Holding

The Court held that there is no employer‑employee relationship between the Railway Administration and the employees of railway institutes and clubs, and therefore they cannot be treated as railway employees.

Summary

The petition filed under Article 32 by an association of about 2,000 employees of railway institutes and clubs sought to have these workers treated on par with employees of statutory railway canteens. The petitioners argued that the institutes and clubs are integral parts of the railways, receive grants‑in‑aid and other facilities, and therefore their staff should enjoy the same service conditions as canteen staff. The respondents contended that the institutes and clubs are managed by independent committees, their staff are paid from membership fees and a per‑capita grant from the Staff Benefit Fund, and there is no employer‑employee relationship with the Railway Administration. The Court examined the financial and administrative arrangements, noting that the grants cover only a portion of activities and that wages are paid by the institutes themselves, unlike canteen staff whose salaries are subsidised by the railways. Concluding that there is a material difference and no legal employer‑employee nexus, the Court dismissed the petition, holding that any remedy for unsatisfactory service conditions lies elsewhere.

Issues considered

Whether employees of railway institutes and clubs should be treated as railway employees on par with statutory canteen employees.
Whether an employer‑employee relationship exists between the Railway Administration and the staff of institutes and clubs.
Whether the writ petition is maintainable concerning locus standi and joinder of parties.

Legislation cited

Factories Act, 1948

Subjects

Railway institutesRailway clubsStatutory canteensEmployer-employee relationshipArticle 32Welfare facilitiesService conditions

Judgment

ALL INDIA RAILWAY INSTITUTE EMPLOYEES' ASSOCIA-
A
TION THROUGH THE GENERAL SECRETARY y
v.
UNION OF INDIA THROUGH THE CHAIRMAN

FEBRUARY 27, 1990
B
[RANGANATH MISRA, P.B. SAWANT AND
K. RAMASWAMY, JJ.]

C
Railway Institutes and Clubs-Employees-Whether entitled to be
treated on par with employees in Statutory Canteens run by Railway
Administration.

This petition under Article 32 of the Constitution of India has
-
been filed by an Association of about 2,000 employees working in 500
Railway Institutes and Clubs in various parts of the country claiming
that they should be treated on the same par as the employees in the
D Statutory Canteens run by the Railway Administration. In support of
their claim the petitioners while enumerating the range of activities
handled by them, they have attempted to draw a parallel with the
regular employees contending inter alia that not only they receive
grants-in-aid and a number of facilities from the Govt., the Railway
Board has always treated these institutes and clubs as an integral part
E of the Railways.

The Respondents resisted the petition stoutly and contended that
the Institutes and Clubs are managed by a Committee representing its
membership which engages stich staff as is required and meets the cost
of their wages and allowances etc., that the Railways are not the princi-
F pal employers of their staff, that they are not paid directly from the
Consolidated Fund of India and whatever facilities are provided to
them they are confined to the wholetime staff as a special case and not
on account of any obligation under any law. On consideration of respec-
tive contentions and documents on record while dismissing the petition,
this Court,
G
HELD: There is a material difference between the canteens run in
the Railway establishments and the Institutes and Clubs. The Institutes/
Clubs have to run on the membership fees and fixed grants received
from the Staff Benefit Fund. The fund consists of receipts from the
forfeited provident fund and bonus, and of fines. The grant is made as
.,_
'

H pointed out by the Respondents, to each Institute/Club at the rate of

594
RAILWAY EMP. ASSCN. '· U.0.l. [SAWANT, J.[ 595

Rs.14 per capita of the non-gazetted staff employed at the relevant
A
establishment. Out of this contribution, only Rs.4 per capita are spent
on the activities of the education, relief in case of distress and sickness.
sports, scouts activities and for other miscellaneous purposes. There is
further no dispute that the wages and .allowances of the Staff of the
Institutes/Clubs are paid by the Institutes/Clubs themselves and they
are not subsidised by the Railway Administration as in the case of the B
statutory and non-statutory recognised canteens. [600H] [601E-F & G]

-
On the facts, it cannot be held that there is a relationship of'
employer-employee between the Railway Administration and the
employees engaged in the Institutes and Clubs. Neither law nor facts
spell out such relationship. If the present service conditions of these
e_mployees are unsatisfactory, the remedy lies elsewhere. [603B-C]
c
CIVIL ORIGINAL JURISDICTION: Writ Petition No. 1389
of 1987.

(Under Article 32 of the Constitution of India). D

G. Ramaswamy, Additional Solicitor General, M.K. Rama-
murthy, Mrs. Shyamala Pappu, K."K. Venugopal, Gobind M.ukhoty,
M.A. Krishnamurthy, Ms. Chandan Ramamurthy, Dalveer Bhandari,
C. Ramesh, G.D. Gupta, L.K. Gupta, G. Venkatesh Rao, Ms. A
Subhashini, Ms. Susma Suri, C.V.S. Rao, P. Parmeshwaran, Mrs. E
;
Urmila Kapoor, Krishna Pra_sad,}n_dra f'.!"ckwanaancl S.K. Jain, for
the Appearing Parties.

The Judgment of the Court was delivered by

SAW ANT, J. This petition is filed as stated in the petition by an F
Association of about 2,000 employees working in 500 Railway Insti-
tutes and Clubs in various parts of the country. Their grievance, as in
the case of the petitioners in the matters pertaining the Railway Can-
teens, is that they are not treated as railway employees. It is their case
that although the Institutes/Clubs in which they work are non-statu-
tory, they are on par with the employees in the statutory canteens run G
-----<( in the Railway establishments proper. According to them, the Railway
Institutes and Clubs were set up to provide recreational facilities to the
railway employees. They are managed by Committees consisting of
representatives of all the members of the Institutes/Clubs elected
periodically. The Institutes/Clubs have the following category of
employees: (!) Manager (2) Accountant (3) Clerk (4) Librarian in- H
596 SUPREME COURT REPORTS [ 1990] 1 S.C.R.

A charge (5) Librarian (6) Watchman (7) Daftry (8) Watermen (9) y
Canteen employees ( 10) Billiards Marker etc. These employees are
appointed by the Committee and their salaries are paid out of the
contributions received from the members of the respective Institutes/
Clubs and the grants-in-aid given by the Railway Board to the
Institutes/Clubs. The Committees of management is presided over by
B a president who is the concerned Divisional Railway Manager or his _f
nominee. The Railway Administration has the right to dissolve or to i
from an ad-hoc Committee.

2. According to the petitioners further, the Railway Board has
· always treated the Institutes and Clubs as an integral part of the Rail-
C ways, since they not only receive grants-in-aid but also other facilities
from the Government. Section B of Chapter XXVIII of the Railway
Establishment Manual makes a special provision for the Institutes and
-
Clubs. Paragraph 2808 of the Manual states that a Railway Institute
should be looked. upon as a club provided by the Railway, rent free for
the benefit of its employees and therefore, the Railway should provide
D everything which a landlord ordinarily would, and the Institute should
pay for all that a tenant would usually be liable to pay. Paragraph 2809
state's that the Railway Administration will bear (a) the first cost of the
building including the cost of electric installations with necessary furni-
ture, roads, ferices, tennis courts and other play-grounds. Wherever
possible a garden will also be provided; (b) the cost of maintenance
E and alterations.

In the case of tennis courts and play-grounds the Railway 1
Administration will bear only the cost of ordinary engineering repairs.
The said paragraph however requires that the Institute funds should
bear (a) the cost of rolling, watering, grass-cutting and other main- )•,_
F tenance charges of play-grounds, other than engineering repairs; (b)
the cost of maintenance of its gardens and ornamental grounds; (c) the
cost of maintenance and renewal, whether partial or complete, of
electric installations (which include electric fans) payable at a flat rate
of 5 per cent per annum on the capital cost of the installations; (d) the
cost of electric current consumed and hire of meter; (e) the occupier's
G share of municipal taxes for specific direct services rendered to an
Institute by a municipality such as conservancy, water and the like j-·
taxes as distinct from taxes of a general nature; (f) water charges
calculated at so much per tap, each Railway Administration fixing its
own scale of charges. In cases where large quantities of water are
supplied by the Railway Adminstration, as in the case of swimming
H baths, the actual cost of water supplied should be recovered. Para-
RAILWAY EMP. ASSCN. v. U.0.l. [SAWANT, J.J 597

graph 2810 provide that: (i) no rent is recoverable in the case of Rail-
way buildings used as officers' club provided conditions stipulated in A
para 1942-E are fulfilled; (ii) no rent is recoverable in the case of
officers' clubs if the buildings are specially constructed against
amounts specifically sanctioned by the Railway Board (iii) no rent is
recoverable in the case of clubs, if additional expenditure is incurred in
converting an existing building into a club or providing ancilaries to B
make it· suitable as a club, if the expenditure is incurred with the
specific approval of the Railway Board and (iv) no rent is recoverable
in the case of clubs where the building is erected by the club at its costs
on Railway land. Paragraph 2811 further provides that: Class IV staff
employed in Railway Institutes may be given residential accommoda-
tion free of rent provided such accommodation is either part and
parcel of the Institute building and its recognised out-houses, or is not c
required for any other railway purpose, or cannot be rented to outsi-
Y-J.\
ders and would otherwise lie'vacant. According to paragraph 2813 the
membership of the Institute/Club is optional. Paragraph 2817 gives
powers to the respective General Managers to frame rules to suit local
requirements of the Railway Administrations and other circumstances D
of the place.

The employees of the Institutes/Clubs are entitled to free passes,
and to get medical facilities provided by the Railway Hospitals. The
employees belonging to Class IV are eligible for absorption in the
Railways and for that purpose they are given relaxation in age. E

The petitioners, therefore, claim that they should be treated on
the same par as the employees in statutory canteens and non statutory
canteens there being no difference in their status.
-{
3. The petition is resisted on behalf of the respondent Union of F
India. According to the. respondents, the Institutes and Clubs have
their origin in the rules rega;ding Staff Benefit Fund which is provided
for in Chapter .VIII of Railway Establishment Code Vol. I ( 1985
edition). According to the rules contained in this Chapter as clarified/
modified by the administrative instructions from time to time, the
main objectives of the Fund are to provide additional amenities to the G
railway servants and their families in the shpere of education, recrea-
tion, relief to the distressed, financial assistance during sickness and
development of sports and scouting activities. The Fund consists of
contribution from-Railway revenues-at the rate ofRs. 14 per capita of
the sanctioned strength of non-gagetted employees as on 31st March of
each year. The contribution of Rs.14 is broadly apportioned amongst H
598 SUPREME COURT REPORTS [ 1990] 1 S.C.R.

various spheres of activities as under:
A
(i) (a) Education 2.50
(b) Recreation other than sports 2.00
(c) Relief of distress, sickness etc. 3.50
(d) Miscellaneous items 0.50
B
(ii) Sports activities 2.50
(iii) Scouts activities 1.00

c
(iv) Recreational facilities to officers
and supervisory staff
2.00

According to the respondents further, as per the provisions of
t)le Railway Establishment Code and the Establishment Manual, the
-
/-~---:
Institutes and Clubs are managed by a committee representing its
membership. It is the Managing Committee which engages such staff
as is required and meets the cost of their wages and allowances. The
D conditions of service including the scales of pay of the staff are decided
upon by the respective Managing Committees and hence they vary
from Institute to Institute and Club to Club. The cost of the staff
running the institute including the pay bill of the staff is met by the "'-...-
Managing Committee from membership fees and from grants received
from the Staff Benefit Fund. As will be evident from the apportion-
E ment of the per capita grant among the various activities, only a sum of
Rs.4 per capita comes to the share of the recreational facilities. The -·
~

funds available for recreational facilities are further limited because
the membership of the Institutes/Clubs is optional. These facilities
further, in the nature of things, are availed of by the members for a few
"
hours beyond working hours. The Managing Committees therefore, y
F engage only part-time staff. They engage full-time staff only when it is
considered absolutely necessary. There are about 449 Institutes and
332 Clubs and they have engaged about 1741 employees of whom
about 887 are on full time basis, the rest being engaged on part time
basis. The whole-time employees are allowed passes and Privilege
Ticket Orders on a restricted scale in terms of para 1526 of the Railway
G Establishment Manual.

It is, therefore, contended on behalf of the respondents, that the
r
Railways are not the principal employers of the staff engaged .in the
Institutes/Clubs and they have no control whatsoever on it. The statf is
not paid directly from the Consolidated Fund of India. Whatever
H facilities are provided to the whole-time staff are provided only as a
RAILWAY EMP. ASSCN. v. U.0.1. ISAWANT, J.] 599

special case, and not on account of any obligation under any law. It is
A
also contended that in fact it is the Managing Committees who have
erlgaged the staff and they ought to have been joined as parties to the
petition. The respondent Union of India having no relationship with
the employees, the petition is liable to be dismissed on account of
non-joinder/mis-joinder of parties. The respondent have also ques-
tioned the locus standi of the present Association to fi)e the petition B
\I since according to them no such Association exists.

4. The respondent further point out that the Managing Commit-
tees of the Institutes/Clubs do not receive any subsidy or loan from the
Railways for meeting specifically the wage bill of the employees as do
the Managing Committees of the statutory/non-statutory recognised
canteens and, therefore, the present employees stand on a diffe:ent
c
footing than that of the employees in the statutory/non-statutory
recognised canteens. In reply to the contention of the petitioners that
the rules framed for th~ constitution of Managing Committees of the
Institutes/Clubs give power to the Railway Administration to dissolve
the Managing Committees or to appoint ad hoc Committees, it is D
pointed out that these rules are framed locally by General Managers of
Zonal Railways, Production Units etc. in terms of the provisions
contained in para 2817 of the Establishment Manual. They are not
uniform and not all rules so framed provide for either the dissolution
of the Managing Committee or appointment of ad hoc Committee by
the Railway Administration.The respondents also deny that the Rail- E
; way Board has treated Institutes/Clubs as an integral part of the Rail-
ways. It is also pointed out that the Railway free-passes and privilege
ticket orders are given only to the full time employees as a special case.
But even they are given on a restricted scale. As regards the medical
facilities, again, it is pointed out that it is given to the employees and
not to their family members or dependent relatives. As regards the F
facilities of absorption in the Railways by relaxing the age limit, the
respondent points out that it is not only this staff but also the staff of
cooperative societies, canteen commission bearers, vendors of depart-
mental canteen who are eliteble for such relaxation in age limit to the
extent of the service rendered in such organisation whichever is less,
for appointment in Group D categories. But they have to appear G
before Railway Service Commissions/Railway Recruitment Board
alongwith casual labourers and substitutes, and they are considered
only after the eligible casual labourers and substitutes are considered.
It is lastly submitted on behalf of the respondents that although the're
is no obligation on the Railways, the Railways have issued administra-
tive instructions to the Zonal Railways etc. that whenever it is found
600 SUPREME COURT REPORTS [1990] 1 S.C.R.

A\
absolutely necessary by the Managing Committees of the Institutes/
Clubs to employ staff on full time basis they should be paid remunera- r
tion keeping in view the local market conditions.

5. It is also the contention of the respondents that the Railways
are providing financial assistance/grants-in-aid for various non-welfare
6 activities and to non-railway agencies such as private schools run in the ~
railway colonies, cooperative societies/banks etc. Since the employees I
engaged in these activities/non-railway organisations do not ipso facto
become railway servants, the employees of these Institutes/Clubs can
also not become the railway employees for the same reason. The
service in the railway Institutes/Clubs is purely in the nature of private
employment. On the other hand, the railway employees are recruited
c according to the rules of recruitment. They are subjected to rigorous
standards with regard to age limit, educational qualifications, medical
fitness, interviews, character verification etc. as well as to stiff com- ~
p_etition. To treat the employees in Railway Institutes/Clubs as rail-
way-employees would amount to a back-door entry of these employees
Ii> to Government service without following the regular procedure. It is
also contended by them that the letters of appointment offered to
these employees by the respective Managing Committees make it clear
that they are not to be treated as railway servants. For all these ~
reasons, these employees form a separate class and they are not com-
parable with any other category of staff of the Railways. It is also
IE submitted on behalf of the respondents that the analogy of the
employees in railway canteens is not applicable to these employees ·•
because the status of the canteen employees is itself being contested by
the respondents. It is lastly contended that if this Court deems it '+
proper to treat the full time employees of the Institutes/Clubs as rail-
way servants it will have to be left open to the Respondents to frame y
F such rules as it considered necessary for the efficient running of the
Institutes/Clubs and for engaging such staff as are considered neces-
sary. If the employees concerned are then directed to be absorbed only
subject to the requisite standards of age, educational qualifications
etc. and only such of them as are found suitable, many of the present
employees may be faced with unemployment which will not be in the
q; interests of the employees themselves.
'
6. After considering the respective contentions of the parties r-
and the documents on record, we are of the view that there is a mate-
rial difference between the canteens run in the Railway establish-
ments, and the Railway Institutes and Clubs. In the first instance, the
JIJ canteens are invariably a part of the establishments concerned. They
RAILWAY EMP. ASSCN. v. U.0.I. [SAWANT, J.] 601

----r - are run to render services during the hours of woi:k since the services, A
by their very nature are expected directly to assist the staff in discharg-
ing their duties efficiently. The lack of canteen-facilities is ordinarily
bound to hamper and interfere with, the normal working of the staff
and affect their efficiency. The importance of the services rendered by
the canteens to the staff in the day-to-day discharge of their work
-..,. . therefore needs no further emphasis. Suffice it to say that the canteen- B
1 services are today regarded as a part and parcel of every establish-
ment. So much so that they have been made statutorily mandatory

-
under the Factories Act, 1948 in establishments governed by the said
Act where more than 250 workers are employed. The canteen-services
are thus no longer looked upon as a mere welfare activity but as an
essential requirement where sizable number of employees work. That
is why even the Railway Administration has, by its Establishment c
_,J, Manual made a provision for canteens even where the Factories Act
• \ does not apply, and has laid down procedure for their registration and
approval and for extending to them almost the same facilities and
monetary assistance as in the case of the statutory canteens. However,
the same cannot be said of the Institutes and Clubs. Although for them D
also the Railway Establishment Manual makes provisions in the same
Chapter XXVIII dealing with Staff Welfare, the provisions are of a
_.-) materially different nature and pattern. In the first instance, there is
no provision either for subsidy.or loan directly from the funds of the
Railway Administration. The Institutes/Clubs have to run on the

- membership fees and fixed grants received from the Staff Benefit
Fund. The Fund consists of receipts from the forfeited provident fund
and bonus, and of fines. The grant is made as pointed out by the
Respondents, to each Institute/Clubs at the rate of Rs.14 per capita of
the non-gazetted staff employed at the relevant establishment. Out of
E

~ this contribution, only Rs.4 per capita are spent on the activities of
the Institutes and Clubs, the rest of the amount being spent on educa- F
tion, relief in case of distress and sickness, sports, scouts activities and
for other miscellaneous purposes. There is further no dispute that the
wages and allowances of the staff of the Institutes/Clubs are paid by
the Institutes/Clubs themselves and they are not subsidised by the
Railway Administration as in the case of the statutory and non-
statutory recognised canteens. G

S·A. By their very nature further the services of the Institutes/
Clubs are availed of beyond working hours only. It is common
knowledge that not all members of the Railway-staff avail of them.
One has to be a member to do so by paying fees. The membership is
alscf optional. That is why most of the staff employed in the Institutes/ H
602 SUPREME COURT REPORTS [1990] 1 S.C.R.

A Clubs is part time. As has been stated by the respondents, out of about '("
1741 employees engaged in 449 Institutes and 332 Clubs nearly half are
part time employees. The services rendered by the employees are not
of a uniform nature. They are engaged for different services with
different, service conditions according to the requirement. The
Institutes/Clubs further do not engage in uniform activities, the
B activities conducted by them varying depending upon the infrastruc- .f
ture and the facilities available at the respective places. I

7. What is more importance as far as the issue involved in this
petition is concerned, is that the provision of the Institutes/Clubs is not
mandatory. They are established as a part of the welfare measure for
C the Railway staff and the kind of activities they conduct depend,
among other things, on the funds available to them. The activities have
to be tailored to the budgets since by their very nature the funds are
-
not only limited but keep on fluctuating. If the costs of the activities go
beyond the means, they have to be curtailed. So also, while starting a
new activity, it is necessary to take into account its financial implica-
D tions and the capacity of the Institute/Club to raise the necessary
funds. The only varying component of the funds is the membership fee
which is uncertain.

8. If as contended by the petitioner Association the workers

-
engaged in these Institutes/Clubs are treated as Railway employees,
E the danger is that these welfare activities which are otherwise
encouraged by the Railway Administration may in course· of time
shrink and cease altogether for want of funds. This will not be in the
interests of the workers themselves. One cannot lose sight of the fact
that today the emoluments of government servants including those of
the Railway employees, may they belong to Class IV or to a higher
F category, are substantial and inhibit fresh recruitment. The services
rendered by a government agency, therefore, become costly and
uneconomical. Compared to the services which are rendered by the
Institutes/Clubs and the benefits which flow from them, an increase in
their administrative expenditure which may result from granting the
status of the railway employees to their workers, will be dispro-
G portionately high and forbidding. This will also have a snow-balling
effect on other welfare activities carried on by the Railways and similar
activities carried on by all other organisations. We also cannot lose
sight of fact that the workers engaged in the welfare activities today
are drawn from the respective localities without restrictions of the
qualifications of education, age etc. Whatever little scope for employ-
H men! is available to the local population at the respective places may
RAILWAY EMP. ASSCN. v. U.0.1. [SAWANT, J.l 603

'1 ~ also vanish with the cessation of these activities. After all, the number A
' of employees who may benefit by becoming railway employees docs
not today exceed 887 who are the full time employees scattered all
over the country. But, they may deprive many of their bread in the
presenti and in the future. For, as pointed out by the Respondents, if
the Railway Service Rules are made applicable, many of the present
B
-'\:, employees will also have to face immediate unemployment. This is of
r course yet a larger related socio-economic consideration.

-
9. On the facts placed before us which we have discussed above,
we are also not persuaded to hold that there is a relationship of
employer-employee between the Railway Administration and the
employees engaged in .the Institutes and Clubs. Neither law nor facts c
spell out such relationship. If the present service conditions of these
employees are unsatisfactory, the remedy lies elsewhere.

10. Since we are disposing of the petition on merits, it is not
necessary to deal with the legal contentions raised on behalf of the
D
Respondents that the petitioner Association has no locus standi and
that the petition is not maintainable for non-joinder and/or mis-
joinder of the parties.

11. In the result, we dismiss the Writ Petition and discharge the
rule with no order as to costs.
E
R.N.J. Petition dismissed: