer as a worldly businessman in his practical commercial wisdom
would not allow contractor to bring larger number of contract labour
G which may be in excess of the requirement of the principal employer. On
the contrary, the principal employer would see to it that the contractor
brings only those number of workmen who are required to discharge their
duties to carry out the work of the principal employer on his establishment
through, of course, the agency of the contractor. In fact the scheme of the
H Act and regulations framed there-under clearly indicate that even the
AIR INDIA STATUIDRY CORPN. v. UNION l.ABOUR UNION 595
number of the workmen required for the given contract work is to be A
specified in the licence given to the contractor. Consequently, the aforesaid
apprehension projected on behalf of the principal employer is more imagi·
nary than real. Even apart from that, after the absorption of the erstwhile
contract workmen by the principal employer on abolition of the contract
labour system under Section IO, it is always open for the employer as an
B
entrepreneur, in an appropriate case, if the excess working staff is not
found to be required by him to retrench such excess staff in accordance
with law by following the provisions of the Industrial Disputes Act, 1947.
But that has nothing to do with the moot question as to what is the fate
of erstwhile contract labour on abolition of contract labour system under
the provisions of Section 10 of the Act. (659-E-H; 660-A-D] C
Gujarat Electricity Board, Thennal Power Station, Ukai, Gujarat v.
Hind Mazdoor Sabha & Ors., (1995] S SCC 27, partly overruled.
7. Engagement of contract labour has been found to be unjustified D
by a catena of decisions of this Court. When the work is of perennial
nature and instead of engaging regular workmen, the system of contract
labour is resorted to, it would only be for fulfilling the basic purpose of
securing monetary advantage to the principal employer by reducing
. expenditure on work force. It would obviously be an unfair labour
\practice and is also an economically short-sighted and unsound policy, E
both from the point of view of the undertaking concerned and the country
as a whole. Such a system was tried to be put to an end by the legislature
by enacting the Act but when it found there are certain activities of
establishment where the work is not of perennial nature then the
contract labour may not be abolished but still it would be required to F
be regulated so that the lot of the workmen is not rendered miserable.
The real scope and ambit of the Act is to abolish contract labour system
as far as possible from every establishment. Consequently, on abolition
which is the ultimate goal, the erstwhile regulated contract labour cannot
be thrown out of establishment as tried to be submitted on behalf of the G
management taking resort to the express language of Section 10 of the
Act. Such a conclusion reached by the two-Member Bench in Dena Nath's
case flies in the face of the very scope and ambit of the Act and
frustrated the very scheme of abolition of contract labour envisaged by
the Act. [660-G-H; 661-A·C] H
596 SUPREME COURT REPORTS (1996] SUPP. 9 S.C.R.
A Dena Nath v. National Fe1ti/izers Ltd., [1992) I SCC 695, overruled.
R.K Panda & On. v. Steel Autho1ity of India & Ors., [1994) 5 SCC
304, referred to.
CfVIL APPELLATE .JURISDICTION: Civil Appeal No. 15535 of
B 1996 etc.
From the Judgment and Order dated 28.4.92 of the Bombay High
Court in A. No. 146 of 1990.
Ashok Desai, Attorney General, T.R. Andhyarujina, Solictor
C General, P.P. Malhotra, Ms. Indra Jaising, K.K. Singhvi, Sr. Advs., M.D.
Sisodia, K. Swamy, Lalit Bhasin, Ms. Nina Gupta, Ms. Kiran Bhardwaj,
Vineet Kr., Ms. Ethel Pereira, Ms. Ritu Makkar, P.P. Singh, G. Nageswara
Reddy, C.V.S. Rao, Ms. Anil Katiyar, Ms. Anita Shenoi, Sanjay Parikh,
B.N. Singhvi, Sanjay Singhvi, Anil K. Gupta, Ms. Pushpa Singhvi, T. Srid-
D haran, P.K. Manohar, S.R. Bhat, Brij Bhushan, R.N. Keshwani, Ms. C.
Ramamurthy and A.K. Sanghi for the appearing parties.
The following Judgments of the Court were delivered by
K. RAMASWAMY, J ..Leave granted.
E These appeals by special leave arise from the judgment of the
Division Bench of the Bombay High Court dated April 28, 1992 made in
Appeal No. 146 of 1990 and batch. The facts in appeal arising out of S.L.P.
7417/92, are sufficient to decide the questions of law that have arisen in
these appeals. The appellant initially was a statutory authority under inter-
F national Airport Authority of India Act, 1971 (for short, '!AA! Act') and
on its repeal by the Airports Authority of India Act, 1994 was amalgamated
with National Airport Authority (for short, the 'NAA') under single
nomenclature, namely, !AA!. The IAAI is now reconstituted as a company
under Companies Act, 1956.
·'
G The appellants engaged, as contract labour, the respondent union's
members, for sweeping, cleaning, dusting and watching of the buildings
owned and occupied by the appellant. The Contract Labour (Regulation
and Abolition) Act, 1970 ( for short, the 'Act') regulates registration of the
establishment of principal employer, the contractor engaging and supplying
H the contract labour in every establishment in which 20 or more workmen
AIR INDIASfATIITORY CORPN. '· UNION !ABOUR UNION (KRAMASWAMY,J.) 597
are employed on any day of the preceding 12 months as contract labour. A
The Act had come into force from September 5, 1970. The appellant had
9btained on September 20, 1971 a certificate of registration from Regional
Labour Commissioner (Central) under the Act. The Central Government
exercising the power under Section 10 of the Act, on basis of recommen-
dation and in consultation with the Central Advisory Board constituted B
under Section 10(1) of the Act, issued a notification on December 9, 1976
prohibiting "employment of contract labour on and from December 9, 1976
for sweeping, cleaning, dusting and watching of buildings owned or oc-
cupied by the establishments in respect of which the appropriate govern-
ment under the said Act is the Central Government." However, the said
prohibition was not to apply to "outside cleaning and other maintenance
c
operations of multi- storeyed buildings where such cleaning or maintenance
cannot be carried out except with specialised experience." It would appear
that Regional Labour Commissioner (Central) Bombay by Jetter dated
January 20, 1972 informed the appellant that the State Government is the
appropriate Government under the Act. Therefore, by proceedings dated D
May 22, 1973 the Regional Labour Commissioner (Central) had revoked
the registration. By Amendment Act 46 of 1982, the Industrial Disputes
Act, 1947 (for short, the 'ID Act') was made applicable to the appellant
and was brought on statute book specifying the appellant as one of the
industries in relation to which the Central Government is the appropriate E
Government and the appellant has been carrying on its business "by or
under its authority" with effect from August 21, 1982. The Act was
amended bringing within its ambit the Central Government as appropriate
Government by amendment Act 14 of 1986 with effect from January 28,
1986. F
Since the appellant did not abolish the contract system and failed to
enforce the notification of the Government of India dated December 9,
1976, the respondents came to file writ petitions for direction to the
appellant to enforce forthwith the aforesaid notification abolishing the G
contract labour system in the aforesaid services and to direct the appellant
to absorb all the employees doing cleaning, sweeping, dusting, washing and
watching of the buildings owned or occupied by the appellant-estab-
lishment, with effed from the respective dates of their joining as contract
labour in the appellant's establishment with all consequential
rights/benefits, monetary or otherwise. The writ petition was allowed by the H
598 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A learned single Judge on November 16, 1989 directing that all contract
workers be regularised as employees of the appellant from the date of filing
of the writ petition. Preceding thereto, on November 15, 1989, the Govern-
ment of India referred to the Central Advisory Board known as Mobile
Committee under Section 10(1), which recommended to the Central
Government not to abolish the contract labour system in the aforesaid
B
services. Under the impugned judgment dated April 3, 1992, the learned
judges of the Division Bench dismissed the appeal. Similar was the fate of
other appeals. Thus these appeals by special leave.
Shri Ashok Desai, the learned Attorney General, Shri Andhyarujina,
C the learned Solicitor General, appearing for Union of India and the
appellant respectively, contended that the term "appropriate Government"
under Section 2(1)(a) of the Act, as on December 9, 1976, was the State
Government. The appellant was not carrying on the business as an agent
of the Central Government nor the Central Government was its principal.
This Court, in Heavy Engineering Mazdoor Union v. The State of Bihar &
D Ors., [1969] 3 SCR 995 (for short, the "Heavy Engineering case"), had
interpreted the phrase "the appropriate Government" and held that the .
Central Government was not the appropriate Government under the ID
Act. The ratio therein was followed in Hindustan Aeronautics Ltd. v. 171e
Workmen & Ors., [1975] 4 SCC 679; Rashtriya Mill Mazdoor Sangh v. Model
Mills, Nagpur & Anr., [1984] Supp. SCC 443 and Food Corporation of India
E Workers' Union v. Food Corporation of India & Ors., [1985] 2 SCC 294. It
is thus firmly settled law that the appropriate Government was not the
Central Government untill the Act was amended with effect from January
28, 1986. Ther~fore, the view of the High Court that the appropriate
Government is the Central Government is not correct in law. The learned
Attorney General further argued that the interpretation of this Court in
F Heavy Engineering case has stood the test of time and the parties have
settled the transaction on its basis. It would, therefore, not be correct to
upset that interpretation. The learned Solicitor General contended that the
notification published by the Central Government under Section 10 of the
Act on December 9, 1976 was without jurisdiction. The Advisory Board
G independently should consider whether the contract labour in each of the
aforestated services should be abolished taking into consideration the
perennial nature of the work, the requirement of number of employees is
the respective specified services in the establishment of the appellant. The
Advisory Board had not adverted to the prescribed criteria of Section 10(2)
to the appellant's establishment. Mobile Committee after detailed examina-
H
AIRINDIASTATIJTORY CORPN. "· UNION LABOUR UNION (K.RAMASWAMY,J.] 599
tion, had recommended to the Central Government not to abolish the A
contract labour system in the afore..,aid services. It was contended that the
notification dated December 9, 1976 is without authority of law or, at any
rate, clearly illegal; and so that direction by the High Court to enforce the
offending notification is not correct in law. It was further contended that,
after the Amendment Act had come into force from January 28, 1986, the
Central Government being the appropriate Government, had accepted the B
recommendation of Mobile Committee of not abolishing the contract
labour system. The notification dated December 9, 1976, no longer
remained valid for enforcement. The High Courf, therefore was not right
in directing the appellant to enforce the notification. Alternatively, it was
contended that even assuming that the notification is valid and enforceable, C
it would be effective only from January, 1986. However, by abolition of
contract labour system, the workmen would not automatically become the
employees of the appellant. In Dena Nath and Ors. v. National Fertiliser
Ltd. and Ors., [1992] 1 SCC 695, this Court had held that the High Court,
in exercise of its power under Article 226, has no power to direct absorp-
tion of the contract labour as its direct employees. The impugned judgment D
was expressly disapproved in Dena Nath's case. Therefore, its legality has
been knocked off its bottom. It was further contended that the Act, on
abolition of the contract labour system, does not envisage to create direct
relationship between the principal employer and the contract labour. The
erstwhile contract Jabour have to seek and obtain industrial award under
the ID Act by virtue of which the appellant would be entitled to satisfy the E
Industrial Court that there was no need to absorb all the contract labour
but only smaller number is required as regular employees. On recording
finding in that behalf, the Industrial Court would make bis award which
would be enforceable by the workmen. This Court in Gujarat Electricity
Board v. Hind Mazdoor Sabha & Ors., [1995] 5 SCC 27 had pointed out the
lacuna in the Act and given directions of the manner in which the in- F
dustrial action has to be taken on abolition of the contract labour system.
The High Court, therefore, was not right in its direction that the workmen
require to be absorbed in the respective services of the establishment of
the appellant. It is also contended that the appellant, though • initially was
a statutory Corporation under the !AA! Act, on its abolition and constitu-
tion as a company, is entitled to regulate its own affairs on business G
principles and the direction for absorption would lead to further losses in
which it is being run. The learned Solicitor General bas, therefore, sub-
mitted a scheme under which its subsidiary, namely, Air Cargo Corporation
would take the workmen and absorb them into service, subject to the above
regulation. It has to consider as to how many of the contract labour require H
600 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A to be absorbed. Prescription of qualification for appointment was necessary
the principle of reservation adopted by the Central Government requires
to be followed; their names require to be called from Employment Ex-
change. The workmen should be absorbed on the principle of "last come
first go" subject to their fitness, qualifications and probation etc.
B Shri K.K. Singhvi and Mrs. Indira Jai Singh, learned senior counsel
and AK. Gupta learned counsel for the respondents, contended that the
appellant is an industry carrying on its business of Air Transport Services.
Prior to the !AA! Act, it was under the control of Civil Aviation Depart-
ment, Government of India; after the !AA! Act, the appellant has been
C carrying on its industry by or under the authority of the Central Govern-
ment. The relevant provisions in the !AA! Act would establish the deep
and pervasive control the Central Government has over the functions of
the appellant. Whether the appellant is an industry carrying on business by
or under the authority of the Central Government, must be determined
D keeping in view the language of the statute that gave birth to the Corpora-
tion, and the nature of functions under the !AA! Act etc. The appellant's
working sy;tem under the !AA! Act and the control the Central Govern-
ment is exercising over the working of the industry of the appellant do
indicate that right from its inception the appellant has been carrying on its
E business, by or under the authority of the Central Government. Rightly
understanding that legal position, the Central Government had referred the
matter to the Central Advisory Board under Section 10(1) of the Act and
on the basis of its report had issued the notification dated December 9,
1976 abolishing the contract labour system in the aforestated services.
Therefore, it is valid in law. The Bench in Heavy Engineering case, narrowly
F construed the meaning of the phrase "the appropriate Government" placing
reliance on the common law doctrine of "principal and agent". The public
law interpretation is the appropriate principle of construction of the phrase
"the appropriate Government". In view of internal evidence provided in the
!AA! Act and the nature of the business carried on by the appellant by or
G under the control of the Central Government, the appropriate Government
is none other than the Central Government. In particular, after the
development of law of "other authority" or "instrumentality of the State"
under Article 12 of the Constitution, the ratio in Heavy Engineering case is
no longer good law. In Hindustan Aeronauties Ltd. and Food Corporation
H . of India cases, this Court had not independently laid any legal preposition.
AIRINDIASTATUTORYCORPN.» UNION LABOUR UNION(K.RAMASWAMY,J.] 601
Food Corporatio11 of India's case was considered with reference to the A
regional warehouses of the FCI situated in different States and in this
functional perspective, this Court came to the conclusion that the ap-
propriate Government would be the State Government.
This Court in Sukhdev Singh & Ors. v. Bhagatram Sardar Singh & B
Anr., [1975] 3 SCR 619; R.D. Setty v. Airp01t Authority & Ors., [1979] 3 SCR
1014; Ma11aging Director, U.P. Warehousi11g Co1poratio11 & Anr. v. VN.
Vajpayee, (1980] 2 SCR 773; Ajay Hasia Etc. v. Khalid Mujib Sehravardi &
Ors. Etc., [1981] 2 SCR 79 - wealth of authorities - had held that settled
legal position would lend to interpret the phrase "appropriate Government" C
in public law interpretation; under the Act the Central Government is the
appropriate Government to take a decision under Section 10 of the Act to
abolish the contract labour system. It is further contended that the Central
Government, after notifying abolition of contract labour system is devoid
of power under Section 10(1) to appoint another Advisory Board to
consider whether or not to abolish the same contract labour system in the ,D
aforesaid services in the establishments of the appellant. The recommen-
dation of the Mobile Committee and the resultant second notification were,
therefore, without authority of law. The two Judge Benches in Dena Nath
and Gujarat Electricity Board's cases have not correctly interpreted the law.
After abolition of the contract labour system, if the principal employer E
omits to abide by the law and fails to absorb the labour worked in the
establishments of the appellant on regular basis, the workmen have no
option but to seek judicial redress under Article 226 of the Constitution.
Judicial Review being the basic feature of the Constitution, the High Court
is to have the notification enforced. The citizen has a fundamental right to F
seek redressal of their legal injury by judicial process to enforce his rights
in the proceedings under Article 226. The High Court, therefore, was right
to dwell into the question and to give tile impugned direction in the
judgment. The workmen have a fundamep.tal}'ight to life. Meaningful right
to life springs from continued work t9 earli their livelihood. The right to
employment, therefore, is an integral facet of right to life. When they were G
engaged as contract labour and were continuously working in the estab-
lishments of the appellant, to make their right to social and economic
justice meaningful and effective, they required to be continuously engaged
as contract labour so long as the work is available in the establishment.
When work is of perennial nature and on abolition of contract labour H
602 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A system, they are entitled, per force, to be absorbed on regular basis
transposing their erstwhile contractual status into that of an employer-
employee relationship so as to continue to take out their livelihood by
working under the employer and be entitled to receive salary prescribed
to that post. Thereby they became entitled to be absorbed without any
B hiatus with effect from the date of abolition. If any action is needed to be
taken thereafter against the employee, it should be only in accordance with
either the statutory rules or the ID Act, if applicable. In either event, the
right to absorption assures to the workmen the right to livelihood as
economic empowerment, right to social justice and right to dignity of
person which are the concomitants of social democracy. These facets of
C constitutional rights guaranteed to the workmen as their Fundamental
Rights should be kept in view in interpreting the expression "appropriate
Government" and the duty of the appropriate Government enjoined under
Section 10(1) of the Act a!ld other regulatory provisions in relation to the
employment of the workmen. Therefore, the view in Dena Nath's case is
D not correct in law and requires to be overruled.
There is no hiatus in the operation of the Act on abolition of the
Contract labour system under Section 10. The object and pureose of the
Act are two-fold. As long as the work in an industry is not perennial, the
E Act regulates the conditions of the workmen employed through the con-
tractor registered under the Act. The services of the workmen are chan-
nelised through the contractor. The principal employer is required to
submit the number of workmen needed for employment in its establishment
who are supplied by the contractor, an intermediary; but the primary
responsibility lies upon the principal employer to abide by law; the violation
F thereof visits With penal consequences. The Act regulates systematic opera-
tion. Wages to the contract labour should be paid under the direct super-
vision of the principal employer. The principal employer is enjoined to
compel the contractor to pay over the wages and on his failure, the
principal employer should pay and recover it from the contractor/inter-
G medkry. The principal employer alone is required to provide safety, health
and other amenities to ensure health and safe working conditions in the
establishment of the principal employer. This would clearly indicate the
pervasive control the principal employer has over the contract labour
employed through intermediary and regulation of the work by the workmen
H during the period of service. On advice by the Board that the work is of
AIRINDIASfATITTORYCORPN.•. UNION LABOUR t:NION (KRAMASWAM\,J.) 603
perennial nature etc. and on being satisfied of the conditions specified A
under Section 10(2), the appropriate Government takes a decision to
abolish the contract labour and have the decision published by a notifica-
tion. It results in abolition of the contract labour. Consequently, the linkage
of intermediary/contractor is removed from the operational structure under
the Act. It creates direct connection between the principal employer and B
the workmen. There is no escape route for the principal employer to avoid
workmen because it needs their services and the workmen are not meant
to be kept in the lurch. The words "principal employer" do indicate that
the intermediary/contractor is merely a supplier of labour to the principal
employer. On effacement of the contractor by abolition of the contract C
labour system, a direct relationship between the principal employer and
the workmen stands knitted. Thereby the workman becomes an employee
of the principal employer and it relates back to the date of engagement as
a contract labour. The details of the workmen, requirement of the work
force, duration of the work etc. are regulated under the Act and the Rules. D
The Act, Rules and statutory forms do furnish internal and unimpeachable
evidence obviating the need to have industrial adjudication; much less there
arises any dispute. There is no machinery for workmen under the ID Act
to seek industrial adjudication. If any industrial adjudication is to be
sought, it would be only by a recognised union in the establishment of the E
appellants who are unlikely to espouse their dispute. Therefore, the
methodology suggested in Gujarat Electricity Board's case, by another
Bench of two Judges apart from being unworkable and incongruous, is not
correct in law. On abolition of the contract labour, the principal employer
is left with no right but duty to enforce the notification, absorb the
workmen working in the establishment on contract basis transposing them F
as its regular employees with all consequential rights and duties attached
to a post on which the workman working directly under the appellant was
entitled or liable. The Act gave no option to pick and choose the employees
at the whim of the principal employer. The view of the High Court,
therefore, is correct to the extent that the notification should be enforced G
with effect from the date of abolition, namely, December 9, 1976. The
subsequent amendment with effect from January 28, 1986 is only a recog-
nition of and superimposition of pre-existing legal responsibility of the
Central Government as the appropriate Government. It does not come into
being only from the date the amendment came into force. Consequently, H
604 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R/
A the workmen, namely, the memberlV'f the respondent· Union must be.
declared to be the employees with effect from the respective dates on
which they were discharging their duties in the respective services of the
appellant's establishments either as Sweeper, Duster, Cleaner, Watchman
etc. The view, therefore, of ti)e High Court to the extent that they should
B be absorbed with effect from the date of the judgment of the learned single
Judge, is not correct in law. Therefore, to do complete justice, direction
may be given to absorb the workmen with effect from the date of abolition,
i.e., December 9, 1976 under Article 142 of the Constitution.
The respective contentions would give rise to the following ques-
C lion~:
1. What is meaning of the word "appropriate Government under
Section 2(1)(a) of the Act?
2. Whether the view taken in Heavy Engi.neering case is correct in
D law?
3. Whether on abolition the contract labour are entitled to be ab-
sorbed; if so, from what date?
4. Whether the High Court µnder Article 226 has power to direct
E their absorption; if so, from what da(e?
5. Whether it is necessary to make a reference under Section 10 of
the ID Act for adjudication of dispute qua absorption of the contract
labour?
6. Whether the view taken by this Court in Dena Nath and Gujarat
F State Electricity Board's case is correct in law.?
7. Whether the workmen have got a right for absorption and, if so,
what is the remedy for enforcement?
Section 2(1)(a) of the Act defines "appropriate Government" to
G mean·
""(i) in relation to an establishment in respect of which the ap-
propriate Government under the Industrial Disputes Act, 1947 (Act
14 of 1947), is the Central Government, the Central Government;
H (ii) in relation to any other establishment, the Government of the
AIR !NDIASTATIJTORY CORPN.>. UNION !ABDUR UNION (K.RAMASWAMY,J.) 605
State in which that other establishment is situated" A
Prior to Amendment Act 14 of 1986, the definition was as under :
"2(1)(a) "Appropriate Government" means-
(1) in relation to - B
(i) any establishment pertaining to any industry carried on by or
under the authority of the Central Government, or pertaining to
any such controlled industry as may be specified in this behalf by
the Central Government, or
c
(ii) any establishment of any railway, Cantonment Board, major
port, mine or oil-field, or
(iii) any establishment of a banking or insurance company,
the Central Government, D
(2) in relation to any other establishment the Government of the
State in which that other establishment is situate."
Section 2(a)(i) of the ID Act defines "appropriate Government" thus;
Unless there is anything repugnant in the subject or context, "ap- E
propriate Government" means, iµ relation to any Ind trial Disputes con-
cerning any industry carried on by or under the authority of the Central
Government or by a railway company for concerning any such controlled
industry as may be specified in this behalf by the Central Government ...."
and Indian Airlines and Air India Corporation established under Section F
3 of the Air Corporation Act 1953 are enumerated industries under
Amendment Act 46 of 1982 which came into force with effect from
21.8.1984.
In Heavy Engineering case (supra), industrial dispute was referred
under Section 10 of the ID Act by the State Government of Bihar to the G
Industrial Tribunal for its .adjudication. The competency of the State
Government was questioned by the Mazdoor Union contending that the
appropriate Government to refer the dispute was the Central Government.
The High Court negatived the contention and had upheld the validity of
reference. On appeal, a Bench of two Judges had held that the wqrds H
606 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A "under authority of' means pursuant to the authority, such as an agent or
a servant's acts under or pursuant to the authority of its principal or master.
The Heavy Engineering Company cannot be said to be carrying on its
business pursuant to the authority of the Central Government. Placing
reliance on common law interpretation, the Bench was of the opinion that
B the Company derived its powers and functions from its Memorandum and
Articles of Association. Though the entire share capital was contributed by
the Central Government and all the shares were held by the President and
officers of the Central Government were in-charge of the management, it
did not make any difference. The company and the share-holders are
distinct entities. The fact that the President of India and certain officers
C hold all its shares did not make the company an agent either of the
President or of the Central Government. The power to decide how the
company should function; the power to appoint Directors and the power
to determine the wages and salaries payable by the company to its
employees, were all derived from the Memorandum of Company and
D Articles of Association of the .Company and not by the reason of the
Company being agent of the Central Government. The learned Judges
came to that conclusion on the ba~is of concession and on private law of
principal and agent and as regards a company registered under the Com-
panies Act, on the basis of the power of internal management. In Hindustan
E Aeronautics Ltd case (supra), learned Judges merely followed the ratio of "
Heavy Engineering case. It further concluded that the enumeration of
certain statutory Corporations in the definition would indicate that those
enumerated Corporations would come within the definition of the "ap-
propriate Government" without any further discussion. In Rashtriya Mill
Mazdoor Sangh's case, a Bench of three Judges, while interpreting Section
F 32(iv) of the Payment of Bonus Act, considered the purpose of the expres-
sion "unrler the authority of any department of the Central Government for
purpose of payment of bonus". The meaning and scope of the expression
"industry carried on by or under the authority of any department of the
Central Government", was examined and it was held that the industrial
G undertaking retains its identity, personality, and status unchanged though
in its management, the Central Government exercised the power to give a
direction under Section 16 and the management is subjected to regulatory
control. It is seen that the above decision was reached in the context in
which the payment of bonus was to be determined and paid to the
H employees by the department. In Food Corporation of In,dia's case (supra),
AIRINDIASfATlITORYCORPN.>. UNIONIABOURUNION[KRAMASWAMY,J.) 607
a Bench of two Judges was to consider whether regional office of the Food A
Corporation of India and the warehouses etc. were an "establishment"
within the meaning of Section 2(i)(e) of the Act and whether FCI is an
industry carried on by or under the authority of the Central Government.
Following the aforesaid three decisions, it was held that a bare reading of
the definition would indicate that the "establishment" defined under the Act B
means inter alia any place, any industry, trade, business, manufacture
warehouse, godown or the place set up by the Corporation where its
business is carried on. Though for the purpose of industrial disputes the
Central Government is an appropriate Government in relation to Food
Corporation of India, its establishments at various places is not under the
control of the Government of India. Therefore, appropriate Government c
under the Industrial Disputes Act is the State Government. In that behalf,
the learned Judges, undoubtedly, relied upon Heavy Engineering case. It
would thus be seen that the construction adopted on the phrase "ap-
propriate Government" under the ID Act was considered with reference
to its functional efficacy. The Heavy Enginee1ing case, as held earlier, had D
proceeded on common law principles and the concession by the counsel.
As noted, the appellant, to start with, was a statutory authority 'Jut
pending appeal in this Court, due to change in law and in order to be in
tune with open economy, it became a company registered under the E
Companies Act. To consider its sweep on the effect of Heavy Engineering
case on the interpretation of the phrase 'appropriate Government', it would
be necessary to recapitulate the Preamble, Fundamental Rights (Part Ill)
and Directive Principle (Part IV) - trinity setting out the conscience of the
Constitution deriving from the source "We, the people", a charter to
establish an egalitarian social order in which social and economic justice
F
with dignity of person and equality of status and opportunity, are assured
to every citizen in a socialist democratic Bharat Republic. The Constitu-
tion, the Supreme law heralds to achieve the above goals under the rule of
law. Life of law is not logic but is one of experience. Constitution provides
an enduring instrument, designed to meet the changing needs of each G
succeeding generation altering and adjusting the unequal conditions to
· pave way for social and economic democracy within the spirit drawn from
the Constitution. So too, the legal redressal within the said parameters. The
words in the Constitution or in an Act are but a framework of the concept
which may change more than the words themselves consistent with the H
608 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A march of law. Constitutional issues require interpretation broadly not by
play of words or without the acceptance of the line of their growth. ·
Preamble of the Constitution, as its integral part, is designed to realise
socio economic justice to all people including workmen, harmoniously
blending the details enumerated in the Fundamental Rights and the Direc-
B tive Principles. The Act is a social welfare measure to further the general
interest of the community of workmen as opposed to the particular interest
of the ind.ividual entrepreneur. It seeks to achieve a public purpose, i.e.,
regulated conditions of contract labour and to abolish it when it is found
to be of perennial nature etc. The individual interest can, therefore, no
C longer stem the forward flowing tide and must, of necessity, give way to
the broader public purpose of establishing social and economic democracy
in which every workman realises socio-economic justice assured in the
Preamble, Articles 14, 15 and 21 and the Directive Principles of the
Constitution.
D The founding fathers of the Constitution, cognizant of the reality of
life wisely engrafted the Fundamental Rights and Directive Principles in
Chapters III and IV for a democratic way of life to every one in Bharat
Republic, the State under Article 38 is enjoined strive to promote the
welfare of the people by securing and protecting as effectively as it may, a
social order in which justice, social, economic and political shall inform all
E the institutions of the national life and tu minimise the inequalities in
income and endeavour to eliminate inequalities in status, facilities and
opportunities, not only amongst individuals but also amongst groups of
people residing in different areas or engaged in different vocations. Article
39(a) provides that the State shall direct its policies towards securing the
citizens, men and women equally, the right to an adequate means of
F livelihood; clause (d) provides for equal pay for equal work for both men
and women; clause (e) provides to secure the health and strength of
workers. Article 41 provides that within the limits of its economic capacity
and development, the State shall make effective provision to secure the
right to work as fundamental with just and humane conditions of work by
G suitable legislation of economic organisation or in any other way in which
the worker shall be assured of living wages, conditions of work ensuring a
decent standard of life and full enjoyment of leisure and social and cultural
opportunities to the workmen. The poor, the workman and the common
man can secure and realise economic and social freedom only through the
right to work and right to adequate means of livelihood, to just and humane
H
AIR INDIA STATUTORY CORPN. '· UNION LABOcR UNION (K.RAMASWAMY,J.] 609
conditions of work, to a living wage, a decent standard of life, education A
and leisure. To them, these are fundamental facets of life. Article 43A,
brought by 42nd Constitution (Amendment) Act, 1976 enjoins upon the
State to secure by suitable legislation or in any other way, the participation
of workers in the management of undertakings, establishments or other
organisations engaged in any industry. Article 46 gives a positive mandate
to promote economic and educational interest of the weaker sections of B
the people. Correspondingly, Article 51A imposes fundamental duties on
every citizen to develop the scientific temper, humanism and to strive
towards excellence in all spheres of individual and collective activity, so
that the nation constantly rises to higher levels of endeavour and achieve-
ment. To make these rights meaningful to workmen and meaningful right
to life a reality to workmen, shift of judicial orientation from private law
c
principles to public law interpretation harmoniously fusing the interest of
the individual enterprenuer and the paramount interest of the community.
Article 39A furnishes beacon light that justice be done on the basis of equal
opportunity and no one be denied justice by reason of economic or other
disabilities. Courts are sentinal in the qui vive of the rights of the people, D
in particular, the poor. The judicial function of a Court, therefore, in
interpreting the Constitution and the provisions of the Act, requires to
build up continuity of socio-economic empowerment to the poor to sustain
equality of opportunity and status and the law should constantly meet the
needs and aspiration oi the society in establishing the egalitarian social
order. Therefore, the concepts engrafted in the statute require interpreta- E
tion from that perspectives, without doing violence to the language. Such
an interpretation would elongate the spirit and purpose of the Constitution
and make the aforesaid rights to the workmen a reality lest establishment
of an egalitarian social order would be frustrated and Constitutional goal
defeated.
F
Keeping this broad spectrum in view, let us consider whether the
interpretation given in Heavy Engineering case is consistent with the scheme
and spirit of the Constitution. In Rajasthan State Electricity Board, Jaipur
v. Mohan Lal & Ors., [1967] 3 SCR 377, a Constitution Bench, composing
the learned Judges who formed the Bench in Heavy Engineering case, G
considered the issue of interpretation and Bhargava, J. speaking on behalf
of the majority, had held that "other authority" within the meaning of
Article 12 of the Constitution need not necessarily be an authority to
perform governmental functions. The expression 'other authority' is wide
enough to include within it every authority created by a statute on which H
610 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A powers are conferred to carry out governmental functions or the "functions
under the control of the Goverrunent". It is not necessary that some of the
powers conferred be Governmental sovereign functions to carry on com-
mercial activities. Since the State is empowered under Articles 19(1)(g)
and 298 to carry on any trade or business, it was held that Rajasthan State
B Electricity Board was "other authority" under Article 12 of the Constitution.
The significance of the observation is that an authority under the control
of the State need not carry on Governmental functions. It can carry on
commercial activities. At this juncture, it is relevant to keep at the back of
our mind, which was not brought to the attention of the Bench which
decided Heavy Engineering case, that Article 19(2) of the Constitution
C grants to the· State, by clause (ii) thereof, monopoly to carry on, by the
State or by a Corporation owned or controlled by the State, any trade,
business, industry or service whether to the exclusion, complete or partial,
of citizens or otherwise. The narrow interpretation strips the State of its
monopolistic power to exclude citizens from the field of any activity, to
D carry on any trade, business, industry or service, total or partial. A reverse
trend which would deflect the constitutional perspective was set in motion
by the same Bench in Fraga Tools Corporation v. C. V. !manual, [1969] 3
SCR 773 decided on February 19, 1969, 24 days prior to the date of
decision in Heavy Engineering case; in which it was held in main that writ
E under Article 226 would not lie against a company incorporated under
Companies Act and the declaration that dismissal of the workmen was
illegal, given by the High Court was set aside. But the operation of the
above ratio was put to stop by the Constitution Bench decision in Sukhdev
Singh & Ors. v. Bhagat Ram & Anr., [1975] 2 SCR 619. In that behalf, the
F interpretation given by Mathew, J. in a separate but concurrent judgment
is of vital significance taken away the State action from the clutches of
moribund common law jurisprudence; it set on foot forward march under
public law interpretation. Mathew, J. had held that the concept of State
had undergone drastic change. It cannot be conceived of simply as a
cohesive machinery yielding the thunderbolt of authority. The State is a
G service Corporation. It acts only through its instrumentalities or agencies
of natural and juridical person. There is a distinction between State action
and private action. There is nothing strange in the notion of the State acting
through a Corporation and making it an agency or instrumentality of the
State with an event of the welfare State. The framework of the civil service
H administration became increasingly insufficient for handling new tasks
AlRINDIASTATIJTORYCORPN.,. UN!ONIABOURUNION(K.RAMASWAMY,J.j 611
,
which were often of a specialised and highly technical character. Develop- A
ment of policy of public administration, through separate Corporations
which would operate largely according to business principles and separate-
ly accountable though under the Memorandum of Association or Articles
of Association become the arm of the Government. Though their
employees are not civil servants, it being a public authority and State B
{
Corporation, therefore, is subject to control of the Government. The public
corporation, being a corporation of the State, is subject to the constitution-
al limitation as the State itself. The governing power, wherever located,
must be subject to the fundamental constitutional limitations. The Court,
therefore, had laid the test to see whether the Corporation is an agency or
instrumentality of the Government to carry on business for the benefit of C
the public. Thus, the ratio in Praga Tools case, no writ would lie against
the Corporation is no longer a good law. Though Corporation is not a
statutory body, as it is not a authority, it is an instrumentality of the State.
In R.D. Shetty v. International Aiport Authority of India & Ors., [1979] D
3 SCR 1.014, this Court had held that due to expansion of welfare and social
service functions, the State increasingly controls material and economical
resources in the society involving large scale industrial and commercial
activities with their executive functions affecting the lives of the people. It
regulates aJld dispenses special services and provides large number of
benefits. When the Government deals with the public, it cannot act ar· E
bitrarily. Where a corporation is an instrumentality or agency of the
Government, it would be subject to the same constitutional or public law
limitation as the Government. The limitations of the action by the Govern-
ment must apply equally when such actions are dealt with by Corporation
having instrumentality element with public and they cannot act arbitrarily. F
Such a functioning cannot enter into relationship with any person it likes
·at its sweet will. Its action must be in conformity with some principle which
meets the test of reason and relevance. Therefore, the distinction between
a statutory corporation and the company incorporated under the Com-
panies Act was obliterated.
G
In Managing Director, U.P. Warehousing Copn. v. V.N. Vajpayee,
[1980] 2 SCR 773, Chinnappa Reddy, J. in his separate but concurrent
judgment laid down the relevant principles. The Government establishes
and manages large number of industries and institutions which have be-
come biggest employer and there is no good reason why the Government H
612 SUPREME COURT REPORTS [1996] SUPP. 9S.C.R.
A should not be bound to observe the equality clause of the Constitution in
a matter of employment and its dealings with its employees; why the
Corporation set up or owned by the Government should not equally be
bound and why instead such Corporation would become citadels of
patronage and arbitrary action. Such a distinction perhaps would mock at
B the Constitution and the people; some element of public employment is all
that is necessary to take the employee beyond the reach of rule which
denies him the protection of Articles 14 and 16. Independence and integrity
of the- e!fiployees in the public sector should be secured as much as the
independence and integrity of the civil servants. It was, therefore, held that
a writ would lie against the warehousing corporation.
c
Jn Ajay Hasia Etc. v. Khalid Mujib Sehravardi & Ors. Etc., [1981] 2
SCR 79, a Constitution Bench was to consider whether a Society registered
under the J & K Societies Registration Act would be a State under Article
12 of the Constitution amenable to the reach of the writ jurisdiction. The
D Constitution Bench laid the following test to determine whether the entity
is an instrumentality or agency of the State; (1) if the entire share capital
of the corporation is held by the Government, it would go a long way
towards indicating that the corporation is an instrumentality or agency or
Government; (2) where the financial assistance of the State is so much as
to meet almost entire expenditure of the corporation, it would afford some
E indication of the corporation being impregnated with governmental char-
acter; (3) it must also be relevant factor whether the corporation enjoys
monopoly status which is State conferred or State protected; (4) existence
of deep and pervasive State control may afford an indication that the
corp9ration is a State agency or instrumentality; (5) if the functions of the
F corporation are of public importance and closely related to governmental
functions, it would be a relevant factor in classifying the corporation as an
instrumentality or agency of Government; (6) specifically, if a department
of Government is transferred to a corporation, it would be a strong factor
supportive of the inference of the corporation being an instrumentality or
G agency of Government. In Delhi Transport C01poration v. D. T.C. Mazdoor
Corpn., AIR (1991) SC 101, it was held that the State has a deep and
pervasive control over the functioning of the society and, therefore, is an
agency of the State. In Som Prakash Rekhi v. Union of India & Ors., [1981]
2 SCR 111, it was held that the settled position in law is that any authority
under the control of the Government of India comes within the definition
H of a State. Burmashell Oil Co. was held to be an instrumentality of the State
AIR INDIA STATUTORY CORPN. '· UNION LABOUR UNION [K.RAMA,WAMY,J.) 613
thou&h it was a Government company. The authority in administrative law A
is a body having jurisdiction in certain matters of public nature. Therefore,
the ability conferred upon a person by law is to alter his case by his own
will directed to that end. The rights, duties and liabilities or other legal
relation, either of himself or other persons must be present to make a
person an authority. When the person is an agent or functions on behalf B
of the State, as an instrumentality, the exercise of the power is public.
Sometimes, the test is formulated by asking whether corporation was
formed by or under the statute. The true test is not how it is founded in
legal personality but when it is created, apart from discharging public
functions or doing business as the proxy of the State, whether there is an
element of ability in it to effect the relations by virtue of power vested in C
it by law. In that case, it was held that the above tests were satisfied and
the company was directed to pay full pension.
In Manmohan Singh Jaitla v. Commissioner, Union Tenito1y of Chan-
digarh & 01~., [1984) Supp. sec 540, it was held that JD educational D
institution receiving 95% of the grant- in-aid from the Government is "other
authority'' under Article 12 of the Constitution. It was, therefore, held that
the termination of the service without enquiry was without jurisdiction.
Dismissal from service without enquiry was declared illegal under Article
226. In P.K Ramachandra Iyer & Ors. v. Union of India & Ors., [1984) 2
SCC 141, !CAR, a Society registered under the Societies Registration Act, .E
was held and adjunct of the Government of India. It was financed by the
Government of India. Its budget was voted as part of the budget of the
Ministry of Agriculture. It was held that it was the State under Article 12
and was amenable to jurisdiction under Article 32 of the Constitution. The
Project and Equipment Corporation of India which is a subsidiary owned F
by State Trading Corporation was held by this Court inA.L. Kalra v. Project
and Equipment Corpn. of India Ltd., [1984) 3 SCC 316, to be an agency of
the Government within the meaning of Article 12 of the Constitution of
India. In Central Inland Water Transport Corpn. Ltd. & AllT. v. Brojonath
Ganguly & Anr., [1986) 3 SCC 156, a Government company incorporated G
under Companies Act was held to be an instrumentality or agency. In this
case, this Court construed the Fundamental Rights under Articles 14 to 17,
the Directive Principles under Articles 38, 41 and 42, the Preamble of the
Constitution and held that the River Steam Navigation Co. Ltd. was
carrying on the same business as the corporation was doing. A scheme of
arrangement was entered into between the corporation and the company. H
614 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A They were managed by the Board of Directors appointed and removable
by the Central Government. It was, therefore, held that it was an agency
or instrumentality of the State under Article 12. In that behalf this Court
pointed out that the trade or business activity of the State constitutes public
enterprise; the structural forms in which the Government operates in the
B field of public enterprise are many and varied. They may consist of
governmental department, statutory body, statutory corporation or Govern-
ment companies etc.; immunities and privileges possessed by bodies so set
up by the Government under Article 298 are subject to Fundamental
Rights and Directive Principles to further the State policy. For the purpose
of Article 12, the Court must see necessarily through corporate veil to
C ascertain behind the veil the face of instrumentality or agency of the State.
If the instrumentality or agency of the State has assumed the garb of a
governmental company, as defined in Section 3(7) of the Companies Act,
it does not follow thereby that it ceases to be an instrumentality or agency
of the State. Applying the above test, it was held that Inland Water
D Transport Corporation was State.
When its correctness was doubted and its reference to the Constitu-
tion Bench was made in Delhi Transpott Corpn. case (supra), while holding
that Delhi Road Transport Authority was an instrumentality of the State,
it was held that employment is not a bounty from the State nor can its
E; survival be at their mercy. Income is the foundation of any Fundamental
Rights. Work is the sole source of income. The right to work become as
much fundamental as right to life. Law as a social machinery requires to
remove the existing imbalances and to further the progress serving the
needs of the Socialist Democratic Republic under the rule of law. Prevail-
ing social conditions and actualities of the life are to be taken into account
F to adjudge the dispute and to see whether the interpretation would sub-
serve the purpose of the Society.
In Lucknow Development Authority v. M.K Gupta, [1994] 1 SCC 243,
the question was whether a Government Authority is amenable to the
G regulation of Consumer Protection Act. It was held in paragraph 5 and 6
that a Government or a semi-Government body or local authority are
amenable to the Act as much as any other private body rendering similar
service. This is a service to the society and they are amenable to public
accountability for health and growth of society, housing construction or
building activities, by private or statutory body rendering service within the
H meaning of Section 2(0) of the said Act. In Star Enterprises & Ors. v.
AIRINDIASTATIITORYCORPN.,. UNIONIABOURUNION(K.RAMASWAMY,J.J 615
C.l.D.C. of Maharashtra Ltd., [1990] 3 SCC 280, it was held that the State A
or its instrumentality entering into commercial filed must act in consonance
with the rule of law. In paragraph 10, it was held that judicial review of
administrative action has bec_ome expensive and its scope is becoming
, wider day by day. The traditional limitations have been vanishing and the
sphere of judicial scrutiny is being expanded. State activity too is becoming
fast perversive as the State has descended into the conunercial field and B
joint public sector undertaking has grown up. The State action must be
justified by judicial review, by opening up of the public law interpretation.
Accordingly, it was held that the action of company registered under the
Companies Act was amenable to judicial review.
In LIC of India & Anr. v. Consumer Education & Research Centre &
c
Ors., [1995] 5 SCC 482, it was held that in the contractual field of State
action, the State must act justly, fairly and reasonably in the public interest
commensurate with the constitutional conscience and socio-economic jus-
tice; insurance policies of LIC, terms and conditions prescribed therein
involve public element. It was, therefore, held in para 23 at page 498 that D
every action of the public authority or the person acting in public interest
or any act that gives rise to public element, should be guided by public
interest. It is the exercise of the public power or action hedged with public
element that becomes open to challenge. If it is shown that the exercise of
the power is arbitrary, unjust and unfair, it should be n" answer for the E
State, its instrumentality, public authority or person whose acts have the
insignia of public element, to say that their actions are in the field of private
law and they are free to prescribe any conditions or limitations in their
actions. They must be based on some rational and relevant principles. It
must not be guided by irrational or irrelevant considerations. Every ad-
ministrative decision must be hedged by reasons. At page 501 in para 28 it F
was held that though the dispute may fall within the domain of contractual
obligation, if would not relieve the State etc. of its obligation to comply
with the basic requirements of Article 14. To this extent, the obligation is
of public character, invariably in every case, irrespective of there being any
other right or obligation. An additional contractual obligation cannot divest
the claimant of the guarantee under Article 14 of non-arbitrariness at the G
hands of the State etc. in any of its actions.
In G.B. Mahajan & Ors. v. Jalgaon Municipal Council & Ors., [1991]
3 sec 91 at 109, para 38, it was held that in interpretation of the test of
reasonableness in Administrative Law, the words 11 void11 and "voidable 11 H
616 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A found in private law are amenable to public law situations and "carry over
with them meanings that may be in apposite in the changed context. Some
-
'
such thing has happened to the words 'reasonable' or reasonableness etc."
In Shrisht Dhawan (Smt.) v. M/s. Shaw Brothers, [1992] 1 SCC 534 at 553,
para 20 the private law principle of fraud and collusion in Section 17 of
B the Contract Act was applied to public law remedy and it was held "that
fraud in public law is not the same as fraud in private law. Nor can the
ingredient, which has established fraud and commercial transaction be of
assistance in determining fraud in administrative law. It has been aptly
observed in Khwaja v. Secreta1y of State for the Home Department & Ors.,
C (1983) 1 ALL. E.R. 765 that it is dangerous to introduce maxims of
common law as to the effect of fraud while determining fraud in relation
to the statutory law." In Khwaja's case (supra), it was held "despite the
wealth of authority on the subject, there is nowhere to be found in the
relevant judgments (perhaps because none was thought necessary) a defini-
tive exposition of the reasons why a person who has obtained leave to enter
D by fraud is an illegal entrant. To say that the fraud 'vitiates' the leave or
that the leave is not 'in accordance with the Act' is, with respect, to state
a conclusion without explaining the steps by which it is reached. Since we
are here concerned with purely statutory law, I think there are dangers in
introducing maxims of the common law as to the effect of fraud on common
E law transactions and still greater dangers in seeking to apply the concepts
of 'void' and 'voidable'. In a number of recent cases in your Lordships'
House, it has been pointed out that these transplants from the field of
contract do not readily take root in the field of public law. This is well
illustrated in the judgment of the Court of Appeal in the instant case of
F Khwaja (1982) 1 WLR 625 at 630; of (1982) 2 ALL ER 523, .at 527, where
Donaldson LJ spoke of the appellant's leave to enter as being 'voidable ab
initio', which I fmd, with respect, an impossible difficult legal category to
comprehend". Thus, the limitations in private law were lifted and public
law interpretation of fraud was enlarged.
G
In must be remembered that the Constitution adopted mixed
economy and control over the industry in its establishment, working and
production of goods and services. After recent liberalised free economy
private and multi-national entrepreneurship has gained ascendancy and
entrenched into wider commercial production and services, domestic con-
H sumption goods and large scale industrial productions. Even some of the public
AIRINDJASTATIITORYCORPN.>. UNIONJ.A1!0URUNION(K.RAMASWAMY,J.) 617
Corporations are thrown open to the private national and multi-national A
investments. It is axiomatic, whether or not industry is controlled by
Government or public Corporations by statutory form or administrative
clutch or private agents, juristic persons, Corporation whole or Corpora-
,
tion sole, their constitution, control and working would also be subject to
the same constitutional limitations in tlie trinity, viz., Preamble, the Fun-
damental Rights and the Directive Principles. They throw open an element B
of the public interest in its working. They share the burden and shoulder
constitutional obligations to provide facilities and opportunities enjoined
in the Directive Principles, the Preamble and the fundamental rights
enshrined in the Constitution. The word 'control', therefore, requires to be
interpreted in the changing commercial scenario broadly in keeping with
the aforesaid constitutional goals and perspectives.
c
From the above discussion, the following principles would emerge :
(1) The constitution of the Corporation or instrumentality or
agency or Corporatirn aggregate or Corporation sole is not D
of sole material relevant to decide whether it is by or under
the control of the appropriate Government under the Act.
•
(2) If it is a statutory Corporation, it is an instrumentality or
agency of the State. If it is a company owned wholly or
partially by a share capital, floated from public exchequer, it E
gives indicia that it is controlled by or under the authority of
the appropriate Government.
(3) In commercial activities carried on by a Corporation estab-
lished by or under control of the appropriate Government
having protection under Articles 14 and 19(2), it is an in- F
strumentality or agency of the State.
(4) The State is a service Corporation. It acts through its in-
strumentalities, agencies or persons - natural or juridical.
G
(5) The governing power, wherever located, must be subject to
the fundamental constitutional limitations and abide by the
principles laid in the Directive Principles.
(6) The framework of service regulations made in the appropriate
rules or regulations should be consistent with and subject to H
618 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A the same public law principles and limitations.
(7) Though the instrumentality, agency or person conducts com-
mercial activities according to business principles and are
separately accountable under their appropriate bye-laws or
Memorandum of Association, they become the arm of the
B Government.
(8) The existence of deep pervasive State control depends upon
the facts and circumstances in a given situation and in the
altered situation it is not the sole criterion to decide whether
the agency or instrumentality or persons is by or under the
c control of the appropriate Government.
(9) Functions of an instrumentality, agency or person are of
public importance following public interest element.
(10) The instrumentality, agency or person must have an element
D
of authority or ability to effect the relations with its employees
or public by virtue of power vested in it by.law, memorandum
of association or bye-laws or articles of association.
(11) The instrumentality, agency or person renders an element of
E public service and is accountable to health and strength of
the workers, men and women, adequate means of livelihood,
the security for payment of living wages, reasonable condi-
tions of work, decent standard of life and opportunity to enjoy
full leisure and social and cultural activities to the workmen.
F (12) Every action of the public authority, agency or instrumentality
or the person acting in public interest or any act that gives
rise to public element should be guided by public interest in
exercise of public power or action hedged with public element
and is open to challenge. It must meet the test of reasonable-
ness, fairness and justness.
G
(13) If the exercise of the power is arbitrary, unjust and unfair, the
public authority, instrumentality, agency or the person acting
in public interest, though in the field of private law, is not
free to prescribe any unconstitutional conditions or limita-
H tions in their actions.
AIR INDIA SfATIITOR Y CORPN. '· UNION LABOUR UNION (K.RAMASWAMY. J.) 619
__. It must be based on some rational and relevant principles. It must A
not be guided by irrational or irrelevant considerations and all their actions
would satisfy the basic law requirement' of Article 14. The public law
interpretation is the basic tool of interpretation in that behalf relegating
common law principles to purely private law field.
B
From this perspective and on deeper consideration, we are of the
considered view that the two-Judge Bench is Heavy E11gi11eeri11g case nar-
rowly interpreted the words "appropriate Government" on the common law
principles which no longer bear any relevance when it is tested on the anvil
of Article 14. It is true that in Hindustan Machi11e Tool's R.D. Shetty's and
Food Corporatiol! of India cases the ratio of Heavy Ellginee>illg case formed c
the foundation. In Hindustan machi11e Tool's case, there was no inde-
pendent consideration except repetition and approval of the ratio in Heavy
E11ginee1i11g case. It is to reiterate that Heavy Engineering case is based on
conce5'ion. In R.B. Shetty's case, the need to dwelve in-depth into this
aspect did not arise but reference was made to the premise of private law D
interpretation which was relegated to and had given place to constitutional
perspectives of Artie!~ 14 which is consistent with the view we have stated
above. In Food Corpor~tion of India's case, the Bench proceeded primarily
on the premise that warehouses of the Corporation are situated within the
jurisdiction of different State Governments which led it to conclude that
the appropriate Government would be the State Government. E
In the light of the above principles and discussions, we have no
hesitation to hold that the appropriate Government is the Central Govern-
ment from the inception of the Act. The notification published under
Section 10 on December 9, 1976, therefore, was in exercise of its power as F
appropriate Government. So it is valid in law. The learned Solicitor
General is not right in contending that the relevant factors for abolition of
the contract labour system in the establishment of the appellant was not
before the Central Advisory Board before its recommendation to abolish
the contract labour system in the establishment of the appellant. The G
learned Attorney General has placed before us the minutes of the Board
which do show the unmistakable material furnished do indicate that the
work in all the establishments including those of the appellants, is of
perennial nature satisfying all the tests engrafted in Section 10(2) of the
Act. Accordingly, on finding the work to be of perennial nature, it had
recommended and the Central Government had considered and accepted H
620 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A the recommendation to abolish the contract labour system in the aforesaid
services. Having abolished it, the Central Government was denuded of its
power under Section 10(1) to again appoint insofar as the above services
of the Mobile Committee to go once over into the self-same question and
the recommendations of the latter not to abolish the contract labour system
in the above services and the acceptance thereof by the Central Govern-
B ment are without any legal base and, therefore, non est.
The next crucial question for consideration is : whether the High
Court was right in directing enforcement of the notification dated Decem-
ber 9, 1976 issued by the Central Government? Before adverting to that
C aspect, it is necessary to consider the relevant provisions of the Act.
The constitutionality of the Act was challenged in Mis. Gammon
India Ltd. & Ors. v. Union of India & Ors., [1974] 1 SCC 596 on the
touchstone of the Fundamental Rights given by Articles 14, 15, 19(1)(g)
D and of Article 265. The Constitution Bench elaborately considered the
provisions of the Act and had held that the Act in Section 10 empowers
the Government to prohibit employment of contract labour. The Govern-
ment, under that Section, has to apply its mind to various factors, before
publishing the notification in the official Gazette prohibiting employment
of contract labour in any process, operation or other work in any estab-
E lishment. The words "other work in any establishment" were held to be
important. The work in the establishment will be apparent from Section
10(2) of the Act as incidental or necessary to the industry, trade, business,
manufacture or occupation that is carried on in the e;tablishment. The
Government before notifying prohibition of contract labour work which is
F carried on in the establishment, will consider whether the work is of a
perennial nature in that establishment or work is done ordinarily through
regular workmen in that establishment. The words "work of an estab-
lishment" which are used in defining workmen as contract labour being
employed in or connected with the work of an establishment indicate that
the work of the establishment there is the same as work in the estab-
G lishmer.t contemplated by Section 10 of the Act. The contractor undertakes
to produce a given result for the establishment through contract labour.
He supplies contract labour for any work of the establishment. The entire
site is the establishment and belongs to the principal employer who has a
right of supervision and control; he is the owner of the premises and the
H end product and from whom the contract labour receives its payment either
AIR INDIASTATlITORY CORPN. '· UNION LABOUR UNION [KRAMASWAMY.J.J 621
directly or through a contractor. It is the place where the establishment A
intends to carry on its business, trade, industry, manufacture, occupation
after the construction is complete. Accordingly, the constitutionality of the
Act was upheld.
The appalling conditions of contract labour who are victims of ex- B
ploitation have been engaging the attention of various committees for a
long time and in furtherance of the recommendations, the Act was enacted
to benefit, as a welfare measure, the contract labour. Various welfare
measures, viz., provisions for canteens, rest rooms, facilities for supply of
drinking water, latrines, urinals, first aid facilities and amenities for the
dignity of human labour, are in larger interests of the community. Legisla- c
ture is the best Judge to determine what is needed as the appropriate
conditions for employment of comract labour. The legislature is guided by
the needs of the general public in determining the reasonableness of such
requirements under the Act and the rules made thereunder. Suffice it
would, for the purpose of this case, to concentrate on the definition of D
"contract labour" under Section 2{b), "contractor" under Section 2(c).
"establishment" under Section 2(e), "principal employer" under Section
2(g), "wages" under Section 2{h) and of "workman" under Section 2{i),
Under Section 2( c), ''contractor", in relation to an establishment, means a
person who undertakes to produce a given result for the establishment,
other than a supply of goods or articles of manufacture to such estab- E
lishment, through contract labour or who supplies contract labour for any
- work of the establishment and includes a sub-contractor. "Establishment",
under Section 2{e ), means any office or department of the Government or
a local authority, or any place where any industry, trade, business, manufac-
ture or occupation is carried on. "Principal employer", under Section 2(g), F
means, in relation to any office or department of the Government or a local
authority, the head of that office or department of such other officer as the
Government or local authority, as the case may be, may specify in this
behalf; and in a factory, it means the owner or occupier of the factory and
where a person has been named as the manager of the factory under the
Factories Act, 1948, the person so named; in a mine, it means the owner G
or agent of the mine and where a person has been named as manager of
the mine, the person so named; and in any other establishment, any person
responsible for the supervision and control of the establishment, is the
principal employer. 11 Workman 11, under Section 2(i), means any person
employed in or in connection with the work of any establishment to do any H
622" SUPREME COURT REPORTS [1996) SUPP. 9 S.C.R.
A skilled, semi-skilled or unskilled, manual, supervisory, technical or clerical
work for hire or reward, whether the terms of employment be express or
implied, but does not include any such person categorised in clauses (a) to
(e) which are not relevant for the purpose of this case.
B Every principal employer of an establishment under the Act is en-
joined under Section 7 to apply for registration and have it registered
thereunder. The registration is subject lo the revocation under Section 8
on fulfilment of certain conditions enumerated therein. The effect of
non-registration is enumerated in Section 9 in the mandatory language that
no principal employer shall employ contract labour in th.e establishment
C after the specified period. Section 12 enjoins similar obligation on the
contractor for registrations with mandatory language, that from the ap-
propriate date, no contractor to whom ~e Act applies, shall undertake or
execute any work through contract labour except under and in accordance
with the licence issued in that behalf by the licencing officers. Licence is
D granted under Section 13 and revocation, suspension and amendment
thereof have been provided in Section 14 with which we are not concerned
in this case. The welfare measures mandated in Chapter V be complied
with by every establishment. Under Section 21, every principal employer
shall nominate his representative to be present at the time of disbursement
of wages by the contractor and the contractor should be responsible for
E payment of wages to every such workman. Representative of the principal
employer should ensure and certify that wages was paid in the prescribed
manner. In case of default committed by the contractor in paying wages
within the prescribed period or for short payment, the principal employer
should ensure payment of wages in full or the unpaid balance due, as the
case may be, to the contract labour employed by the contractor in his
F
establishment. He is empowered to recover the amount so paid from the
contractor either by deduction from any amount payable to the contractor
under any contract or as a debt payable by the contractor.
Section 10 prohibits employment of contact labour with a 11011
G obstante clause. The appropriate Government, after consultation with the
Central Advisory Board or, as the case may be, State Board, prohibit, by
notification published in the official Gazette, employment of contract
labour in any process, operation or other work in any establishment. Before
issue of any such notification, the appropriate Government is enjoined to
H have regard to the conditions of work and benefits provided for the
AIR INDIASTATIJTORYCORPN. '- UNION lABOUR UNION IKRAMASWAMY,J.] 623
contract labour in the establishment and other relevant factors, such as - A
(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, is of sufficient duration having regard to the nature of
industry, trade, business, manufacture or occupation carried on in that B
establishment; (c) whether it is done ordinarily through regular workmen
in that establishment or an establishment similar thereto; and (d) whether
it is sufficient to employ considerable number of whole-time workmen.
Section 20 makes it mandatory to provide the amenities of welfare and
health facilities enjoined in sections 16 to 19. The expenses incurred in that
behalf may be recovered, by the principal employer, from the contractor. C
The penalty for non-compliance is provided in Sections 23 and 24 of the
Act. Offences by companies are dealt with under Section 25. For the
prosecution of non-cognisable offences, complaint is to be laid with pre-
vious s,anction of the Inspector in writing. Section 27 prescribes limitation
for laying prosecution. D
Rules have been prescribed in that behalf for effective enforcement
of the Act. Forms and terms and conditions of licence have been
prescribed in Rules 21 to 25. Chapter V of the Central Rules deals with
welfare and health of the contract labour. Chapter VI deals with payment
of wages to the workmen and the manner of payment has also been E
provided therein. Form III referred to in Rule 18(3) envisages, among
others, name and address of the principal employer, type of business etc.,
total No. of workmen directly employed, name and address of the contrac-
tor, nature of work in which contract labour is to be employed on any day,
maximum number of contract labour to be employed on any date, probable F
duration of employment of contract labour etc. The licence issued in Form
IV under Rule 21(1) indicates the particulars envisaged in Form III. Form
XIII under Rule 75 requires information as to the list of workmen
employed by the contractor and also to be specified, the name and surname
of the workmen, SI. No., age and sex, father's/husband's name, nature of G
employment, designation, permanent home address of the workman, date
of commencement of employment, signature/thumb impression of
workmen, date of termination of employment, reasons for termination.
Certificate of completion of the work has been provided in Form XV as
per Rule 77. Form XVII,,., per Rule 78(1)(a}(i) is Register of Wages and
provides the particulars, apart from other details, number of days worked, H
624 SUPREME COURT REPORTS (1996) SUPP. 9 S.C.R.
A units of work done, daily-rate of wages/piece rate etc. Register of Wages-
cum-Muster Roll is prescribed in Form XVIII referred to in Rule
78(1)(a)(i) and requires details in particular as to daily attendance, units
worked, designation/nature of work, total attendance, units of work done,
overtime \vages etc.
B It would thus be seen that before the Central or State Advisory Board
advises the appropriate Government under Section 10(1) on the issue
whether or not to abolish the contract labour system, it has before it all the
relevant factual material and the appropriate Government after the receipt
and consideration of the recommendations and the material and takes
C decision.
The pivotal question for consideration is : on abolition of the contract
labour by publication of a notification in the Gazette under sub-section (1)
of Section 10, what would be the consequences? It is seen that so long as
the contract labour system continues, the principal employer is enjoined to
D ensure payment of wages to the contract labour and to provide all other
amenities envisaged under the Act and the Rules including provisions for
food, potable water, health and safety and failure thereof visits with penal
consequences. {
E The 42nd Constitution (Amendment) Act, 1976, brought explicitly in
the Preamble socialist and secular concepts in sovereign democratic of
Bharat with effect from January 3, 1977. The Preamble was held as part of
the Constitution in His Holiness Kesavananda Bharati Sripadagalavarn v.
State of Kera/a, (1973] Supp. SCR 1. The provisions of the Constitution
including Fundamental Rights are alterable b11t the result thereof should
F be consistent with the basic foundation and the basic structure of the
Constitution. Republican and democratic form of Government, secular
chacacter of the Constitution, separation of powers, dignity and freedom
to the individual are basic features and foundations easily discernible, not
only from the Preamble but the whole scheme of the Constitution. In S.R.
G Bommai v. Union of India, (1994] 3 SCC 1, it was held that Preamble of
the Constitution is the basic feature. Either prior to 42nd Constitution
(Amendment) Act, or thereafter, though the word "socialist" was not
expressly brought out separately in the main parts of the Constitution, i.e.,
in the Chapters on Fundamental Rights or the Directive Principles, its
seed-beds are right to participation in public offices, right to seek con-
H sideration for appointment to an office or post; right to life and right to
AIR INDIA STATIITORY CORPN. '· UNION LABOUR UNION fK.RAMASWAMY.J.J 625
equality which would amplify the roots of socialism in democratic form of A
Government; right to equality of statu' and of opportunity, right to equal
access to public places and right to prohibition of discrimination read with
right to freedom, protective discrimination, abolition of untouchability, its
practices in any form a constitutional offence, as guaranteed in Part III &
IV, i.e., Fundamental Rights and Directive Principles which to every citizen
are Fundamental Rights. In Mine1va Mills Ltd. & Ors. v. Union of India & B
Ors., [1981] 1 SCR 206 = AIR (1980) SC 1789, the Constitution Bench had
held that the Fundamental Rights and the Directive Principles are two
wheels of the chariot in establishing the egalitarian social order. Right to
life enshrined in Article 21 means something more than survival of animal
existence. It would include the right to live with human dignity vide Francis
Coralie Mullin v. The Administrator, Union Tenito1y of Ddhi & Ors., AIR
c
(1981) SC 746 para 3; Olga Tellis v. Bombay Municipal Corporation, AIR
(1986) SC 180; Delhi Transpo1t Corporation v. D. T.C. Mazdoor Congress,
AIR (1991) SC 101para223, 234 and 259 = [1991] Supp. 1SCC600. Right
to sustenance allowance during suspension was held in state of Maharashtra
v. Chandrabhan, AIR (1983) SC 803 para 20 to be a part of right to life. D
Right to means of livelihood and the right to dignity, to health, right to
potable water, right to pollution free environment and right to education
have been held to be part of right to life. Social justice has been held to
be fundamental right in Consumer Education and Research Centre v. Union
of India, [1995] 3 SCC 42 = (1995) 1 SCALE 354 at 375. The Directive E
Principles in our Constitution are fore-runners of the U.N.O. Convention
on Right to Development as inalienable human right and every person and
all people are entitled to participate in, contribute to and enjoy economic,
social cultural and political development in which all human rights, fun-
damental freedoms would be fully realised. It is the responsibility of the
State as well as the individuals, singly and collectively, for the development F
taking into account the need for fuller responsibility for the human rights,
fundamental freedoms as well as the duties to the community which alone
can ensure free complete fulfilment of the human being. They promote and
protect an appropriate social economic order in democracy for develop-
ment. The State should provide facilities and opportunities to ensure
development and to eliminate all obstacles to development by appropriate G
economic and social reforms so as to eradicate all social injustice. These
principles are imbibed, as stated earlier, an integral part of our Constitu-
tion in the Directive Principles. Therefore, the Directive Principles now
stand elevated to inalienable fundamental human rights. Even they are
justiciable by themselves. Social and economic democracy is the foundation H
626 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A for stable political democracy. To make them a way of life in the Indian
polity, law as a social engineer, has to create just social order, remove the
inequalities in social and economic life and socio-economic disabilities due
to which people are languishing; and to require positive opportunities and
facilities as individuals and groups of persons for development of human
personality in our civiliscd,idemocratic set up so that every individual would
B strive constantly to rise to higher levels. Dr. Ambedkar, in his closing
speech in Constituent Assembly on November 25, 1949, had lucidly
s/ucidated the meaning of social and political democracy. He stated that it
ineans a way of life which recognises liberty, equality and fraternity as the
principles of life. They are not to be treated as separate items in a trinity.
.C They are not to be treated as separate items in a trinity. They form an
integral union. One cannot divorce one from the other; otherwise it would
defeat the very purpose of democracy. Without equality, liberty would
produce supremacy of the few over the many; equality without liberty
would kill the initiative to improve the individual's excellence, political
equality without socio-economic equality would run the risk of democratic
D institutions to suffer a set back. Therefore, for establishment of just social
order in which social and economic democracy would be a way of life
inequalities in income should be removed and every erdeavour be made
to eliminate inequalities in status through the rule •.:· :.w.
E The word "socialism" was brought into the Preamble and its sweep
elaborately was considered by this Court in several judgments. It was held
that the meaning of the word "socialism" in the Preamble of the Constitu-
tion was expressly brought in the Constitution to establish an egalitarian
social order through rule of law as its basis structure. In Mbwva Mills Ltd.
F case, the Constitution Bench had considered the meaning of the word
"socialism 11 to crystalise a socialistic State securing to its people socio-
economic justice by interplay of the Fundamental Rights and the Directive
Principles. In D.S. Nakara & Ors v. Union of India, [1983] 2 SCR 165,
another Constitution Bench had held that the democratic socialis.n
G achieves socio-economic revolution to end poverty, ignorance, disease and
inequality of opportunity. The basic framework of socialism was held to
provide a decent standard of life to the working people and especially to
provide security from cradle to grave. The less equipped person shall be
assured a decent minimum standard of life to prevent exploitation in any
H form, equitable distribution of national cake and to push the disadvantage
to the upper ladder of life. It was further held that the Preamble directs
AIR INDIASTATIITORY CORPN. '· UNION JABOUR UNION (KRAMASWAMY,J.] 627
the centers of power, the Legislative, Executive and Judiciary, to strive to A
shift up from a wholly feudal exploited slave society to a vibrant, throbbing
socialist welfare society is a long march; but daring the journey to the
fulfilment of goal, every State action, whenever taken, must be directed and
must be so interpreted as to take the society towards that goal, Dr.
V.K.R.V. Rao, one of the eminent economists of India in his "Indian B
Socialism-retrospect and prospect" has stated that equitable distribution of
the income and maximisation of the production is the object of socialism
under the Constitution to solve the problems of unemployment, low income
and mass poverty and to bring about a significant improvement in the
national standard of living. He also stated that to bring about socialism, C
deliberate and purposive action on the part of the State, in regard to
production as well as distribution and necessary savings, investment, use of
human skills and use of science and technology should be brought about.
Changes in property relations, taxation, public expenditure, education and
the social services are necessary to make a socialist State under the D
Constitution, a reality. It must also bring about, apart from distribution of
income, full employment as also increase in the production. In State of
Kamataka v. Shri Ranganatha Reddy & Anr., [1978] 1 SCR 641, a Bench of
nine judges of this Court, considering the nationalisation of the contract
carriages, had held th>.t the aim of socialism is the distribution of the
material resources of the community in such a way as to subserve the E
commonhood. The principle embodied in Article 39(b) of the Constitution
is one of the essential directives to bring about the distribution of the
material resources. It would give full play to the distributive justice. It fulfils
the basic purpose of re-structuring the economic order. Article 39(b),
therefore, has a social mission,it embraces the entire material resources of F
the community. Its task is to distribute such resources. Its goal is to
undertake distribution as best to subserve the common good. In Sanjeev
Coke Manufacturing Co. v. Bharat Cooking Coal Ltd. & Anr., [1983] 1 SCR
1000, another Constitution Bench interpreted the word 11 socialism'1 and
Article 39(b) of the Constitution and had held that the broad egalitarian G
principles of economic justice was implicit in every Directive Principle. The
Jaw was designed to promote broader egalitarian social goals to do
economic justice for all. The object of nationalisation of mining was to
distribute nation's resources. In State of Tamil Nadu Etc. Etc. v. L. Abu
Kavur Bai & Ors. Etc., [1984] 1 SCR 725, the same interpretation was given H
628 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A by another Constitution Bench upholding nationalisation of State Carriages
and Contract Carriages (Acquisition) Act. Therefore, all State actions
should be such to make socio-economic democracy with liberty, equality
and fraternity, a reality to all the people through democratic socialism
under the rule of law.
B In Consumer Education & Research Centre & Ors. v. Union of India
& Ors., (1995] 3 SCC 42, a Bench of three Judges (to which one of us, K.
Ramaswamy, J., was a member) had to consider whether right to health
of workers in the Asbestos industries is a fundamental right and whether
the management was bound to provide the same? In that context, con-
C sidering right to life under Article 21, its meaning, scope and content, this
Court had held that the jurisprudence of personhood or philosophy of the
right to life envisaged under Article 21 enlarges its sweep to encompass
human personality in its full blossom with invigorated health which is a
wealth to the workman to earn his livelihood, to sustain the dignity of
D person and to live a life with dignity and equality. The expression "life"
assured in Article 21, does not connote mere animal existence or con-
tinued drudgery through life. It has a much wider meaning which includes
right to livelihood, better standard of living, hygienic conditions in the
workplace and leisure.
E
Right to health and medical care to protect health and vigour, while
in service or after retirement, was held a fundamental right to a worker
under Article 21, read with Articles 39(e), 41, 43, 48-A and all related
constitutional provisions and fundamental human rights to make the life of
the workman meaningful and purposeful with dignity of person. The right
F
to health of a worker is an integral facet of meaningful right to life, to have
not only a meaningful existence but also robust health and vigour without
which the worker would lead a life of misery. Lack of health denudes him
of his livelihood. Compelling economic necessity to work in an industry
exposed to health hazards, due to indigence for bread-winning for himself
G and his dependents, should not be at the cost of the health and vigour of
the workman.
The Preamble and Article 38 of the Constitution envision social
justice as the arch to ensure life to be meaningful and livable with human
H dignity. Jurisprudence is the eye of law giving an insight into the environ-
AIR INDIASTATIITORYCORPN.» UNION !ABDUR UNION (K.RAMASWAMY,J.) 629
ment of which it is the expression. It relates the Jaw to the spirit of the time A
and makes it richer. Law is the ultimate aim of every civilised society, as a
key system in a given era, to meet the needs and demands of its time.
Justice, according to law, comprehends social urge and commitment. The
Constitution commands justice, liberty, equality and fraternity as supreme
values to usher in the egalitarian social, economic and political democracy.
B
Social justice, equality and dignity of person are cornerstones of social
democracy. The concept of "social justice" which the Constitution of India
engrafted, consists of diverse principles essential for the orderly growth and
development of personality of every citizen. "Social justice" is thus an
integral part of justice in the generic sense. Justice is the genus, of which
social justice is one of its species, Social justice is a dynamic device to c
mitigate the sufferings of the poor, weak, dalits, tribals and deprived
sections of the society and to elevate them to the level of equality to live a
life with dignity of person. Social justice is not a simple or single idea of a
society but is an essential part of complex social change to relieve the poor
etc. from handicaps, penury, to ward off distress and to make their life D
livable, for greater good of the society at large. In other words, the aim of
social justice is to attain substantial degree to social, economic and political
equality, which is the legitimate expectation and constitutional goal. Social
security, just and humane conditions of work and leisure to workman are
part of his meaningful right to life and to achieve self-expression of his
personality and to enjoy the life with dignity. The State should provide E
facility and opportunities to enable them to reach at least minimum stand-
ard of health, economic security and civilised living while sharing according
to their capacity, social and cultural heritage.
In a delivered development society like ours, steeped with unbridge- F
able and ever-widening gaps of inequality in status and of opportunity, law
is a catalyst, rubicon to the poor etc. to reach the ladder of social justice.
What is due cannot be ascertained by an absolute standard which keeps
changing, depending upon the time, place and circumstance. The constitu-
tional concern of social justice as an elastic continuous process is to accord G
justice to all sections of the society by providing facilities and opportunities
to remove handicaps and disabilities with which the poor, the workmen etc.
are languishing and to secure dignity of their person. The Constitution,
therefore, mandates the State to accord justice to all members of the
society in all facets of human activity. The concept of social justice embeds
equality to flavour and enliven the practical content of life. Social justice H
630 SUPREME COURT REPORTS (1996] SUPP. 9 S:C.R.
A and equality are complementary to each other so that both should maintain
their vitality." Rule of law, therefore, Is a potent instrument of social justice
to bring about equality in results. It was accordingly held that right to social
justice and right to health are Fundamental Rights. The management was
directed to provide health insurance during service and at least 15 years
after retirement and periodical tests for protecting the health of the
B
workmen.
In UC of India & Anr. v. Consumer Education & Research Centre &
Ors., [1995] 5 SCC 482, considering the Life Insurance Corporation's right
to fix the rates of premium, this Court had held that the authorities or
C private persons or industry are bound by the Directives contained in Part
IV and the Fundamental Rights in Part III and the Preamble of the
Constitution. The right to carry on trade is subject to the Directives
contained in the Constitution, the Universal Declaration of Human Rights,
European Convention of Social, Economic and Cultural Rights and foe
D Convention on Right to Development for Socio Economic Justice. Social
security is a facet of socio-economic justice to the people and a means to
livelihood. In Murlidhar Dayandeo Kesekar v. Vishwanath Pandu Barde &
Anr., (1995] supp 2 SCC 549 (to which two of us, K. Ramaswamy, and
B.L. Hansaria JJ., were members), the question arose : whether the
E alienation of the lands assigned to Scheduled Tribes was valid in law?
In that context considering the Preamble, the Directive Principles and
the Fundamental Rights including the right to life, this Court had held
that economic empowerment and social justice are Fundamental Rights
to the tribes. The basic aim to the welfare State is the attainment of
substantial degree of social, economic and political equalities and to
F achieve self-expression in his work as a citizen, leisure and social justice.
The distinguishing characteristic of the welfare State is the assumption
by community acting through the State and as its responsibilities to
provide the means, whereby all its members can reach minimum stand-
ard of economic security, civilised living, capacity to secure social status
G and culture to keep good health. The welfare State, therefore, should
take positive measure to assist the community at large to act in collective
responsibility towards its member and should take positive measure to
assist them to achiev~ the above. It was, therefore, held thus :
H "Article 21 of the Constitution assures right to life. To make right
AIR INDIASTATL'TORYCORPN.>. UNION JABOUR UNION [KRAMASWAMY.l.[ 631
to life meaningful and effectiv"1 this Court put up expansive inter- A
pretation and brought within itsambit right to education, health,
\
speedy trial, equal wages for equal work as fundamental rights.
Articles 14, 15. and 16 prohibit discrimination and accord equality.
The Preamble to the Constitution as a socialist republic visualises
to remove economic inequalities and to provide facilities and
B
opportunities for decent standard of living and to protect the
economic interest of the weaker segments of the society, in par-
ticular, Scheduled Castes i.e. Dalits and the Scheduled Tribes i.e.
Tribes and to protect them from "all forms of exploitations". Many
a day have come and gone after 26.1.1950 but no leaf is turned in
the lives of the poor and the gap between the rich and the poor is C
gradually widening on the brillk of being unbridgeable.
Providing adequate means of livelihood for all the citizens and
distribution nf the material resources of the community for com-
mon welfare, enable the poor, the Dalits and the Tribes, to fulfil D
the basic needs to bring about a fundamental change in the
structure of the. Indian society which was divided by erecting
impregnable walls of separation between the people on grounds
of caste, sub-caste, creed, religion, race, language and sex. Equality
of opportunity and status thereby would become the bedrocks for E
social integration. Economic empowerment thereby is the founda-
tion to make equality of status, dignity of person and equal oppor-
tunity a truism. The core of the commitment of the Constitution
to the social revolution through rule of law lies in.effectuation of
the fundamental rights and directive principles as supplementary
and complementary to each other. The Preamble, Fundamental F
Rights and Directive Principles - the trinity - are the conscience
of the Constitution. Political democracy has to be stable. Socio-
\ economic democracy must take strong roots and should become a
way of life. The State, therefore, is enjoined to provide adequate
means of livelihood to the pocrr, weaker sections of the society, the G
Dalits and the Tribes and to distribute material resources of the
community to them for common welfare etc. 11
It was accordingly held that right to economic empowerment is a
fundamental right. The alienation of assigned land without permission of H
632 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A competent authority was held void.
In R. Chandevarappa and Ors. v. State of Kamataka and Ors., (1995]
6 SCC 309 (to which two of us, K. Ramaswamy and B.L. Hansaria, .JJ.,
were members) this Court was to consider whether the alienation of
Government lands allotted to the Scheduled Castes was in violation of the
B Constitutional objectives under Articles 39(b) and 46. It was held that
economic empowerment to the Dalits, the Tribes and the poor as a part
of distributive justice is a Fundamental Right; assignment of the land to
them under Article 39(b) was to provide socio-economic justice to the
Scheduled Castes. The alienation of the land, therefore, was held to be in
C violation of the Constitutional objectives. It was held thus :
"In fact, the cumulative effect of social and economic legislation is
to specify the basic structure. Moreover, the social system shapes
the wants and aspirations that its citizens come to have. It deter-
mines in part the sort of persons they want to be as well as the
D sort of persons they are. Thus an economic system is not only an
institutional device for satisfying existing wants and needs but a
way of creating and fashioning wants in the future. The economic
empowerment, therefore, to the poor, the dalits and the tribes as
an integral constitutional scheme of socio-economic democracy is
a way of life of political democracy. Economic empowerment is,
E
therefore, basic human right and a fundamental right as part of
right to live, equality and of status and dignity to the poor, the
weaker sections, the dalits and the tribes.
The prohibition from alienation is to effectuate the constitu-
F tional policy of economic empowerment under Articles 14, 21, 38,
29 and 46 read with the Preamble of the Constitution. Accordingly
refusal to permit alienation is to effectuate the constitutional
policy. The alienation was declared to be void under Sections 23
of the Contract Act being violative of the constitutional scheme of
economic empowerment to. accord equality of status, dignity of
G 11
persons and economic empowerment.
It was further held that providing adequate means of livelihood for
all the citizens and the distribution of the material resources of the com-
munity for common welfare, enable the poor, the dalits and the tribes, to
H fulfil the basic needs to bring about the fundamental change in the struc-
AIR INDIA SfATUTOR YCORPN. '· UNION LABOUR UNION [K.RAMASWAMY,J.] 633
ture of the, Indian society. Equality of opportunity and status would thereby A
become the 'oedr9cks for social integration. Economic empowerment is,
therefore, a basic human right and Fundamental Right as a part of right
to life to make political democracy stable. Socio-economic democracy must
take strong route and beco~e a·way of \ife. The state, therefore, is enj()ined
to provide adequate means to livelihood to the poor, the weaker sections B
of the society, the dalits and the tribes a~cl distribute material resources of
the community to then1 for common welfare. Justice is an attribute of
human conduct and rule of law is indispensable foundation to establish
socio- economic justice. The doctrine of political economy must include
.interpretation for the public good which is based on justice that would
guide the people when questions of economic and social policy are under C
consideration. In Peerless Ge11eral Fina11ce a11d Investme11t Co. Ltd. & A11r.
v. Reserve Ba11k of India, [1992] 2 SCC 343 at 389 para 55, this Court had
held that stability of the political democracy hinges upon socio-economic
democracy. Right to development is one of the important facets of basic
human rights. Right to self-interest is inherent in right to life. Mahatma D
Gandhiji, the Father of Nation said that "every human being has a right to
live and, therefore, to find the wherewithal to feed himself and where
necessary to cloth and house himself'. In D.K. Yadav v. !.MA. I11dustries
Ltd, [1993] 3 sec 259, the question was whether the workman for absence
in service for 7 days can be removed without an enquiry. In that context a
bench of three judges had held thus : E
"Article 21 clubs life with liberty, dignity of person with means of
livelihood without which the glorious contents of dignity of person
would he reduced to animal eXistence. When right to life inter-
preted in the light of the colour and content of procedure estah- F
lished by law must be in conformity with the minimum fairness and
processual justice, it would relieve legislative callousness despiring
opportunity of being heard and fair opportunities of defence.
Article 14 has a pervasive processual potency and versatile quality,
equalitarian in its soul and allergic to discriminatory dictates.
Equality is the antithesis of arbitrariness". G
In Dalmia Cement (Bharat) Ltd. & Anr. v. Union of India & 01'. Etc.,
JT (1996) 4 SC 555, a Bench of three Judges (to which one of us, K.
Ramaswamy, .I., was a member) was to consider the constitutionality of
Jute Packing Material Act, 1987. The law was made to protect the agricul- H
634 SUPREME COURT REPORTS [1996] SUPP. 9 S.CR
A . turists cultivating jute and jute products. In that context it was held thus :
"the agriculturists have fundamental rights to social justice and
economic empowerment. The Preamble of the Constitution is the
epitome of the basic structure built in the Constitution guarantee-
ing justice - social, economic and political - equality of status and
B of opportunity with dignity of person and fraternity. To establish
an egalitarian social order, the trinity, the Preamble, the Fun-
damental Rights in Part III and Directive Principles of State Policy
(for short, 'Directives') in Chapter IV of the Constitution
delineated the socio-economic justice. The. word justice envision
c in the Preamble is used in broad spectrum to harmonise individual-
right with the general welfare of the society. The Constitution is
the supreme law. The purpose of law is realisation of justice w~ose
content and scope vary depending upon the prevailing social en-
vironment. Every social and economic chahge causes change in the
law. In a democracy governed by rule of law, it is not possible to
D change the legal basis of socio-economic life of the community
without bringing about corresponding change in lhe law. In inter-
pretation of the Constitution and the law, endeavour needs to be
made to harmonise the individual interest with the paramount
interests of the community keeping pace with the realities of ever
E changing social and economic life of the community envisaged in
the Constitution. Justice in the Preamble implies equality consis-
tent with the competing demands between distributive justice with
those of cumulative justice. Justice aims to promote the general
well-being of the community as well as individual's excellence. The
principal end of society is to protect the enjoyment of the rights
F of the individuals subject to social order, well-being and morality.
Establishment of priorities of liberties is a political judgment.
Law is the foundation on which the potential of the society
stands. Law is an instrument for social change as also defender for
G social change.
Social justice is the comprehensive form to remove social
imbalances by law harmonising the rival claims or the interests of
different groups and/or sections in the social structure or in-
H dividuals by means of which alone it would be possible to build up
AIRIND!ASfATlJIDRYCORPN.'- UNIONIABOURUNION[KRAMASWAMY,J.} 635
a welfare State. The idea of economic justice is to make equality A
of status meaningful and the life worth living at its best removing
inequality of opportunity and of status - social, economic and
political.
Law is the ultimate aim of every civilised society, as a key system B
in a given era, to meet the needs and demands of its time. Justice,
according to law, comprehends social urge and commitment. Jus-
tice, liberty, equality and fraternity are supreme consfitutional
values to establish the egalitarian social, economic and political
democracy. Social justice, equality and dignity of person are
cornerstones of social democracy..Social justice consists of diverse C
principles essential for the orderly growth and development of
personality of every citizen. Justice is the generic sense and social
justice is its facet, a dynamic devite to mitigate the sufferings of
the disadvantaged and to eliminate handicaps so as to elevate them
to the level of equality to live life with dignity of person. Social D
justice is not a simple or single idea of a society but it an essential
part of complex social change to relieve the poor etc. from hand-
icaps, penury, to ward them off from distress and to make .their
lives livable for greater good of the society at large. Social justice,
· therefore, gives substantial degree of social, economic and political E
equality, which is the C:onstitutional right of every citizen. In para
19, it was further elaborated that social justice is one of the
disciplines of justice which relates to the society. What is due
cannot be ascertained by absolute standard which keeps changing
·depending upon the. time, place and circumstances. The constitu-
tional concern of social _jllstice, as· an 'elastic continuous process, F
is to transform and accord justice to sections of the society by
providing facilities and opportunities to remove .handicaps and
disabilities with the poor etc. are languishing. It aims to secure
dignity of their persons. It is the duty of the State to accord justice
to all members of the society in all facets of human activity. The G
concept of social justice embeds equality to flavour and enlivens
practical content of life. Social justice and equality are complemen-
tary to each other so that both should maintain their vitality. Rule
of law, therefore, is a potent instrument of social justice to bring
about equality in result.
H
636 SUPREMF COURT REPORTS [1996] SUPP. 9 S.C.R.
A Social and economic justice in the context of our Indian Con-
stitution must, therefore, be understood in a comprehensive sense
to remove every inequality and to provide equal opportunity to all
citizens in social as well as economic activities and in every part
of life. Economic justice means the abolition of those economic
conditions which ultimately result in the inequality of economic
B values between men. It means to establish a democratic way of life
built upon socio-economic structure of the society to make the rule
of law dynamic.
The Fundamental Rights and the Directive are, therefore, har-
c moniously be interpreted to make the law social engineer to provide
flesh blood to the dry bones of law. The Directive would serve the
Court as a beacon light to interpretation. Fundamental Rights are
rightful means to the end, viz., social and etonomic justice provided
in the Directives and Preamble. The Fundamental Rights and the
Directives establish the trinity of equality, liberty and fraternity in
D an egalitarian social order and prevent exploitation.
Social Justice, therefore, forms the basis of progressive stability
in the society and human progress. Economic justice means
abolishing such economic conditions whicil remove the inequality
E of economic value between man and man, concentration of wealth
and means of production in the hands of a few and are detrimental
to the vast Law, therefore, must seek to serve as a flexible instru-
ment of socio-economic adjustment to bring about peaceful socio-
economic revolution under rule of law. The Constitution, the
fundamental supreme lex distributes the sovereign power between
F the Executive, the Legislature and the Judiciary. The Court, there-
fore, must strive to give harmonious interpretation to propel for-
ward march and progress towards establishing an egalitarian social
11
order.
The validity of the Act was accordingly upheld.
G
It is already seen that in D.T.C's case (supra), this Court had held
that right to life to a workman would include right to continue in per-
manent employment which is not a bounty of tb:e employer nor can its
survival be at the volition and mercy of the employer. Income is the
H foundation to enjoy many Fundamental Rights and when work is the source
AIRINDIASfATlITORYCORPN.>. UNION !ABOUR UNION (KRAMASWAMY,J.( 637
of income, the right to work would become as such a fundamental right. A
Fundamental Rights can ill-afford to be consigned to the limbo of un-
defined premises and uncertain application. In Bandhu Mukti Morcha v.
U11io11 of India, [1984] 3 SCC 161, this Court had held that right to life with
human dignity enshrined in Article 21 derives its life breath from the
Directive Principles of State Policy and that opportunities and facilities
B
should be provided to the people. In Olga Tellis's case, this Court had held
that the right to livelihood is an important facet of the right to life.
Deprivation of the means of livelihood would denude the life itself. In
C.E.S.C. Ltd. & Ors. v. S.C. Bose & 01'., [1992] 1SCC441, it was held that
the right to social and economic justice is a fundamental right. Right to
health of a worker is a fundamental right. The right to live with human c
dignity at least with minimum sustenance and shelter and all those rights
and aspects of life which go to make a man's life complete and worth living,
would form part of the right to life. Enjoyment of life and its attainment -
social, cultural and intellectual - without life cannot be meaningful, would
embrace the protection and preservation of life guaranteed by Article 21. D
In Life /11surance Corporation case, a Bench of two Judges had held that
right to economic equality is a fundamental right. In Dalmia Cement Bharat
Ltd. case, right to economic justice was held to be a fundamental right.
Right to Shelter was held to be a• fundamental right in Olga Tellis's case;
P.G. Gupta v. State of Gujarat & Ors., [1995] Supp. 2 SCC 182; Mis.
Shantisar Builders v. Narayan Khim/a/ Totame & Ors., [1990] 1 SCC 520; E
Chameli Singh & Ors. v. State of U.P. & Anr., [1996] 2 SCC 549 etc.
It would, thus, be seen that all essential facilities and opportunities
to the poor people are fundamental means to development, to live with
minimum comforts, food, shelter, clothing and health. Due to economic F
constraints, though right to work was not declared as a fundamental right,
right to work of workman, lower class, middle class and poor people is
means to development and source to earn livelihood. Though, right to
employment cannot, as a right, be claimed but after the appointment to a
post or an office, be it under the State, its agency instrumentality, juristic G
person or private enterpreneur it is required to be dealt with as per public
element and to act in public interest assuring equality, which is a genus of
Article 14 and all other concomitant rights emanating therefrom are
species to make their right to life and dignity of person real and meaning-
ful. The democracy offers to everyone as a doer, an exerter and developer
and enjoyer of his human capacities, rather than merely as a consumer of H
638 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A utilities, as stated by Justice K.K. Mathew, in his "The Right to Equality
and Property under the Indian Constitution" at page 47-48. These exer-
cises of human capacity require assess to the material resources and
also continuous and sufficient intake of material means to maintain
human energy. Lack of access to the material resources is an impedi-
B ment to the development of human personality. This impediment, as a
lack of access to means of labour, if we take labour in its broadest sense
of human resource, requires removal only under the rule of law. To the
workmen, right to employment is the property, source of livelihood and
dignity of person and a means to enjoy life, health and leisure. Equality,
as a principle of justice, governs the distribution of material resources
C including right to employment. Private property ownership has always
required special justifications and qualifications to reconcile the institu-
tion with the public interest. It requires to thrive and, at the same time,
be responsive to social weal and welfare. St. Thomas Acquinas, in his
"Selected Political Writings" (1948 Edn.) at page 169, has stated that the
D private rights and public needs are to be balanced to meet the public
interest "the common possession of things is to be attributed to natural
law, not in the sense that natural law decrees that all things are to be
held in common and that there is to be no private possession, but in the
sense that there is no distinction of property on the grounds of natural
E law, but only by human agreement, and this pertains to positive law, as
we have already shown. Thus, private property is not opposed to natural
law, but is an addition to it, devised by human reason. If, however, there
is such urgent and evident necessity that there is clearly an immediate
need of necessary sustenance, if, for example, a person is in immediate
danger of physical privation, and there is no other way of satisfying his
F need, then he may take what is necessary from another person's goods,
either openly or by stealth. Nor is this strictly speaking fraud or rob-
bery." Property is a social institution based upon an economic need in
a society organised through division of labour, as propounded by Dean
Rosco Pound in his "An Introduction to Philosophy of law" (1954 Edn.)
G page 125, at 129. M.R. Cohen in his "Property and Sovereignty" (13
Cornell} Law Quarterly page 8 at 12 had stated that "the principle of
freedom of personality certainly cannot justify a legal order wherein a
few can, by virtue of their legal monopoly over necessities, compel
others io work under degrading and brutalizing condition." If there is
H no property or if one does not derive fruits and means of one's labour,
•
AIR INilIA STATIITOR Y CORPN. '· UNION !ABDUR UNION [KRAMASWAMY. I] 639
no one would have any incentive to labour· in the broader sense. Social A
progress receives set back without equality of status, fraternity would not
be maximised. Edward Kent in his "Property, Power and Authority", Prof.
Herald Laski in his "Congress Socialist" dated April 11, 1936, had stated
that "those who know the normal life of the poor will realise enough that
without economic security, liberty is not worth living". Brooklyn Law
B
Review page 541 at 5~7 has stated that "In modern translation, public
officers and others who promulgate policies to increase unemployment or
to deny or dilninish benefits to the poor are accountable for the conse-
quences to free human personality." It would, thus, be clear that in a
socialist democracy governed by the rule of law, private property, right of
· the citizen for development and his right to employment and his entitle- c
ment for employment to the labour, would all harmoncously be blended to
serve larger social interest and public purpose.
Mahatma Gandhiji, the Father of the Nation, in his book "Socialism
of My Concept", has said thus :
D
"To a people famishing and idle, the only acceptable form in which
God can dare appear is work and promise of food as, wages. God
created man to work for his food, and said that those who ate
without work were thieves. Eighty per cent of India are compulsory
thieves half the year. Is it any wonder if India ha' become one vast
11 E
prison?
Again, he stressed :
No one has ever suggested that grinding pauperism can lead to
anything else than moral degradation. Every human being has a F
right to live and, therefore, to find the wherewithal to feed himself
and, where necessary, to clothe and house himself... In a well
ordered society the securing of one's livelihood should be, and is
found to be the easiest thing in the world. Indeed, the test to
orderliness in a country is not the number of millionaires it owns,
but the absence of starvation among its masses. G
••• • •• • ••
Working for economic equality means abolishing the eternal con-
flict between capital and labour. It means the levelling down of the
few rich in whose hands is concentrated the bulk of the nation's H
640 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A wealth on the one hand, and the levelling up of the semi-started,
naked millions on the other. A non-violent system of Government
is clearly an impossibility so long as the wide gulf between the rich
and the hungry millions persists. The contrast between the palaces
of New Delhi and the miserable hovels of the poor labouring class
nearby, cannot last one day in a free India in which the poor will
B enjoy the same power as the richest in the land. A violent and
bloody revolution is a certainty one day, unless there is voluntary
abdication or riches and the power that riches give a sharing them
for the common good."
c plannedPandit Jawahar Lal Nehru, the architect of social and economic
democracy, in his "Independence and After That" (Collection of
Speeches 1946-49) Publication Division, Government of India 1949 Edn. at
page 28, had stated that social equality in the widest sense and equality of
opportunity for every one, every man and woman must have the oppor-
tunity to development to the best of his or her ability. However, merit must
D come from ability and hard work and not because of cast or birth or riches.
Social equality would develop the sense of fraternity among the members
of a social groups where each would consider the other as his equal, not
higher or lower. A society, which does not treat each of its members as
equals, forfeits its right of being called a democracy. All are equal partners
E in the freedom. Every one of our ninety four hundred million people must
have equal right to opportunities and blessings that freedom of India has
to offer. To bring freedom in a comprehensive sense to the common man,
material resources and opportunity for appointment be made available to
secure socio-economic empowerment which would ensure justice and full-
ness of life to workmen, i.e., every man and woman. In "Beyond Justice" by
F Agnes Heller at page 180, on the distribution of material, she has stated
about on distributive justice thus :
"The distribution of material goods has always been of concern in
images and theories of .iustice, but, even when the issue was given
G the highest importance, it was subjected to and understood within
a general theory of justice, and addressed \\ithin the framework of
a complete socio-political concept of justice. As we have seen, in
the prophetic concept of justice the misery of the poor called for
divine retribution, since alleviating misery was believed to be a
H matter not of optional charity but of moral duty. To neglect this
AIRIND!A'TATIJTORYCORPN.,. UNIONIABOURUNION(K.RAMASWAMY,J.( 641
-. duty was to sin, to breach the divine laws. Plato proposed the A
abolition of private property for the caste of guardians in order to
make the Republic as a whole just. Aristotle, who coined the term
'distributive justice', recommended as relative equality of wealth -
neither too much nor too little, but 'medium wealth' - as a condition
of good life of the good citizen and the good city. Even Rousseau,
B
the most egalitarian philosopher in respect of distribution, sub-
jected the solution of this problem to :he general patterns of an
socio-political concept of justice.
Locke did not completely break with this longstanding tradition
either. As we have seen, he contributed to the emergence of the C
concept 'retributive justice' rather than 'distributive justice. How-
ever, he had already presented a sophisticated theory legitimizing
inequality in property ownership, a theory deriving property from
work. I have mentioned that Locke did not support the idea 'to
each according to his entitlement' for he put 'entitlement' into the D
'to each' catego.ry, whereas the 'according to' category was defined
by 'work' (mixing work and nature}. But Locke never claimed that
entitlement was the main issue, let alone the only issue of justice.
Hume is undoubtedly the founding father of that branch of socio-
political justice now called 'distributive'. He even claimed that E
property and property alone is the subject matter of justice. He
asserted too that retribution (negative sanctions} in the suspen-
sion of justice for the sake of social utility : 'When any man, vein
in political society, renders himself by his crimes, obnoxious to the
public, he is punished by the laws in his goods and persons; that F
is, the ordinary rules of justice are, with regard to him, suspended
for a moment..,,,,
Humane also deduced justice from 'public utility'. Inequality in
property ownership is just because it is useful. We can imagine two G
cases - and extreme cases - where property (inequality in property
ownership) qua justice loses its social usefulness; the situation of
absolute abundance and the situation of absolute scarcity. In the
former, property is useless, redundant because, if all needs can be
satisfied, we are beyond justice. In the latter situation property
rules are violable, thus justice must be suspended. Yet we live in H
642 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A a situation of limited abundance (or limited scarcity). This is why
property qua justice is useful. Thus in Humane the concept 'justice'
reduces to the idea 'to each according to his property entitlement';
all other uses of the notion 'justice' are seen as relating to the
'suspension on justice' (although the term 'equity' can remain
relevant in these other contexts).
B
Humane, an extremely sincere man, did not shirk from facing
proposals alien to his own. He stated, nature is so liberal to
mankind, that, were all her presents equally divided among the
species, and improved by art and industry, every individual would
c enjoy all the necessaries, and even most of the comforts of life .....
It must also be confessed, that, wherever we depart from this
equality, we rob the poor of more satisfaction than we add to the
rich..... 11
Justice K.K. Mathew in his "Democracy Equality and Freedom" at
D page 55 has, t,herefore, stated that the single ·most important problem in
constitutional law years to come in this country' will be how to implement
the Directive Principles and at the same time give full play to the Fun-
damental Rights. It is only by implementing the Directive Principles that
distributive justice will be achieved in the society. Justice, as Artistotle said,
E "is the bond of men in society" and "states without justice" are, as St.
Augustine said, "robber-bands".
In Keshvananda Bhani's case, Jaganmohan Reddy, J. had held that
"what is implicit in the Constitution is that there is duty on the courts to
interpret the Constitution and the laws to further the Directive Principles
F
which under Article 37 are fundamental in the governance of the country'.
The majority had held in favour of the way for the implementation of the
Directive Principles under rule of law. Justice Palekar, in particular, had
laid emphasis on social and economic justice to make Fundamental Rights
a reality.
G
Coming to the meaning of "regulation" under the Act, in Blacks Law
dictionary (sixth edition) at page 1286 the work "regulation" is defined as
"the act of regulating; a rule or order prescribed for management or
government; a regulating principle; a precept. Rule or order prescribed by
H superior or competent authority relating to action of those under its
AIRIND!ASTATUIDRYCORPN.,. UNIONIABOURUNION(KRAMASWAM,YJ.J 643
control". In Corpus Juris Secunderon (Vol. 76) at page 612, the power to A
regulate carries with it full power or the thing subject to regulation and in
the absence of restrictive words, the power must be regarded as plenary or
the interest of public. It has been held to contemplate or employ the
continued existence of the subject matter. In "Craise on Statute Law" (7th
Edition) at page 258, it is stated that if the legislation enables something B
to be done, it gives power at the same time "by necessary implication, to
do everything which is indispensable for the purpose of carrying out the
purpose in view''. In D.K. V. Prasada Rao & Anr. v. The Government of
Andhra Pradesh represented by its Secretary, _Home Department Secretariat
Buildings, Andhra Pradesh Hyderabad & Ors., {1983) 2 AWR 344 = AIR
{1984) AP, a Division Bench of the Andhra Pradesh High Court, (to which C
one of us, K. Ramaswamy, J., was a member) had to consider the question
elaborately whether the power to regulate Cinematograph Act and Andhra
Pradesh Cinematograph Regulation would include power to fix rates of
admission under the cinema/theatres. Though there was no specific power
under the Act or the Regulation to fix rates of admission, it was held at D
page 360 that "power to regulate would include power to for the rate of
admission into the cinema/theaters''. Lord Justice Hale of England about
three centuries ago in his treatise "De Portibus Moris" reported in Harg
Law Tracts 78 had stated that "when the private property is affected with
a public interest, it ceases tci be. "juris privati" only and it becomes colthed E
with a public interest when used in a manner to make it of public conse-
quence and affe,Ct the community at large; and so using it, the owner grants
to the public an interest in that use, and must submit to be controlled by
the public for common good''. This statement was quoted with approval by
ihe Supreme Court of United States of America in 1876 in the leading
judgment, Munn v. The Peopl~ of Illinois, 94 US 115. Justice Whaite dealing F
with the question whether the legislature can fix the rates for storage of
grains in private warehouses by a statute of 1871 when its interpretation
had come up for consideration of right to property ancl its enjoyment and
of the public interest, it was held that "under such circumstances it is
difficult to see why, if the common carrier or the miller, or the ferrymen G
or the innkeeper or the wharfinger or the baker, or the cartmen, or the
chakney-coachman, pursues a public employment and exercises "a sort of
public office," these plaintiffs in error do not. They stand, to use again the
language of their counsel, in the very "gateway of commerce'', take toll from
all who pass. Their business "most certainly tends to be a common charge H
644 SUPREME COURT REPORTS {1996) SUPP. 9 S.C.R.
A and has become a thing of public interest and use." Therein, there is a
specific observation which is apposite to the facts in this case. It was held
that the statute simply extends the law so as to meet this new development
of commercial progress. There is no attempt to compel the owners to grant
the public an interest in their property, but the Act declares their obliga-
B tion, if they use it in the particular manner. It is immaterial whether the
plaintiffs therein had built their warehouses and established their business
before the regulation was made. It was held that after the regulation has
come into force, they are enjoined to abide by the regulation to carry on
the business. This Court had .approved the ratio in Prasadrao's case; when
it was followed by Karnataka High Court against which an appeal came to
C .be filed and the power to regulate rates of admission into cinema/theaters
was upheld by this Court.
In Horatio J. Olcott v. County Board of Supe1visors of Fond Du Lac
County, 21 L.Ed. 382 at 388, the Supreme Court of United States of
D America had held that whether the railroad is a private or a public one,
the ownership thereof is not material that the ownership may be private
company but they are compellable to permit the public to use their works
in the manner in which such work can be used. In John 0. Graham,
Commissioner, Department of Public Welfare, State of Arizona v. Carmen
Richardson Etc., 29 L.Ed 2nd 534, the question was whether the respondent
E alien in Arizona will be denied of welfare benefits offending 14th Amend- •
ment to the American Constitution. Interpreting 14th Amendment, the
Supreme Court of United States of America had held that the word
"person" in the context of welfare measures encompasses lawfully resident
aliens as well as citizen of the United States and both citizen and alien are
F entitled to the equal protection of the laws of the State in which they reside.
The power to deny the welfare benefit was negated by judicial pronounce-
ment. In Grace Marsh v. State ofAlabama, 90 L.Ed. 265, when the appellant
was distributing pamphlets in privately owned colony, he was convicted of
the offence of trespass on Albama Statue. On writ of certiorary, the
Supreme Court of United States of America deciding the right to pass and
G repass and the right of freedom of expression and equality under 14th
amendment, had held by majority that the Corporate's right to control the
inhabitants of the colony is subject to regulation but the ownership does
not always mean absolute denomination. The more an owner, for his
advantage, opens up his property in use by public in general, the more do
his right become circumscribed by statutory and constitutional rights of
H those who use it. The conviction was in violation of !st and 14th Amend-
A!RINDJASTATIITORYCORPN.,. UNION!ABOURUNION[K.RAMASWAMY,J.) 645
men!. In Republic Aviation Corporation v. National Labour Relations Board, A
324· US 793 = 89 L.Ed. 1372, the owner of privately held bridges, ferries,
turnpikes and railroads etc. may operate them as freely as a farmer does
his farm, but when it operated privately to benefit the public, their opera-
tion is essentially a public function. It was subject to State regulation. The
Supreme Court, therefore, had held that when the rights of the private
owners and the constitutional rights require interpretation, the balance has B
to be struck and the Court would, mindful of the fact that the right to
exercise liberties safeguarded by the Constitution lies at the foundation of
free government by· free men, in all cases weigh the circumstances and
appraise the reasons in support of the regulations of the rights etc. It was
accordingly held that for interpretation of the rights of the private owner C
vis-a-vis constitutional rights, it is but the duty of the Court to weigh the
balance and to consider the case in the dropback. It Georgia Railroad &
Banking Co. v. James M Smith, 128 US 377 = 32 L.Ed. 174, it was held
that in the absence of any provision in the charter, legislature has power
to prescribe rates when the property is put to public use and the statute
was held to be constitutional. Gennan Aliance Insurance Co. v. !KL Lews, D
58 L.Ed. 1011 = 233 US 387, per majority it was held that a business may
be as far as affected with a public interest as to permit legislative regulation
of its rates and charges, although no public trust is imposed upon the
property and although public may not have a legal right to demand and
receive service.
E
It is true in Dena Nath's case, a Bench of two Judges was to consider
the question whether or not the persons appointed as contract labour in
violation of Sections 7 and 12 of the Act should be deemed to be direct
employees of the principal employer. The Bench on literal consideration
of the provisions, had concluded that the Act merely regulates conditions
of service of the workmen employed by a contractor and engaged by the F
principal employer. On abolition of such contract labour altogether by the
appropriate Government neither the Act nor the rules provide that labour
should be directly absorbed by the principal employer. It was, therefore,
concluded that the High Court exercising the power under Article 226 of
the Constitution cannot give direction for absorption. True, Court cannot G
enquire into and decide the question whether employment of contract
labour in any process operation or any other work in establishment should
be abolished or not and it is for the appropriate Government to decide it.
The Act does not provide total abolition of the contract labour system
under the Act. The Act regulates contract labour system to prevent ex-
ploitation of the contract labour. The preamble of the Act furnishes the H
646 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A key to its scope and operation. The Act regulates not only employment of
contract labour in the establishment covered under the Act and its aboli-
tion in certain circumstances covered under Section 10(2) but also "matters
connected therewith". The phrase "matters connected therewith" gives clue
to the intention of the Act. We have already examined in detail the
operation of the provisions of the Act obviating the need to reiterate the
B same once over. The enforcement of the provisions to establish canteen in
every establishment under Section 16 is to supply food to the workmen at
the subsidised rates as it is a right to food, a basic human right. Similarly,
the provision in Section 17 to provide rest rooms to the workmen is a right
to leisure enshrined in Article 43 of the Constitution. Supply of wholesome
C drinking water, establishment of latrine and urinals as enjoined under
Section 18 are part of basic human right to health assured under Article
39 and right to just and human conditions of work assured under Article
42. All of them are fundamental human rights lo the workmen and are
facets of right to life guaranteed under Article 21. When the principal
employer is enjoined to ensure those rights and payment of wages while
D the contract labour system is under regulation, the question arises whether
after abolition of the contract labour system that workmen should be left
in a lurch denuding them of the means of livelihood and the enjoyment of
the basic fundamental rights provided while the contract labour system is
regulated under the Act? The Advisory Committee constituted under
Section 10(1). requires to consider whether the process, operation and
E other work is incidental to or necessary for the indus(ry, trade, business,
manufacture or occupation that is carried on in the establishment, whether
it is of a perennial nature, that is to say, whether it is of substantive duration
having regard to the nature of indus(ry, trade, business, manufacture or
· occupation carried on in that establishment, whether it is done ordinarily
F through regular workmen in the establishment or an establishment similar
thereto, whether it is sufficient to employ considerable number of whole
time workmen. Upon consideration of these facts, recommendation for
abolition was made by the Advisory Board for the appropriate Government
to examine the question and tak~ a decision in that behalf. The explanation
to Section 10(2) provides that when any process or operation or other work
G is of perennial nature, the decision of the appropriate Government thereon
shall be final. It would thus give indication that on the abolition of the
contract labour system by the publication of the notification in the official
Gazette, the necessary concomitant is that the whole time workmen are
required for carrying on the process, operation or other work being done
in the industry, trade, business, manufacture or occupation in that estab-
H
. AIRINDIASfATUTORY CORPN. '· UNION !ABDUR UNION (KRAMASWAMY,J.J 647
lishment. When the condition of the work which is of perennial nature etc., A
as envisaged in sub-section (2) of Section 10, thus are satisfied, the con-
tinuance of contract labour stand prohibited and abolished. The con-
comitant result would be that source of regular employment becomes open.
What would be the consequence that ensue from abolition is the B
question?It is true that we find no express provision in the Act declaring
the contract labour working in the establishment of the principal employer
in the particular service to be the direct employees of the principal
employer. Does the Act intend to deny the workmen to continue to work
under the Act or does it intend to denude him of the benefit of permanent
employment and if so, what would be the remedy available to him. The c
phrase "matters connected therewith" in the Preamble would furnish the
consequence of abolition of contract labour. In this behalf, the Gujarat
Electricity Board case, attempted, by interpretation, to fill in the gap but it
also fell short of full play and got beset with insurmountable difficulties in
its working which were not brought to the attention of the Bench. With due D
respect such scheme is not within the spirit of the Act. As seen, the object
is to regulate the contract labour so long as the contract labour is not
perennial. The labour is required to be paid the prescribed wages and are
provided with other welfare benefits envisaged under the Act under direct
supervision of the principal employer. The violation visits with penal con-
sequences. Similarly, when the appropriate Govermnent finds that the E
employment is of perennial nature etc. contract system stand abolished,
thereby, it intended that if the workmen were performing the duties of the
post which were found to be of perennial nature on par with regular
service, they also require to be regularised. The Act" did not intend to
denude them of their source of livelihood and means of development, F
throwing them out from employment. As held earlier, it is a socio-economic
welfare legislation. Right to socio-economic justice and empowerment are
constitutional rights. Right to means of livelihood is_ also constitutional
right. Right to facilities and opportunities are only part of and means to
right to development. Without employment or appointment, the workmen G
will be denuded of their means of livelihood and resultant right to life,
leaving them in the lurch since prior to abolition, they had the work and
thereby earned livelihood. The Division Bench in Dena Nath's case has
taken too narrow a view on technical consideration without keeping at the
back of the mind the constitutional animations and the spirit of the
provisions and the object which the Act seeks to achieve. The operation of H
1
648 SUPREME COURT REPORTS (1996) SUPP. 9 S.C.R.
A the Act is structured on an inbuilt procednre leaving no escape route.
Abolition of contract labour system ensures right to the workmen for
regularisation of them as employees in the establishment in which they
B
were hitherto working as contract labour through the contractor. The
contractor stands removed from the regulation under the Act and direct
relationship of "employer and employee" is created between the principal
employer and workmen. Gujarat Electricity's case, being of the co-ordinate
-
Bench, appears to have softened the rough edges of Dena Nath's ratio. The
object of the Act is to prevent exploitation of labour. Section 7 and Section
12 enjoin the principal employer and the contractor to register under the
Act, to supply the number of labour required by the principal employer
C through the contractor; to regulate their payment of wages and conditions
of service and to provide welfare aminities, during subsistence of the
contract labour. The failure to get the principal employer and the contrac-
tor registered under the Act visits with penal consequences under the Act.
The object, thereby, is to ensure continuity of work to the workmen in strict
D compliance of law. The conditions of the labour are not left at the whim
and fancy of the principal employer. He is bound under the Act to regulate
and ensure payment of the full wages, and also to provide all the amenities
enjoined under Sections 16 to 19 of the Act and the rules made thereunder.
On abolition !'f contract labour, the intermediary, i.e., contractor, is removed·.
E from the field and direct linkage between labour and principal employer is
established. Thereby, the principal employer's obligation to absorb them
arises. The right of the employee for absorption gets ripened and fructified.
If the interpretation in Dena Nath's case is given acceptance, it would be an
open field for the principal employer to freely flout the provisions of the
Act and engage workmen in defiance of the Act and adopt the principle of
F hire and fire making it possible to exploit the appalling conditions in which
the workmen are placed. The object of the Act, thereby gets rudely shat-
tered and the object of the Act easily defeated. Statutory obligations of
holding valid licence by the principal employer under Section 7 and by the
contractor under Section 12 is to ensure compliance of the law. Dena
G Nath's ratio falls foul of the constitutional goals of the trinity; they are free
launchers to exploit the workmen. The contractor is an intermediary be-
tween the workmen and the principal employer. The moment the contract
labour system stands prohibited under Section 10(1), the embargo to
continue as a contract labour is put an end to and direct relationship has
H been provided between the workmen and the principal employer. Thereby,
AIR IND!ASTATUIDRY CORPN. '· UNION LABOUR UNION [KRAMASWAMY,l.] 649
the principal employer directly becomes responsible for taking the services A
of the workmen hitherto regulated through the contractor. The object of
the penal provisions was to prevent the prohibition of the employer to
commit breach of the provisions of the Act and to put an end to exploita-
tion of the labour and to deter him from acting in violation of the constitu-
tional right of the workmen to attain decent standard of life, living, wages, B
right to health etc.
The founding fathers placed no limitation or fetters on the power of
the High Court under Article 226 of the Constitution except self-imposed
limitations. The arm of the Court is long enough to reach injustice wherever
it is found. The Court as sentinal in the qui vive is to mete out justice in C
given facts. On finding that either the workmen were engaged in violation
of the provisions of the Act or were continued as contract labour, despite
prohibition of the contract labour under Section 10(1), the High Court
has, by judicial review as the basic structure, constitutional duty to enforce
the law by appropriate directions. The right to judicial review is now a basic D
structure of the Constitution by catena of decisions of this Court starting
from Indira Gandhi v. Raj f'{arayan, AIR (1975) SC 2299 and Bommai's
case. It would, therefore, be/necessary that instead of leaving the workmen
in the lurch, the Court would properly mould the relief and grant the same
in accordance with ·Jaw.
E
The public law remedy given by Article 226 of the constitution is to
issue not only the prerogative writs provided therein but also any order or
direction to enforce any of the fundamental rights and "for any other
purpose". The distinction between public law and private law remedy by
judicial adjudication gradually marginalised and became obliterated. In F
L.J.C. v. Escorts Ltd. & Ors., [1986] 1 SCC 264 at 344, this Court in
paragraph 102 had pointed out that the difficulty will lie in demarcating
the frontier between the public law domain and the private law field. The
question must be decided in each case with reference to the particular
action, the activity in which the State or the instrumentality of the State is G
engaged when performing the action, the public law or private law charac-
ter of the question and the host of other relevant circumstances. Therein,
the question was whether the management of LIC should record reasons
for accepting the purchase of the shares? It was in that fact situation that
this Court held that there was no need to state reasons when the manage-
ment of the shareholders by resolution reached the decision. This Court H
650 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A equally pointed out in other cases that when the State's power as economic
power and economic entrepreneur and allocator of economic benefits is
subject to the limitation of fundamental rights, a private Corporation under
the functional control of the State engaged in an activity hazardous to the
health and safety of the community, is imbued with public interest which
B the State ultimately proposes to regulate exclusively on its industrial policy.
It would also be subject to the same limitations as held in M. C. Mehta &
Ors. v. Union of India & Ors., [1987] 1 SCC 395.
The legal right of an individual may be foun,ded upon contract or a
statute or an instrument having the force of law. For a public law remedy
C enforceable under Article 226 of the Constitution, the action of the
authority needs to fall in the realm of public law • be it a legislative act of
the State, an executive act of the State or an instrumentality or a person
or authority imbued with public law element. The question requires to be
determined in each case. However, it may not be possible to generalise the
D nature of the action which would come either under public law remedy or
private law field nor is it desirable to give exhaustive list of such actions.
As held by this Court in Calcutta Gas Co. Ltd. v. State of West Bengal, AIR
(1961) SC 1044 para 5 that if the legal right of a Manager of a company is
denuded on the basis of recommendation by the Board of Management of
the company, it would give him right to enforce his right by filing a writ
E petition under Article 226 of the Constitution. In Mu/chand v. State of M.P.,
AIR (1968) SC 1218, this Court had held that even though the contract was
void due to non-compliance of Article 229, still direction could be given
for payment of the amount on the doctrine of restitution tinder Section 70
of the Act, since the State had 'derived benefit under the void contract. The
F same view was reiterated in State of West Bengal v. V:K Manda/ & Ors.,
AIR (1962) SC 779 at 789 and in New Marine Coal Co. Ltd. v. Union of
India, [1964] 2 SCR 859. In Gujarat State Financial Corporation v. Lotus
Hotel, [1983] 3 SCC 370, a direction was issued to release loan to the
respondent to comply with the contractual obligation by applying the
doctrine of promissory estoppel. In Mahabir Auto Store v. Indian Oil
G Corporation, [1990] 3 sec 752, contractual obligations were enforced
under public law remedy of Article 226 against the instrumentality of the
State. In Shreelekha Vidyarthi v. State of U.P., [1991] 1 SCC 212 contractual
obligations were enforced when public law element was involved. Same
judicial approach is adopted in other jurisdictions, namely, the House of
H Lords in Gillie v. West Noifolk and Wisbech Area Health Authority, (1986)
AIRINDIASfATUTORY CORPN. "· UNION LABOUR UNION [KRAMASWAMY,J.J 651
. . \.
AC 112 wherein the House of Lords held that though the claim of the A
plaintiff was negatived but on the anvil of power of judicial review, it was
held that the public law content of the claim was so great as to make her
case an exception to the general rule. Similarly in Dr. Roy v. Ke11sinstone
and Chelsea Family Practioners Committee, (1992) !AC 624, the House of
Lords reiterated that though a matter of private law is enforceable by B
ordinary actions, a court also is free from the constraints of judicial review
and that public law remedy is available when the remuneration of Dr. Roy
was sought to be curtailed. In L.I. C v. Co11Sumer Education and Research
Centre & Ors., [1995] 5 SCC 482, this Court held that each case may be
examined on its facts and circumstances to find out the nature and scope
of the controversy. The distinction between public law and private law C
remedy has now become thin and practically obliterated.
In writ petition filed under Article 32 of the Constitution of India,
the petitioners, in R.K. Panda & Ors. v. Steel Authority of India & Ors.,
[1994] 5 sec 304, contended that they had been working in Rourkela Plant D
of the Steel Authority of India for period ranging between 10 and 20 years
as contract labour. The employment was of perennial nature. The non-
regularisation defeated their right to a job. The change of contractors
under the terms of the agreement will not have any effect on their continu-
ing as a contract labour of the predecessor contractors. The respondent
contended that due to modernisation of the industry, the contract labour E
are likely to be retrenched. They were prepared to allow the contract
labour to retire on voluntary basis or to be absorbed for local employment.
A Bench of three Judges of this Court had held that the contract labour
were continuing in the employment of the respondent for last 10 years, in
spite of change of contractors, and hence they were directed to be ab- F
sorbed as regular employees. On such absorption, their inter se seniority
be determined, department or job-wise, on the basis of continuous employ-
ment; regular wages will be payable only for the period subsequent to
absorption and for the period thereto. Such of those contract labour in
respect of whom the rate of wages have not fixed, the minimum rate of G
wages would be payable to such workmen of the wages of the regular
employees. The establishment was further directed to pay the wages. If the
staff is found in excess of the requirement, the direction for regularisation
would not stand in their way to retrench the workmen in accordance with
law. If there arises any dispute as regards the identification of the contract
labour to be absorbed, the Chief Labour Commissioner, Central Govern- H
652 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A ment, on evidence, would go into that question. The retrenched employees
shall also be entitled to the benefit of the decision. The 10 year period
mentioned by the Court would count to calculate retrenchment benefits.
This ratio is an authority for several propositions. In spite of there being
no report by the Advisory Board under Section 10(2) and no prohibition
under Section 10(1), the Act was enforced and this Court directed to
B absorb them within the guidelines laid down in the judgment. This ratio
also is an authority for the proposition that the jurisdiciion of the Court
under Article 32, pari mate1ia with Article 226 which is much \vider than
Article 32 "for any other purpose" under which suitable directions are
required to be given based on factual background. Therein the need to
C examine the correctness of Dena Nath's ratio did not arise nor is it a case
of abolition of contract labour. So, its reference to be as a statement of
laying the law in Dena Nath's case.
Prior to the Act came into force, in The Standard-Vacuu1n Refining
D Co. of India v. Its Workmen & Ors., [1969] 3 SCR 466, a Bench of three
'fudges of this Court had held that the contract labour, on reference under
Section 10 of the ID Act was required to be regularised, after the industrial
dispute was adjudicated, under Section 2(k) of the ID Act. Since workmen
had substantial interest in dispute, it was held that the direction issued by
the Tribunal that the contract labour be abolished was held just in the
E circumstances of the case and should not be interfered with. In other
words, this Court upheld the jurisdiction of the Tribunal after deciding the
dispute as an industrial dispute and gave direction to abolish the contract
labour. The power of the Court is not fettered by the absence of any
statutory prohibition.
F
In Security Guards Board for Greater Bombay and Thane District v.
Security & Personnel Service Pvt. Ltd. & Ors., [1987] 3 SCC 413, the
question as regards absorption of security guards employed in any factory
or establishment etc. under Maharashtra Private Security Guards (Regula-
tion of Employment and Welfare) Act, 1981 had come up for considera-
G tion. It was held that the exemption under Section 23 is in regard to the
security guards employed in the factory or establishment or in any class or
classes of fabricating factory's establishment. The co-relationship of the
security guards or classes of security guards who may be exempted from
the operation of the Act is with the factory or establishment or class or
H classes of factories or establishments in which they work and not with the
AIR INDJASfATLTORY CORPN. '· UNION IABOUR UNION [KRAMASWAMY,J.) 653
agency or agent through and by whom they were employed. In other words, A
the ratio of that case is that it is not material as to through which contractor
the employee came to be appointed or such labour came to be engaged in
the establishment concerned. The direct relationship would emerge after
the abolition of the contract labour. In Sankar Mukherjee & Ors. v. Union
of India & 01>·., AIR (1990) SC 532, the State Government exercising the
B
power under Section 10 of the Act prohibited employment of contract
labour in cleaning and stacking and other allied jobs in the brick depart-
ment. Loading and unloading of bricks from wagons and trucks was not
abolished. Writ petition under Article 32 of the Constitution of India was ·
filed. A Bench of three Judges of this Court had held that the Act requires
to be construed liberally so as to effectuate the object of the Act. The c
bricks transportation to the factory, loading and unloading are continuous
process; therefore, all the jobs are incidental to or allied to each other. All
the workmen performing these jobs were to be treated alike. Loading and
unloading job and the other jobs were of perennial nature. Therefore, there
was no justification to exclude the job of loading and unloading of bricks D
from wagons and trucks from the purview of the notification dated
February 9, 1980. Thus, this Court had given direction to abolish the
contract labour system and to absorb the employees working in loading and
unloading the bricks which is of perennial nature. In national Federation of
Railway Porters, Vendors & Bearers v. Union Of India & Ors., [1995] 3 SCC
152, a Bench of two Judges, to which one of us (K. Ramaswamy, J.) was a E
member, was to consider whether the Railway Parcel Porters working in
the different railway stations were contract labour for several years. When
they filed writ petition, the Central Assistant Labour Commissioner was
directed to enquire and find out whether the job is of a permanent and
perennial nature and whether the petitioners were working for a long F
period. On receipt of the report, with findings in favour of workers, the
Bench had directed the Railway Administration to regularise them into the
service. This case also is an authority for the proposition t,!iat in an
appropriate case the Court can give suitable directions to the competent
authority, namely, Central Labour Commissioner to enquire and submit a
report. The perennial nature of the work and other related aspects are G
required to be complied with before directions are given under of Section
10(1) and 10(2) of the Act. On receipt of the report, the Court could mould
the relief in an appropriate manner to meet the given situation. In Fraga
Tools case, this Court held that mandamus may be issued to enforce duties
H
654 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A and positive obligation of a public nature even though the persons or the
authorities are not public officials or authorities. The same view was laid
in Anadi Mukta v. V.R. Rudani, [1989] 2 SCC 691 and Unni Krishnan v.
State of A.P., [1993] 1 SCC 645. In Comptroller & Auditor General of India
v. KS. Jagannathan, [1986] 2 SCC 679, this Court held that a mandamus
would be issued to implement Directive Principles when Government have
B adopted them. They are under public obligations to give preferential
treatment implementing the rule of reservation under Articles 14 and 16(1)
and (4) of the Constitution. In L.l.C. case, directions were issued to frame
policies accessible in common man.
C Thus, we hold that though there is no express provision in the Act
for absorption of the employees whose contract labour system stood
abolished by publication of the notification under Section 10(1) of the Act,
in a proper case, the Court as sentinal in the qui vive is required to direct
the appropriate authority to act in accordance with law and submit a report
D to the Court and based thereon proper relief should be granted.
It is true that learned counsel for the appellant had given alternative
proposal, but after going through its contents, we are of the view that the
proposal would defeat, more often than not, the purpose of the Act and
keep the workmen at the whim of the establishment. The request of the
E learned Solicitor General that the management may be left with that
discretion so as to absorb the workman in the best manner favourable to
the workmen cannot be accepted. In this behalf, it is necessary to recapitu-
late that on abolition of the contract labour system, by necessary implica-
tion, the principal employer is under statutory obligation to absorb the
F contract labour. The linkage between the contractor and the employee
stood snapped and direct relationship stood restored between principal
employer and the contract labour as its employees. Considered from this
perspective, all the workmen in the respective services working on contract
labour are required to be absorbed in the establishment of the appellant.
Though there exists no specific scale of pay to be paid a regular employees,
G it is for the establishment to take such steps as are necessary to prescribe
scale of pay like class 'D" employees. There is no impediment in the way
of the appellants to absorb them in the last grade, namely, grade IV
employees on regular basis. It is seen that the criteria to abolish the
contract labour system is the duration of the work, the number of
H employees working on the job etc. That would be the indicia to absorb the
AIR INDIA STATUTORY CORPN. '· UNION !ABDUR UNION [KRAMASWAMY, !.) 655
employees on regular basis in the respective services in the establishments. A
Therefore, the date of engagement will be the criieria to determine their
inter se seniority. In case, there would be any need for retrenchment of any
excess staff, necessarily, the principle of "last come, fist go" should be
applied subject to his reappointment as and when the vacancy arises.
Therefore, there is no impediment in way of the appellants to adopt the B
above procedure. The award proceedings as suggested in Gujarat Electricity
Board case are beset with several incongruities and obstacles in the way of
the contract labour for immediate absorption. Since, the contract labour
gets into the service of the principal employer, the Union of the Existing
employees may not espouse their cause for reference under Section 10 of
the ID Act. The workmen, on abolition of contract labour system have no C
right to seek reference under Section 10 of!D Act. Moreover, the workmen
immediately are kept out of job to endlessly keep waiting for award and
thereafter resulting in further litigation and delay in enforcement. The
management would always keep them at bay for absorption. It would be
difficult for them to work out their right. Moreover, it is a tardy and D
time-consuming process and years would role by. Without wages, they
cannot keep fighting the litigation endlessly. The right and remedy would
be a teasing illusion and would be rendered otiose and practically compel
the workmen to remain the mercy of the principal employer. Considered
from this pragmatic perspective, with due respect to the learned Judges, E
the remedy carved out in Gujarat Electricity Board case would be unsatis-
factory. The shortcomings were not brought to the attention of this Court.
So, that part of the direction in Gujarat Electricity Board case is not, with
due respect to the Bench, correct in law. The Dena Nath's case, as held
earlier, has not correctly laid down the law. Therefore, it stands over-ruled.
Moreover, the Bombay High Court has correctly held that the High Court F
under Article 2,l6 of the Constitution would direct the principal employer
to absorb the contract labour, after its abolition, even though some of the
contractors have violated Section 12 of the Act and the appellants have
violated Section 7 of the Act. In the judgments under appeal, High Court
has directed to absorb the services of the workman from the date of the G
judgment. The respondent-Union did not challenge it. We are, therefore,
constrained not to grant the benefit to the employees of the respondent-
Union from the date of the abolition of the contract labour system. We,
therefore, uphold the direction issued by the High Court to regularise their
services with effect from the respective dates of the judgments of the High H
656 SUPREME COURT REP ORTS (1996] SUPP. 9 S.C.R.
A Court with all consequential benefits. Before conclusion, we express our
deep appreciation for valuable assistance given by all the learned counsel .
in the appeals.
The appeals are accordingly dismissed, but, in the circumstances,
without costs.
B
S.B. MAJMUDAR, J. : (Concurring Judgment) I have gone through
the lucid and erudite judgment prepared by learned Brother Ramaswamy,
J. I wholly concur with what has been held therein. I endorse each and
every conclusion to which my learned Brother Ramaswamy, J. has reached.
C However, as the fate of erstwhile contract labour on abolition of contract
labour system under the provisions of Section 10(1) of the Contract Labour
(Regulation and Abolition) Act, 1970 has always raised a vaxed question
before the High Courts and before this Court. I have thought it fit to pen
my observations on this question. It is true that a Bench of two-Judges of
D this Court to which I was a party in the case of Gujarat Electricity Board,
Thennal Power Station, Ukai, Gujarat v. Hind Mazdoor Sabha & Ors., [1995)
5 SCC 27 in the light of earlier judgment of two-Judges' Bench of this Court
in the case of Dena Nath v. National Fertilizers Ltd., [1992] 1 SCC 695 had
to soften the rigour of the latter decision, by trying to evolve a locus
paenitentiae for contract labourers on abolition of their contract labour
E from the establishment. But on further consideration it is found, as rightly
held by Brother Ramaswamy, J., that such a scheme would not be work-
able. Under the Contract Labour (Regulation and Abolition) Act, 1970
(hereinafter referred to as 'the Act') twin methodology had been adopted
by the legislature. In the first instance, it sought to regulate contract labour
p employed in any establishment wherein such labour was not of a perennial
nature but had to be regulated so that the right to life available to workmen
as per Article 21 would not be rendered illusory. Various welfare measures
have been provided by the Act in connection with such regulations. The
contract workers who are engaged by the contractor for the benefit of the
principal employer are brought within the beneficial sweep of Chapter V
G of the Act. Section 16 deals with provision of canteens for such workmen.
Section 17 deals with rest-rooms. Section 18 enjoins the contractor employ-
ing such contract labour in connection with work of such establishment to
provided sufficient supply of wholesome drinking water as well as sufficient
number of latrines and urinals of the prescribed types and washing
H facilities. Section 19 enables such contract labour to get first aid facilities
AIR INDIA STATlJTORY CORPN. '· UNION LABOUR UNION [S.B. MAJMUDAR I] 657
to be provided in the establishment. Section 20 imposes on the principal A
employer liability to discharge the obligations regarding providing of
amenities as laid down by Sections 16, 17, 18 and 19 for the benefit of the
contract labour employed in the establishment, if the contractor defaults
in his duties. Section 21 enjoins the principal employer to see to it that
proper wages are paid to such contract labour and to nominate a repre- B
sentative duly authorised by him to be present at the time of disbursement
of wages by the contractor and it shall be the duty of such representative
to certify the amount paid as wages as laid down by Section 21. Sub-service
(4) of Section 21 makes the principal employer liable to pay such wages to
the contract labourers if the contractor fails to make payment of their
wages, and then to recover the same from the contractor. Chapter VI deals C
with penalties and procedure for enforcement of these welfare measures
for the benefit of the contract labourers who are brought within the
regulatory sweep of the Act. This is one facet of the Act. The other object
of the Act is to abolish the contract labour system. In cases where the
contract labour is employed on a work which is of perennial nature, that D
is to say, it is of sufficient duration having regard to the nature of industry,
trade, business, manufacture or occupation that is carried on in the estab-
lishment of the principal employer. As per Section 10(2) of the Act, once
conditions laid down therein are satisfied, the appropriate Government on
the report of the Advisory Board has to abolish contract labour system
from such process, operation or other work in an establishment. The E ·
conditions for undertaking such an exercise by such Government in con-
nection with the establishment of principal employer are laid down by
Section 10(2) clauses (a) to (d). These conditions clearly indicate that the
work which the contract labourers are doing is of a perennial nature and
is incidental to or necessary for the industry, trade, business, manufacture F
or occupation carried on in that establishment and it is otherwise done
ordinarily through regular workmen in that establishment or an estab-
lishment similar thereto and it is sufficient to em11loy considerable number
of whole time workmen. Once these conditions art 'Stablished, on the basis
of the report of the advisory board concerned, i1 · . an obligation of the
appropriate Government to abolish such contract I · 1ur system prevailing G
in the given process or operation in the establishme. .
Now the moot question is as to what happens after such prohibition.
It is obvious that prior to abolition, the contract labour doing work of
perennial nature on the establishment of principal employer had the ad- H
658 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A vantage of regulatory provisions found in Chapter V and these provisions
were given teeth by the legislature in Chapter VI by providing for penalties
and procedure for imposition of sanctions by prosecution. The question is
whether after abolition of contract labour system, the contract labourers
who were earlier having regulatory protections would be rendered perso11a
B 11011 grata and would be thrown out from the establishment and told off the
gates. Then in such a case the remedy of abolition of contact labour would
be worse than the disease and it has to be held that the legislature while
trying to improve the lot of erstwhile contract labourers who are doing
work of perennial nature for the principal employer and are doing work
C which is otherwise to be done by regular workmen had really left them in
the lurch by making them lose all the facilities available to contract labour
on the establishment as per Chapter V and desired them to wash their
hands of the establishment and get out and face starvation. It is axiomatic
that if they continued to be contract labourers their wages would have been
D guaranteed nnder Section 21 of the Act with an obligation in the principal ·
employer to pay them if the contractor fails to discharge his obligation in
connection with payment of wages. Wages are the livelihood of workman
and his large number of dependents. If on abolition of contract labour
system, contract labour itself is to be abolished, it would cause economic
ruin and economic death to contract labourer and his dependents for
E amelioration of whose lot order under Section 10 is to be passed. If it is
held that on abolition of contract labour system, the erstwhile contract
labourers are to be thrown out of the establishment, lock, stock and barrel,
it would amount to throwing the baby out with the bath water. That
obviously cannot be the scope, ambit and purport of Section 10 of the Act.
F It has to be kept in view that contract labour system in an establishment is
a tripartite system. In between contract workers and the principal employer
is the intermediary contractor and because of this intermediary the
employer is treated as principal employer with various statutory obligations
flowing from the Act in connection with regulation of the working condi-
G tions of the contract labourers who are brought by the intermediary con-
tractor on the principal's establishment for the benefit and for the purpose
of the principal employer and who do his work on his establishment
through the agency of the contractor. When these contract workers carry
out the work of the principal employer which is of a perennial nature and
H if provisions of Section 10 get attracted and such contract labour system in
AIR INDIA STATITTOR Y CORPN. '- UNION JABOUR UNION IS.B. MAJMUDAR J.) 659
the establishment gets abolished on fulfillment of the conditions requisite A
for that purpose, it is obvious that the intermediary contractor vanishes and
along with him vanishes the term 'principal employer'. Unless there is a
contractor agent there is no principal. Once the contractor intermediary
goes the term 'principal' also goes with it. Then. remains out of this
tripartite contractual scenario only two parties - the beneficiaries of the B
abolition of the erstwhile contract labour system i.e. the workmen on the
one hand and the employer on the other who is no longer their principal
employer but necessarily becomes a direct employer for these erstwhile
contract labourers. It was urged that Section 10 nowhere provides for such
a contingency in express term. It is obvious that no such express provision C
was required to be made as the very concept of abolition of a contract
labour system wherein the work of the contract labour is of perennial
nature for the establishment and which otherwise would have been done
by regular workmen, would posit improvement of the lot of such workmen
and not its worsening. Implicit in the provision of Section 10 is the legisla-
tive intent that on abolition of contract labour system, the erstwhile con- D
tract-workmen would become direct employees of the employer on whose
establishment they were earlier working and were enjoying all the
regulatory facilities on that very establishment under Chapter V prior to
the abolition of such contract labour system. Though the legislature has
expressly not mentioned the consequences of such abolition, but the very E
scheme and ambit of Section 10 of the Act clearly indicates the inherent
legislative intent of making the erstwhile contract labourers direct
employees of the employer on abolition of the intermediary contractor. It
was contended that contractor might have employed a number of workmen
who may be in excess of the requirement and, therefore, the principal p
employer on abolition of the contract labour may be burdened with excess
workmen. It is difficult to appreciate this contention. The very condition
engrafted in Section 10(2)(d) shows that while abolishing contract labour
from the given establishment, one of the relevant considerations for the
appropriate Government is to ascertain whether it is sufficient to appoint G
considerable number of whole time workmen. Even otherwise there is an
inbuilt safety valve in Section 21 of the Act which enjoins the principal
employer to make payment of wages to the given number of contract
workmen whom he has permitted to be brought for the work of the
establishment if the contractor fails to make payment to them. It is,
H
660 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A therefore, obvious that the principal employer as a worldly businessman in
his practical commercial wisdom would not allow contractor to bring larger
number of contract labour which may be in excess of the requirement of
the principal employer. On the contrary, the principal employer would see
to it that the contractor brings only these number of workmen who are
B required to discharge their duties to carry out the work of the principal
employer on his establishment through, of course, the agency of the
contractor, in fact the scheme of the Act and regulations framed there-
under clearly indicate that even the number of the workmen required from
the given contract work is to be specified in the licence given to the
C contractor. Consequently, the aforesaid apprehension projected on behalf
of the principal employer is more imaginary than real. Even apart from
that, after the absorption of the erstwhile contract workmen by the prin-
cipal employer on abolition of contract labour system under Section 10, it
is always open for the employer as an entrepreneur, in an appropriate case,
if the excess working staff is not found to be required by him to retrench
D such excess staff in accordance with law by following the provisions of the
Industrial Disputes Act, 1947. But that has nothing to do with the moot
question as to what is the fate or erstwhile contract labour on abolition of
contract labour system under the provisions of Section 10 of the Act. As
rightly observed by Brother Ramaswamy, J. in his judgment, the scheme
E envisaged in the Gujarat Electricity Board's case is not workable as the
existing workmen may not espouse the cause of erstwhile contract workmen
who were aspiring to get employment on regular basis and even if they
espouse their cause the litigation itself would be spread over a number of
years and in the meantime the erstwhile contract labourers and their
F dependents would starve. I, therefore, wholly agree with Brother Ramas-
wamy, J. in his view that the scheme envisaged by Gujarat Electricity Board's
case is not workable and to that extent the said judgment cannot be given
effect to.
Before parting with this judgment, it has to be appreciated that
G engagement of contract labour has been found to be unjustified by a catena
of decisions of this Court. When the work is of perennial nature and instead
of engaging regular workmen, the system of contract labour is resorted to,
it would only be for fulfilling the basic purpose of securing monetary
advantage to the principal employer by reducing expenditure on work
H fords. It wonld obviously be an unfair labour practice and is also an
AIRINDIASTATUIORY CXJRPN. v. UNION LABOUR UNION (S.B. MAJMUDAR, J.J 661
economically short-sighted and unsound policy, both from the point of view A
-· of the undertaking concerned and the country as a whole. Such a system
was tried to be put to end by the legislature by enacting the Act but when
it found that there are certain activities of establishment where the work is
not of perennial nature then the contract labour may not be abolished but
still it would be r~quired to be regulated so that the lot of the workmen is B
not rendered miserable. The real scope and ambit of the Act is to abolish
contract labour system as far as possible from every establishment. Conse-
quently, on abolition which is the ultimate goal, the erstwhile regulated
contract labour cannot be thrown out of establishment as tried to be
submitted on behalf of the management taking resort to the express lan-
guage of Section 10 of the Act. Such a conclusion reached by the two-Mem- C
ber Bench in Dena Nath's case (supra), flies in the face of the very scope
and ambit of the Act and frustrates the very scheme of abolition of contract
labour envisaged by the Act. Such a conclusion, with respect, cannot be
countenanced, as it results· in a situation where relatives of the patient are
told by the operating surgeon that operation is successful but patient has D
died.
So far as the judgment of the three-Member Bench of this Court in
R.K Panda & Ors. v. Steel Authority of India & Ors., (1994) 5 SCC 304 is
concerned, it is true that in para 6 of the Report in the last four lines it is
observed while referring to Dena Nath's case (supra) that neither the Act E
nor the Rules framed by the Central Government or by any appropriate
Government provide that upon abolition of the contract Jabour, the
labourers would be directly absorbed by the principal employer, but that
is not the ratio of the decision of the said three-Member Bench. It has only
referred to what Dena Nath's case decided. It is also required to be noted F
that the question which has been posed for our consideration is as to what
is that fate of the erstwhile contract Jabour on abolition of contract labour
system in the establishme.nt under Section 10 of the Act. Such a question
had not come up for consideration before this Court in R.K Panda's case
{supra). Therefore, it could not be urged that the ratio of Dena Nath's case G
was approved by three-Member Bench in RK Panda's case (supra). In the
latter case no abolition was directed by the appropriate Government under
Section 10 of the Act. It was a case in which the contract labourers were
claiming to be absorbed directly by the principal employer without there
being any order under Section 10. Consequently, the question with which
we are concerned in the present case did not fall for consideration of the H
662 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.
A Bench in RK Pa11da's case (supra), nor had the Bench decided that
question one way or the other. I, therefore, respectfully concur with the
view taken by Brother Ramaswamy, J. on the scope and ambit of Section •
10 of the Act and hold that on abolition of the contract labour system from
any establishment under Section 10 of the Act by the appropriate Govern-
ment the logical and legitimate consequences thereof will be that the
B erstwhile regulated contract labour covered by the sweep of such abolition
for the concerned activities would be entitled I to be treated as direct
employees of the employer on whose establishment they were ear lier
working and they would be entitled to be treated as regular employees at
least from the day on which the contract labour system in the establishment
for the work which they were doing gets abolished.
T.N.A. Appeals dismissed.
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