Supreme Court of India
BALWANT RAI SALUJA & ANR. ETC. ETC.versusAIR INDIA LTD. & ORS.
- Citation
- 2013 INSC 755
- Decided
- 13 November 2013
- Disposal
- Matter referred to larger bench
- Bench
- C K PRASAD
Holding
The contract between Air India and HCI is a sham; the canteen workers are deemed employees of Air India and the CGIT award is restored.
Summary
The workmen employed in the canteen of Air India, which was operated by Chef Air, a unit of the Hotel Corporation of India (HCI), claimed they were regular employees of Air India. Air India argued that HCI was a separate legal entity and that it had no control over the workers' hiring, wages, or discipline. The Supreme Court examined whether the contract between Air India and HCI was a sham designed to evade statutory rights, applying tests of control, payment of wages, and disciplinary authority. It held that the canteen was a statutory canteen under the Factories Act, that Air India exercised sufficient control to be the principal employer, and that the contract was a camouflage violating Sections 25T and 25U of the Industrial Disputes Act. Consequently, the Court restored the CGIT award, directing Air India to regularise the workers as permanent employees with full back wages and benefits.
Issues considered
- Whether the canteen operated by HCI for Air India qualifies as a statutory canteen under the Factories Act and Rules.
- Whether the engagement of contract workers through HCI amounts to a sham contract intended to deprive the workers of their statutory and constitutional rights.
- Whether the findings of the Central Government Industrial Tribunal (CGIT) declaring the workers as deemed employees of Air India are legally valid.
- Whether the judgments of the Delhi High Court that set aside the CGIT award are erroneous.
- What relief, including regularisation and back wages, the workers are entitled to.
Legislation cited
- Air Corporations Act, 1953
- Companies Act
- Contract Labour (Regulation and Abolition) Act, 1970
- Delhi Factories Rules, 1950s. Rule 65, s. Rule 66, s. Rule 67, s. Rule 68, s. Rule 70
- Factories Act, 1948s. 2(n), s. 46
- Industrial Disputes Act, 1947s. 25F, s. 25N, s. 25T, s. 25U, s. 2(k), s. 2(ra), s. 2(s), s. 33(2)(b)
Subjects
statutory canteencorporate veilprincipal employerunfair labour practicecontract labourindustrial disputes actregularisationAir IndiaHotel Corporation of India
Judgment
[2013] 16 S.C.R. 706
A BALWANT RAI SALUJA & ANR. ETC. ETC.
v.
AIR INDIA LTD. & ORS.
(Civil Appeal Nos.10264-66 of 2013)
NOVEMBER 13, 2013
B
[CHANDRAMAULI KR. PRASAD AND
V. GOPALA GOWDA, JJ.]
Industrial Disputes Act, 1947 - ss.2(k), 2(ra), 2(s), 25T
C and 25U - Vth Schedule, Entry No.10 - Factories Act, 1948
- Delhi Factories Rules of 1950 - Contract Labour
(Regulations and Abolition) Act, 1970 - Industrial Disputes
Act, 1947 - Whether the concerned workmen of Chefair, a unit
of Hotel Corporation of India (HCI) with which Air India had
D entered into a contract to provide canteen services at its
establishment, were entitled to be treated as being regular
employees of Air India - And whether e.1gaging the contract
workmen in the canteen situated in the premises of Air India
through HCI amounted to sham and camouflage by Air India
E to deprive the legitimate statutory and fundamental rights of
the concerned workmen as provided under the provisions of
the Industrial Disputes Act and the Constitution - Difference
of opinion between Hon'ble Judges of the Division Bench -
Matter referred to Hon'ble the Chief Justice of India for placing
F the same before an appropriate Bench.
Dispute arose as to whether the concerned workmen
of Chefair, a unit of Hotel Corporation of India (HCI) with
which Air India had entered into a contract to provide
canteen services at its establishment, were entitled to be
G treated as being regular employees of Air India.
The appellants contended before this Court that the
obligation to provide for the Canteen was with Air India
and, therefore, the workmen were entitled to be treated
H 706
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 707
as their employees and Air India their employer; that Air A
India had a large role to play in the operation and
management of the Canteen and, in the circumstances,
once the veil of the contract was lifted, the control of Air
India was writ large over the Corporation. It was
contended that the Corporation was a wholly owned B
subsidiary of Air India which controlled the composition
of the Board of Directors and ·appointed and removed
Directors in consultation with the Government of India;
and notwithstanding that the general management of the
Corporation was vested in its Managing Director, Air India c
was conferred with the power to issue directions or
instructions as it thought fit in regard to the financeS- and
the conduct of the business and affairs of the
Corporation and, hence, the workmen employed by the
Corporation were, in fact, the employees of Air India. 0
The appellants further submitted that the
Corporation may be a separate legal entity but Air India's
control over the affairs of the Canteen made it the
principal employer. The appellants also submitted that the
workmen were engaged in the Canteen provided by Air E
India in compliance of Rule 65(2) of the Rules framed by
the Union Territory of Delhi in exercise of powers under
Section 46 of the Factories Act; that the workmen of a
statutory canteen have to be treated as employees of
such establishment whose obligation is to provide for the F
Canteen; and since in the case in hand, the obligation to
provide for the Canteen was with Air India, therefore, the
workmen were entitled to be treated as their employees
and Air India their employer.
G
Referring the matter to Hon'ble the Chief Justice of
India for placing the same before an appropriate Bench,
the Court
Per Chandramauli Kr. Prasad. J.
H
708 SUPREME COURT REPORTS [2013] 16 S.C.R.
A HELD:1. It is well settled that the Court can lift the veil,
look to the conspectus of factors governin~ employment,
discern the naked truth though concealed intelligently.
The Court has to be astute in piercing the veil to avoid
the mischief and achieve the purpose of law. It cannot be
B swayed by legal appearance. The court's duty is to find
out whether contract between the principal employer and
. the contractor ::: i::h~m. nominal or merely a camouflage
to deny employment benefits to the workmen. [Para 14]
[726-D-F]
c 2. The Hotel Corporation of India (HCI) is a
Government Corporation incorporated under the
Companies Act. It is a legal entity altogether different from
its shareholders. The fact that Air India or its nominee are
the shareholders of the Corporation and in the
D management of business and finances, it is subject to the
directions issued by Air India in terms of the
Memorandum of Association and Articles of Association
shall not merge the Corporation's identity jn
shareholders. The Corporation is a separate legal entity,
E not subservient to Air India but a servant to its
Memorandum of Association and Articles of Association.
[Para 17] [729-E-G]
3. Few of the well recognized tests to find out the real
F relationship are whether the principal employer: (i) pays I
the salary to the workmen instead of the contractor, (ii) I
controls and supervises the work ·of the employees, (iii) I
has role in' selection and appointment of the employees,
and (iv) acts as a disciplinary authority over the conduct
G and discipline of the employees. 'Air India does not fulfill
the test laid down so as to treat it as the principal
employer. [Para 19] [730-C-E]
4. It is not the case of the Workmen that it is Air India
which pays their emoluments instead of the Corporation.
H Air India. has neither any role in selection and appointment
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 709
of the workmen nor it controls and supervises their work. A
It is further not their case that Air India is their disciplinary
authority over their conduct and discipline. Air India, by
giving subsidy at a specified rate or for that matter
purchasing few articles for the Canteen on its behalf and
further bringing to the notice of the Corporation the B
complaint in regard to the functioning of the Canteen, will
not make ·it the principal employer. The Corporation is a
Government company like Air India and the workmen in
no way will be prejudiced if they continue to be the
employees of the Corporation. There does not ·seem to c
be any mala fide or oblique motive in Air India entering
into a contract with Chef Air, a unit of the Corporation for
operating its Canteen. Certainly, it is not to defeat the
rights of the workmen. [Para 23] [732-0-H]
5. The obligation to provide Canteen is by itself not D
decisive to determine the status of workmen employed
in the Canteen. As an absolute proposition of law it
cannot be said that "whenever in discharge of statutory
mandate a canteen is set up or other facilities provided
by the establishment, the employees of the canteen or E
such other facility become the employees of that
establishment". Having tested the case of the workmen
on the touchstone of the principles laid down by this
Court, it is found that they do not satisfy those tests so
as to hold that Air India is the principal employer. [Paras F
26, 27 and 29] [734-F; 735-B-C; 736-G]
Heavy Engineering Mazdoor Union v. State of Bihar
(1969) 1 SCC 765: 1970 (1) SCR 995; Steel Authority of
India Ltd. v. National Union; Waterfront Workers (2001) 7 SCC G
1: 2001 (2) Suppl. SCR 343; Haldia Refinery Canteen
Employees Union and Others v. Indian Oil Corporation Ltd.
& Ors. (2005) 5 SCC 51: 2005 (3) SCR 972; International
Airport Authority of India v. International Air Cargo Workers'
Union (2009) 13 SCC 37 4: 2009 (8) SCR 1; General H
710 SUPREME COURT REPORTS [2013] 16 S.C.R.
A Manager, (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon
v. Bharat Lal (2011) 1 SGB 635; M. M.R. Khan v. Union of
India 1990 S,upp SCC 191: 1990 SCR 687; Workmen of the
Canteen of Coates of India Ltd. v. Coates of India Ltd. & Ors.
(2004) 3 SCC 547 and Hari Shankar Sharma v. Artificial
B Limbs Manufacturing Corpn. (2002) 1 SCC 337 - referred
to.
Per V. Gopala Gowda. J. (dissenting)
HELD:1. Air India, in spite of being the statutory
C corporation did not consider it necessary to come to the
court with clean hands but on the other hand, it has
suppressed relevant material fact regarding the number
of employees/workmen working in its establishment. The
wholly owned subsidiary corporation- HCI has adopted
D unfair labour practice as defined under Section 2(ra) of
the Industrial Disputes Act, 1947 at serial No. 10 entry in
the Vth Schedule under the heading of the Unfair Labour
Practices practiced by the employer, by keeping workers
in employment in the canteen for 40 days at a time and
E thereafter employing them on contract basis after a break
though the nature of work to be performed by them in the
canteen have been perennial in nature, for the reason
that they were required to provide and maintain the
statutory canteen in the factory premises to cater the
F food stuff to its employees/ workmen. Therefore, they
have committed a statutory offence punishable under the
provision of Section 25U of the l.D. Act for employing the
concerned workmen on contract basis with a break in
their service which constitutes u'nfair labour practice and
G is prohibited under Section 25T of the l.D. Act either by
the employer or the workmen under the above Schedule
to the l.D. Act. The concerned workmen have been
discharging the permanent nature of work in different
capacities working cQhtinuously ranging from 3 years to
H 20 years with an artificial break after 40 days of
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 711
employment by the employer with an oblique motive to A
deprive them of their legitimate statutory right of
regull'lrizing them as permanent workmen in the statutory
canteen which is being run by the Air India in its factory
premises through HCI from its Chefair unit. [Para 15] [753-
A-H; 754-A] B
2. In public sector undertaking like Airways, there are
different types of situations·. One of them is the.statutory
canteen which must ·be provided by such Industrial
establishment which is a factory in terms of the definition C
of the Factories Act, since manufacturing activities are
involved. 1.n the instant case the Air India falls under the
category of factory where the occupier is defined under
Section 2(n) of the Factories Act and therefore, it is duty
bound to provide a canteen to its employees/ workmen
which is known as the statutory canteen. It is the D
statutory obligation on the part of Air India to provide a
statutory canteen under the provisions of Factories Act
and Rules and therefore, it is one more strong
circumstance in favour of the concerned workmen for
regularization in their services as permanent workmen by E
the Air India. The most important legal aspect of the case
which is required to be considered is that the law
stipulates statutory obligation on the part of Air India to
provide and maintain statutory canteen to cater the food
stuff to its employees/ workmen as per notification F
referred to supra. Therefore, the canteen facility to be
provided to the employees/ workmen cannot be
withdrawn by the owner of the establishment, namely,
the principal employer. Therefore, the necessary corollary
to this condition is the fact that in such a situation the G
nature of employment involved in the canteen in question.
is perennial in nature. The need for workers to run the
canteen by the Management of Air India is permanent.
The vacancies of various posts in the canteen are
permanent in nature. [Para 21] [760-D-H; 761-A] H
I
712 SUPREME COURT REPORTS [2013] 16 S.C.R.
A 3. From the review of case law on this aspect, two
kinds of situations arise, one in which the contractor is
changed but not the workers employed. The other
situation is where the contractor is changed and along
with him the workers a!so get the boot. The effect of this
B situation appears that the workers have been temporary.
In reality they are kept temporary in order to perpetuate
'unfair labour practice by the employer, which is not
permissible in view of Section 25T of the l.D. Act read with
entry at Serial No. 10 in the Vth Schedule of the l.D. Act
c regarding unfair labour practices on the part of the
employer. In the case in hand, Air India is the principal
employer and Chefair - an unit under HCI is the
contractor. The CGIT has rightly arrived at the finding that
Chefair is the·unit of HCI which renews the contract of
canteen workers every forty days. Unfortunately, the said
0
workers, have been continued as contract workers in the
canteen though they have completed 240 days of
continuous service in a year as defined under Section
258 of the l.D. Act which action of the Air India is unfair
E labour practice and is prohibited under Section 25T of the
l.D. Act. In spite of statutory prohibition of employing the
concerned workmen in the canteen on contract basis in
permanent nature of work, the Chefair - a unit of HCI and
Air India have indulged in unfair labour practices as
defined under Section 2(ra) read with Section 25T and the
F Vth Schedule of the l.D. Act, with a deliberate intention
_to deprive the statutory rights of the concerned workmen
which is a glaring patent illegality committed by them for
which they are liable to be punished under Section 25U
of the l.D. Act read with the Rules. [Para 22) [761-B-H;
G 762-A-B]
4. If the case pleaded by Air India and HCI is
accepted, it amounts to giving a reward to Air India, who
is the principal employer. It also amounts to holding that
H the concerned workmen are contract employees of the
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 713
contractor·and they are not put in the continuous service A
which amounts to conferring reward upon the HCI and
AIR India who have committed illegality. The concerned
workmen who are working in the canteen at the relevant
time have been working in the vacancies which are
permanent in nature. Therefore, they are required to be B
regularized by the pri·ncipal employer as .permanent
workmen and they are also entitled to the consequential
benefits since they have rendered their services for more
than 3 to 20 years continuously saving the artificial
breaks imposed on them by the employer from time to c
time to deprive them from regularization as permanent
employees of the establishment. [Para 23] [762-C-F]
5. Further, it is clear from the Delhi Factories Rules
of ·1950 and the Notification of 1991 issued by Lt.
Governor of the Union Territory of Delhi that Air India is D
the occupier l)nder Section 2(n) of the Factories Act and
it must provide and maintain a statutory canteen for its
employees/ workmen. The vacancies in various posts that
exist for canteen workers are permanent in nature but the
Management of HCI on behalf of Air India has continued E
them as contract workers for a long period with a break
after 40 days, which is an unfair labour practice on their
part though it is prohibited under Section 25T of the l.D.
Act. The temporary rotation of concerned workers in the
vacancies of the canteen by the HCI, which is an F
instrumentality of the State is to countenance a situation
where two statutory entities of the above nature collude
together to.perpetuate 'unfair labour practices' as defined
under Section 2(ra) which is enumerated at serial no. 10
under the heading of 'unfair labour practice' on the part G
of the employer in the Vth Schedule to the l.D. Act.
Therefore, this Court is bound to ensure the
implementation of all relevant laws, especially those
enacted by the Legislature to fulfill the constitutional
obligations under the Directive Principles of State Policy H
714 SUPRfi:ME COURT REPORTS [2013] 16 S.C.R.
A and bring this unholy alliance between Air India and HCI
to an end by declaring the canteen workers as
employees of the principal employer. [Para 24] [762-G-H;
763-A-D]
6.The High Court unjustly refused the claim of the
8
canteen workmen by accepting the untenable arguments
advanced on behalf of the Air India that the canteen run
through HCI from Chefair is not the statutory canteen and
Air India is not the principal employer. This conclusion
is not only erroneous but is also contrary to the law laid
C down by this Court. [Para 28] [766-G-H]
7. The presence of a statutory obligation on the part
of Air India to run a canteen must always be seen as one
more strong circumstance to determine the wider
o question of regularization of the concerned workmen
involved in this case. [Para 29] [767-A-B]
8. In all statutory canteens, the nature of employment,
of vacancies, is indeed of a permanent nature and those
who deploy the workmen on contract basis to discharge
E statutory duties of an employer amounts to unfair labour
practice. In the nature of rotational hire and fire, policy
adopted by the employer must not be rewarded for the
illegalities perpetuated by them. This is more so when the
principal employer is a statutory corporation coupled with
F the fact that the contractor also is one such entity and
the two should not be allowed to continue "their unfair
labour practices to employ the workmen on contract
basis in the canteen to discharge the statutory duty by
the occupier to provide and maintain a statutory canteen
G for its employees/workmen in its factory. Both Air India
and HCI have colluded with each other to perpetuate
unfair labour practices by engaging the concerned
workmen in the statutory canteen of the principal
employer- Air India. [Para 29] [767-D-G]
H
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 715
9. Classically jurists like Salmond and others while A
developing the jurisprudence relating to Torts have laid
down the test to determine the relationships between
'master and servant'. In such situations the predominant
test deployed was the test of control and supervision.
Post constitutional jurisprudence in India must no longer B
be allowing pr~ctice of the traditional master and servant
relationship but should be facilitating employer-employee
relationships mediated by constitutional jurisprudence
which is relevant to the area of labour law jurisprudence
in our country in the interest of maintaining industrial c
peace and harmony which is in larger public interest.
[Para 30] [767-H; 768-A-B]
10. The practice by Air India constitutes unfair labour
practice. Therefore, the findings and reasons recorded by
CGIT on the points of dispute in relation to the concerned D
employees declaring that the concerned contract workers
of the canteen are deemed employees of Air India is a
ri·ght decision. Further, setting aside the termination
orders passed against some of the concerned workmen
is also justified for the reason that the services of the E
concerned workmen in the above cases were terminated
during pendency of the industrial disputes before CGIT
regarding absorption of the concerned workmen as
permanent employees, without obtaining approval from
the CGIT as required under Section 33(2)(b) of the l.D. Act. F
Apart from the above reason, the termination of services
of the workmen involved in the above industrial dispute
cases· is unsustainable in law for the reason that they
have not complied with the mandatory provisions of
Section 25F, clauses (a) and (~) of the l.D. Act and have G
not obtained the permission from the Central
Government as required under Section 25N of Chapter
VB-of-the l.D. Act. Therefore, the orders of termination
passed against the concerned workmen are void ab initio
in law and the same are liable to be set aside. CGIT has H
716 SUPREME COURT REPORTS [2013) 16 S.C.R.
A rightly passed an. award in favour of all the workmen in
all the Industrial Disputes on the file of CGIT. The same
cannot be termed either as erroneous or error in law.
[Para 49] [783-H; 784-C-H; 785-A]
11. The findings and reasons recorded on the
8
contentious points by both the single Judge and the
Division Bench of the Delhi High Court in the impugned
judgment that no better service conditions than the
Management of HCI would be provided to the canteen
workers except to get free air tickets which apparently
C some employees of Air India are entitled to, is untenable
in law. [Para 50] [785-B-C]
12. Further, the Management of Air India is directed
to absorb all the concerned workmen as permanent
D workmen on its rolls from the date of their appointment
and grant all the consequential benefits such as salary
for which they are entitled for after computing properly,
taking into consideration the pay scale and periodical
wage revision that has taken place and are applicable to
E the respective posts of the concerned workmen as per
the notification issued by the Lt. Governor, Union Territory
of Delhi and on the basis of similar notifications
applicable for them. Similarly, the Industrial Dispute case
involving the workmen whose services were terminated
F during the pendency of petition before CGIT, must also
be treated as permanent workmen at par with the
concerned workmen involved in the instant case. The
award for their reinstatement to their posts shall be
passed with all consequential benefits with full back
G wages. [Paras 53 and 54] [787-C-G]
M.M.R. Khan & Ors. v. Union of India & Ors. 1990 (Supp)
SCC 191 : 1990 SCR 687; Parimal Chandra Raha & Ors. v.
Life Insurance Corporation of India and Ors. 1995 suppl. (2)
SCC 611: 1995 (3) SCR 34, Basti Sugar Mills Ltd. v. Ram
H Ujagar & Ors. AIR 1964 SC 355: 1964 SCR 838; Union of
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 717
India & Ors. v. M. Aslam & Ors. (2001) 1 SCC 720: 2001 (1) A
SCR 62; Salomon v. Salomon & Co. Ltd. 1897 AC 22; Indian
Petrochemicals Corporation Ltd. & Anr. v. Shramik Sena &
Ors. (1999) 6 SCC 439:1999 (1) Suppl. SCR 47; Steel
Authority of India Ltd. & Ors. v. National Union Waterfront
Workers & Ors. (2001) 7 SCC.1: 2001 (2) Suppl. SCR 343; B
International Airport Authority of India v. International Air
Cargo Workers' Union & Anr. (2009) 13 SCC 374: 2009 (8)
SCR 1; Hari Shanker Sharma and Ors. y. Artificial Limbs
Manufacturing Corporation and Ors. (2002) 1 SCC 337; State
of UP. & Ors. v. Renusagar Power Co. & Ors. (1988) 4 SCC C
59: 1988 (1) Suppl. SCR 627; Delhi Development Authority
v. Skippe( Construction Co. (P.) Ltd. & Anr. (1996) 4 SCC
622: 1996 (2) Suppl. SCR 295; Kapila Hingorani v. State of
Bihar (2003) 6 SCC 1: 2003 (1) Suppl. SCR 175; Workmen
of Ni/giri Coop. Mkt. Society Ltd. v. State of Tamil Nadu & Ors.
0
(2004) 3 SCC 514: 2004 (2) SCR 159, Haldia Refinery
Canteen Employees Union & Ors. v. Indian Oil Corporation
& Ors. (2005) 5 SCC 51: 2005 (3) SCR 972; Dena Nath &
Ors. v. National Fertilisers & Ors. (1992) 1 SCC 695: 1991
(2) Suppl. SCR 401; Hussainbhai, Calicut v. Alath Factory
Thezhila/i Union, Kozhikode and· Ors. (1978) 4 SCC 257: E
1978 (3) SCR 1073; Kanpur Suraksha Karamchari Union v.
Union of India & Ors. (1988) 4 SCC 478: 1988 (2) Suppl.
SCR 590; Hussainbhai Calicut, M.M.R. Khan, Parimal
Chandra Raha Harjinder Singh v. Punjab State Warehousing
Corporation (2010) 3 SCC 192: 2010 (1) SCR 5~1; F
Kesvananda Bharati v. State of Kera/a (1973) 4 SCC- 225:
1973 (0) Suppl. SCR 1 and Secretary, HSEB v. Suresh &
Ors. (1999) 3 SCC 601: 1999 (2) SCR 238 - referred to.
Case Law Reference : G
In the judgment of Chandramauli Kr. Prasad:
1970 (1) SCR 995 referred to Para 15
2001 (2) Suppl. SCR 343 referred to Para 16
H
718 SUPREME COURT REPORTS [2013] 16 S.C.R.
A 2005 (3) SCR 972 referred to Para 20
2009 (8) SCR 1 referred to Para 21
(2011) 1 sec 635 referred to Para 22
B 1990 SCR 687 referred to Para 24
(2004) 3 sec 547 referred to Para 26
(2002) 1 sec 337 referred to Para 27
In the judgment of V. Gopala Gowda, J.:
c
1990 SCR 687 referred to Para 2
1995 (3) SCR 34 referred to Para 7
1964 SCR 838 referred to Para 7
D
2001 (1) SCR 62 referred to Para 7
1897 AC 22 referred to Para 7
1999 (1) Suppl. SCR 47 referred to Para 7
E 2001 (2) Suppl. SCR 343 referred to Para 7
2009 (8) SCR 1 referred to Para 7
(2002) 1 sec 337 referred to Para 7
F 1988 (1) Suppl. SCR 627 referred to Para 8
1996 (2) Suppl. SCR 295 referred to Para 8
2003 (1) Suppl. SCR 175 referred to Para 8
2004 (2) SCR 159 referred to Para 10
G
2005. (3) SCR 972 referred to Para 10
1991 (2) Suppl. SCR 401 referred to Para 11
1978 (3) SCR 1073 referred to Para 16
H
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 719
1988 (2) Suppl. SCR 590- referred to Para 17
2010 (1) SCR 591 referred to Para 32
1973 (0) Suppl. SCR 1 referred to Para 32
1999 (2) SCR 238 referred to Para 41
B
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
10264-10266 of 2013
From the Judgment and Order dated 02.05.2011 of the
High Court of Delhi at New Delhi in ·LPA No. 388, 390 & 391 c
of 201 O
Jayant Bhushan, Praveen Kumar Singh, Sanjeev
Choudhary, Pallav Mogia, Anirudhha P. Mayee for the
Appellants.
D
Chander Uday Singh, Sangeeta Bharti, Anukul Raj, .
Shewta Mishra, Ruchi Kohli, Vidushi Chokhani, T. S. Sidhu"
Praveen Jain, Pallavi Mohan, Ganesh Karnath, Sumit Gupta,
Ashish Suman, Vikas Soni (for M/s. M. V. Kini & Associates),
for the Respondent. E
The Judgments and Order of the Court were delivered by
' '
CHANDRAMAULI KR. PRASAD, J. 1. Leave granted.
2. Air India Limited was conktituted under the Air F
· Corporations Act, 1953. By virtue of Section 3 of the Air
Corporations (Transfer of Undertakings and Repeal) Act, 1994,
Air India has vested in Indian Airlines Limited. It has Ground
Services Department at Indira Gandhi International Airport,
Delhi. Respondent No. 2 is Hotel Corporation of India, which G
is a Government Company incorporated under the Companies
Act. The authorized share capital of the Hotel Corporation of
India, hereinafter referred to as the Corporation, is Rupees 10
. crores, divided into 10 lakhs equity shares of Rs. 100/- each.
The Corporation is a wholly owned subsidiary of Air India and H
720 SUPREME COURT REPORTS [2013] 16 S.C.R.
A its entire share capital is held by Air India and its nominee.
Excepting 6 shares, 4,99,994 shares have been subscribed by
Air India and rest by its nominees. Air India controls the
composition of the Board of Directors and appoints Directors
in consultation with the Government of India. The power to
B remove the Directors from office before the expiry of the term
is vested with Air India, in consultation with the Government of
India, so also the power to fill up the vacancies caused by
death, resignation, retirement or otherwise. General
management of the Corporation is vested in the hands of the
c Managing Director. Notwithstanding that, Air India is conferred
with the power to issue such directions or instructions as it may
think fit in regard to the finances and the conduct of the business
and affairs of the Corporation. Duty has been cast upon the
Corporation to comply with and give effect to such directions
D and instructions. The main objects for which the Corporation
is incorporated are large and include carrying the business of
hotels, motels, restaurants, cafes, kitchens, refreshment rooms,
canteens and depots etc. in general and its incidental and
ancillary objects are establishment of catering and opening
hotels, which would tend to promote or assist in Air India's
E business as an international air carrier. Respondent No. 3, Chef
Air Flight Catering, hereinafter referred to as 'Chef Air', is one
of the units of the Corporation.
3. Section 46 of the Factories Act, inter alia, confers power
F on the State Government to make rules requiring a specified
factory where more than 250 workers are ordinarily employed,
to provide and maintain a.canteen for the use of the workers.
In exercise of the aforesaid power, Rules 65 to 71 have been
incorporated in the Delhi Factory Rules, 1950, hereinafter
G referred to as 'the Rules:. Rule 65(1) was to come into force in
respect of ar:iy class or description of factories on such dates
as the Chief Commissioner may by notification in the Official
Gazette appoint. Rule 65(2) of the Rules, inter alia,
contemplates that the occupier of every factory notified by the
H Chief Commissioner, where more than 250 workers are
BALWANT RAI ,SALUJA v. AIR INDIA LTD. & ORS.· 721
[CHANDRAMAULI KR. PRASAD, J.]
ordinarily employed, shall provide in or near the factory an A
adequate canteen in accordance with the standard prescribed
in those Rules. In pursuance of the provisions of sub-rule (1) of
Rule 65 of the Rules, the Lieutenant-Governor of the Union
Territory of Delhi, by notification in the Official Gazette, dated
21st of January, 1991, directed that Rules 65 to 70 of the Rules B
shall apply to the factories specified in the said Rules with effect
from the date of publication of the notification in the Official
Gazette. It included M/s. Air India Ground Services Department,
Indira Gandhi International Airport, Delhi (Engineering Unit).
4. The workmen working in Air India Ground Services
c
Department Canteen, hereinafter referred to as 'the Canteen',
raised an industrial dispute and the competent Government
made a reference to the Central Government Industrial Tribun~I
as to whether the demand of the workmen employed by Chef
Air to provide canteen service to be treated as deemed D
employees of the management of Air India is justified and, if
so, what relief the workmen are entitled to? The workmen laid
their claim and, according to them, they were employed by Air
India on casual basis in the Canteen and their employment was
through Chef Air, which is a unit of the Corporation. According E
to the workmen, the Corporation has entered into a contract with
Air India to run and maintain the canteen and for that purpose,
they were initially appointed for a period of 40 days and said
period used to be extended from time to time and in this way
each of them had completed service for 240 days in a year. F
According to the workmen, they were called for interview on.
several occasions but had not been selected and on the
contrary, persons junior to them have been regularized. The
workmen have further alleged that Air India had entered into a
contract with the Corporation to deny the workmen their G
legitimate right by circumventing the various provisions of the
Contract Labour (Regulation and Abolition) Act, 1970.
According to them, they were performing duties of a permanent
and perennial nature required by Air India but were being paid
wages less than the regular employees. Case of the workmen H
722 SUPREME COURT REPORTS (2013] 16 S.C.R.
A further is that issuance of letters of appointment for 40 days with
artificial break in service is an unfair labour practice and on the
aforesaid grounds they sought regularization of the services
with back wages in Air India.
5. Air India resisted the claim of the workmen, inter alia,
8
stating that they were not their employees and relationship of
employer and employee does not exist between them.
According to them, Chef Air is a unit of the Corporation
engaged in various businesses including establishing and
C running of canteens. According to Air India, the Canteen is
being run and maintained by the Corporation on the basis of a
fixed subsidy per employee provided by them. It is a specific
assertion of Air India that they have no control over the
workmen and that their conditions of service are governed by
the Rules and Regulations of the Corporation. Air India has
D admitted that the infrastructure of the Canteen was provided by
them but its management is in the hands of the Corporation.
Air India has further pointed out that letters of appointment, token
numbers, ESI cards etc. , .ave been issued to the workmen by
the Cprporation and, hence, the prayer for regularizing their
E services by Air India is misconceived. Air India has denied that
the Canteen in question is a statutory canteen and was
employing more than 250 workers.
6. On the basis of the materials placed on record, the
F Central Government Industrial Tribunal, hereinafter referred to
as·"the Tribunal", came to the conclusion that the Corporation
is 100% subsidiary of Air India and the Canteen in question is
a statutory Canteen established for the welfare of more than
2,000 workers. The Tr,ibunal also came to the conclusion that
G the Canteen is established within the premises of Air India and
the Corporation carries on its business under the control and
administration of Air lndi~. According to the Tribunal, the running
of the Canteen by the Corporation in respect of the statutory
duty of Air India cannot be said to be its independent act.
H Accordingly, the Tribunal observed that hiring of employees for
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 723
[CHANDRAMAULI KR. PRASAD, J.]
running the statutory canteen by the Corporation is a A
camouflage and the workmen employed in the Canteen are
deemed employees of Air India. Thus, the Tribunal held the
demand of the workers to be justified and finding that the
workmen have been terminated from their services during the
pendency of the dispute held that the termination is illegal· and, B
accordingly, set aside the termination of their employment and
directed reinstatement with 50% back wages.
7. Assailing the aforesaid award af the Tribunal, Air India
preferred writ petition before the High Court.
c
8. The learned Single Judge held that Air India is the sole
holder of the shares of the Corporation but it is a separate legal
entity which is independent of its shareholders. The authority
to issue ,directions does not merge the identity of the
Corporation with the shareholder. The learned Single Judge D
accordingly held as follows:
" ...... Thus, in my view the mere fact of HCI being a 100%
subsidiary of Air India and the aforesaid peculiar Articles
of Association would not be decisive of whether the
E
employees aforesaid of HCI and working in the canteen
· of Air India are to be treated as employees of Air India or
not."
9. As regards the grievance of the workmen that Air India
had devised to employ the workmen through a unit of the F
Corporation to defeat their rights, the learned Single Judge
observed as follows:
"19. One thing which emerges is that in the present case,
no motive to-defeat any rights of the employees, in Air India G
entering into a contract with Chef Air (a unit of HCI) for
operating its canteen, even if it be a statutory canteen have
been established. It was not as if by employing workmen
in HCI instead of in Air India, the workmen were being
made employees of a weaker entity against whom they H
724 SUPREME COURT REPORTS [2013] 16 S.C.R.
A can claim no rights. After all HCI is also a Government of
India company as Air India is."
10. The learned Single Judge further came to the
conclusion that the Corporation was not incorporated for the
sole purpOSJ:! of operating the Canteen for Air India but was set
8
up as a legal entity to carry on business in diverse fields.
According to the learned Single Judge, Air India engaged the
Corporation which has expertise in the field to run and operate
the Canteen and that will not make the workmen employees of
Air India. The learned Single Judge ultimately held as follows:
c
"23. HCI in the present case is seen as one such expert.
It has been providing flight catering services to Air India
and other airlines besides carrying on other allied
businesses. As aforesaid, HCI was not incorporated
D merely to run the canteen of Air India so as to keep the
employees of the said canteen, managed through the
medium of HCI, at arm's length from Air India. HCI is a
business entity in its own right and no mala fides have
been established in Air India entrusting the operation and
E management of the canteen aforesaid to HCI. As
aforesaid, in spite of repeated asking, no prejudice is
shown to have been caused to the workmen in them being
the employees of the HCI instead of Air India. Of my own
I can only gauge that may be as employees of Air India
F they may be entitled to a free flight once in a while and
which they may not be entitled to as an employee of HCI.
However, that is hardly determinative of the matter in
controversy: Again it is not as if Air India is attaining to
offload its canteen employees to an entity which is sick or
near the stage of being closed down. HCI is informed to
G be a running concern."
11. Accordingly, it set aside the award passed by the
Tribunal.
H 12. The workmen, aggrieved by the same, preferred an
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 725
[CHANDRAMAULI KR. PRASAD, J.].
appeal before .the Division Bench of the High Court. The A
Division Bench framed the following question for its
consideration:
"11. The core issue that emanates for consideration is
whether in the obtaining factual matrix it can be held that B
the employees of the canteen established by Air India in
its premises and run by the HCI be treated as regular
employees of Air India. Before we advert to the factual
canvas, we think it appropriate to refer to the citations in
the field, cull out the principles and analyse whether they C
are applicable to the material brought on record."
13. The Division Bench of the High Court analysed the
facts, referred to the various decisions of this Court and
ultimately came to the conclusion. that the Corporation is a
separate entity and not a part of Air India as found by the D
Tribunal. It endorsed the finding of the learned Single Judge that
merely because the Articles of Association confer power on Air
India to issue such directions or instructions as it may think fit
in regard to conduct of the business and affairs of the
Corporation and make it obligatory for the Corporation to carry E
on the direction of Air India, would not merge the identity of the
shareholders with the Corporation. The Division Bench
ultimately affirmed the decision of the learned Single Judge
and, while doing so, observed as follows:
"20. On the basis of the aforesaid enunciation of law, the
F
factual matrix is required to be tested. As is manifest, there
is no material on record to show that the respondent - Air
India had any role in the appointment of the employees in
the canteen. No administrative or disciplinary action could
be taken by the respondent against the canteen workers. G
The respondent had itself not undertaken the obligation to
run the canteen but had only provided facility so that its
employees could avail the canteen facilities. It is not a case
where the employees of the canteen were enlisted under
a welfare fund scheme, provident fund scheme and H
726 SUPREME COURT REPORTS [2013] 16 S.C.R.
A medical sqheme of the respondent - management. The
responsibility to run the canteen was absolutely with the
HCI and it was totally a contractual relationship between
the two. Air India had no say in the selection or other affairs
of the canteen workers."
B
14. Mr. Jayant Bhushan, Senior Advocate appearing on
behalf of the <:;:;:>Pll;:ints submits that the obligation to provide
for the Canteen is with Air India and, therefore, the workmen
are entitled to be treated as their employees and Air India their
C employer. It is further contended that Air India has a large role
to play in the operation and management of the Canteen and,
in the circumstances, the veil of the contract has to be lifted and
this Court is competent to do so to arrive at the truth. In support
of the submission reliance has been placed on a large number
of decisions of this Court. I do not have the slightest hesitation
D in accepting this broad submission of Mr. Bhushan and, hence,
I deem it unnecessary to refer to all those decisions. It is well
settled that the court can lift the veil, look to the conspectus of
factors governing employment, discern the naked truth though
concealed intelligently. The court has to be astute in piercing
E the veil to avoid the mischief and achieve the purpose of law.
It cannot be swayed by legal appearance. The court's duty is
to find out whether contract between the principal employer and
the contractor is sham, nominal or merely a camouflage to deny
employment benefits to the workmen.
F
15. Once the veil is pierced, the control of Air India is writ
large over the Corporation, submits Mr. Bhushan. He points out
that the Corporation is a wholly owned subsidiary of Air India
which controls the composition of the Board of Directors and
G appoints and removes Directors in consultation with the
Government of India. According to him, the general
management of the Corporation is vested in its Managing
Director. Notwithstanding that, Air India is conferred with the
power to issue directions or instructions as it may think fit in
regard to the finances and the conduct of the business and
H
BALWANT RAI SALUJA v. AIR INDIA LTIJ. & ORS. 727
[CHANDRAMAULI KR. PRASAD, J.]
affairs of the Corporation and, hence, the workmen employed A
by the Corporation are, in fact, the employees of Air India. Mr .
.C.U. Singh, however, submits that notwithstanding the aforesaid
power vested in Air India, the Corporation is still a separate
legal entity. The fact that its entire share is held by Air India or
Air India has the power to appoint the Board of Directors, issue B
directions etc., will not denude the legal status of the
Corporation as a Government company. The fact that the
Canteen required to be provided by Air India is being run by
the Corporation through one of its units Chef Air will not make
Air India its principal employer. He points out that in order to c
determine the principal employer one is required to see as to
who is paying the salary, who is supervising the work, the role
played in selection and appointment of the workmen,
disciplinary control over them and whether such employees are
covered under the welfare scheme of Air India etc. He points
0
out that the responsibility to run the Canteen is with the
Corporation and, hence, Air India cannot be treated as its
. principal employer. According to him, the Corporation is a
separate legal entity and even though Air India is a holding
company, the Corporation shall still be a separate legal entity.
E
Further, the Corporation is not subservient to Air India but is a
servant to its Memorandum of Association and Articles of
Association. In support of the submission, reliance has been
placed on a decision of this Court in the case of Heavy
Engineering Mazdoor Union v. State of Bihar, (1969) 1 SCC
765. Paragraph 5 of the judgment reads as under: F
"5. It is true that besides the Central Government having
contributed the entire share capital, extensive powers are
conferred on it, including the power to give directions as
to how the company should function. the power to appoint G
directors and even the power to determine the wages and
salaries payable by the company to its employees. But
these powers are deriyed from the company's
memorandum of association and the articles of
association and not by reason of the company being the H
728 SUPREME COURT REPORTS [2013] 16 S.C.R.
A agent of the Central Government. The question whether a
corporation is an agent of the State must depend on the
facts of each case. Where a statute setting up a
corporation so provides, such a corporation can easily be
identified as the agent of the State as in Graham v. Public
B Works Commissioners, 1901 (2) KB 781, where
Phillimore J. said that the Crown does in certain cases
establish with the consent of Parliament certain officials or
bodies who are to be treated as agents of the Crown even
though they have the power of contracting as principals.
c In the absence of a statutory provision, however, a
commercial corporation acting on its own behalf, even
though it is controlled wholly or partially by a Government
Department, will be ordinarily presumed not to be a servant
or agent of the State. The fact that a minister appoints the
members or directors of a corporation and he is entitled
D
to call for information, to give directions which are binding
on the directors and to supervise over the conduct of the
business of the corporation does not render the
corporation an agent of the Government. (See The State
Trading Corporation of India Ltd. v. The Commercial Tax
E Officer, Visakhapatnam, 1964 (4) SCR 99 at 188. per
Shah, J. and Tamlin v. Hannaford, 1950 (1) KB 18 at 25,
26). Sucli an inference that the corporation is the agent of
the Government may be drawn where it is performing in
substance governmental and not commercial functions.
F (Cf. London County Territorial and Auxiliary Forces
Association v. Nichol's., 1948 (2) All ER 432."
(underlining mine)
G 16. Mr. Singh has also drawn my attention to a Constitution
Bench judgment of this Court in the case of Steel Authority of
India Ltd. v. National Union Waterfront Workers, (2001) 7 SCC
1, in which it has been held as follows:
"41 ............. The President of India appoints Directors of
H the Company and the Central Government gives directions
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 729
[CHANDRAMAULI KR. PRASAD, J.]
as regards the functioning of the Company. When disputes A
arose between the workmen and the management of the
Company, the Government of Bihar referred the disputes
to the Industrial Tribunal for adjudication. The union of the
workmen raised an objection that the appropriate
Government in that case was the Central Government, B
therefore, reference of the disputes to the Industrial Tribunal
for adjudication by the State Government was incompetent.
A two-Judge Bench of this Court elaborately dealt with the
question of appropriate Government and concluded that
the mere fact that the entire share capital was contributed c
by the Central Government and the fact that all its shares
w~re held by the President of India and certain officers of
the Central Government, would not.make any difference.
It was held that in the absence of a statutory provision, a
commercial corporation acting on its own behalf, even 0
though it was controlled, wholly or partially, by a
government department would be ordinarily presumed not
to be a servant or agent of the State .......... "
17. I have considered the rival submissions and find
substance in the submission of Mr. Singh and the ~uthorities E
relied on do support his contention. The Corporation
undisputedly is a Government Corporation incorporated under
the Companies Act. It is a legal entity altogether different from
its shareholders. In my opinion, the fact that Air India or its
nominee are the shareholders of the Corporation and in the F
management of business and finances, it is subject to the
directions issued by Air India in terms of the Memorandum of
Association and Articles of Association shall not merge the
Corporation's identity in shareholders. In my opinion, the
Corporation is a separate legal entity, not subservient to Air G
India but a servant to its Memorandum of Association and
Articles of Association.
18. Mr. Bhushan, then submits that the Corporation may
be a separate legal entity but Air India's control over the affairs
H
730 SUPREME COURT REPORTS [2013] 16 S.C.R.,
A of the Canteen makes it the principal employer. He points out
that many of the articles for running the Canteen were
purchased by Air India and, in fact, grievances pertaining to
running of the Canteen were entertained by it. These, according
to the learned counsel, clearly show that Air India is the principal
B employer.
19. I have bestowed my consideration to the aforesaid
submission, but find no substance in the same. Few of the well
recognized tests to find out the real relationship are whether
C the principal employer:
(i) pays the salary to the workmen instead of the
contractor,
(ii) controls and supervises the work of the
D employees,
(iii) has role in selection and appointment of the
employees, and
(iv) acts as a disciplinary authority over the conduct
E and discipline of the employees.
20. Reference in this connection can be made to a
decision of this Court in the case of Haldia Refinery Canteen
Employees Union and Others v. Indian Oil Corporation Ltd.
F & Ors. (2005) 5 SCC 51, wherein it has been held as follows:
"16 ..... lt has nothing to do with either the appointment or
taking disciplinarv action or dismissal or removal from
service of the workmen working in the canteen. Only
because the' management exercises such control does not
G mean that the employees working in the canteen are the
employees of the management. Such supervisorv control
is being exercised by the management to ensure that the
workers employed are well qualified and capable of
rendering proper service to the employees of the
H management." (underlining mine)
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 731
[CHANDRAMAULI KR. PRASAD, J.]
22. lrt the case of International Airport Authority of India A
v. International Air Cargo Workers' Union, (2009) 13 SCC
374, this Court echoed the same view and observed as follows:
"38. The tests that are applied to find out whether a
person is an employee or an independent contractor may
8
not automatically apply in finding out whether the contract
labour agreement is a sham, nominal and is a mere
.camouflage. For example, if the contract is for supply of
labour, necessarily, the labour supplied by the contractor
will work under the directions, supervision and control of C
the principal employer but that would not make the worker
a direct employee of the principal employer, if the salary
is paid by a contractor, if the right to regulate the
employment is with the contractor, and the ultimate
supervision and control lies with the contractor.
D
39. The principal employer only controls and directs the
work to be done by a contract labour, when such labour
is assigned/allotted/sent to him. But it is the contractor as
employer, who chooses whether the worker is to be
assigned/allotted to the principal employer or used E
otherwise. In short, worker being the employee of the
contractor, the ultimate supervision and control lies with
the contractor as he decides where the employee will work
and how long he will work and subject to what conditions.
Only when the contractor assigns/sends the worker to work F
under the principal employer, the worker works under the
supervision and control of the principal employer but that
is secondary control. The primary control is with the
contractor."
22. This Court has taken the same view in General G
Manager, (OSD), Bengal Nagpur Cotton Mills, Rajnandgaon
v. Bharat Lal, (2011) 1 SCC 635, in which it has been held as
follows:
"10. It is now well settled that if the industrial adjudicator H
732 SUPREME COURT REPORTS [2013] 16 S.C.R.
A finds that the contract between the principal employer and
the contractor to be a sham, nominal or merely a
camouflage to deny employment benefits to the employee
and that there was in fact a direct employment, it can grant
relief to the employee by holding that the workman is the
B direct employee of the principal employer. Two of the well-
recognised tests to find out whether the contract labourers
are the direct employees of the principal employer are: (1)
whether the principal employer pays the salary instead of
the contractor; and (it) whether the principal employer
c controls and supervises the work of the employee. In this
case, the Industrial Court answered both questions in the
affirmative and as a consequence held that the first
respondent is a direct employee of the appellant."
23. Bearing in mind the principles aforesaid, when I
D proceed to consider the facts of the present case, I find that
Air India does not fulfill the test laid down so as to treat it as
the principal employer. It is not the case of the workmen that it
is Air India which pays their emoluments instead of the
Corporation. Air India has neither any role in selection and
E appointment of the workmen nor it controls and supervises their
work. It is further not their case that Air India is their disciplinary
authority over their conduct and discipline. In my opinion, Air
India, by giving subsidy at a specified rate or for that matter
purchasing few articles for the Canteen on its behalf and further
F bringing to the notice of the Corporation the complaint in regard
to the functioning of the Canteen, will not make it the principal
employer. As has rightly been observed by the High Court, the
Corporation is a Government company like Air India and the
workmen in no way will be prejudiced if they continue to be the
G employees of the Corporation. In my opinion, there does not
seem to be any mala fide or oblique motive in Air India entering
into a contract with Chef Air, a unit of the Corporation for
operating its Canteen. Certainly, it is not to defeat the rights of
the workmen.
H
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 733
[CHANDRAMAULI KR. PRASAD, J.]
24. Mr. Bhushan, lastly submits that the workmen were A
engaged in the Canteen provided by Air India in compliance
of Rule 65(2) of the Rules framed in exercise of powers under
Section 46 of the Factories Act. According to him, the
workmen of a statutory canteen have to be treated as
employees of such establishment whose obligation is to B
provide for the Canteen. In the case in hand, according to Mr.
Bhushan, the obligation to provide for the Canteen is with Air
India and, therefore, the workmen are entitled to be treated as
their employees and Air India their employer. In support of the
submission reliance has been placed on a decision of this c
Court in the case of M.M.R. Khan v. Union of India, 1990 Supp
SCC 191, and my attention has been drawn to Paragraph 39
of the judgment which ·reads as follows:
"39. The result, therefore, is that the workers engaged in
the statutory canteens as well as those engaged in non- D
statutory recognised canteens in the railway
establishments are railway employees and they are entitled
to be treated as such. The Railway Board has already
treated the employees of all statutory and 11 Delhi based
non-statutory recognised canteens as railway employees E
w.e.f. October 22, 1980. The employees of the other non-
statutory recognised canteens will, however, be treated as
railway employees w.e.f. April 1, 1990. They would,
therefore, be entitled to all benefits as such railway
employees with effect from the said date, according to the F
service conditions prescribed for them under the relevant
rules/orders."
25. Reliance has also been placed on a Constitution Bench
decision of this Court in the case of Steel Authority of India G
Ltd. (supra) referred to by the learned counsel for Air India also
and my attention has been drawn to paragraph 107 thereof,
which records as follows:
"107. An analysis of the cases, discussed above, shows
H
734 SUPREME COURT REPORTS [2013] 16 S.C.R.
A that they fall in three classes: (1) where contract labour is
engaged in or in connection with the work of an
establishment and employment of contract labour is
prohibited either because the industrial adjudicator/court
ordered abolition of contract labour or because the
B appropriate Government issued notification under Section
10(1) of the CLRA Act, no automatic absorption of the
contract labour working in the establishment was ordered;
(it) where the contract was found to be a sham and
nominal, rather a camouflage, in which case the contract
c labour working in the establishment of the principal
employer were held, in fact and in reality, the employees
of the principal employer himself. Indeed, such cases do
not relate to abolition of contract labour but present
instances wherein the Court pierced the veil and declared
the correct position as a fact at the stage after employment
D
of contract labour stood prohibited; (iii) where in discharge
of a statutory obligation of maintaining a canteen in an
establishment the principal employer availed the services
of a contractor the courts have held that the contract labour
would indeed be the employees of the principal employer."
E
26. According to Mr. Bhushan, the Constitution Bench
judgment clinches the issue. I do not find any substance in the
submission of Mr. Bhushan and the authorities relied on are
clearly distinguishable. In my opinion, the obligation to provide
F Canteen is by itself not decisive to determine the status of
workmen employed in the Canteen. Reference in this
connection can be made to a decision of this Court in
Workmen of the Canteen of Coates of India Ltd. v. Coates of
India Ltd. & Ors. (2004) 3 SCC 547 wherein it has been held
G as follows:
"4 ........... lt is sufficient for us to state that some
requirement under the Factories Act of providing a canteen
in the industrial estabiishment, is by itself not decisive of
H
BALWANT RAI SALUJA v. AIR !NOIA LTD. & ORS. 735
[CHANDRAMAULI KR. PRASAD, J.]
the question or sufficient to determine the status of the A
persons employed in the canteen."
(underlining mine)
· 27. The aforesaid submission has squarely been dealt
with by this Court in the case of Hari Shankar Sharma v. B
Artificial Limbs Manufacturing Corpn., (2002) 1 SCC 337, and
this Court in no uncertain terms has held that as an absolute
proposition of law it cannot be said that "whenever in discharge
of statutory mandate a canteen is set up or other facilities
provided by the establishment, the employee of the canteen or, C
such other facility become the employee of that establishment".
Relevant portion of the judgment reads as follows:
"5. The submission of the appellants that because the
canteen had been set up pursuant to a statutory obligation D
under Section 46 of the Factories Act therefore the
employees in the canteen were the employees of
Respondent 1, is unacceptable. First, Respondent 1 has
disputed that Section 46 of the Factories Act at all applies
to it. Indeed, the High Court has noted that this was never E
the case of the appellants either before the Labour Court
or the High Court. Second, assuming that Section 46 of
the Factories Act was applicable to Respondent 1, it
cannot be said as an absolute proposition of law that
~,henever in discharge of a statutory mandate, a canteen
is set up or other facility is provided by an establishment,
F
the employees of the canteen or such other facility become
the employees of that establishment. It would depend on
how the obligation is discharged by the establishment. It
·may be carried out wholly or substantially by the ,....
establishment itself or the burden may be delegated to an ......
independent contractor. There is nothing in Section 46 of
the Factories Act, nor has any provision of any other statute
been pointed out to us by the appellants, which provides
for the mode in which the specified establishment must set
up a canteen. Where it is left to the discretion of the H
736 SUPREME COURT REPORTS [2013] 16 S.C.R.
A establishment concerned to discharge its obligation of
setting up a canteen either by way of direct recruitment or
by employment of a contractor, it cannot be postulated that
in the latter event, the persons working in the canteen
would be the employees of the establishment. Therefore,
8 even assuming that Respondent 1 is a specified industry
within the meaning of Section 46 of the Factories Act,
1946, this by itself would not lead to the inevitable
conclusion that the employees in the canteen are the
employees ,of Respondent 1."
c 28. Now referring to the authority of this Court in the case
of M.M.R. Khan (supra}, the same is clearly distinguishable.
In this case, it has been held that the workmen engaged in the
statutory canteens as well as those engaged in non-statutory
recognized canteens are railway employees and they have to
D be treated as such. This Court came to the aforesaid
conclusion as, on fact, it was found that though the workmen
were employed in the canteen through the device of a labour
contract, they were essentially working under the control and
supervision of the railway establishment. Further, the provision
E for running and operating the canteen was in the Establishment
Manual of the Railways. Under these circumstances, this Court
came to the conclusion that the workmen engaged in the
statutory canteens were, in fact, the railway employees. No such
facts exist in the present case.
F
29. In the Steel Authority of India Ltd.(supra}, the
Constitution Bench observed that the authorities of this Court
show that they fall in three classes including the aforesaid class
but it has not endorsed the said view. In fact, the decisions
which I have referred to in the earlier paragraphs of this
G judgment negate this contention. I have tested the case of the
workmen on the touchstone of the principles laid down by this
Court and find that they do not satisfy those tests so as to hold
that Air India is the principal employer.
H 30. Having found no substance in any of the submissions
BALWANT RAI SALUJA v. AIR !NOIA LTD. & ORS. 737
made on behalf of the appellants, I do not find any merit in these A
appeals and they are dismissed accordingly, but without any
order as to costs.
V. GOPALA GOWDA, J. 1. Leave granted.
2. I have gone through the judgment of my learned brother 8
Judge in these civil appeals, in which my learned brother Judge
has concurred with the impugned judgment. However, I am in
respectful disagreement with the opinion of my learned brother
·and I am recording my reasons for the same.
c
These appeals have been filed by the appellants
challenging the judgment and order dated 2nd May, 2011
passed in LP.A. ·Nos.388 of 2010, 390 of 2010 and 391 of
2010 confirming the judgment and order dated 8th April, 2010
of the learned single Judge of the Delhi High Court passed in D
WP Nos.14178 of 2004, 14181/2004 and 14182 of 2004,
wherein the learned single Judge has set aside the common
award dated 5th May, 2004 of the Central Government Industrial
Tribunal (for short 'CGIT') passed in Industrial Disputes case
Nos. 97, 98 and 99 of 1996. The CGIT recorded that the E
concerned workmen of Chefair, a unit of Hotel Corporation of
India (for short HCI) with which Air India had entered into a
contract to provide canteen services at its establishment, are
entitled to be treated as being employees .of it and
consequently held that they are entitled to the relief sought for F
by them. The said judgment of CGIT was set aside by the
Division Bench of the Delhi High Court in LPA Nos.388 of
2010, 390 of 2010 and 391 of 2010 vide its judgment dated
2nd May, 2011 after adverting to certain relevant facts, legal
contentions and cases like M.M.R. Khan & Ors. v. Union of
India & Ors.1, and some other decisions of this Court and G
concurred with the finding of facts and reasons recorded by the
learned single Judge in setting aside the award and
consequently dismissed the appeals of the concerned
1. 1990 (Supp) sec 191. H
738 SUPREME COURT REPORTS [2013] 16 S.C.R.
A workmen. That is how these Civil Appeals are filed by the
workmen urging various factual and legal contentions in support
of their claims with a request to set aside the impugned
judgments and orders of the Division Bench and the learned
single Judge of the Delhi High Court in the aforesaid Letter
B Patent Appeals and the writ petitions.
3. Since my learned brother Judge has referred to certain
facts and legal contentions to decide the points that arose for
consideration of this Court, I also refer to certain relevant
necessary facts and rival legal contentions urged on behalf of
C the parties with a view to answer the contentious points that
would arise in these appeals to answer the same.
4. Three industrial disputes case Nos. 97, 98 and 99 of
1996 were registered by CGIT pursuant to the order of
D references made by the Central Government in the Ministry of
Labour vide its order No.L-11012/23/96-IR (Coal-I) dated
23.10.96 for adjudication on the points of dispute referred to it
in relation to the workmen mentioned in the respective orders
of references made by it and in relation to other industrial
E disputes namely ID Case Nos. 107/96 and 108/96 which are
individual cases of industrial disputes filed by the concerned
workmen since their services were illegally terminated by the
employer Air India during pendency of the industrial disputes
referred to supra in relation to the absorption of the services
F of the concerned workmen by the Management of Air India
before the CGIT without obtaining the approval from the CGIT,
despite the order dated 04.12.1996 passed by CGIT wherein
an undertaking was given by the Management of Air India that
neither it will change the contractor Chefair without permission
G of/intimation to the Tribunal nor will it take any action against
the workmen listed in the reference order made to the CGIT
for an adjudication of their dispute. Despite the same, the
services of the concerned workmen in the Industrial disputes
in case ID Nos.97, 98 and 99/1996 were terminated. The action
H of the Management of Air India in terminating the services of
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 739
[V. GOPALA GOWDA, J.]
the concerned workmen in the complaint ID Nos. 107 and 108/ A
1996 is in contravention of Section 33(2)(b) of the Industrial
Disputes Act, 1947 (in short 'l.D. Act'). Therefore, the
complaints were filed by the said workmen under Section 33(A)
of the l.D. Act to adjudicate the existing industrial dispute
between the concerned workmen and the Management of Air 8
India regarding their illegal order of termination during the
pendency of the industrial disputes referred by the Central
.
Government which are registered as reference Nos.97, 98 and
-
99 of 1996 with regard to the absorption of the services of the
contract labour employees, employed by the HCI on behalf of C
M/s Air India and made them to work in the Chefair. The
aforesaid canteen is the statutory canteen in terms of the
definition of Section 46 of the Factories Act, according to the
appellants herein and they requested the CGIT for answering
the points of dispute which was referred to in the order of
references made by the Central Government in ID Nos.97 to
0
99, to treat the111 as the deemed employees of the Management
of Air India and also to set aside the orders of termination
·passed against individual concerned workmen and requested
the CGIT to pass an order of reinstatement with· all
consequential benefits including the award of back-wages. E
5. In support of their respective claims and counter claims
on behalf of the workmen and the Management of Air India, they
filed their statements respectively in the cases referred to supra
before_ the CGIT. In the claim petition, the workmen contended F
that the canteen which is being run by the Air India through HCI
through Chefair has engaged the concerned workmen in these
cases as coi:itract employees in various capacities and they
have been working in the canteen run by the Management of
Air India through Chefair ranging from 3 to 20 years on the date G
of references made by the Central Government to the CGIT
which in turn is run by its subsidiary Company HCI. Delhi State
·Government in exercise of its power under Section 46 of the
Factories Act, 1948 •.framed Rules 65 to 70 called Delhi
Factories Rules of 1950 (hereinafter referred to as 'the Rules'). H
740 SUPREME COURT REPORTS [2013] 16 S.C.R.
A A Notification was issued by the Lt. Governor of the Union
Territory of Delhi under Rule 65(2) of the Rules stating that the
Rules of the Factories Act shall apply to the factories specified
in the Schedule to the said notification. In the Schedule to the
notification, the description of the factory at serial No. 9- M/s.
Air India Ground Services Deptt. IGI, Air Port Delhi
8
(Engineering Unit) F.D.1725 is one of the specified factories,
the same is mark~J :::::: - Ex.P. 4 in the lndui:;trial dispute cases
before the CGIT.
6. Rule 65 states for providing canteen, Rule 66 speaks
C of Dining Hall, Rule 67 provides Equipment, Rule 68 for fixing
the prices to be charged, Rule 69 deals with Accounts and Rule
70 deals with Managing Committee to manage the affairs of
the statutory canteen. The relevant Rules will be adverted to in
the reasoning portion of my judgment while answering the
D relevant contentious points that will be framed shortly.
7. Strong reliance was placed upon the Rules and the
Notification referred to supra by the learned senior counsel Mr.
Jayant Bhushan inter alia contending that the canteen is being
E run by the Air India through HCI by Chefair where the concerned
workmen have been working in different capacities for number
of years such as cook, ground cleaning staff, servicing, washing
staff etc. etc.
The HCI employed them on contract basis as canteen
F workers though they have been discharging their duties which
are in perennial nature. Then action of the Management of Air
India in employing the concerned workmen on contract basis
is an unfair labour practice as defined under Section 2(ra) of
the l.D. Act enumerated in the Vfh Schedule to the Act, which
G provision was inserted by way of an amendment by Act No. 46
of 1982 w.e.f. 21.8.1984 at serial No. 10 to the Vth Schedule
which states that "to employ workmen as casual or temporary
workers and to continue them as such for years with the object
to deprive them of the status and privileges of permanent
H workmen is an unfair labour practice on the part of the
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 741
[V. GOPALA GOWDA, J.]
employer". It is further stated that Management of Air India has A
employed more than 2000 employees in its factory and therefore
notification issued by the Lt. Governor of Delhi on 21st January,
1991 applying Rules 65 to 70 of Rules 1950 to the said
establishment framed under Section 46 of the Factories Act will
be applicable to the canteen in question run by the HCI on B
behalf of Air India. It is the case pleaded and proved before
the CGIT by the concerned workmen and it has recorded the
finding in this regard in their favour by placing reliance upon
three judge bench decision of this Court in the ca!res of M.M.R.
Khan (supra), Parima/ Chandra Raha & Ors. v. Life Insurance c
Corporation of India and Ors. 2 , and another decision of this
Court in Basti Sugar Mills Ltd. v. Ram Ujagar & Ors3. in
support of the legal contention urged o.n behalf of the workmen
that employees of statutory canteens i.e. canteens which are
required to be compulsorily provided to its workmen in the D
factory as per Section 46 of the Factories Act are employees
of the establishment not only for the purpose of Factories Act
but also for all other purp'Jses. In the case of Parimal Chandra
Raha referred to supra, this Court has held that for canteen
workers of contractor who runs the canteen, it must pass the
E
relevant test to determine on the facts as to whether providing
canteen to its workmen by a factory was obligatory on its part.
In Basti Sugar Mills Ltd.'s case, this Court has held that the work
of removal of press mud was given to the contractor and the
workmen in that case were employed by the contractor to do
that work, the contractor terminated their services on F
completion of the work. The stand taken in the said case by
the establishment was that they had nothing to do with the
workmen. The workmen in the case approached this Court for
relief against the termination of their services. This Court held
that the workmen were employed in the industry to do manual G
work for reward and therefore it is held that the Company was
their employer, as the workmen were employed by the
contractor with whom the Company had contracted in the
2. 1995 suppl. (2) sec 611.
3. AIR 1964 SC 355. H
742 SUPREME COURT REPORTS [2013) 16 S.C.R.
A course of conducting its business for execution of the said work
of removal of the press mud which is ordinarily part of the
industry. Further reliance was placed by the learned counsel
upon the decision of this Court in Union of India & Ors. v. M.
Aslam & Ors. 4 wherein this Court has held that for the unit run
B canteens of Army, Navy and Air Forces, the employees of such
canteens are entitled to service benefits as government
servants. Findiny cf fact was recorded by the CGIT in favour
of the concerned workmen while answering the points of
dispute referred to it by the Central Government with reference
c to the factual legal aspects and evidence on record from the
aforesaid cases. This finding is found fault with by the Single
Judge and Division Bench of the Delhi High Court and they had
set aside the finding recorded by CGIT. Strong reliance was
placed by the Delhi High Court upon the plea taken by Air India
D and HCI with regard to the fact that though HCI is subsidiary
Company of the Air India, it is governed by its own
Memorandum and Articles of Association as existed in the
Companies Act and is governed by the provisions of the said
Act. HCI is an independent legal entity from that of the Air India.
E The learned single Judge while accepting the factual and legal
contentions urged on behalf of Air India, has referred to
paragraph 17 of his judgment and stated with reference to the
. Memorandum and Articles of Association, and observed that
the general management of business of HCI vests with its
Board of Directors, no doubt, the same is subject to the
F directions, if any, that will be issued from time to time from Air
India with regard to the finance and conduct of its business
affairs. However, the composition of the Board of Directors of
HCI is constituted by Air India in consultation with the
Government of India. In view of the said reason, it cannot be
G said that the concerned contract employees employed by HCI
to do work in the canteen are employees of Air India in the face
of the first principle of Corporate law with reference to
Salomon v. Salomon & Co. Ltd. 5, wherein it was held that
4. (2001 > 1 sec 120.
H 5. 1897 AC 22.
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 743
[V. GOPALA GOWDA, J.]
Company is a person all together different from its A
shareholders though Air India is the sole holder of the shares
of the HCI. The HCI is a legal entity independent of its
shareholders with reference to Section 46 in Chapter V of the
Factories Act under the heading "welfare". The mandatory
provision is provided to maintain a canteen in the 8
establishment, which is a measure for the welfare of the
workers, the statutory obligation on the part of the industrial
establishment to provide and maintain a canteen in the factory.
If it is found that the operation of such canteen has been
entrusted to such an expert, it cannot be said that the C
employees deployed by such expert in such canteen becomes
employees of the factory/establishment. Further, it is held by
him that HCI was not incorporated merely to run the canteen of
Air India so as to keep the employees of the canteen
maintained by it at arm's length from Air India. The HCI is a D
business entity on its own rights and no malafide have been
established by the concerned workmen in the Management of
Air India in entrusting the operation and management of its
canteen to the HCI and no prejudice is shown to have been
caused to the concerned workmen being the employees of the
HCI instead of Air India, except that they may be entitled to a E
free flight once in a while from it, which they may not be entitled
to get as workmen of the HCI. Therefore, he has held that it is
hardly determinative of the matter in controversy and thereafter
he has referred to the judgments of this Court in Indian
Petrochemicals Corporation Ltd. & Anr. v. Shramik Sena & F
Ors. 6, Steel Authority of India Ltd. & Ors. v. National Union
Waterfront Workers & Ors. 7 , International Airport Authority of
India v. International Air Cargo Workers' Union & Anr. 6, in
support of his conclusion laid down by applying the test laid
down in those cases to the fact situation and held that there is G
no relationship of employer and employee and hence no
s. (1999) s sec 439.
1. c2001)1 sec 1
a. c2009)13 sec 374 H
744 SUPREME COURT REPORTS [2013] 16 S.C.R.
A existing industrial dispute would arise within the meaning of
Section 2(k) of the l.D. Act between the concerned workmen
and the Management of Air India. Therefore, he has quashed
the award of the CGIT which was affirmed by the Division
Bench of the Delhi High Court in the aforesaid LP.As by
accepting the reasons recorded by the learned single Judge
8
and also after extracting certain relevant paragraphs from the
decisions of this Court in the cases of M.M.R. Khan, Parimal
Chandra Raha, Indian Petrochemicals Corporation Ltd., (all
referred to supra) Hari Shanker Sharma and Ors. v. Artificial
C Limbs Manufacturing Corporation and Ors 9 • The Division
Bench of Delhi High court has concurred with the finding and
reasons recorded by the learned single Judge in the impugned
judgment and dismissed the letter patent appeals of the
concerned workmen. The correctness of the said judgment and
order are impugned in these civil appeals by the concerned
D workmen reiterating their factual and legal contentions as has
been adverted to before the CGIT and the High Court in the
writ petition and the appeals. Therefore, the same need not be
adverted to once again in this judgment with a view to avoid
repetition.
E
8. It is contended by the learned senior counsel Mr. Jayant
Bhushan on behalf of the concerned workmen, placing strong
reliance upon Section 46 of the Factories Act and notification
of the year 1991 referred to supra issued by Lt. Governor of
F the Union Territory of Delhi upon the Rules 65 to 70 of the Rules
that the Management of Air India is enumerated at serial No.9
in the Schedule to the said notification. Therefore, the
Management of Air India was required to provide a statutory
canteen to its workmen in its industrial establishment and the
G learned senior counsel also placed strong reliance upon the
Memorandum and Articles of Association of HCI particularly
clause 33 in Chapter XIII to substantiate his contentions that the
control and directions that will be issued from time to time with
regard to running of the ca11teen and managing the canteen is
H 9. c2002) 1 sec 337.
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 745
[V. GOPALA GOWDA, J.]
on the Management of Air India to HCI wherein, the A
Management of Air India was the occupier. The learned senior
counsel has further placed strong reliance upon the findings
recorded by the CGIT in its award in answer to the points of
disputes referred to it holding that the concerned workmen were
- employed by HCI to work in the statutory canteen of the B
Management of Air India and placed strong reliance upon the
judgment of this Court in State of UP. & Ors. v. Renusagar
Power Co. & Ors. 10 , which is followed by two other judgments
of this Court in Delhi Development Authority v. Skipper
Construction Co. (P.) Ltd. & Anr. 11 , Kapila Hingorani v. State c
of Bihar12, wherein this court has laid down the legal principles
by following the judgment of Salomon v. Salomon (supra) with
a view to find out as to whether the contract employment of the
concerned workmen by the HCI on behalf of the Management
of Air India is a sham or a camouflage. The CGIT has pierced , D
the veil with reference to the existing factual situation and found
that the concerned workmen had been working in the statutory
canteen required to be established and managed by the
Management of the Air India as per Rule 65(2).of the Rules and
the HCI is a subsidiary Company of the Air India as it holds E
100% share holding and therefore, the Air India has got the
control and supervision of its business under clause 33 of the
Memorandum and Articles of Association. Therefore he has
requested this Court to set aside the findings of fact recorded
by the learned single judge, which are concurred with by the
Division Bench in the impugned judgment and order as it is F
vitiated not only on account of erroneous finding for non
consideration of the proved facts and legal evidence on record
but also suffers from error of law as has been laid down by this
Court in ·catena of cases referred to supra upon which the
learned senior counsel has placed strong reliance in support G
of the case of the concerned workmen in these appeals.
10. (1988) 4 sec 59.
11. (1996) 4 sec 622.
12. (2003) 6 sec 1. · H
746 SUPREME COURT REPORTS [2013] 16 S.C.R.
A 9. Further he has placed strong reliance upon the
judgment of this Court in M.M.R. Khan's case particularly
paragraphs 25, 27 and 30 in support of the proposition of law
wherein this Court has held that rules framed by the State
Government of Delhi under Section 46 of the Factories Act are
8 obligatory on the part of the Railway Administration to provide
and maintain statutory canteen. In pursuant to the above rules
and notifications, this Court has held that canteens were
incidental and connected with the manufacturing process and
is subject to the manufacturing process. The nature of the
c canteen is deemed to be the statutory, since it is a necessary
concomitant·of the manufacturing activity and further railway
establishment has recognized the obligation of the Railway
Administration .by the Act which makes provision for meeting
the cost of the canteen though Railway Administration to employ
D any staff committee or cooperative society for the management
of the canteen. The legal responsibility for the proper
management of such canteen rests not with such agency but
solely with the Railway Administration. With reference to
paragraph 27 of the said decision and also having regard to
the undisputed fact of the case in hand that the Chefair unit of
E the HCI in which canteen is being run is situated in the
premises of the Air India and that it is also the statutory duty of
the Air India under Rules 65(2) and 65(4) of the Delhi Factories
Rules, that the canteen building should be situated not less than
fifty feet from any latrine, urinals, boiler house, coal stacks, ash
F dumps and any other source of dust, smoke or obnoxious fumes
etc. and that the manager of the factory shall submit for the
approval of Chief Inspector of plans and site plan as provided
under sub-rule (3) of Rule 65 and further that the construction
of the canteen building is in accordance with Rules 65, 66, 67
G and 70 which would clearly go to show that the said canteen is
established by Air India to discharge its welfare statutory
obligation to its workmen/employees as provided under the
Factories Act and Rules framed under by the State government
of Delhi. Also, the managing committee constituted under the
H Rules should consult from time to time regarding the quality and
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 747
[V. GOPALA GOWDA, J.]
quantity of food stuff to be prepared and served in the canteen A
to its workmen/employees and for other purposes. Therefore,
he has contended that the legal principles laid down by this
Court in M.M.R. Khan's case with all fours are applicable to the
present fact situation. Hence, it is contended by the learned
senior counsel that the findings and reasons recorded by the B
learned single Judge and the Division Bench in the impugned
judgments after setting aside the finding of facts recorded in
the award on this aspect of the matter by CGIT in answer to
the points referred to it is not only erroneous but also suffers
from error in law and is liable to be set aside and the common c
award passed by CGIT should be restored.
10. Another ground urged by the learned senior counsel
is that the High Court failed to appreciate the fact that the
canteen has been in existence since 1945. It is a deemed
·statutory canteen under Section 46 of the Factories Act vide D
notification of 1991 referred to supra. Therefore, the CGIT has
come to the right conclusion and held that the canteen- is
incidental to and running the canteen and the work of the
workmen is subject to the supervision and control of Air India.
It is further contended that the Division Bench of the Delhi High E
Court has erroneously applied the judgments in lndia·n
Petrochemicals Corporation Ltd., Parimal Chandra Raha and
referred to para 22 of M.M.R. Khan's case, Workmen of Nilgiri
Coop. Mkt. Society Ltd. v. State of Tamil Nadu & Ors. 13, Haldia
Refinery Canteen Employees Union & Ors. v. Indian Oil F
Corporation & Ors. 14, and Hari Shanker Sharma (supra) to set
aside the findings of the CGIT and concurred with the finding
of learned single Judge. Therefore, the learned senior counsel
has urged this Court for quashing of the impugned judgments
of both the learned single judge and the Division Bench since G
the same are not only based on erroneous reasoning but also
suffer from error in law in view of the clear pronouncement of
13. (2004) 3 sec 514.
14. (2005) 5 sec 51. H
748 SUPREME COURT REPORTS [2013] 16 S.C.R.
A law laid down by this Court in the three Judge Bench decision
of this Court in the case of M.M.R. Khan (supra) on the question
of providing and maintaining statutory canteen to its workmen/
employees in support of his contentions that the employment
of contract employees by Air India through HCI to run the
B statutory canteen in its premises is a sham and camouflage to
deprive the legitimate statutory and fundamental rights of the
concerned workmen. Therefore, he submits that the CGIT was
justified in lifting the veil or piercing the veil from the nature of
employment to provide and maintain the statutory canteen by
c Air India through HCI and the finding by CGIT is supported by
plethora of judgments of this Court referred to supra. It is further
submitted by him that there is direct control and supervision on
the functioning of the canteen and its employees by Air India
being a statutory canteen 'which is required to be maintained
D by it in conformity with Rules 65 to 70 of the Delhi Factories
Rules 1950 and under Section 46 of the Factories Act and
notification has been rightly issued enlisting the Management
of Air India in the Schedule to the said notification for providing
and maintaining the statutory canteen which notification has not
E been questioned by Air India. Therefore, the decisions of the
Supreme Court referred to supra regarding piercing the veil for
the purpose of finding out the real facts and to give effect to
the object and intendment of the statute while recruiting the
workmen on contract basis which is in violation of the statutory
provisions of the Industrial Disputes Act has been rightly arrived
F at by the CGIT on proper appreciation of pleadings and
evidence on record to answer the points in the affirmative.
Therefore, the learned senior counsel has requested this Court
to interfere with the impugned judgments and for restoration of
the award passed by the CGIT.
G
11. Mr. C.U. Singh, learned senior counsel for the
respondent sought to justify the impugned judgment of the
Division Bench of the Delhi High Court in affirming the judgment
of the learned single Judge by placing strong reliance upon the
H decisions of this Court in Dena Nath & Ors. v. National
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 749
[V. GOPALA GOWDA, J.] ·
Fertilisers & Ors. 15, and Steel Authority of India (supra). It is A
contended by the learned senior counsel for the respondent that
the Division Bench after adverting to the rival legal contentions
has elaborately referred to the decision of M.M.R. Khan's case
and the various other decisions referred to in the impugned
judgment rightly concurred with the findings and reasons B
recorded by the learned single judge in reversing the findings
and reasons recorded in the Award by the CGIT on the points
of dispute referred to it by the Central Government for its
adjudicatjon'. On appreciation of ta·cts pleaded and evidence
on record, keeping in view the fact that the concerned workmen c
are employed in the canteen by the HCI which is the statutory
Corporation, therefore, the Management of Air India has. no
power of recruitment, disciplinary control on the employees and
no control and supervision on functioning of the workmen of the
canteen. Therefore, the High Court has rightly arrived at the D
conclusion and held that there is no relationship of master and
servant or employer and employee between the concerned
workmen of the canteen and the Air India. The HCI is an
independent legal entity which has been carrying on with its
business strictly in conformity with the Memorandum and
E
Articles of Association and therefore he contends that there is
no need for this Court to interfere with the impugned judgments.
Further, he has urged that the canteen in which the concerned
workmen were employed by HCI is not a statutory canteen and
the finding recorded by the CGIT on the points of dispute by
placing reliance upon the Notification of 1991 and that Air India F
has employed more than 2000 employees and that the said
canteen is the statutory canteen and that there is an obligation
on the part of the Management of Air India to cater the food
stuff to its workers and employees, is an erroneous finding and
also suffers from error in law. Therefore, the said finding has G
been rightly set aside by the learned single Judge, the same
is affirmed by the Division Bench of the Delhi High Court by
concu~ring with decision of the learned single judge. Hence, he
further contends that there is no questions of law mych less the
15. (1992) 1 sec 695. H
750 SUPREME COURT REPORTS [2013] 16 S.C.R.
A questions of law framed by the workmen in the appeals involved
which require to be considered and answered by this Court in
exercise of its jurisdiction. Hence he has prayed for dismissal
of. these appeals.
12. On the basis of rival factual and legal contentions, the
8
following questions of law would arise for consideration:
(1) Whether the canteen which is run through HCI
from its Chefair unit by the Management of Air India,
is the statutory canteen of it under Rules 65 to 70
c of the Delhi Factories Rules of 1950?
(2) Whether engaging the contract workmen in the
canteen situated in the premises of Air India
through HCI amounts to sham and camouflage by
D Air India to deprive the legitimate statutory and
fundamental rights of the concerned workmen as
provided under the provisions of the Industrial
Disputes Act and the Constitution and can this
Court pierce the veil to find out and ascertain the
real and correct facts as to whether they are the
E
workmen of Air India?
(3) Whether the findings and reasons recorded by
the CGIT on the points of disputes in the common
award dated 5th May, 2004 in ID Nos. 97, 98, 99,
F 107 and 108 of 1996 are legal and valid?
(4) Whether the findings recorded by the learned
single Judge in CWP No.14178, 14181and14182
of 2004 which are concurred with by the Division
G Bench in LPA Nos.388, 390 and 391 of 2010 suffer
from erroneous reasoning and error in law and
warrant interference by this Court?
(5) What award the concerned workmen are entitled
to?
H
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 751
[V. GOPALA GOWDA, J.]
Answer to Point Nos. 1 and 2: A
13. First two points are answered together by assigning
the following reasons since they are inter-related. At the very
outset it is critically useful to place on record certain relevant
questions of fact which are on record and are not in dispute
8
with a view to determine the nature of dispute between the
parties that is referred to by the CGIT for adjudication in
exercise of its power and examine the rights and obligations
of the parties tp find out as to what relief the concerned
workmen in the appeals are entitled to, keeping in view the
provisions of Factories Act read with the Delhi Factories Rules C
of 1950, The Contract Labour (Regulations and Abolition) Act,
1970 and the Industrial Disputes Act, 1947.
14. It is an undisputed fact that the Labour Department vide
its notification dated 21st January, 1991 issued in pursuance D
of the provisions of sub-rule (1) of Rule 65 of the Delhi
Factories Rules wherein Lt. Governor of Union Terri.tory of Delhi
directed that Rules 65 to 70 of the Rules which shall apply to
the factories which are mentioned in the Schedule to the said
Notification at serial No.9 - M/s. Air India Ground Services E
Deptt. IGI, Air Port Delhi (Engineering Unit) ED.1725 is
enlisted. In view.of the aforesaid notification, the Air India is
statutorily required to maintain and ·provide a canteen in its
factory premises to cater the food stuff to its employees/
workmen. It is the case of the concerned workmen that there F
are 2000 workmen working in the establishment of Air India
which plea is accepted by the CGIT and the finding of fact is
1
recorded on the basis of evidence on record by it, particularly,
the admission made by the witness examined on ~ehalf of Air
India before CGIT.
G
15. Rules_ 65 to 70 of the Rules framed by the Union
Territory of Delhi under Section 46 of the Factories Act are
applicable in respect of Air India as it is enlisted in the Schedule
to the Notification issued by the Labour Department referred
to supra, to provide a statutory canteen by a factory where 250 H
752 SUPREME COURT REPORTS [2013] 16 S.C.R.
A workmen are employed by it. The case of the concerned
workmen in the industrial disputes raised by them is that Air
India has employed more than 2000 workmen and on the basis
pf the pleadings and evidence on record has proved the points
of dispute referred to it in the Industrial disputes referred to
B supra. The Air India has now challenged the applicability of the
Notification and the Rules framed by the Delhi Union Territory
under Section 46 of the Factories Act. The case pleaded by
the workmen on the other hand is that they are working in
Chefair which belongs to the HCI which is wholly owned
c-subsidiary Company of Air India with expertise in food
preparation and catering to the employees/workmen and
traveling passengers in their domestic and international Air
Crafts, and it is bound by its Memorandum and Articles of
Association, which is comprehensive enough to regulate the
conduct of its business for Air India including the nature of
0
employer and employee relationship. The service conditions
prevailing in the HCI vis-a-vis its employees are comparable
to the relation between the workers and Air India and Chefair
in terms of monetary benefits and the same are largely similar.
The cpst of providing the canteen services to its employees/
E workmen was provided by Air India on the basis of 'per
employee subsidy'. The CGIT, with reference to Factories Rules
and Notification referred to supra has held that Air India has to
provide food stuff to its employees/workmen at the subsidiary
rate. The pleadings of Air India in its counter statement filed
F before the CGIT are cleverly designed and drafted stating that
there were not more than 250 employees/workmen of Air India
in order to apply the relevant provisions of the Factories Act
and Rules in relation to a statutory canteen run by HCI through
Chefair and therefore·the notification is not applicable to the
G Air India. The said pleadings of Mis Air India on a jurisdictional
fact was demolished by t~e concerned workmen of the canteen
by cross examining the witness of Air India, who is its
designated officer. He has stated in his evidence unequivocally
that the actual number of workmen/employees availing the
H canteen facilities in the factory premises were in the range of
BALWANT RAI SALUJA v. AIR !NOIA LTD. & ORS. 753
[V. GOPALA GOWDA, J.]
2000 persons - a figure which was at least not less than eight A
times the number contained in the original pleadings of Air
India. Air India, in spite of being the statutory corporation did
not consider it necessary to come to the court with clean hands
but on the other hand, it has suppressed relevant material fact
regarding the number of employees/workmen working in its B
establishment. Therefore, the CGIT, on the basis of admission
made by the witness examined on behalf of the Air India as
MW1, has recorded the finding of fact holding that a total figure
of 2000 employees/workmen are working in its establishment
c
anct they are availing the canteen facilities, which is run through
the HCI from its Chefair unit in the premise of Air India. The
wholly owned subsidiary corporation- HCI has adopted unfair
labour practice as defined under Section 2(ra) of the l.D. Act
at serial No. 10 entry in the Vth Schedule under the heading of
the Unfair Labour Practices practiced by the employer, by D
keeping workers in employment in the canteen for 40 days at
a time and thereafter employing them on contract basis after a
break though the nature of work to be performed by them in
the canteen have been perennial in nature, for the reason that
they were required to provide and maintain the statutory E
canteen in the factory premises to cater the food stuff to its
employees/ workmen. Therefore, they have committed a
statutory offence punishable under the provision of Section 25U
of the I. D. Act for employing the concerned workmen on contract
basis with a break in their service which constitutes unfair
labour practice and is prohibited under Section 25T of the l.D. F
Act either by the employer or the workmen under the above
Schedule to the l.D. Act. The concerned workmen got the
Industrial Disputes referred to the CGIT for adjudication on the
points of the dispute referred to it by the Central Government
in the orders of reference who are covered in the award passed G
by the CGIT. They have been discharging the permanent nature
of work in different capacities working continuously ranging
from 3 years to 20 years with an artificial break after 40 days.
of employment by the employer with an oblique motive to
deprive them of their legitimate statutory right of regularizing H
754 SUPREME COURT REPORTS [2013] 16 S.C.R
A them as permanent workmen in the statutory canteen which is
being run by the Air India in its factory premises through HCI
from its Chefair unit.
16. Mr. Jayant Bhushan, the learned senior counsel on
behalf of the appellants- concerned workmen with reference to
8
the pleadings of the parties and the evidence on record, has
rightly placed strong reliance upon the Notification of 1991
issued by the Labour Department enlisting Air India in the
Schedule to the Notification at serial No.9 to provide a statutory
canteen to the employees/ workmen of Air India which is being
C run through HCI from its Chefair unit on its behalf which is its
subsidiary company as it has got 100% share holding as per
Memorandum and Articles of Association. On the basis of
pleadings and evidence on record, the learned senior counsel
substantiated the finding of fact recorded by the CGIT, wherein
D it has held that the concerned workmen are employed by Air
India through its subsidiary Corporation- HCI, which is a sham
contract and this veil is required to be pierced to find out the
real facts involved in the case as to whether they are working
for Air India or the HCI. The learned senior counsel has rightly
E placed strong reliance upon the decision of three Judge Bench
decision of this Court in Hussainbhai, Calicut v. Alath Factory
Thezhilali Union, Kozhikode and Ors. 16, the relevant paragraph
of which reads as under:
F "5. The true test may, with brevity, be indicated once
again. Where a worker or group of workers labours to produce
goods or services and these goods or services are for the
business of another. that other is. in fact, the employer. He
has economic control over the workers' subsistence. skill. and
G continued employment. If he, for any reason. chokes off. the
worker is. virtually, laid off. The presence of intermediate
contractors with whom alone the workers have immediate or
direct relationship ex contractu is of no consequence when.
on lifting the veil or looking at the conspectus of factors
H 1e. (1978) 4 sec 257.
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 755
[V. GOPALA GOWDA, J.)
governing employment. we discern the naked truth. though A
draped in different perfect paper arrangement. that the real
employer is the Management. not the immediate contractor.
Myriad devices. half-hidden in fold after fold of legal form
depending on the degree of concealment needed. the type
of industry, the local conditions and the like may be resorted s
to when labour legislation casts welfare obligations on the real
emplove( based on Articles 38. 39. 42. 43 and 43-A of the
Constitution. The court must be astute to avoid the mischief
and achieve the purpose of the law and not be misled by the
mava .of legal appearances." c
(Emphasis laid by this Court)
17. He has further very rightly placed reliance upon the
three Judge Bench decision of this Court in the case of Kanpur
Suraksha Karamchari Union v. Union of India & Ors17 . wherein D
this Court has held with reference to interpreting Section 2(n)
and Section 46 of the Factories Act read with Rules of UP
Factories Rules 1950 -Rule 1968, Section 7 and after
adverting to the Government of India Notification order No. 18/
(1)80/D(JCM) dated 25th July, 1981 accorded sanction to treat E
all employees of the canteen established in defence industrial
establishments under Section 46 of the Act as the government
employees with immediate effect and further made
observations in the said case that in certain cases, canteens
are run by either contractors or co-operative societies or some F
other bodies.
18. The legal question that arose for consideration of this
Court in that case was whether the services of the workers,
before they were declared to be government employees should
be taken into consideration for purposes of calculating their G
pension dues on retirement. E.S. Venkataramiah J., as he then
was, ih Kanpur Suraksha Karamchari Union (supra), speaking
for the Court observed as under:
11. (1988) 4 sec 478. H
756 SUPREME COURT REPORTS [2013] 16 S.C.R.
A "4. The Act is applicable both to the factories run by
government and the factories run by other private
companies, organisations. persons etc. It was enacted for
the purpose of improving the conditions of the workers in
the factories. Section 46 of the Act reads thus:
B
'46. Canteens.-(1) The State Government may
maht:: ru!es requiring that in any specified factory
wherein more than two hundred and fifty workers
are ordinarily employed, a canteen or canteens
shall be provided and maintained by the occupier
c for the use of the workers.
(2) Without prejudice to the generality of the
foregoing power, such rules may provide for-
D ( a) the date by which such canteen shall be
provided;
(b) the standards in respect of construction,
accommodation, furniture and other equipment of
the canteen;
E
(c) the foodstuffs to be served therein and the
charges which may be made therefor;
(d) the constitution of a managing committee for the
canteen and representation of the workers in the
F
management of the canteen;
(dd) the items of expenditure in the running of the
canteen which are not to be taken into account in
fixing the cost of foodstuffs and which shall be borne
G by the employer;
(e) the delegation to the Chief Inspector, subject to
such conditions as may be prescribed, of the power
to make rules under clause (c).'
H 5 ......... The expression "occupier" of a factory is defined
BALWANT RAI SALUJA if. AIR INDIA LTD. & ORS. 757
[V. GOPALA GOWDA, J.]
in Section 2(n) of the Act as the person who has ultimate A
control over the affairs of the factory, provided that (1) in
the case of a firm or other association of individuals, any
one of the individual partners or members thereof shall be
deemed to be the occupier; (ii) in the case of a company,
any one of the directors shall be deemed to be the B
occupier; and (iii) in the case of a factory owned or
controlled by the Central Government or any State
Government, or any local authority, the person or persons
appointed to manage the affairs of the factory by the
Central Government, the State Government or the local c
authority, as the case may be, shall be deemed to be the
occupier. Under clause (iii) of Section 2(n) of the Act, in
the case of a factory owned or controlled by the Central
Government, the person or persons appointed to manage
the affairs of the factory by the Central Government shall D
be deemed to be the occupier. The person so appointed
to manage the affairs of the factory of the Central
Government is under an obligation to comply with Section
46 of the Act by establishing a canteen for the benefit of
workers. The Canteen Managing Committee, as stated E
above, has to be established under Rule 68 of the Rules
to manage the affairs of the canteen. The functions of the
Canteen Managing Committee are merely advisory. It is
appointed by the Manager appointed under Section 7 of
the Act and the Manager is required to consult the Canteen
Managing Committee from time to time as to the quality F
and quantity of foodstuff served in the canteen, the
arrangement of the menus, times of meals in the canteen
etc. The food, drink and other items served in the canteen
are required to be sold on "ho profit" basis and the prices
charged are subject to the approval of the Managing G
Committee. The accounts pertaining to a canteen in a
government factory may be audited by its departmental
Accounts Officers."
H
758 SUPREME COURT REPORTS [2013) 16 S.C.R.
A Rule 67, sub-rules (1 ), (2) and (3), is traceable in this case
which reads thus:
"67. Equipment:
(1) There shall be provided and maintained
B sufficient utensils, crockery, cutlery, furniture and any
other equipment necessary for efficient running of
the canteen. Suitable clean clothes for employees
serving in· the canteen shall also be provided and
maintained.
c
(2) The furniture utensils and other equipment shall
be maintained in a class and hygienic condition. A
service counter, if provided, shall have a top of
smooth and impervious material. Suitable facilities
D including an adequate supply of hot water shall be
provided for the cleaning of utensils and equipment.
(3) Where the canteen is managed by a co-
operative society, registered under the Bombay Co-
operative Societies Act, 1952, as in force in the
E Union Territory of Delhi, the occupier shall provide
and maintain the equipment as required under sub-
rule (1) for such canteen."
19. In the case in hand, it is an undisputed fact that the
F building for running the canteen is situated in the Air India
premises. It has got statutory obligation under aforesaid rules
read with the Notification of 1991 referred to supra to provide
for necessary furniture and infrastructure to run the statutory
canteen in the premises of Air India. In the case of Kanpur
G Suraksha Karmachari Union referred to supra, it was urged
on behalf of the management that before the government
orders were passed, the number of years of service rendered
by the workmen under the managing Committee before
government officially absorbed them, could not be counted as
H years of service rendered by them. The Court had rejected the
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 759
[V. GOPALA GOWDA, J.]
said contention urged on behalf of the management and held A
that even though the management of the canteen may be by
the Managing Committee, the workers were employees of the
factory and their services for the purposes of pension would
have to be calculated with effect from the date they started
working in the canteen. Further, in the said case on the basis B
of pleadings and legal contentions urged on behalf of the
parties it is held that the management of the canteen could be
with the certain committee for determining lhe rights of the
workers, it was the occupier of the factory who is responsible
for them. The said conclusion was_ ~rriveEl-at by this Court in c
that case after noticing the rights conferred on the workers
though the interpretation was not confined to the provisions of
the Factories Act but also regarding retirement benefits
payable to the workmen employed in the canteen in the said
case. It was further observed by this Court that one test which D
is derived is in relation to the. question as to who is the occupier
of the relevant factory and whose responsibility is it to see
whether the canteen is provided and is running in accordance
with the provisions of the Factories Act?
·20. Learned senior counsel on behalf of the workmen has E
also placed reliance upon another judgment of this Court in
Parimal Chandra Raha (supra) upon which the CGIT placed
reliance in arriving at the right conclusion to hold that the
concerned workmen are entitled for absorption. In the above
said case, this Court held that the appellant workmen working F
in the canteens at different offices of LIC across the country
were like regular employees of the LIC as the canteens are run
and managed by different entities like Canteen Committees,
Cooperative Society of the employees and even contractors
and directions about how to run the canteen were issued by G
the LIC. In the said case, the infrastructure, the premises, the
furniture, electricity, water etc. were supplied by the LIC. The
working hours were also fixed by the LIC. Though LIC was
obviously not a factory, and the canteen established and run
by it was not a statutory canteen, still this Court held that whether H
760 SUPREME COURT REPORTS [2013] 16 S.C.R.
A the canteen was to be run under an obligatory provision of the
Factories Act or under a non-statutory obligation to provide a
canteen, the position. is the same and that the canteen workers
become a part of the establishment. Therefore, iri the said case
it is held that the w~rkmen were entitled to the same wages as
B Class-IV employees of the LIC.
21. In another decision rendered by three judge Bench of
this Court in the M.M.R.Khan's case, demands were made by
the canteen workers in many manufacturing establishments like
C textiles, sugar mills, rope factories and also in service
establishments like RBI, LIC, Railways and Airways for
establishment of a statutory canteen where there are more than
250 workmen working in such factory. In public sector
undertaking like Airways, there are different types of situations.
One of them is the statutory canteen which must be provided
D by such Industrial establishment which is a factory in terms of
the definition of the Factories Act, since manufacturing activities
are involved. In the instant case the Air India falls under the
category of factory where the occupier is defined under Section
2(n) of the Factories Act and therefore, it is duty bound to
E provide a canteen to its employees/ workmen which is known
as the statutory canteen. It is the statutory obligation on the part
of Air India to provide a statutory canteen under the provisions
of Factories Act and Rules and therefore, it is one more strong
circumstance in favour of the concerned workmen for
F regularization in their services as permanent workmen by the
Air India. The most important legal aspect of the case which is
required to be considered by me in this case is that the law
stipulates statutory obligation on the part of Air India to provide
and maintain statutory canteen to cater the food stuff to its
G employees/ workmen as per notification referred to supra.
Therefore, the canteen facility to be provided to the employees/
workmen cannot be withdrawn by the owner of the
establishment, namely, the principal employer. Therefore, the
necessary corollary to this condition is the fact that in such a
H situation the nature of employment involved in the canteen in
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 761
[V. GOPALA GOWDA, J.]
question is perennial in nature. The need for workers to runU:ie A
canteen by the Management of Air India is permanent.. The
vacancies of various posts in the canteen are permanent: i.n
nature.
22. From the review of case law on this aspect, two kinds B
of situations arise, one in which the contractor is changed but
not the workers employed. In the Parimal Chandra Raha and
the Indian Petrochemicals cases referred to supra, such were
the situations, upon which strong reliance is placed by the
learned single Judge and the Division Bench of the High Court C
to set aside the finding of fact recorded by the CGIT in its award
on the points of disputes referred to it. This Court has taken a
note of this relevant fact and considered the same in the instant
case to decide as to whether the canteen workers should be
regularized by the principal employer? The other situation is
where the contractor is changed and along with him the workers D
also get the boot. The effect of this situation appears that the
workers have been temporary. In reality they are kept temporary
in order to perpetuate 'unfair labeur practice by the employer,
which is not permissible in view of Section 25T of the.l.D. Act
read with entry at Serial No. 1O in the Vth Schedule of the l.D. E
Act regarding unfair labour practices on the part of the
employer. In the case in hand, I hold that Air India is the
principal employer and Chefair - an unit under HCI is the
contractor, on the basis of the pleadings of the parties and law
laid down by this Court referred to supra in the earlier F
paragraph of this judgment. The CGIT ha.s rightly arrived at the
finding that Chefair is the unit of HCI which renews the contract
of canteen workers every forty days. Unfortunately, the said
workers, have been continued as contract workers in the
canteen though they have completed 240 days of continuous G
service in a year as defined under Section 258 of the l.D. Act
which action of the Air India is unfair labour practice and is
prohibited under Section 25T of the l.D. Act. In spite of statutory
prohibition of employing the concerned workmen in the canteen
on contract basis in permanent natu(e of work, the Chefair - a H
762 SUPREME COURT REPORTS [2013) 16 S.C.R.
A unit of HCI and Air India have indulged in unfair labour practices
as defined under' Section 2(ra) read with Section 25T and the
Vth Schedule of the l.D. Act, with a deliberate intention to
deprive the statutory rights of the concerned workmen which is
a glaring patent illegality committed by them for which they are
B liable to be punished under Section 25U of the l.D. Act read
with the Rules.
23. If the case pleaded by Air India and HCI is accepted
by the single Judge and the Division Bench of the High Court,
C . it amounts to giving a reward to Air India, who is the principal
employer. It also amounts to holding that the concerned
workmen are contract employees of the contractor and they are
not put in the continuous service which amounts to conferring
reward upon the HCI and AIR India who have committed
illegality. Both the learned single Judge and the Division Bench
D of the High Court have erroneously accepted the case pleaded
by Air India and HCI which suffers from error in law as it goes
against the statutory provisions of the Factories Act, Rules and
the l.D. Act. The concerned workmen who are working in the
canteen at the relevant time have been working in the vacancies
E which are permanent in nature. Therefore, they are required to
be regularized by the principal employer as permanent
workmen and they are also entitled to the consequential
benefits since they have rendered their services for more than
3 to 20 years continuously saving the artificial breaks imposed
F on them by the employer from time to time to deprive them from
regularization as permanent employees of the establishment as
has been held by the CGIT in its award by accepting the claim
of the workmen.
G 24. Further, it is clear from the Rules of 1950 and the
Notification of 1991 referred to supra that Air India is the
occupier under Section 2(n) of the Factories Act and it must
provide and maintain a statutory canteen for its employees/
workmen. The vacancies in various posts that exist for canteen
workers are permanent in nature but the Management of HCI
H on behalf of Air India has continued them as contract workers
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 763
[V. GOPALA GOWDA, J.]
for a long period with a break after 40 days, which is an unfair A
labour practice on their part though it is prohibited under
Section 25T of the l.D. Act. The temporary rotation of concerned
workers in the vacancies of the canteen by the HCI, which is
an instrum·entality of the state is to countenance a situation
where two statutory entities of the above nature collude together B
to perpetuate 'unfair labour practices' as defined under Section
2(ra) which is enumerated at serial no. 10 under the heading
of 'unfair labour practice' on the part of the employer in the Vth
Schedule to the l.D. Act. Therefore, this Court is bound to
ensure the implementation of all relevant laws, especially those c
enacted by the Legislature to fulfil the constitutional obligations
under the Directive Principles of State Policy and bring this
unholy alliance between Air India and HCI to an end by
declaring the canteen workers as employees of the principal
employer.
D
25. The M.M.R. Khan'.s case referred to supra, fully
• supports the finding recorded by the CGIT on the points of
dispute in favour of the concerned workmen by directing the Air
India to regularize them as canteen workers, At Para 25 of the
said judgment the observations made by this Court wtiich are E
very relevant for our purpose read thus: ·
"25. Since in terms of- the Rules made by the State
Governments under Section 46 of the Act, it is obligatory
on the railway administration to provide a canteen, and the F
canteens in question have been established pursuant to
the said provision there is no difficulty in holding that the
canteens are incidental to or connected with the
manufacturing process or the subject of the manufacturing
process. The provision of th_e canteen is deemed by the G
statute as a necessary concomitant of the manufacturing
activity. Paragraph 2829 of the Railway Establishment
Manual recognises thei obligation on the railway
Administration created by the Act and as pointed out
earlier paragraph 2834 makes provision for meeting the H
764 SUPREME COURT REPORTS (2013] 16 S.C.R.
A cost of the canteens. Paragraph 2832 acknowledges that
although the railway administration may employ anyone
such as a staff committee or a co-operative society for the
management of the canteens, the legal responsibility for
the proper management rests not with such agency but
- B solely with the railway administration. If the management
of the canteen is handed over to a consumer cooperative
society the bye-laws of such society have to be amended
suitably to provide for an overall control by the railway
administration."
c 26. Before applying the legal principles laid down in the
above paragraph of the case to the case in hand, it is pertinent
to note that at the very outset three kinds of canteens exist in
the Railways. They are: (i) Statutory canteens as required under
Section 46 of the Factories Act, 1948 where more than 250
D employees are working, (ii) Non-statutory non-recognized
canteens which employ 250 or less than 250 employees and
hence there is no statutory obligation on the part of the employer
to maintain them, where workers exceed hundred and such
canteens are set up with prior approval of the Railway Board,
E and (iii) Non-Statutory non-recognized canteens where 100 or
less than hundred workers work and are set up without prior
approval ot the Railway Board.
27. In the decision of this Court in M.M.R. Khan(supra),
F the workers engaged in the -first and second category of
canteens mentioned above were treated as Railway employees
after considering the relevant facts and statutory provisions of
the Factories Act and the Rules. Thus. this Court held that the
workmen would be entitled to all service conditions prescribed
G for them under relevant rules/orders. The relevant paragraph
from the said decision reads as under:
"30. While discussing above the contention that the
employees in the statutory canteens cannot be treated as
railway employees even for the purposes of the said Act,
H we have referred to the various developments, and
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 765
[V. GOPALA GO\fVDA, J.]
documents on record including the court decisions. It is not A
necessary to repeat them here. In view of the same, the
contention advanced by Mr Ramaswamy that the railway
administration is engaged in varied welfare activities, and
the employees engaged in these activities will also have
to be treated as railway employees, in case, the canteen B
employees are recognized as railway employees does not
appeal to us. We express no opinion on the subject as to
whether the employees engaged in other welfare activities·
will or will not be entitled to the status of the railway
employees, since neither they nor the facts pertaining to c
them are before us. Our conclusion that the employees in
the statutory canteens are entitled to succeed in their claim
is based purely on facts peculiar to. them as discussed
above. If by virtue of all these facts they are entitled to the
status of railway employees and they cannot be deprived D
of that status merely bedause some other employees
similarly or dissimilarly situated may also claim the "same
status. The argument to say the least can only be
described as one in terrorem,_ahd as any other argument
of the kind has to be disregarded." ·
E
(Emphasis laid by the Court)
28. I have carefully analysed the law enunciated by this
Court in M.M.R. Khan's case which throws interesting light on ·
the history of the canteen workers' litigation which I have F
carefully considered and applied the legal principle laid down
in that case to the fact situation of the case in hand. The
canteen workers of the canteen of Railways in Kharagpur
approached the High Court of Calcutta praying that they be
recognized as Railway workers and that all service conditions G
available to railway workers be made available to them. The
.learned single Judge dismissed the petition. The Division
Bench directed the respondents to recognize the workers as
Railway employees but rejected their plea for simnar service
conditions. The matter came before this Court and the Court H
766 SUPREME COURT REPORTS [2013] 16 S.C.R.
A was inclined to agree with the Division Bench decision of the
Calcutta High Court and left it open to the Union of India. The
railway board acted on the initiative of this Court and declared
that all Kharagpur canteen workers; soon followed b·y all
statutory canteen workers across India would be deemed
B railway workers, but governed by their earlier service
conditions. The prime mover therefore was not the Railway
Establishment Manual (REM) but a judicia·I interpretation
clubbed with judicial nudging, to achieve the constitutional goals
for canteen workers. Therefore the contention urged by Mr. C.U.
c Singh, learned senior counsel on behalf of Air India that the
decision rendered by this Court in M.M.R. Khan's case is
distinguishable from the facts of the instant case, as this Court
placed reliance upon the REM and the circulars issued by the
Railway Board in the above referred case is wholly untenable
D in law, for the reason that REM is also invoked by the Railways.
I have to state that this Court has not given relief to railway
cante~l'.l .Workers because of the REM. On the contrary, it is the
statutory status of one type of canteen that was the prime mover,
not only for workers to claim their rights, but also for the railways
to find a basis for classification and then create a suitable
E administrative system to govern a.II kinds of canteen workers
using a reasonable basis for classification. Indeed the
distinguishing feature adopted by the Railways in the above
referred case is primarily the one provided by the Factories Act
and the Rules. The relevant fact has been duly recognized by
F this Court in the aforesaid case without in any way watering
down the importance of a statutory canteen to be provided to
the employees/ workmen by the occupier of a factory. The
learned single Judge and Division Bench have unjustly refused
the claim of the canteen workmen by accepting the untenable
G arguments advanced by the learned senior counsel on behalf
of the Air India that the canteen run through HCI from Chefair
is not the statutory canteen and Air India is not the principal
employer. This conclusion is not only erroneous but is also
contrary to the law laid down by this Court in the cases referred
H
BALWANT RAI SALUJA Ii. AIR INDIA LTD. & ORS. 767
[V. GOPALA GOWDA, J.]
to supra which are binding upon it. A
29. The presence of a statutory obligation on the part of
Air India to run a canteen must always be seen as one more
strong circumstance for me to determine the wider question of
regularization of the concerned workmen involved in this case.
8
In Indian Petrochemicals Corpn.'s case, referred to supra
we noticed the facts of that case which are quite ·similar to the
case in hand. This Court was greatly influenced in oeterminative
way of the finding of fact and. recorded that the workers were
in continuous employment in the canteen for a considerable C
length of time. The underlying test is what is the nature of
employment of the concerned workmen in the case in hand?
Is it a temporary or casual vacancy or is it perennial and
permanent in nature? The answer to the aforesaid queries by
me is that in all statutory -canteens, the nature of employment,
of vacancies, is indeed of a permanent nature and those who D
deploy the workmen on contract basis to discharge statutory
duties of an employer amounts to unfair labour practice. In the
nature of rotational hire and fire, policy adopted by the employer
must not be rewarded for the illegalities perpetuated by them.
This is more so when the principal employer is a statutory E
corporation coupled with the fact that the contractor also is one
such entity and the two should not be allowed to con.tinue their
unfair labour practices to employ the workmen on contract basis
in the canteen to discharge the statutory duty by the occupier
to provide and maintain a statutory canteen for its employees/ f7
workmen in its factory. Both Air India and HCI have colluded
with each other to perpetuate unfair labour practices by
engaging the concerned workmen in the statutory canteen of
the principal employer- Air India.
G
30. Another important angle is examined by me in relation
to the nature of test to be used to determine employment
relations between the parties. Classically jurists like Salmond
and others while developing the jurisprudence relating to Torts
have laid down the test to determine the relationships between
H
768 SUPREME COURT REPORTS [2013] 16 S.C.R.
A 'master and servant'. In such situations the predominant test
deployed was the test of control and supervision. It is needless
to state that post constitutional jurisprudence in India must no
longer be allowing practice of the traditional master and servant
relationship but should be facilitating employer-employee
B relationships mediated by constitutional jurisprudence which is
relevant to the area of labour law jurisprudence in our country
in the interest of maintaining industrial peace and harmony
which is in larger public interest.
31. Further there has been considerable discussion in the
C area of determining the relevant test relating to the
jurisprudence of employer-employee relationship. Sometimes,
we have fallen back on the old principles of master and servant
and quite often when we find that these were not capable of
delivering justice to the workers keeping with the principles
D contained in our Directive Principles of State Policy as .
enshrined in Part IV of the Constitution, this Court has taken
note of this difficult situation and has devised new tests to meet
the challenges of the new times.
E 32. That is why the legal principle has been enunciated by
this Court right from the Hussainbhai Calicut, M.M.R. Khan,
Parima/ Chandra Raha to Harjinder Singh v. Punjab State
Warehousing Corporation 16 establishing the trend of healthy
constitutional jurisprudence and its application to labour law
F keeping in mind the basic feature of the constitution namely to
render social justice to the weaker sections of the society as
has been held by this Court in Kesvananda Bharati v. State of
Kerala 19 . The concept of social justice has been vividly
explained in the case of Harjinder Singh, the relevant
G paragraph of which is extracted hereunder:
"30. Of late, there has been a visible shift in the courts'
approach in dealing with the cases involving the
1a. (2010)3 sec 192
H 19. (1973)4 SCC2 25
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 769
[V. GOPALA GOWDA, J.]
interpretation of social welfare legislations. The attractive A
mantras of globalisation and liberalisation are fast
becoming the raison d'etre of the judicial process and an
impression has been created that the constitutional courts
are no longer sympathetic towards the plight of industrial
and unorganised workers. In large number of cases like B
the present one, relief has been denied to the employees
falling in the category of workmen, who are illegally
retrenched from service by. creating by-lanes and side-
lanes in the jurisprudence developed by this Court in three
decades. The stock plea raised by the public employer in c
such cases is that the initial employment/engagement of
the workman/employee was contrary to sonie or the other
statute or that reinstatement of the workman will put
unbearable burden on the financial health of the
establishment. The courts have readily accepted such plea
0
unmindful of the accountability of the wrong doer and
indirectly punished the tiny beneficiary of the wrong ignoring
the fact that he may have continued in the employment for
years together and that micro wages earned by him may
be the only source of his livelihood."
E
33. Courts in this country have been faced with the problem
to resolve the dilemma as to who is really independent
contractor and who is not? In the light of the Constitution Bench
decision in Steel Authority of India's case (supra) on the
subject, the crucial test is to determine whether the nature of F
the contractual relationship between the parties that is juristically
introduced is a genuine one or a sham contract. It must be
noted that employers and their organizations and indeed all
parties to labour litigation keep close watch on the evolving
jurisprudence and tailor iegal agreement and paper contracts G
accordingly to suit the purpose of finding the cheapest and most
exploitable labour with honourable exceptions as we have seen
· in the case of the railway management. This craze for facilitating
'flexible labour' which is another phrase for 'hire and fire'
deserves no constitutional sympathy. H
770 SUPREME COURT REPORTS [2013] 16 S.C.R.
A 34. Two broad judicial approaches have manifested
themselves in the above background - one that responds to
constitutional jurisprudence, as pointed out in Harjinder
Singh's case (supra) and the other that abides by the new
dogmas of globalisation and liberalisation. It is my considered
B view that I must abide by the former jurisprudence keeping in
view the mandate we find in the judgments of this Court referred
to supra.
35. The test which I come across is almost universal in its
C application to address the wide range of fact situations which
has been discussed by me in this judgment. In the case of
Hussainbhai (supra), this Court has held that the test of
economic control in contrast to the test of control and
supervision is the test to ascertain the employer-employee
relationship. I am inclined to apply the above test to the fact
D situation of the case in hand to determine the fact as to whether
a genuine contract or a sham contract exists between Air India
and the Hotel Corporation of India. Indeed if I pierce the veil of
legal appearances that is contained in the contractual
a~rangement between the two public sector corporations
E named above, I must come to the conclusion that what I see is
a sham contract between them behind which many unfair labour
practices like the 40 days contract of employment of the
concerned workmen in the canteen has been perpetuated by
them in order to deny permanent employment to the workmen
F in the canteen which is of permanent and statutory in nature and
therefore carries with it permanent vacancies.
36. The learned senior counsel on behalf of Air lnclia,
placing reliance upon the decision of this Court referred to
G supra urged that the concerned workmen in the canteen are
'workmen' only for the purpose of Factories Act. I disagree with
the said contention and the view point for the reason that the
same workers are also 'workers' as defined under Section 2(s)
of the l.D. Act and permanently keeping them on a temporary
status is against entries at serial numbers 5 and 10 of the Vth
H Schedule of the l.D. Act pertains to "Unfair Labour Practices"
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 771
[V. GOPALA GOWDA, J.]
under the l.D. Act which prohibits employers from committing A
such illegalities, for which the statutory penal action is
prescribed under Section 25U of the l.D. Act on such persons.
The existing practice that is followed by either the Hotel
Corporation of India or Air India independent of each other or
in collusion thereof is unbecoming of a model employer. B
Interestingly, this position would remain the same irrespective
of whether the canteen worker is an employee of the
'independent contractor' or the 'priocipal employer'.
37. Further question is whether the above two legal entities
are independent of each other or not, has become central focus C
to stay within the confines of the test of 'control and
supervision'. I am prompted to find out whether the wholly owned
subsidiary, the HCI is acting at the behest of Air India and if so
to what extent. If, however, I have to apply the other tests already
laid down by this Court as, I propose to do in this case in D
Hussainbhai's case, then the independence of the separate
legal personalities and the interpretation made in Salomon v.
Salomon, on which the learned single judge relies, pales into
insignificance. The relevant paragraph reads as under:
E
"Then, if the company was a real company, fulfilling all the
requirements of the Legislature, it must be treated as a
company, as an entity, consisting indeed of certain
corporators, but a distinct and independent corporation.
The Court of Appeal seem to treat the company F
sometimes as substantial and sometimes as shadowy and
unreal: it must be one or the other, it cannot be both. A
Court cannot impose conditions not imposed by the
Legislature, and say that the shareholders must not be
related to each other, or that they must hold more than one G
share each. There is nothing to prevent one shareholder
or all the shareholders holding the shares in trust for some
one person. What is prohibited is the entry of a trust on
the register: s. 30 . If all the shares were held in trust that
would not make the company a trustee."
H
772 SUPREME COURT REPORTS [2013] 16 S.C.R.
A 38. The said principle has been followed by this Court in
catena of cases namely, Kanpur Suraksha karamchari Union
and Basti Sugar Mills Ltd. referred to supra. In the case of
State of UP v. Renusagar Power Co. (supra), this Court held
as under:
B
'"55 ....... On the other hand these English cases have often
pierced the veil to serve the real aim of the parties and
for public purposes. See in this connection the
observations of the Court of appeal in DHN Food
Distributors Ltd. v. London Borough of Tower Hamlets. It
c is not necessary to take into account the facts of that case.
We may, however, note that in that case the corporate veil
was lifted to confer benefit upon a group of companies
under the provisions of the Land Compensation Act, 1961
of England. Lord Denning at p. 467 of the report has made
D certain interesting observations which are worth repeating
in the context of the instant case. The Master of the Rolls
said at p. 467 as follows:
'Third, lifting the corporate veil. A further very interesting
E point was raised by counsel for the claimants on company
law. We all know that in many respects a group of
companies are treated together for the purpose of general
accounts, balance sheet and profit and loss account. They
are treated as one concern. Professor Gower in his book
F on company law says: 'there is evidence of a general
tendency to ignore the separate legal entities of various
companies within a group, and to look instead at the
economic entity of the whole group'. This is especially the
case when a parent company owns all the shares of the
subsidiaries, so much so that it can control every
G
movement of the subsidiaries. These subsidiaries are
bound hand and foot to the parent company and must do
just what the parent company says. A striking instance is
the decision of the House of Lords in Harold Holdsworth
& Co. (Wakefield) Ltd. v. Caddies. So here. This group is
H
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 773
[V. GOPALA GOWDA, J.]
virtually the same as a partnership in which all the three A
companies are partners. They should not be treated
separately so as to be defeated on a technical point. They
should not be deprived of the compensation which should
justly be payable for disturbance. The three companies
should, for present purposes, be treated as one, and the B
parent company, DHN, should be treated as that one. So
that DHN are entitled to claim compensation accordingly.
It was not necessary for them to go through a conveyancing
device to get it. ..... '
xxx xxx xxx c
xxx xxx xxx
65. Mr. Justice 0. Chinnappa Reddy speaking for this
Court in L/C v. Escorts Ltd. had emphasised that the D
corporate veil should be lifted where the associated
companies are inextricably connected as to be, in reality,
part of one concern. It is neither necessary nor desirable
to enumerate the classes of cases where lifting the veil is
permissible, since that must necessarily depend on the E
relevant statutory or other provisions, the object sought to
be achieved, the impugned conduct, the involvement of the
element of the public interest, the effect on parties who
may be affected. After referring to several English and
Indian cases, this Court observed that ever since A
F
Salomon & Co. Ltd. case a company has a legal
independent existence distinct from individual members.
It has since been held that the corporate veil may be lifted
and corporate personality may be looked in. Reference
wa~ made to Pennington and Palmer's Company Laws.
G
66. It is high time to reiterate that in the expanding horizon
of modern jurisprudence, lifting of corporate veil is
permissible. Its frontiers are unlimited. It must, however,
depend primarily on the realities of the situation. The ~im
of the legislation is to do justice to all the parties. The H
774 Sl,JPREME COURT REPORTS [2013) 16 S.C.R.
A horizon of the doctrine of lifting of corporate veH is
expanding. Here, indubitably, we are of the opinion that it
is correct that Renusagar was brought into existence by
Hindalco in order to fulfil the condition of industrial licence
of Hindalco through production of aluminium. It is also
B manifest from the facts that the model of the setting up of
power station through the agency of Renusagar was
adopted by Hindalco to avoid complications in case of
take over of the power station by the State or the Electricity
Board. As the facts make it abundantly clear that all the
c steps for establishing and expanding the power station
were taken by Hindalco, Renusagar is wholly owned
subsidiary of Hindalco and is completely controlled by
Hindalco. Even the day-to-day affairs of Renusagar are
controlled by Hindalco. Renusagar has at no point of time
indicated any independent volition. Whenever felt
D
nei;:essarv. the State or the Board have themselves lifted
the corporate veil and have treated Renusagar and
Hindalco as one concern and the generation in Renusagar
as the own source of generation of Hindalco. In the
impugned order the profits of Renusagar have been
E treated as the profits of Hindalco.
xxx xxx xxx
68. The veil on corporate personality even though not lifted
F sometimes, is becoming more and more transparent in
modern company jurisprudence. The ghost of Salomon
case still visits frequently the hounds of Company Law but
the veil has been pierced in many cases. Some of these
have been noted by Justice P.B. Mukharji in the New
Jurisprudence."
G
(Emphasis laid by the Court)
39. The above said judgment is followed by this Court in
D.D.A. v. Skipper Construction Co.(supra). The relevant
H paragraphs read as under:
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 775
[V. GOPALA GOWDA, J.)
1,;i/
"2s1'. The law as stated by Palmer and Gower has been A
approved by this Court in TELCO v. State of Bihar. The
following passage from the decision is apposite:
' ... Gower has classified seven categories of cases
where the veil of a corporate body has been lifted.
B
But, it would not be possible to evolve a rational,
consistent and inflexible principle which can be
invoked in determining the question as to whether
the yeil of the corporation should be lifted or not.
Broadly stated, where fraud is intended to be
prevented, or trading with an enemy is sought to be C
defeated, the veil of a corporation is lifted by judicial
decisions and the shareholders are held to be the
persons who actually work for the corporation.'
27. In DHN Food Distributors Ltd. v. London Borough of D
Tower Hamlets the court of appeal dealt with a group of
companies. Lord Denning quoted with approval the
statement in Gower's Company Law that
"there is evidence of a general tendency to ignore the E
separate legal entities of various companies within a group,
and to look instead at the economic entity of the whole
group".
The learned Master of Rolls observed that "this group is
virtually the same as a partnership in which all the three F
companies are partners". He called it a case of "three in
one" - and, alternatively, as "one in three".
28...The concept of corporate entity was evolved to
encourage and promote trade and commerce but not to G
commit illegalities"o·no-defraud people. Where. therefore.
the corporate character is employed for the purpose of
committing illegality or for defrauding others, the court
would ignore the corporate character and will look at the
reality behind the corporate veil so as to enable it to pass
H
776 SUPREME COURT REPORTS [2013] 16 S.C.R.
A appropriate orders to do justice between the parties
concerned. The fact that Tejwant Singh and members of
his family have created several corporate bodies does not
prevent this Court from treating all of them as one entity
belonging to and controlled by Tejwant Singh and family if
B it is found that these corporate bodies are merely cloaks
behind which lurks Tejwant Singh and/or members of his
family and that the device of incorporation was really a ploy
adopted for committing illegalities and/or to defraud
people.
c The concept of resulting trust and equity"
(Emphasis laid by the Court)
40. In Kapila Hingorani v. State of Bihar (supra), this Court
D held as under:
"26. The proposition that a company although may have
only one shareholder will be a distinct juristic person as
adumbrated in Salomon v. Salomon and Co., has time
and again been visited by the application of doctrine of
E lifting the corporate veil in revenue and taxation matters.
(See Dal Chand and Sons v. CIT and Juggilal Kamlapat
v. CIT.)
27. The corporate veil indisputably can be pierced when
F the corporate personality is found to be opposed to justice.
convenience and interest of the revenue or workman or
against public interest. (See CIT v. Sri Meenakshi Mills
Ltd., Workmen v. Associated Rubber Industry Ltd., New
Horizons Ltd. v. Unifm of India, State of UP. v. Renusagar
G Power Co., Hussainbhai v. Ala th Factory Thezhilali Union
and Secy., H.S.E.B. v. Suresh.)"
(Emphasis laid by the Court)
41. This Court in Secretary, HSEB v. Suresh & Ors2°. has
H 20. (1999) 3 sec ao1.
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 777
[V. GOPALA GOWDA, J.]
held as under: A
"6. In order to keep the said plants and stations ylean and
hygienic, the appellant-Board, upon tenders being floated,
awards contracts to contractors who undertake the work
of keeping the same clean and hygienic. One such co11tract B
was awarded to one Kashmir Singh, for "proper; complete
and hygienic cleaning, sweeping and removal of garbage
from the Main Plant Building" at Panipat, at the rate of Rs
33,000 per month with a stipulation to engage minimum
42 Safai Karamcharis with effect from 15-5-1987 for a C
period of one year and in terms therewith the contractor
took over the work and performed the said work through
the above-stated Safai Karamcharis.
xxx xxx xxx
D
9. The High Court did in fact note with care and caution
the doctrine of "lifting of the veil" in industrial jurisprudence
and recorded that in the contextual facts and upon lifting
of the veil. question of having any contra opinion as
regards the exact relationship between the contesting E
parties would not arise and as such directed reinstatement
though, however, without any back wages. While it is true
that the doctrine enunciated in Saloman v. Sa/oman & Co.
Ltd. came to be recognised in the corporate jurisprudence
but its applicability in the present context cannot be
F
doubted. since the law court invariably has to rise up to
the occasion to do justice between the parties in a manner
· as it deems fit. Roscoe Pound stated that the greatest
virtue of the law court is flexibility and as and when the
situation so demands. the law court ought to administer
justice in accordance therewith and as per the need of the G
situation.
xxx xxx xxx
13. There is, however, a total unanimity of judicial H
778 SUPREME COURT REPORTS [2013] 16 S.C.R.
A pronouncements to the effect that in the event the contract
labour is employed in an establishment for seasonal
workings. question of abolition would not arise but in the
event of the same being perennial in nature, that is to say,
iri the event of the engagement of labour force through an
B intermediary which is otherwise in the ordinary course of
events and involves continuity in the work. the legislature
is candid enough to record its abolition since involvement
of the contractor may have its social evil of labour
exploitation and thus the contractor ought to go out of the
c scene bringing together the principal employer and the
contract labourers rendering the employment as direct, and
resultantly a direct employee. This aspect of the matter has
been dealt with great lucidity, by one of us (Majmudar. J.)
in Air India Statutorv Comn. v. United Labour Union.
D xxx xxx xxx
17. Needless to note at this juncture that the Contract
Labour (Regulation and Abolition) Act being a beneficial
piece of legislation as engrafted in the statute-book, ought
E to receive the widest possible interpretation in regard to
the words used and unless words are taken to their
maximum amplitude, it would be a violent injustice to the
framers of the law. As a matter of fact the law is well settled
by this Court and we need not dilate much by reason
F therefor to the effect that the law courts exist for the society
and in the event of there being a question posed in the
matter of interpretation of a beneficial piece of legislation.
Question of interpreting the same with a narrow pedantic
approach would not be justified. On the contrary, the widest
possible meaning and amplitude ought to be offered to the
G
expressions used as otherwise the entire legislation would
lose its efficacy and contract labour would be left at the
mercy of the intermediary.
xxx xxx xxx
H
BALWANT RAJ SALUJA v. AIR INDIA LTD. & ORS. 779
[V. GOPALA GOWDA, J.]
20. It has to be kept in view that this is not a case in which A
it is found that there was any genuine contract labour
system prevailing with the Board. If it was a genuine
contract system, then obviously it had to be abolished as
per Section 10 of the Contract Labour Regulation and
Abolition Act after following the procedure laid down therein. B
However, on the facts of the present case, it was found by
the Labour Court and as confirmed by the High Court that
the so-called contractor Kashmir Singh was a mere name
lender and had procured labour for the Board from the open
market. He was almost a broker or an agent of the Board c
for that purpose. The Labour Court also noted that the
management witness Shri A.K. Chaudharv also could not
tell whether Shri Kashmir Singh was a licensed contractor
or not. That workman had made a statement that Shri
Kashmir Singh was not a licensed· contractor. Under these D
circumstances, it has to be held that factually there was no
genuine contract system prevailing at the relevant time
wherein the Board could have acted as only the principal
employer and Kashmir Singh as a licensed contractor
employing labour on his own account. It is also pertinent E
to note that nothing was brought on record to indicate that
even the Board at the relevant time was registered as the
principal employer under the Contract Labour Regulation
and Abolition Act. Once the Board was not a principal
employer and the so-called contractor Kashmir Singh was
not a licensed contractor under the Act. the inevitable F
conclusion that had to be reached was to the effect that
the so-called contract system was a mere camouflage,
smoke and a screen and disguised in almost a
transparent veil which could easily be pierced and the real
. contractual relationship between the Board, on the one G'
hand, and the employees, on the other, could be clearly
visualised."
(Emphasis laid by the Court)
42. The legal principle laid down by this Court by following H
780 SUPREME COURT REPORTS [2013] 16 S.C.R.
A the exposition of law for lifting the veil to find out real facts
is very much necessary to the facts of the case in hand
having the law laid down in the case of Salomon v.
Salomon (supra) to examine the correctness of the
findings of the High Court in reversing the finding of fact
B recorded in favour of the concerned workmen by the CGIT
in its award with a view to find out whether the
arrangement with or without the consent of the owner
company facilitated the violation of the basic principles of
labour jurisprudence established in this country over a
c period of more than six decades, especially principles
relating to security of tenure, retrenchment, natural justice,
and many other standards relating to "decent conditions
at work". If two statutory corporations owned by the
Government of India are governed by Rule of law, namely
Factories Act and Industrial Disputes Act, in the manner
D
in which they contended, it would be opposed to the labour
jurisprudence and constitute a clear case of unfair labour
practice which is against the law enunciated by this Court
in plethora of cases referred to supra whose relevant
paragraphs are extracted as above in support of my
E conclusion to hold that the finding in the impugned
judgments of the High Court that is, the HCI, though it is a
subsidiary company of Air India, yet it is a separate and
distinct legal entity and that the concerned workmen have
been employed by the HCI and not Air India and hence,
F there is no relationship of employer and employee and
disciplinary control upon them by Air India, which has been
reached at by the High Court and setting aside the findings
recorded by the CGIT in favour of the concerned workmen,
is not only erroneous but also suffers from error in law as
G the same is opposed to the law laid down by this Court in
catena of cases referred to supra.
43. Any other test required to be applied to the question
of the legal entity of the so called 'independent contractor', is
H irrelevant to the critical issues which arise in this case. The view
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 781
[V. GOPALA GOWDA, J.]
taken by the Delhi High Court regarding the separate legal A
identity of both these corporations, and erroneously setting
aside the findings of the CGIT is not the determining factor in
this case. There have been varying practices in vogue in this
regard. In the Parimal Chandra Raha's case (supra), it is
noticed that there were 'Managing Committees', and B
'Cooperative Societies' which could not exist without a separate
legal personality that is, 'Contractors', many of them also create
convenient legal personalities under garb of different legal
entities. The presence of a contractor clothed with a legal
personality or not as in the case of the defence establishments c
referred to above in the Suraksha Karamchari Union's case
(supra) also has hardly ever been considered to be a
determinative test pertaining to canteen workers on contract.
44. For the reasons recorded by me on the contentious
points with reference to the facts, legal evidence and law laid D
down by this Court in plethora of cases, I am in agreement with
the CGIT on the finding of facts recorded by it on the question
of the relationship between the concerned workmen and the Air
India on proper appreciation of pleadings and the legal
evidence on record and piercing the veil to the fact situation to E
find out true facts which is rightly answered by CGIT on the points
of disputes and the said finding is in conformity with the law
laid down by this Court in Hussainbhai' case and M.M.R.
Khan and other cases referred to supra for the reason that the
contract with the HCI which is a subsidiary Company of Air India F
and employing the contract workers to work in the statutory
canteen, is a sham contract. They have been engaged in
permanent nature of work continuously for number of years. The
finding of fact recorded by the CGIT on the points of dispute
holding that they are entitled for regularization and to be G
absorbed as employees of Air India, without prejudice to any
managerial arrangement to avail the expertise of the HCI of
India through existing arrangements. Indeed that would be a win-
win situation for all the stake holders concerned in this case-
the corporates, the Air India employees numbering more than H
782 SUPREME COURT REPORTS (2013] 16 S.C.R.
A 2000 in this case and the disempowered canteen workers and
that would also be in harmony with our constitutional
jurisprudence.
45. However it must be clarified that the requirement of
reservation as provided for in Articles 14 and 16 of the
8
Constitution must be complied with while regularizing the
canteen workers as employees of Air India. This can be
achieved by complying with relevant provisions of the l.D. Act
in contrast to the action taken by the HCI in violation of the said
C statute. It is alsci further relevant to note that the only relief the
workers have sought is one of regularization on the rolls of Air
India. This does not itself impose any additional expenditure
for it. Therefore, the concern of the learned single Judge of the
High Court, on this count is not attracted in the context of the
relief sought for by the concerned workmen.
D
46. The special facts which are intermingled with questions
of fact relevant to the case at hand may once again be noticed
by me to hold that the concerned workmen have completed 240
days despite attempt of the contractor by giving break in service
E of the concerned workmen by the statutory corporation which
is an instrumentality of the state which is not permissible in law.
47. The wages of the canteen workers and other costs are
paid through the arrangement of per head subsidy @ of Rs.340/
- for over 2000 employees, to the contractor that is, HCI by the
F principal employer -Air India. The supervision and control of the
establishment is adequately provided for through the
'Memorandum and Articles of Association' which binds both
the 'sole owner' and the 'wholly owned subsidiary'. The service
of running the statutory canteen is provided for the benefit of
G the employees of Air India. The statutory obligation on the part
of Air India to run the canteen is squarely placed on the
shoulders of the occupier of the factory as per Section 2(n) of
the Factories Act, because they employ more than 2000
employees despite resorting to pleadings stating that it did not
H employ more than 250 workers, thus seeking to escape from
BALWANT RAI SALUJA v. AIR INDIA LTD. & ORS. 783
[V. GOPALA GOWDA, J.)
the consequences that may follow in case of a 'statutory A
canteen' without challenging the Notification of the Labour
Department issued by the Lt. Governor of Delhi under Rules
65 to 70 of the Rules.
48. For the above reasons, in addition to the test of
8
economic control, as held by this Court in Hussainbhai's case,
I am of the view that the relief sought for by the concerned
workmen which is accepted by the CGIT is legal and valid.
Therefore, I have to accept the finding· and reasons recorded
by the CGIT though the reasons which I have assigned are not
the reasons assigned by it but the conclusions arrived at by the C
CGIT while determining the points of dispute referred to it are
legal and valid. Therefore, the reasons assigned by me in this
judgment must be read into the reasons of the award of the
CGIT. The aforesaid reasons are assigned by me in this
judgment after careful examination of the rival 1legal contentions D
urged by the learned senior counsel on behalf of the parties with
reference to the provisions of the Factories Act, Rules, Contract
Labour Act and Industrial Disputes Act and law laid down by
this Court in catena of cases. These points are accordingly
answered in favour of the workmen. E·
Answer to point No. 3:
49. In view of the foregoing reasons recorded by me in
answering the point Nos. 1 and 2 after adverting to the relevant
facts and interpretation of certain provisions of the Factories F
Act, Rules and the Industrial Disputes Act, particularly Sections
2(k), 2(s) read with the provisions of Section 25(T) and Section
25(U) of the Industrial Disputes Act and Entry No.10 in the Vth
Schedule under the definition of unfair labour practices as
defined in Section 2(ra) regarding the employment of the G
workmen on contract basis against the permanent nature of
employment in the statutory canteen I have held that this
practice by Air India constitutes unfair labour practice. The
decisions rendered by this Court which have been extensi\1ely
referred to by me and some of the cases referred to by the CGIT · H
784 SUPREME COURT REPORTS [2013] 16 S.C.R.
A have rightly answered the points of dispute in favour of the
concerned workmen, on proper appreciation of the facts
pleaded, legal evidence on record and I have applied the legal
principles laid down by this Court in the cases of Basti Sugar
Mills Ltd., Parimal Chandra Raha, Kanpur Suraksha
B Karamchari Union and M.M.R. Khan (all referred to supra)
to the fact situation of the case on hand to restore the award
of the CGIT. The CGIT has rightly come to the conclusion and
recorded the finding of fact assigning valid and cogent reasons.
Therefore, I have to answer that the findings and reasons
C recorded by CGIT on the points of dispute in relation to the
concerned employees declaring that the concerned contract
workers of the canteen are deemed employees of Air India is
a right decision which has been reached after appreciation of
evidence on record and adhering to the legal principles laid
down by this Court in catena of cases. Further, setting aside
0
the termination orders passed against some of the concerned
workmen covered in the industrial dispute case Nos.97 to 99
of 1996 is also justified for the reason that the services of the
concerned workmen in the above cases were terminated
during pendency of the industrial disputes before CGIT
E regarding absorption of the concerned workmen as permanent
employees, without obtaining approval from the CGIT as
required under Section 33(2)(b) of the l.D. Act. Apart from the
above reason, the termination of services of the workmen
involved in the above industrial dispute cases is unsustainable
F in law for the reason that they have not complied with the
mandatory provisions of Section 25F, clauses (a) and (b) of the
LD. Act and have not obtained the permission from the Central
Government as required under Section 25N of Chapter VB of
the l.D. Act. Therefore, the orders of termination passed against
G the concerned workmen are void ab initio in law and the same
are liable to be set aside. I have to hold that the CGIT has rightly
passed an award in favour of all the workmen in all the Industrial
Disputes on the file of CGIT on findings and reasons recorded
on the points of dispute referred to it by the Central Government
H upon which adjudication is made by the CGIT. The same cannot
BALWANT RAI SALUJA v. AIR INDIA LTD'. & ORS. 785
[V. GOPALA GOWDA, J.]
be termed either as erroneous or error in law. Accordingly, I A
answer the point No.3 in favour the concerned workmen.
Answer to point No.4:
50. The findings and reasons recorded on the contentious
points by both the learned single Judge and the Division Bench B
of the Delhi High Court in the impugned judgment that no better
service conditions than the Management of HCI would be
provided to the canteen workers except to get free air tickets
which apparently some employees of Air India are entitled to,
is untenable in law. Incidentally this is another aspect which may C
have a bearing on the question of viability in terms of prevailing
practice in industry. Perhaps, Air India must explore the
significance of the region cum industry principle so well
developed in our labour jurisprudence. It is seriously concerned
about competition and viability rather than focus on the handful
of canteen workers. D
51. The learned single Judge and the Division Bench have
interfered with the finding of fact recorded in the common award
passed by the CGIT by disagreeing with the findings and
reasons recorded by the CGIT and holding that the HCI is a E
subsidiary corporation of Air India and it has got 100% share
holding and power to appoint the Directors of the HCI and after
referring to the decisions of this Court in Kanpur Suraksha
Karamchari Union case (supra), it held that it is a separate
legal entity which finding of fact and reason has been concurred
with by the Division Bench by assigning the similar reasons
F
placing reliance on the decision of this Court in M.M.R. Khan's
case which decision supports the case of the concerned
workmen. The said decision is distinguished by the Division
Bench of the High Court after adverting to certain paragraphs
without considering the relevant paragraph Nos. 25 and 30 G
which has laid down the legal principle and also referred to other
judgments namely Indian Petrochemicals Corporation Ltd.
and Hari Shanker Sharma referred to supra without piercing
the veil to the real facts of the case.
H
786 SUPREME COURT REPORTS [2013) 16 S.C.R.
A 52. Both the learned single Judge and the Division Bench
have exceeded in their jurisdiction in exercising their
extraordinary and supervisory jurisdiction in the Writ Petitions
and the Letter Patent Appeals, while examining the correctness
and findings recorded by the CGIT in the common award which
B the High Court has disagreed with and has set aside the
common award impugned in the Writ Petitions filed by Air India.
Both the learned single Judge and the Division Bench have
exceeded their jurisdiction in interfering with findings of fact
recorded by the CGIT on the points of dispute and the
c contentious issues on proper appreciation of pleadings,
evidence on record and law laid down by this Court in the cases
referred to, in the award I have referred to the relevant factual
aspects and legal evidence and the statutory provisions of the
Factories Act, Rules and the Industrial Disputes Act, while
D answering to Point Nos ..1, 2 and 3 in favour of the concerned
workmen by recording my reasons in this judgment. Therefore,
I have to hold that the learned single Judge and the Division
Bench exceeded in their jurisdiction to interfere with the finding
of fact recorded by the CGIT on the points of dispute which were
referred to by the Central Government. For the reasons
E recorded by me on point Nos. 1 and 2 in this judgment and
further answering the point No.3 in affirmative in favour of the
concerned workmen holding that findings and reasons recorded
by the CGIT on the point of dispute referred to it by the Central
government are neither erroneous nor suffers from error in law.
F Also I have to hold while answering to point No. 4 that both the
learned single Judge and the High Court have disagreed with
the correct finding of fact recorded by the CGIT in its award.
The findings recorded by the learned Singh Judge and Division
Bench in the impugned judgment are not only erroneous but
G suffers from error in law as the same is contrary to the statutory
provisions and law laid down by this Court which have been
extensively referred to by me in the reasoning portion of this
judgment in answer to point Nos. 1 and 2. Hence, I have to hold
that findings and reasons recorded in the impugned judgment
H is wholly untenable and liable to be set aside and accordingly
BALWANT RAI SALUJA v. AfR INDIA LTD. & ORS. 787
set aside by answering point no. 4 in affirmative in favour of A
the concerned workmen.
Answer to Point No.5:
53. Since I have answered point No. 4 in favour of the
concerned workmen and against Air India, the appellants are
B
entitled for the reliefs as prayed for in these appeals.
Accordingly, these appeals are allowed and common award
dated 5.5.2004 passed in l.D. Nos.97 to 99 of 1996 in favour
of the workmen is restored. Further, I direct the Management
of Air India to absorb all the concerned workmen covered in
the l.D. Nos.97 to 99 of 1996 as permanent workmen on its
c
rolls from the· date of their appointment and grant all the
consequential benefits such as salary for which they are entitled
for after computing properly, taking into consideration the pay
scale and periodical wage revision that has taken place and
arc applicable to the respective posts of the concerned D
workmen as per the notification issued by the Lt.· Governor,
Union Territory of Delhi and on the basis of similar notifications
applicable for them.
54. Since I have allowed l.D. Nos. 97 to 99 of 1996, the
E
Industrial Dispute case Nos. 107 and 108 of 1996 involving the
wdrkmen whose services were terminated during the pendency
of petition before CGIT, must also be treated as permanent
workmen at par with the concerned workmen involved in the
::; instant case. The award for their reinstatement to their posts
shall be passed with all consequential benefits with full back F
wages.
55. Accordingly, I allow the appeals of the concerned
workmen in the above said terms.
ORDER G
As we have differed in our opinion, let the record of these
·appeals be placed before Hon'ble The Chief Justice of India
for placing the matters before an appropriate Bench.
Bibhuti Bhushan Bose. Matter referred to Appropriate Bench. H
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